<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:57590.wais]
BUDGET PROCESS REFORM
=======================================================================
HEARING
before the
COMMITTEE ON RULES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
ON
H.R. 853
THE COMPREHENSIVE BUDGET PROCESS REFORM ACT OF 1999
__________
MAY 12 AND 13, 1999
__________
Printed for the use of the Committee on Rules
----------
U.S. GOVERNMENT PRINTING OFFICE
57-496 cc WASHINGTON : 1999
_______________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing
Office
Washington, DC 20402
COMMITTEE ON RULES
DAVID DREIER, California, Chairman
PORTER GOSS, Florida JOHN JOSEPH MOAKLEY, Massachusetts
JOHN LINDER, Georgia MARTIN FROST, Texas
DEBORAH PRYCE, Ohio TONY P. HALL, Ohio
LINCOLN DIAZ-BALART, Florida LOUISE M. SLAUGHTER, New York
DOC HASTINGS, Washington
SUE MYRICK, North Carolina
PETE SESSIONS, Texas
THOMAS REYNOLDS, New York
Vince Randazzo, Staff Director
Eric Pelletier, Deputy Staff Director
George C. Crawford, Minority Staff Director
David Pomerantz, Deputy Minority Staff Director
Bryan H. Roth, Office and Systems Manager
______
Subcommittee on Legislative and Budget Process
PORTER GOSS, Florida, Chairman
DEBORAH PRYCE, Ohio MARTIN FROST, Texas
DOC HASTINGS, Washington JOHN JOSEPH MOAKLEY, Massachusetts
SUE MYRICK, North Carolina
DAVID DREIER, California
Wendy Selig, Staff Director
Kristi Walseth, Minority Staff Director
______
Subcommittee on Rules and Organization of the House
JOHN LINDER, Georgia, Chairman
LINCOLN DIAZ-BALART, Florida TONY P. HALL, Ohio
PETE SESSIONS, Texas LOUISE M. SLAUGHTER, New York
THOMAS REYNOLDS, New York
DAVID DREIER, California
William Evans, Staff Director
Michael Gessel, Minority Staff Director
(ii)
C O N T E N T S
__________
Page
May 12, 1999
Opening statement of the Hon. David Dreier, Chairman of the
Committee on Rules [prepared statement p. 03] 01
Opening statement of the Hon. John Joseph Moakley, Ranking Member
of the Committee on Rules [prepared statemnet p. 06] 04
Opening statement of the Hon. Porter Goss, Vice Chairman of the
Committee on Rules [prepared statement p. 09] 08
Statement of:
Crippen, Dan L., Director, Congressional Budget Office
[prepared statement p. 13]................................. 11
Nussle, Hon. Jim, a Representative in Congress from the State
of Iowa [prepared statement p. 34]......................... 31
Cardin, Hon. Ben, a Representative in Congress from the State
of Maryland [prepared statement p. 43]..................... 40
Minge, Hon. David, a Representative in Congress from the
State of Minnesota [prepared statement p. 47].............. 46
Irving, Dr. Susan J., Associate Director For Federal Budget
Issues, General Accounting Office [prepared statement p.
64]........................................................ 61
Phillips, Martha, The Concord Coalition [prepared statement
p. 90]..................................................... 85
Greenstein, Robert, Center for Budget and Policy Priorities
[prepared statemtent p. 100]............................... 96
Muris, Timothy J., George Mason School of Law [prepared
statement p. 115].......................................... 112
Additional Information Submitted for the Record
Submitted Questions and Answers by Mr. Dan L. Crippen........ 27
Statement of Mr. Bill Frenzel, Co-Chairman, Committee for a
Responsible Federal Budget................................. 58
Submitted Questions and Answers by Dr. Susan J. Irving....... 78
Document on Percentage of Income Tax Paid by Hon. Pete
Sessions................................................... 153
Submitted Questions and Answers by Timothy J. Muris.......... 159
Submitted Questions and Answers by Martha Phillips........... 161
May 13, 1999
Statement of:
Smith, Hon. Nick, a Representative in Congress from the State
of Michigan................................................ 167
Gekas, Hon. George, a Representative in Congress from the
State of Pennsylvania [prepared statement p. 170].......... 168
Barton, Hon. Joe, a Representative in Congress from the State
of Texas [prepared statement p. 173]....................... 171
Regula, Hon. Ralph, a Representative in Congress from the
State of Ohio [prepared statement p. 178].................. 175
Castle, Hon. Michael N., a Representative in Congress from
the State of Delaware [prepared statement p. 185].......... 181
Spratt, Hon. John, a Representative in Congress from the
State of South Carolina [prepared statement p. 196]........ 191
(iii)
HEARING ON H.R. 853, THE COMPREHENSIVE BUDGET PROCESS REFORM ACT
----------
Wednesday, May 12, 1999
House of Representatives,
Committee on Rules,
Washington, D.C.
The committee met, pursuant to call, at 9:30 a.m. in Room
H-313, The Capitol, Hon. David Dreier [chairman of the
committee] presiding.
Present: Representatives Dreier, Goss, Linder, Hastings,
Sessions, Reynolds and Moakley.
The Chairman. The committee will come to order. Today the
Rules Committee embarks on the first of two original
jurisdiction hearings on H.R. 853, the Comprehensive Budget
Process Reform Act of 1999. The committee today will receive
testimony from three of the lead sponsors of the reform bill as
well as analysis by the Congressional Budget Office, the
General Accounting Office, the Concord Coalition, the Center on
Budget and Policy Priorities and other noted witnesses.
Tomorrow we will hear more testimony from many of our
colleagues on both sides of the aisle.
This bill is the product of two years of work between
members of the Rules and Budget Committees and also represents
the first time in almost a decade that the two committees of
jurisdiction in the House have come together in a bipartisan
manner to construct a comprehensive budget process reform
package. This is largely due to the leadership of Porter Goss,
who has united the two committees behind a common-sense reform
plan which we are committed to bring to the full House for
consideration in the near future.
Make no mistake, the current budget process does not work.
It is a disorganized patchwork of decades-old rules and laws.
This comprehensive bill increases efficiency, improves
accountability and strengthens enforcement in the budget
process.
Coming from California, let me highlight just one example.
We have learned that natural disasters are a fact of life,
whether it is hurricanes in Florida, ice storms in New York,
floods in Iowa or an earthquake in my home State. We know that
there will be some impact on the budget each year. This bill
will reform the budget process to require the President and the
Congress to face reality and set aside a disaster reserve fund
in the budget. We don't need to pit the victims of Mother
Nature against those who desire sound fiscal policies, and this
is just one of the many sensible reforms included in the bill.
Again, it is a very bipartisan measure. We have Democrats who
have joined in cosponsoring the bill.
I look forward to the testimony of our distinguished
witnesses today and tomorrow to engage in this important
debate.
[The prepared statement of Mr. Dreier follows:]
[GRAPHIC] [TIFF OMITTED] T7496.001
The Chairman. With that, I am very happy to call on what
looks like a brilliantly written opening statement by my good
friend from south Boston, Mr. Moakley.
Mr. Moakley. Thank you, Mr. Chairman. I have a medical
appointment right after this, and then I have the rule on the
floor.
The Chairman. I have one of those two things.
Mr. Moakley. You have the medical appointment.
The Chairman. That's right.
Mr. Moakley. Ever since the Congressional Budget Act became
law in 1974, people have blamed it every time they don't get
their way. I think if anyone is to blame, it is the actors and
not the act. The Budget Act can only set up incentives to do
the right thing, it can't force a majority of House Members to
make budget decisions against their will.
Mr. Chairman, the bill we are discussing today makes three
major changes in the Budget Act, all of which I oppose. First,
this bill guts the pay-go rule. Under the current law, as
entitlement increases, tax cuts must be paid for. This bill
says you don't have to pay for tax cuts or entitlement
increases. If there is a surplus, this provision encourages
Members to rush out to spend the surplus before anyone else can
use it. Any hope of reserving the surplus for debt reduction
would be totally lost. So the resources we could be using to
fix Social Security and Medicare would be used to pay for a tax
cut.
Secondly, the automatic continuing resolutions will set a
permanent appropriations level. This will encourage Members to
choose between the regular appropriations bills and the
automatic continuing resolution.
Third, the joint budget resolution and fall-back will
create more incentives for political posturing and delay.
So let's face it, Mr. Chairman, the congressional budget
resolution and the President's budget are both political
documents, and as long as one party controls the Congress and
one party controls the White House, there won't be much
negotiation on budget resolutions. No one has any reason to
compromise at such an early stage. But if Members can see the
fall-back, and if they know that the automatic continuing
resolution is in place, the Majority has every reason to pass a
budget that forces a Presidential veto and delineates the
difference between the parties.
I agree with my colleagues that the 1997 changes to the
system for designating emergency spending is in a shambles, but
I don't believe these are the ways to fix them. I object to the
extraordinary power granted to the Budget Committee Chairman to
determine what constitutes an emergency, and I find the
definition of emergency unrealistic. For example, Kosovo is
neither sudden nor unanticipated, but it certainly is an
emergency. Nor do I believe this appropriation lockbox proposal
will work any better than lockbox proposals in the past.
Everyone agrees that the appropriation caps are working well,
maybe just a little too well, and I don't think that we need
any more downward pressure on appropriations.
Mr. Chairman, there are a handful of smaller ideas in this
bill, some of which are good, such as Mr. Cardin's proposed
changes to the budget treatment of insurance programs, and of
course my pro-
posal to make unreported measures subject to Budget Act points
of order. But some of the smaller ideas are dangerous, such as
the definition of the pocket veto. This definition implies,
contrary to the long-standing view of the House, that only the
budget joint resolution cannot be pocket-vetoed during the
session.
Mr. Chairman, despite the inclusion of Mr. Cardin's
proposal and mine, this bill contains a lot of dangerous
changes to our budget process. We should either leave well
enough alone or go back to the drawing board.
[The prepared statement of Mr. Moakley follows:]
[GRAPHIC] [TIFF OMITTED] T7496.002
[GRAPHIC] [TIFF OMITTED] T7496.003
The Chairman. As I said, we are very pleased that this bill
enjoys wide bipartisan support.
Mr. Moakley. It is not wide enough.
The Chairman. I am pleased to call on Mr. Goss.
Mr. Goss. Thank you, Mr. Chairman. I have a prepared
opening statement.
The Chairman. Without objection it will appear in its
entirety in the record.
Mr. Goss. First of all, the distinguished gentleman from
Boston knows I never have dangerous thoughts--
Mr. Moakley. Not lately.
Mr. Goss. And we didn't start out with the idea--
The Chairman. Why don't you go to your doctor's
appointment.
Mr. Goss. I think the concept of "leave well enough alone"
doesn't pass the laugh test, and I remember some of the
comments from the gentleman from Boston's party regarding the
omnibus bill last October. And I heard more comment that rather
than "leave well enough alone", "never again" would have been
the appropriate description for that process.
The other areas that you have raised in your opening
remarks I think are appropriate areas and have received a lot
of attention, and we have tried to come up with what we thought
was a good working solution. Obviously we are having these
hearings to deal with that. I want to particularly thank
Chairman Dreier for pushing forward on this, bringing this to
some kind of conclusion and taking our legislative shot at it.
I think it is long overdue that we do something in this area.
If we haven't got it right, perhaps this process will make it
better. I think we have a good product.
As to the definition of emergency and things like that, I
submit that two months ago there was not an emergency in
Kosovo. The reason that there is one today is because of
actions that have been taken, not because of the situation that
was. I think there is some room to negotiate what an emergency
is, but I think we ought to do it up front, and I think a lot
of us feel that it encourages, like Kosovo, that before we do
them, we know better what we are getting into.
As for the automatic CR, that is something that we
discussed a number of times and have had regular discussion on.
As for the pay-go, I think it makes a lot of sense that all
of the playing field be equal when we talk about surplus. I
think that is what this bill does. Having said that, no matter
how you look at this, any reasonable observer would say that we
can make the rules through a budget process.
The Chairman. Thank you very much.
[The statement of Mr. Goss follows:]
[GRAPHIC] [TIFF OMITTED] T7496.004
[GRAPHIC] [TIFF OMITTED] T7496.005
Mr. Linder. I have only one comment. I think it is long
overdue to fix this process. Thank you.
The Chairman. Mr. Reynolds.
Mr. Reynolds. As a cosponsor of this legislation, I look
forward to the discussion in the hearing. I have had the honor
of serving at town and county and State government levels
before being elected to Congress. I now use some of that
strength of 25 years that local governments must produce a
balanced budget, and the Governor of New York is required by
the State constitution to present a balanced budget to the
legislature, and then for the legislature to adopt a balanced
budget within that. So the State and county and local
governments simply must balance their budgets and are required
to do so by a cohesive and time-line process.
Congress needs to reform the existing budget process to
make the necessary changes to get a more accurate picture of
what we are dealing with in the new millennium.
The Chairman. Mr. Sessions, you have missed a load of
brilliant opening statements.
Mr. Sessions. Mr. Chairman, I did miss some, and when my
colleague from New York speaks, we speak with one voice.
The Chairman. Thank you all very much, and let me say that
it is a privilege once again to see Dan Crippen and to formally
congratulate him. He is the fifth Director of the Congressional
Budget Office, having been appointed to the that post just a
couple of months ago in February. From 1987 to 1988, he served
as the President's advisor on all issues relating to domestic
policy, including the presentation of the Federal budget. From
1981 to 1985, he served as chief counsel and economic policy
advisor to the Senate Majority Leader, working on major tax and
budget bills.
Prior to joining the CBO, Mr. Crippen was a principal with
the consulting firm Washington Council. He has also served as
executive director of the Maryland International Advisory
Council and senior vice president of the Duberstein Group.
Let me welcome you. I look forward to your testimony.
I apologize right now, I don't have to go to the doctor
like Mr. Moakley, but I have to make a call, and then we have
to be down on the floor on our Y2K bill, which is coming up,
and Mr. Goss is going to be presiding.
Obviously as a cosponsor of the bill, I think it is very
clear that I do have a great interest in bringing about this
reform, and we are going to try our darnedest to make it more
bipartisan.
If you have any lengthy prepared remarks, we will include
those in the record without objection.
Mr. Crippen. I have a 2-minute version and a ten minute
version.
The Chairman. Gosh, should we flip a coin.
We will look forward to your 2-minute version.
STATEMENT OF DAN L. CRIPPEN, DIRECTOR, CONGRESSIONAL BUDGET
OFFICE
Mr. Crippen. Mr. Chairman, and Members of the Committee,
thank you for the opportunity to testify on the Comprehensive
Budget Process Reform Act of 1999. It responds to many of the
concerns that have been voiced by Members of Congress and
others in recent years.
A joint budget resolution inviting the President to
negotiate early in the year on the budget has merit, but it is
no panacea. If there were wide disagreements, the joint
resolution might delay the process, having to go through a veto
and the fallback mechanism. If there were no wide
disagreements, the joint resolution would be unnecessary.
An automatic continuing resolution has substantial merit,
especially to avoid a government shutdown. Working out a
suitable determination for an appropriate funding level will
require the concurrence of the appropriators, in which case you
may want to consider a number of alternatives to the current
levels. You might choose the average between the House and
Senate or some other level.
Insurance reform is great in theory but difficult to carry
out. The six years envisioned for implementing reform is a
minimum, although some types of insurance might be scored
earlier than that.
If you were to do nothing else on emergency spending,
simply codifying the definition would be helpful. Without a
definition, it matters little what else you do.
Finally, Mr. Chairman, the extensive changes proposed by
the bill suggest a broader issue of budget process reform that
should be addressed. It is time to convene a new Commission on
Federal Budget Concepts. In general, federal budget concepts
are based on the recommendations of the 1967 President's
Commission on Budget Concepts. Although the commission's
guidelines continue to apply broadly in the budget process,
they do not address certain fundamental issue that lawmakers
and budget scorekeepers currently face. For example, various
proposals to reform Social Security, especially those that call
for personal retirement accounts, raise thorny questions about
the appropriate budgetary treatment. Further, the dividing line
between federal spending and revenue law has become blurred, as
evidenced by the increasing use of refundable tax credits as a
device for expanding budgetary resources. The use of public/
private partnerships, such as those involved in military
housing and various lease-purchase agreements also raises
questions of budgetary treatment for which the 1967
Commission's recommendations provide little or no guidance.
These and other issues put budget scorekeepers in a
difficult position as they seek to apply outdated or incomplete
concepts to novel budget policies. That situation suggests the
need to reevaluate the current budget concepts and to try to
reach consensus on changes that will make them clear,
comprehensive, and more effective. I encourage the committee to
consider that enough has changed in the past 30 years to
warrant another look at our rules.
The Chairman. Thank you very much. That is very helpful. We
appreciate it.
[The prepared statement of Mr. Crippen follows:]
[GRAPHIC] [TIFF OMITTED] T7496.006
[GRAPHIC] [TIFF OMITTED] T7496.007
[GRAPHIC] [TIFF OMITTED] T7496.008
[GRAPHIC] [TIFF OMITTED] T7496.009
[GRAPHIC] [TIFF OMITTED] T7496.010
[GRAPHIC] [TIFF OMITTED] T7496.011
[GRAPHIC] [TIFF OMITTED] T7496.012
[GRAPHIC] [TIFF OMITTED] T7496.013
[GRAPHIC] [TIFF OMITTED] T7496.014
[GRAPHIC] [TIFF OMITTED] T7496.015
The Chairman. Let me jump right into the issue that I
raised in my opening remarks, that being this emergency reserve
fund. Do you have any thoughts about that? We were talking in a
meeting yesterday about the Oklahoma situation, and last
Thursday the Federal Emergency Management Agency indicated that
they had everything necessary fundingwise to deal with that.
Over the weekend and the last couple of days when the President
went there, he came back and requested $372 million. Now we
have been told that there is a request for nearly three times
that amount, approaching a billion dollars, to go to the
Federal Emergency Management Agency.
My personal response to that is we should proceed with what
is necessary rather than all of a sudden just building up a
huge surplus there for emergencies, but the proposal that we
have in this measure obviously calls for us to move in the
direction of setting up a fund there. What thoughts do you have
about that version?
I will tell you that I have tried to get us to a point
where the American people don't immediately come to Washington
every time there is a disaster, natural or man-made, and we
have worked in the past on legislation which would set up a
joint public-private partnership with the insurance side. We
are still working on that and hoping that we can move on that.
But as we try to approach this question, would, in fact,
building up a reserve there create a situation where people
would more naturally be inclined to draw on it? What thoughts
do you have about that?
Mr. Crippen. You can limit that, depending on the
definition of emergency and what conditions you delegate to the
Budget Committee Chairmen in order to designate something an
emergency.
The most important issue is the definition of what
constitutes an emergency. Once a definition has been reached,
the only other concern is how a reserve fund might work,
particularly in floor debates. For example, how quickly could
the Budget Committee Chairmen make these determinations? So how
a reserve fund might work is unclear, but we don't have any
evidence from states that have contingency funds and rainy-day
funds, or whether such funds encourage emergency designations.
The Chairman. How many States have that?
Mr. Crippen. Almost all. I think well over 40 do. Amd most
have constitutional or statutory requirements that they have a
balanced budget. So as part of that process, they tend to do
contingency budgeting.
We have had a wide range of emergency designations in the
recent past--from about a $1.5 billion to $21 billion (in
fiscal year 1998). Whether or not you think all of the $21
billion was for emergencies is another question, but the range
is big in terms of the amount of funds required.
The Federal Emergency Management Agency (FEMA) tends to go
out and address an emergency or a disaster and come back and
request a replenishment of funds. So in some sense, FEMA works
on the notion of a reserve basis already. Expanding that
approach to other agencies that become involved in emergency
situations might be an alternative to having the Congress
establish a reserve-fund procedure.
The Chairman. Do you want to respond to any of the specific
concerns on pay-go and other issues raised by Mr. Moakley in
his opening statement?
Mr. Crippen. Whenever you begin to change these processes,
you may be changing the dynamics, political power, and other
things. The only concern I have--and it wasn't addressed quite
directly by Mr. Moakley, is that we take care not to shift
power away from the Congress in dealing with these matters.
The Congress established this whole process--in the wake of
the Nixon impoundments and called it the Budget Impoundment and
Control Act. It is not just a budget act. The tension between
the President and the Congress prompted the establishment of
the Congressional Budget Office. I think we need to take care
not to give up Congressional power in the interest of
expediency.
But I am not as concerned as Mr. Moakley is about automatic
continuing resolutions. There are a lot of issues about how
they would work and, in turn, who the balance of power would go
to--the appropriators, the President, or the Congress.
The Chairman. There is some bipartisan concern about
automatic CRs.
Thank you very much, Dan. I will turn the opportunity to
question and the Chair over to Mr. Goss.
Mr. Goss. [Presiding.] Thank you, Mr. Chairman. I wish you
success in your rule.
I wanted to ask a little bit on the emergency. We looked a
lot at that, and there are any number of definitions that you
could use, and I am in agreement with your testimony that we
ought to try to corral it a little bit. We may not get it
exactly right, but anything we do would be an improvement.
In that spirit I am mindful of the Federal insurance agency
and flood insurance, FEMA, and relocation revolving funds, and
all of those mechanisms that are out there. I am not talking
about how you do it. What I am trying to say for budget
purposes so we don't have surprises every year that break the
bank up here, and in addition to the surprise the opportunity
to break the bank even further because of the practices that go
on now, can we make an improvement? And I think the answer is
yes.
One of the things that I am concerned about besides the
definitional questions that have been raised is the amounts,
the numbers. How much is the right amount for a rainy day fund?
We have some language about a five year rolling average. Does
that make any sense?
Mr. Crippen. Sure.
Mr. Goss. Is there a better way to do that?
Mr. Crippen. Probably not. It is arbitrary. The amount has
ranged from about $1.5 billion to $20 billion in the recent
past. The average has been $5 billion, but as with all
averages, it depends on your experience. The amount put in is
arbitrary, but the rolling average seems to make sense.
Mr. Goss. The fence you build around that, it seems to me,
is going to be very important as well. And when we talk about
the rolling averages, we need to define emergency, because we
don't want to count the underexpenditures that get added onto
emergency legislation because it is passing. Is that a
reasonable conclusion?
Mr. Crippen. Yes. That is why I raised the one concern--How
does it get worked out on the floor when you have an emergency
supplemental and amendments are being added? How does the
Budget Committee address that issue. Saying this is an
emergency but that is not, might complicate floor consideration
of the proposed measures.
Mr. Goss. Fair enough.
There are a couple of responses I would like to get for the
record. We are trying to complete a record which has been going
on for some time. In your testimony you mention the Catch-22
between trying to encourage more authorization of spending
while at the same time discouraging more authorizations. In
reference to the timetable for reauthorizations that committees
would establish, you suggested some form of staggered program
with the schedule. Would you please comment further on that, on
your suggestions in that area?
Mr. Crippen. The notion I was trying to convey: is pretty
simple if you have a ten year sunset on major authorizing
bills, you would not want them all to expire at the same time.
It is a notional idea, but we have to be careful about how you
do that, and once you get started on the schedule, you would
want to stagger how the operations would come up and be
required.
Mr. Goss. How much information does CBO have on this
subject right now?
Mr. Crippen. Each year we compile a report, which we issue
in January, on how many programs were appropriated for the
current fiscal year without authorization.
Mr. Goss. So this is information that is readily available?
Mr. Crippen. Yes. And for other agencies, too.
Mr. Goss. Thank you very much. That is very helpful.
Mr. Linder.
Mr. Linder. I would like you to comment on what I have seen
pursuant to the Federal rules on tax cuts, the result of that.
Mr. Crippen. We clarify the ability to use surpluses for
tax cuts, and the answer would be yes, the bill does that.
Mr. Linder. When you talk about the five-year rolling
average, in your observation of the history going from $1
billion to $20 billion, are we getting more and more disaster
claims?
Mr. Crippen. On a five year rolling average, $21 billion
was clearly out of the normal range, but last year was an
unusual year. So I don't know that there is a trend. There may
be a slight trend, but if you drop last year, the $5 billion
average is a good place to start with adjustments.
Mr. Linder. I have watched more and more money shifting
from appropriated categories to other categories, such as the
supplemental bill last year for Strategic Defense Initiative.
Is there anything in the Budget Act to solve that?
Mr. Crippen. No. The rules are designed to allow those
kinds of funding changes. In this instance, if you have the
votes, you can do it. I can't see an easy way of--
Mr. Linder. What about if there are no votes? It was
appropriated directly for SDI.
Mr. Crippen. I am sorry, I don't know the answer. But the
numbers should prevent that from happening.
Mr. Linder. Is there ever a time when we are treating
emergencies for private insurance or rate insurance?
Mr. Crippen. To some extent, yes. You do that in public/
private partnerships, flood insurance and other things. There
will always be unforeseen risks--instances in which the losses
are so large that it becomes very difficult for an actuary to
decide what the premiums are and, in turn, to encourage
citizens to buy that kind of insurance because the events are
so rare. Short of mandates from the federal government, buying
insurance is difficult to get the kind of inclusive coverage
for those, but it is certainly possible. There has been
consideration to ask for insurances, but it takes a fair amount
of guidance from the Federal Government.
Mr. Linder. Thank you.
Mr. Goss. Mr. Hastings?
Mr. Hastings. I don't have any questions, Mr. Chairman.
Mr. Goss. Mr. Reynolds?
Mr. Reynolds. No, I am fine. Thank you.
Mr. Goss. We have a couple of unanswered questions which we
would like to submit for the written record, if that is
satisfactory. They are straightforward and basically follow
your commentary in your prepared statement.
Mr. Crippen. Okay.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T7496.016
[GRAPHIC] [TIFF OMITTED] T7496.017
[GRAPHIC] [TIFF OMITTED] T7496.018
[GRAPHIC] [TIFF OMITTED] T7496.019
Mr. Goss. We want to thank you very much. No doubt we will
be talking about this more.
We are joined by our colleagues from Minnesota and Iowa.
This will be called panel one. It will be followed by Dr. Susan
Irving, and she will be followed by panel two.
We welcome you here, gentlemen, and thank you for the
positive contribution you have made to the process which has
been ongoing now for a number of years, and we all know that it
is appreciated and valued and part of the product we are
dealing with.
The good news is that we are planning to go forward with
legislation. The bad news is, for some at least, that is hardly
a surprise. I think everybody has an opinion on whether it is
doable, and that is what we are presenting at this point.
We welcome your views, your participation. Your prepared
statements will be accepted for the record without objection,
and your wisdom on top of that will be encouraged eagerly at
this time by this meeting.
STATEMENT OF HON. JIM NUSSLE, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF IOWA
Mr. Nussle. Mr. Chairman, thank you so much for conducting
this hearing, and, similar to hearings before the Budget
Committee on this subject, we are singing to the choir so to
speak. Your leadership in moving this bill forward, your
participation in crafting this bill as well as the rest of the
Rules Committee in a bipartisan way, the bipartisan nature of
the Budget Task Force and the Budget Committee in drafting this
legislation, I think, has been part of the reason why we have
been able to bring this bill to this point. So we truly
appreciate your leadership.
I am sorry Ben Cardin is not here to start off with,
because as you know, Mr. Chairman, he put in so much spadework
in getting us to this particular point, Mr. Minge as well, and
other members of our Budget Task Force that basically sat down
with a couple of ideas and just for the record--and also it
kind of goes to Mr. Linder's line of questioning as well. Let
me just touch on a couple of things.
Number one, we decided that the process had to be
bipartisan. There are certainly things that while David and I
would agree on, not everybody in the Congress, not everybody
from both parties would necessarily agree to do, and so we had
to do a lot of listening, and we came up with a process that we
believe is bipartisan, one that both parties can enjoy and
support.
The second is we did not try and game outcome, substantive
outcome of a particular issue. Just an example, the question
that Mr. Linder was asking about the pay-go scorecard and on-
budget surpluses and could they be used for tax cuts, the
answer is yes, but there is a corollary answer that it could
also be used for spending increases. So there is nothing in our
bill that necessarily games the outcome that says because of
the rules, something substantively must occur. It still allows
for--and I think this is the beauty of our bill--it doesn't
necessarily work against tax cuts any more than it works
against increasing or decreasing spending. It still allows the
Congress to work its will and make a decision that is in the
best interest of the country.
I think the biggest reason why we are here is, number one,
we had the poster child of all reasons for budget reform come
in 1998, and that was a broken process in which almost nobody
from any particular party or from whatever your point of view
could suggest that the process worked.
As the Task Force for Budget Reform sat down and tried to
look over the last many years since the 1974 Budget Act, we
could not find many years when the exact process was followed.
If we could pick all of the years from 1974 on and try and take
whatever worked and try and codify it, what year would we use?
We found that in 1997, we had agreement with the President and
the Congress up front early in the process. The aggregate
decisions, the big numbers were chosen very early in the
process, and the result was contentious. It obviously will be
in an appropriation and tax process, but we knew the rest of
the fight could be on detail, on discussion and majority rule,
and on amendments and an open process that everybody could
follow. So we tried to codify that in this particular bill.
The first thing we did was made this budget have the force
of law with a joint resolution as opposed to our current
process, which, as you know, is a concurrent resolution. What
this suggests is that the President and the Congress have to be
real early in the year. There are many Democrats who are
frustrated with our current process because they thought that
our current process is not real. We as Republicans are finding
that it is going to be difficult to make that budget real. But
no matter what perspective you bring to it, having the
President and the Congress in January and February, and by the
deadline of April 15 come up with an agreement that has the
force of law is an important perspective to bring to this.
The second big area, I believe, is in the area of
emergencies. We for the first time budget for emergencies on a
rolling average, which sets aside a rainy day fund, which just
about every family, big business, farm, many States in this
country have as a way to deal with unforeseen, yet predictable
emergencies that will occur this year. And we are currently and
maybe possibly the poster child of emergency and supplemental
problems with the process that we are currently in.
Finally, let me just suggest that what we are also doing is
looking toward the future. We begin to budget toward the
unfunded liabilities and other long-term obligations of this
government. At the point in time where we find ourselves in the
era of surpluses, when you take a new measure of your--not only
your budget process, but those priorities that the country has
to take a look at, and our unfunded liabilities which have
never been managed, some of the insurance programs have never
really been taken--as you know, we operate on a cash budgetary
process as opposed to an accrual process, and it does not take
into consideration some of those liabilities. So we begin the
process of looking toward the future and how we can better
manage budgetary decisions later on.
Now, is this the best process bill we can come forward with
or at least the strongest one? As Mr. Linder is suggesting,
will it solve every single problem? No, it can't. When I
explained this to kids back home in government classes because
they study this, some of our more mature constituents in the
district glaze over when you talk about budget reform, but kids
are learning about this. This is an interesting subject to them
because it shows the way that Congress works.
I tell them all we are doing in this bill is writing the
rules on the back of the box that you play Monopoly on. The
rules are the same every time you play the game. We are not
deciding the outcome, or determining who is going to win the
game, or who gets what property, or how many hotels you have on
the game board. What we are saying is every time you turn that
game box over, every time you look at the rules, they ought to
make sense and make the process fair, and we believe that we
have brought forward a bill that will do just that.
With that, I appreciate the time, and I will turn it over
to my colleagues.
[The prepared statement of Mr. Nussle follows:]
[GRAPHIC] [TIFF OMITTED] T7496.020
[GRAPHIC] [TIFF OMITTED] T7496.021
[GRAPHIC] [TIFF OMITTED] T7496.022
[GRAPHIC] [TIFF OMITTED] T7496.023
[GRAPHIC] [TIFF OMITTED] T7496.024
[GRAPHIC] [TIFF OMITTED] T7496.025
Mr. Goss. I am happy to welcome and acknowledge Mr. Cardin,
who has joined us as part of this panel. His testimony is
prepared and already accepted into the record.
You missed the accolades that we were heaping on the panel
before you came in.
Mr. Cardin. You can repeat those.
Mr. Goss. We welcome you.
STATEMENT OF HON. BEN CARDIN, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF MARYLAND
Mr. Cardin. Thank you, Mr. Goss, for those kind comments,
and I appreciate the opportunity to testify on our budget
reform bill, and I thank the committee for holding early
hearings on this subject, and hopefully we will be able to move
some legislation during this session of Congress.
As Mr. Nussle pointed out, this process started with the
Budget Committee looking last year at setting up a special task
force to take a look at our budget process. Mr. Nussle chaired
it. I was the Ranking Democrat on it, and we really looked at
all of the proposals that Members of Congress had come in with.
We worked on a very bipartisan way. There was a lot of give and
take, a lot of compromises that were made in order to try to
move legislation that could be enacted and become law.
I must tell you as a way of background, I started in the
State legislature 32 years ago, and I served on the committee
that had the State budget. I later became a chairman of the
Ways and Means Committee and later speaker of the house and was
speaker for 8 years.
When I came to Congress in 1987, I was appalled by the way
that we used to deal with the Federal budget. My own experience
in the State showed that there was a better way in which for us
to handle the fiscal policy of our Nation.
I must tell you that the objectives that we looked at in
the Budget Reform Task Force were several. First, in my view, I
wanted to make the Congress a more effective entity in dealing
with the fiscal policies of this country. I don't think we have
much to say in this institution about the fiscal policies of
the Nation. I think we have given too much to the executive
branch because of our way that we are so disorganized in our
consideration of the fiscal policy of this Nation. So many of
our recommendations are aimed at making Congress a more
effective entity, not whether it is controlled by Republicans
or controlled by Democrats or split control, or whether the
White House is of a different party than the Majority in
Congress. We want to make this institution work better so that
all of us who are elected can have more to say about the fiscal
policies of the Nation.
That is one reason why we recommended a joint resolution
signed by the President, so that we engage the President
earlier. Under the current system when we have a disagreement,
and we have one again this year with the White House, if we
resolve that late in the process, the executive branch is going
to have a lot more to say than the legislative branch on the
fiscal policy of our Nation. We, as members of this institution
voting in our committees and
voting on the floor, are going to have much less to say about
an appropriation bill or an entitlement bill when that decision
is made with the last vote of the session, where you have to
vote for it or not in order to go home. That is not carrying
out the will of the people that I represent. So a joint
resolution is to engage the President earlier in the process so
we can have a fiscal program that reflects the will of the
people of this country.
I must tell you one of the changes that we made was to have
what is known as a soft landing on the joint resolution. If we
are unable to agree with the President, he vetoes the bill and
we can't override the veto, rather than paralyzing Congress, we
said, okay, we will go back and work on our legislation. So we
are not trying to make Congress weaker, we are trying to make
Congress stronger to give us an opportunity to work more
effectively.
The automatic and continuing resolution is an
acknowledgment that if we need a continuing resolution, we
fail. We fail. We should pass our appropriations bills. The
fact that we provide for automatic continuing resolutions, we
are trying to take the politics out of a gridlock so it is more
likely that we will get our appropriations bills done. If we
know that there is an automatic CR, the likelihood of using it
is more remote because the appropriators want to have their
will. That is their career. They are not going to want a CR to
become law. Knowing that the fall-back is an automatic CR, we
take away penalizing our constituents, and we make it more
likely that Congress, in fact, will succeed.
Our second major objective in addition to increasing the
role of Congress is to work in a true bipartisan way to make
this really a bipartisan product. Here I want to congratulate
Mr. Nussle for the work that he has done. Mr. Nussle has kept
us focused on a bipartisan product. He has taken a lot of lumps
on the Republican side of the aisle in order to keep us
together in a true bipartisan way. I really want to applaud him
in those efforts because there are many times during that
process where I know the pressure he received, and he stood up
to it and said, no, we are going to continue with the
commitment we made.
So first, we have limited the resolution to only deal with
the general budget parameters and the extension of debt if it
is required by the budget resolution. That is all the budget
resolution can deal with.
Secondly, the CR is neutral. It doesn't increase or
decrease. I know that there was a lot of pressure to have it as
a reduction. That would have caused a partisan backlash, and we
stuck true to keep the CR neutral at the current level.
Third, the current budget rules are applied to budget
surpluses, as was interpreted by OMB. We decided not to take on
any real change in the use of the surplus. That was extremely
controversial last year when we talked about ways in which we
could finance additional tax cuts or spending.
When we came up with that recommendation, the surpluses
were nowhere near as large as they are currently being
projected, both on and off-budget surpluses. I helped develop
in our State what is known as spending affordability, and I
think it might be worthwhile for us to look at what we can
afford to spend on new spending or tax cuts as we look at large
surpluses in the future, because I think all of us want to make
sure that those surpluses are real, and it would be very nice
to reduce some debt while we are having a strong economy, and
we may want to look at large surpluses in the future, how we
achieve those surpluses and reduce debt at the same time.
We use the current budget rules on entitlement spending.
There was a lot of pressure to change that particular issue,
and we stuck true to our bipartisan commitment in that regard.
And then on emergency spending, we provided that we would
use the same budget rules as relates to the budget caps on
emergency spending until we adopt new budget spending caps.
And then the third point I want to mention, in addition to
trying to improve the role of Congress in working in a
bipartisan way, we want to make the process more fiscally
accountable. There we adopted many changes. Many are technical,
and I will not go through them, but I will answer any questions
you might have.
On emergency spending, it is ridiculous, it is wrong, so we
developed a way to use a five year average. Mr. Nussle
explained it in the normal budget process to have a new
definition, a true definition of what emergency spending is to
bring the Budget Committee into that process and have some
checks and balances on the way that we handle emergency
spending. It is very timely considering the debate going on on
the floor this week.
And then we developed some accrual accounting. I talk to my
business leaders, and I tell them that the Federal Government
is too small an entity to use accrual accounting. So we start
down the path of doing true accounting, accrual accounting with
insurance programs.
I think these reforms clearly move us in the right
direction. They move to make this institution a stronger
institution. They are truly bipartisan recommendations, and I
am proud to be part of this effort.
Mr. Goss. Thank you, Mr. Cardin. Those are helpful.
[The prepared statement of Mr. Cardin follows:]
[GRAPHIC] [TIFF OMITTED] T7496.026
[GRAPHIC] [TIFF OMITTED] T7496.027
[GRAPHIC] [TIFF OMITTED] T7496.028
Mr. Goss. Mr. Minge.
STATEMENT OF HON. DAVID MINGE, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MINNESOTA
Mr. Minge. I feel all I have to do is sit here between two
giants in the process. I have a statement which has been
circulated. My statement attempted to pick up on two or three
things which I felt that they would neglect to mention. It
turns out that they have mentioned everything.
The only comment I would like to make is that this product
in a way, I believe, represents the best of the types of
efforts that we can produce in Congress.
I have heard the statement quite often, don't let the best
be the enemy of the good, and I would say here let's not let
the best be the enemy of the best from somebody else's group's
perspective. We really have a product which I think is
responsible and credible. Yes, as you indicated earlier, Mr.
Chairman, there are things that each of us would do
differently, I am sure, in some detail if we were the one
solely response for drafting this. I am pleased to be included
in this effort and to be associated with it. I look forward to
its prompt consideration by this committee and on the floor.
[The prepared statement of Mr. Minge follows:]
[GRAPHIC] [TIFF OMITTED] T7496.029
Mr. Goss. I thank you all. I am sorry that we don't have a
fuller committee to see the bipartisan and professional quality
of the testimony and work which has been done on this. A lot of
people have a commitment to it and an understanding of the
subject. It is a refreshing moment.
There are many points of view on this process. We are
hearing them on our side of the aisle and on the other side of
the aisle, and as recently as opening statements this morning
we had a discussion about whether leaving well enough alone is
a better idea than plunging forward.
Obviously the reason that we are not leaving well enough
alone is because we do not think it is very good. We all went
through that last year and decided that--in fact, we didn't
decide, we promised, we pledged to go forward. We filed the
bill last year symbolically before the close of the 105th in
order to ensure our colleagues and the American people that we
were going to try and do better, and I consider this is moving
forward on that promise, and it would not be happening were it
not for you gentlemen and the work that you are doing.
I have a couple of questions, and we are going to hear some
testimony, and these are by way of alerting you to the kinds of
things that we are hearing here. I understand that the
testimony that we are going to be hearing a little later in the
two days of this, is that this measure is going to lead to
increased delays in consideration of the appropriations bills,
undue pressure on the discretionary process of the Federal
budget and have detrimental impacts on Social Security. In
fact, we have already heard some of those statements in some of
the opening remarks. These are the types of things that we are
going to be talking about. Clearly these will be debate-type
items. If any of you wish to comment on any of them now, your
comments are welcome. We can discuss them when we get this
legislation to the floor. I am not concerned. I think we have a
good product.
Mr. Cardin. We cannot do any worse in a delay in
considering the appropriations bills. In the twelve years that
I have been here, I can't tell you how many times we have
passed appropriations bills in a very disorganized way at the
end of a session. Sometimes we have lumped them into one final
vote, as we did last year. It is the wrong way. The current way
is the wrong way to consider it.
Yes, we have had a couple orderly years in my twelve, but
that has been the exception rather than the rule. What we have
proposed is a way that we can have an orderly process between
the executive and legislative branch. It may work, and it may
not. It is possible that we may run into differences that we
cannot resolve early.
I think it is much more likely that we will have an orderly
process with this bill. You can't guarantee that under any
procedure if you have a sharp difference between the executive
and legislative branches of government, but I think the chance
of success are much greater.
On the issue of Social Security, we preserve the current
budget rules on surpluses. Let me repeat that. We preserve the
current
budget rules on surpluses. OMB met with us early and told us
what we were doing was their interpretation of the current
budget rules. I understand that they may have changed some of
their views because budget surpluses are a lot larger than we
anticipated, but there was a lot of pressure on us to change
the budget rules to make it easier for a tax cut and using all
surpluses. We didn't do that.
So I think those criticisms are unfair, and I regret that
people that I admire greatly have raised those issues because I
think it is an effort to not have us discuss the merits of
these proposals.
Mr. Goss. Any further comments?
Mr. Nussle. I would not be surprised if there are those out
there who want to, for their own particular advantage
substantively, I am not talking partisan, because they want to
be able to accomplish something for themselves, their
committee, their own jurisdiction, to try and stick something
in here to gain the outcome, skew it toward one direction or
the other, and that is exactly what we tried to avoid. And this
is more a comment toward the amendment process than anything
else. And I don't know how the Rules Committee will look on
this kind of a bill toward the amendment process, but whether
it is an open rule or whether it is--however it might be
described, I am going to argue that anybody who wants to argue
on technicalities--in other words, the increased delay argument
is one that is a valid discussion. Let's have a discussion on
that, concern about how long the process will take. But to say
substantively it is going to skew the outcome for Social
Security or Medicare or the Aviation Trust Fund or this trust
fund or that trust fund or certain tax cuts, I think, would be
a mistake.
Those who have looked at this can find fault in many areas.
One area that has been brought up is the whole question of the
joint resolution. There are those who are suggesting that this
gives too much power to the President. It is a legitimate
discussion point that we need to have.
But to suggest that it skews the outcome of a substantive
issue before the House today I think would be a mistake, and I
think those experts that have looked at the bill would agree
that it really doesn't game the system.
You may disagree with the way that Congress is approaching
this, and you may disagree with the way--the balance between
the Congress and the President in this instance, but to suggest
that it skews a substantive issue before the House would be a
mistake. There are very few who can hold that argument.
Mr. Minge. I would simply like to point out that on page
17, beginning at line 15 of the bill, there is a point of order
that can be raised by the Senate when the Senate considers the
concurrent resolution, which would compromise the Social
Security program. For those that would like to raise the
specter of the Social Security program being at risk here, I
think this is just one sort of modest example of how this bill
tends to protect Social Security. We should not let that type
of red herring be blown out of--made of whole cloth into
something that someone would consider an issue. It is not.
Mr. Goss. I appreciate your bringing that up. I think it is
current law as well, as you just basically referred to it.
The point of my alerting you is that we all can have a
budget discussion this year or any time soon without talking
about Social Security, or about anything else, not just Social
Security, it seems. So I think we need to be prepared to answer
factually what the provisions are; and I think obviously the
quality of the testimony where you have acknowledged the depth
of this and understanding and fairness among your colleagues
that this is not going to be that kind of a problem.
But it does lead to the question of are we doing the right
thing with bipartisan support on both sides? We are proceeding
to move this legislation on that assumption, and we hope that
is true. I have no reason to believe otherwise, and obviously
those are guesses that we all make in judgments on legislation.
We want this very much to be a bipartisan effort; we are
emphasizing that. The bipartisan nature of the effort that has
gone so far is remarkable, exemplary, I would say, for this
institution.
Mr. Linder.
Mr. Linder. I agree that the later we finish the work, the
more power the executive branch has in getting its way. By
requiring the executive branch's signature on the budget early
on, a lack of agreement between the legislative and executive
branches could presently delay this game and just force
everything late in the season.
Mr. Cardin. Well, understand that the resolution will
contain just very, very broad instructions, broader than our
current resolution, so that if the President vetoes it, he is
vetoing it on a very specific issue; that is, that there is too
much spending or not enough spending, too many tax cuts or not
enough tax cuts. It is going to be on a very broad matter.
If he vetoes it, the Congress has basically one of two
choices. It can work with the President, as we hoped it would,
to resolve this issue so that we can have appropriations bills
that are going to be signed into law that don't have to be
modified later, that we are going to have a tax bill or an
entitlement bill that will be signed into law; or will be
fighting over the policy, not the dollar amounts, and that we
can have a much more intelligent debate in Congress, a more
sincere debate, one which Members are going to spend a lot more
time on because they know it is going to become real.
So I think it makes the whole process work a lot better.
But let us say, if we just have a President and Congress
that are out of step with each other and don't want to work
together for whatever reasons, their political agenda, then we
are basically stuck with the current system; we are not in any
worse shape. Congress goes on and does its work as it does
today. There is no delay. We just move forward, as we would
under the current budget rules.
And then, of course, in the fall of the year, we will have
a problem, but we hope that is not the case. We set up a
process where we can avoid it, but we would know right up front
that there is a disagreement between the President and the
Congress on the size of spending or on the amount of money in
entitlements or taxes.
Mr. Linder. Are you all considering at any point a capital
budget as well as an income and outgo budget?
Mr. Minge. I think that was discussed. I should really let
Jim speak to this, but my--just speaking for myself, one of the
concerns was that the array of things that could be taken up
and the impact it would have on the appropriations process and
the budget process here was vast, and that it made more sense
to do something that we could realistically hope could be
passed by this institution than the more ambitious reform
efforts which, at least in my short experience here, I have
seen flounder and just never carried forward.
Mr. Nussle. I think that is a good answer. It does lead me
to one thing that I did neglect, and that is, you know, there
are many who have given us--and that includes the Rules
Committee--credit for coming up with this, and I would just
suggest that the first thing all of us did was research and
talk to all of the other giants in this institution that have
been concerned about budget reform in the past, including those
that have written legislation on capital budgets and others;
and then we gleaned from all of those people and their bills
the best, or what we consider to be the best that they came up
with.
So, yes, this is an original document that we came up with,
but as happens around here, if you see something good, you
steal it and you make it your own and that is what we have done
here. We have taken--we stand on the shoulders of people who
are no longer in the institution, that have been waiting for
the day to try and make some positive changes; and so, yes, we
considered it, it was part of the hearings.
However, we decided that--at the end, as David said, that
we wanted something that seemed a little bit too drastic. This
was something that could gain the kind of support that we
thought was necessary to move it not only through the House,
but when we were holding these hearings, the Senate. The other
body didn't seem to be as interested in reform, and as you
know, earlier this year they made the commitment to budget
process reform as well. So the realistic chance became much
more realistic, much more prevalent than it had been while we
were writing the bill.
Mr. Linder. Thank you.
Mr. Goss. Mr. Hastings.
Mr. Hastings. I want to follow up on something that John
Linder mentioned regarding the potential for slowing the
process down, and it could be the difference of the markup
between the Congress, the House and the Senate; it is not
confined to the presidency.
Ben, at least you suggested that one of the solutions to
that is having a budget resolution that is very broad, which I
agree, that would be part of the solution. What sort of
incentives do you have in the bill to ensure that it stays
broad, or is it just political will that you would have to go
through to make that happen?
Mr. Cardin. The budget law, if this were to become law, but
the resolution is limited to basically two items. One is the
overall--and I think Jim has a chart that shows the difference.
Mr. Nussle. I will just show you the difference between the
two budgets. This will be the--this is the current budget bill
and the way we currently do it. This will be the new one.
Mr. Hastings. Okay.
Mr. Nussle. We have this in a handout that we give you, so
you don't have to look at the chart. I apologize; there is no
place to put this so everyone can see it.
Mr. Goss. We would like the record to include the handout
as well.
Mr. Nussle. We will do that.
Mr. Cardin. So the point is it is less likely that there
would be a difference between the House and the Senate in
bringing a budget resolution forward than under the current
rules. It is less likely you are going to have a disagreement
between the White House and Congress on a budget resolution. It
still can happen, but it is less likely. And in the event that
you don't reach agreements, you are in no worse shape than you
are today.
What we are trying to do is have a process where we do
reach an agreement, and we think it is more likely that we will
have these issues resolved early. There is enough to fight over
in the budget itself. I mean, I would love to have a good
debate on some of the specifics on the appropriation bills
where not the dollar amounts, but how we actually spend money--
and that would be, I think, a better use of our time than going
through a process where most people say, well, we have to put
this in for leverage for the final negotiations that will take
place in October--September, October between the President and
the Congress.
Mr. Hastings. The only reason I say that, and I recall
having seen this before, but I can see down the line one entity
or the other that is involved in this could then have some sort
of report language that that line item will have--I guess my
concern is, I can see how this can steamroll, and I just wonder
if you discussed that and if there is any way that perhaps you
could reduce those things, other than just political will.
Mr. Cardin. I think it is a very good point. Remember, the
President in signing the resolution would only be signing what
is in the resolution. The President would be fully within his
right to say, look, I am signing this resolution because I
agree with what is in it, but I understand some of the
assumptions that the Budget Committee put in their report that
I can tell you would be very difficult for me ultimately in
agreeing to a bill that carried out that policy.
Mr. Hastings. Suggests that the House or the Senate had
that report language rather than the President.
Mr. Cardin. Right.
Mr. Hastings. I just bring this up--
Mr. Cardin. Remember, we have report language right now in
appropriations bills that do not have the force and effect of
law, so that is a current prerogative of Congress, and it is an
effective way that sometimes we can get different types of
administrators to respond.
Mr. Hastings. Thank you.
Mr. Nussle. This happened in 1997 with the memorandum of
agreement between the Congress and the President. Again, the
aggregate numbers, similar to the ones that I just showed you,
which will be part of the new budget resolution, were agreed
to, but none of the details were agreed to. In fact, many, on
both sides, were able to read whatever they wanted into that,
into that final agreement and say, well, it means we can have
this much for tax relief; well, it really means we can do this
in spending.
What happened was, the normal process then took hold and
eventually we did reach a successful conclusion. But at least
the big discussion, the big aggregate numbers were done ahead
of time.
One other observation I would just make as a member of the
Budget Committee and someone who very much enjoys my membership
on the Budget Committee, after April 15th, we are done, and
from April 15th until the next time the President submits the
budget, we don't have all that much to do on the Budget
Committee; and thankfully, we all have other committee
assignments, to do that work.
I believe that if you pass this kind of an approach, as you
know, OMB and CBO continue the budgeting process throughout the
rest of the year without Members involved. All of a sudden,
almost as a surprise and in a very political document, both the
President and the Congress submit their budgets then the next
year, without any discussion. I mean, unless there is something
to force that discussion, it is just all of a sudden some
mysterious political document that comes down, both sides can
harangue the other, both can say it is dead on arrival, and
then the process really begins.
If you force a bill that needs to be signed in order for it
to be effective, you will see what happened in 1997 where, at
that time, Chairman Kasich and OMB and the chief of staff sat
down--I believe, if I am not mistaken, as early as November;
and this was without any mandate or law to force that--sat down
in November and December of the year prior--of 1996 to begin
working out the details of that memorandum.
And I believe that process you will see begin April 15th;
as soon as that next year's budget passes, you have to start
the process on the next budget. It begins for everyone else; it
should for the Budget Committee and for the Congress as well.
Mr. Hastings. Good. I thank you for your comments on that.
I obviously hope that that is followed in that broadest sense;
I think that is the key.
What you mentioned, Jim, leads to another question that I
have, and that is the whole process of oversight of government
programs. It seems to me that we don't do a very good job. When
you look at the budget process, like you say, the Budget
Committee works hard until April 15th and then they exhaust it,
they go out and we pass it, and then the appropriators do their
job; and finally in October we are totally exhausted, we go
home, and we come back in January and start the process all
over again, and no oversight, really good oversight, exists.
To me, one of the solutions to do that would be a biennial
budget. Did you discuss that at all? Where are you with those
discussions? Is that just one of those--go ahead.
Mr. Nussle. We did discuss it. It was--we received
testimony on that, and to be quite honest, we decided that we
weren't going to pursue a biennial budget. There is nothing in
here that would suggest that you couldn't make this a two year
process as opposed to a one year process, an annual process.
I would agree with you, it may in some instances give more
opportunity for oversight. The converse to that and the reason
we didn't put it in is we felt that it was more of a Senate--it
was something the Senate was obviously very interested in from
Chairman Domenici's standpoint; and from a House perspective,
when you have only a two year term, and as a result, get only
one shot at a budget which the next day is out of--not out of
balance, but almost out of date, certainly by the rest of the
year, whether it is through emergencies or through changes in
our economy, can be out of date--we didn't want to
automatically give it a two year stamp of approval without
having some opportunity to make changes in priorities
throughout the rest of our term in the next year.
So I think for those in the Senate that have a six year
perspective, it is probably a little bit more attractive than
for those of us who have a two year perspective.
I don't disagree that long-term planning can be a part of
that. That is why we adopted a ten year approach to the
numbers, similar to the Senate, so that we can start taking a
more forward look as well as adopting the provisions for
accrual accounting and beginning to test our unfunded
liabilities.
I think that will help in answering your question, but we
didn't--we decided not to put the two year in here until we had
a chance to meet with the Senate and discuss that.
Mr. Minge. The only other comment I would make is, much
like the capital budget, I have heard many people on the
Appropriations Committee say, we don't like this, we don't like
that; and the next thing you know, you have the full committee
organizing on a bipartisan basis to oppose something.
I think we already faced the threat that some of the troops
within Congress on a bipartisan basis, the committees are going
to--it is sort of a delicate balance between what is
politically possible to pass within the institution and what
would be best for us to do. Where that balance is struck each
time is sort of a tough call. But I would certainly compliment
both Jim and Ben for trying to stick within the bounds of what
is realistic.
Mr. Cardin. Let me say that I have no objections to a
biennial budget, but I think in a legislature that meets every
year, it is unlikely that we would do a biennial budget even if
we put it into law. I would think the Appropriations Committee
would probably put out a product every year regardless of what
we try to do with a two year budget. So, as a pragmatic
approach, I think it is one that is not a high priority in what
we are trying to get done, because I am not sure it would be
enforced.
Mr. Hastings. I appreciate the fact that the Senate has
taken a pretty strong position on this. I am one that happens
to believe that it is also good policy, and I can see the
second year for Congress, however, having a number of
supplementals.
I mean, we have annual budgets. How many supplementals do
we have floating around and potentially another one coming up?
So we have a lot of supplementals under any case, but it at
least puts you in a position that all political parties at one
time or another would not be faced with a government shutdown
in an election year where you really turn over at that point
all of the power to the presidency, no matter who is in power,
if you have a disagreement; and it seems to me a biennial
budget would be one way to resolve that, because you work it
out as much as you can in the first year, and the supplemental
in the second year.
Thank you.
Mr. Nussle. In some respects, that is what we did last
year. We basically kept the budget in force because we didn't
have a budget. So you almost saw last year what a two year
budget was like. I am not suggesting it was; I am just saying
that the budget kept its effect. And so you can do it, but I
think the fact that we have never gotten the numbers right--and
it is no reflection on CBO or OMB or anybody; it is impossible
to forecast as big as we are, and so getting it right for 1
year I think is something we ought to try and do first. You
know, let's walk before we run.
But 2 years is a possibility, although we don't include
that under what we have written.
Mr. Hastings. I suspect the Senate, their position will be
that that is something that we talk about. So thank you.
Mr. Goss. Mr. Sessions.
Mr. Sessions. Thank you, Mr. Chairman.
Ben, I would like to go first to a question to you to make
sure I understand. You said that the CR would be neutral if we
were unable to agree. That means that you take which year's--
Mr. Cardin. Last year's.
Mr. Sessions. The prior year. So you just take the prior
year and keep moving forward until we are able to--
Mr. Cardin. Right. There are some who think that there
should be an inflator to it, some who think there should be an
automatic reduction. By using neutral, we took last year's
number without an deflator or inflator.
Mr. Sessions. The last one that had presumably been
utilized and agreed to?
Mr. Cardin. Correct.
Mr. Sessions. And that just automatically happens and does
not require any act of Congress, the President knows it, we
know it?
Mr. Cardin. Right. There is no new appropriation bill
enacted into law, that is passed by the Congress and signed by
the President; and then it would be an automatic continuation
of the current budget.
Mr. Sessions. The reason why I asked this is because I
believe last year we were unclear as to really what would
happen and what needs to take place to avoid shutting down the
government, at least some suggestions that I had.
I would like to direct some of my questions, and I will
confess to you I have not read the bill yet. Do we have a copy?
Mr. Goss. Yes. Do you want it?
Mr. Sessions. Do we have one?
Oh, that is theirs? Okay. It sure is. Excuse me, I thought
that was the prior testimony.
Do you talk anywhere in this budget about scoring dynamic
versus static and make any changes?
Mr. Nussle. No.
Mr. Sessions. No?
Mr. Nussle. No.
Mr. Sessions. Okay.
Mr. Nussle. Just if I could comment on that, that has been
an oversight purview of the Budget Committee as an unsettled
issue; and it is one that, as you know, is somewhat contentious
between the parties, or has been contentious, and we wanted to
avoid that, again in the name of bipartisanship.
Mr. Sessions. Okay. Do you anywhere in here--and it kind of
goes back to Ben's comments, which I do agree with, about
having the legislative branch have some say in how the money
will be spent--do you in any sense talk about walling off
money? I looked at your charts that are here, and it looks
like, look, this is a budget resolution we will worry about
when things are actually appropriated.
But do you in any way talk about the walling off of money,
because I think in particular, it has caused--
Mr. Minge. Walling off money for what?
Mr. Sessions. Well, for instance, let's suppose--and we
could take current circumstances with the war--there was a
question about what the President used money for, where he got
the money to do things. Is there a provision for tightening up?
Really, Congressman Cardin, I am going on your comments.
Mr. Cardin. Right. Well, we do have the lockbox provision
which has been passed by this House on several occasions on a
bipartisan vote.
Mr. Sessions. For Social Security?
Mr. Cardin. No, no, lockbox for cuts that we make in
appropriations bills that we don't want to just get recycled,
that it would be actually used to reduce the deficit. We do
provide for that provision. I think Mr. Minge was very actively
involved in the development of that proposal.
As far as the legal use of money, we have not changed the
definition of how appropriated funds can be used, but there are
certain legal restrictions today on how monies that are
appropriated for one purpose can be used for any other purpose
other than what it was appropriated for. Whether we need to
look at enforcing that is a good question.
You raise a very good question on that, but I think all of
us who served on this task force would like to see appropriated
monies used for their intended purposes and would support
efforts that you might want to look at.
Mr. Sessions. Does it say that in here or reinforce that in
any way? Did you address that really is my question.
Mr. Cardin. No. It was not brought to our attention. We did
not take a look at it, but I think we share your concern that
appropriated monies be used for its intended purposes.
Mr. Sessions. And only for that intended purpose?
Mr. Cardin. Correct.
Mr. Sessions. Good. I thank the Chairman.
Mr. Goss. Ms. Pryce.
Ms. Pryce. Thank you, Mr. Chairman. I am sorry I missed
most of the substantive testimony. I just had one quick
question. The CR, is that similar to the Gekas proposal?
Mr. Nussle. Almost identical. I would hate to say it was
identical without matching it, but it is almost identical
language, yes; and Mr. Gekas knows about that and has been
supportive in putting that provision into our legislation.
Ms. Pryce. I had long thought that he had a great idea, and
I am glad that you incorporated it.
I have no other questions. Thank you for your hard work.
Mr. Goss. To be completely fair, I think there is also a
provision in this bill identical to the Crapo and Harman lock-
box.
Mr. Nussle. Yes. The problem is, we have gleaned so much,
so much of this has been gleaned from others that have worked
so hard. So we must make sure we give credit where credit is
due.
Mr. Goss. One of the reasons we are trying to bring this to
a conclusion and pass legislation at this point is, we do feel
we have had a lot of good testimony over the years, a lot of
good ideas, and the time has come to pass it, take it out and
see how we go.
Along the line of Doc Hastings' question, I would just
point out that I was very much impressed that when I read the
compilation in Title IV, the accountability and the incentives
to start getting order into the process, as Mr. Cardin has
stated, but particularly the 401 provision, the fixed year
authorization request, and then the ten year congressional
review and the continuing additional budget process reforms, I
mean all of these things go to bringing order to a process now.
I think that the debate frankly is going to boil down to,
do you want order or do you want political flexibility? And I
think the institution is better served by a little more order
in this area, so I think that is what we should shoot for.
I want to thank you all very much. This is a very
distinguished panel and we are going to count very much on your
participation as we move along. Thank you all.
We have had reference to giants in the testimony we just
had, and we have written testimony from one of those giants,
Former Member Bill Frenzel, the cochairman for the Committee
for a Responsible Federal Budget. Without objection, I am going
to submit his full statement for the record.
[The prepared statement of Mr. Frenzel follows:]
[GRAPHIC] [TIFF OMITTED] T7496.030
[GRAPHIC] [TIFF OMITTED] T7496.031
[GRAPHIC] [TIFF OMITTED] T7496.032
Mr. Goss. At this time, Chairman Linder is going to call
the next witness.
Mr. Linder. [Presiding.] Dr. Irving, welcome. We are
pleased to have you here.
Dr. Susan J. Irving from the General Accounting Office
oversees work on the structure of the Federal budget, the
budget process, the U.S. fiscal position, and related issues.
Dr. Irving has served as a Legislative Assistant and
Legislative Director to members of the Senate Finance
Committee, as Staff Director to the President's Council of
Economic Advisers in the Executive Office of the President, and
as Vice President of the Committee for a Responsible Federal
Budget. Dr. Irving was a Fellow at Harvard's Institute of
Politics and has taught public management at the John F.
Kennedy School of Government at Harvard University.
Welcome.
STATEMENT OF DR. SUSAN J. IRVING, ASSOCIATE DIRECTOR FOR
FEDERAL BUDGET ISSUES, GENERAL ACCOUNTING OFFICE
Ms. Irving. Thank you. It is a pleasure to be back. In
fact, attached to the back of my written formal statement,
which I would like included in the record, is a list of a
number of testimonies I have presented here or in the Senate or
House Budget Committees dealing with the budget process. We
have gone through several years of looking at issues around
this process.
I think it is really important to start this discussion
with the recognition of how important the budget process is. In
some ways, it is one of the most important things all of you
do, because it is through the budget debate that you make
decisions, with the President, about how to juggle and balance
the sometimes conflicting desires of the American people about
how much of the wealth we produce in the country shall be used
collectively for goals that we can only reach together, and in
what form it should be collected and in what form it should be
spent.
It is not really a surprise that it takes you some time to
think about how to restructure the process, because it is so
important. It is also because it is so important that we ask a
great deal from that process, and it is never going to measure
up in every way to make everybody happy.
On the other hand, you now face a very different situation
than you faced in the last decade when the process was last
changed greatly. It is important to remember the 1974 act was
designed to be outcome-neutral. The goal was to reassert the
role of the Congress vis-a-vis the President. Remember, in
1974, we were only five years away from our last balanced
budget, so deficit reduction didn't look like a big issue for
the process. It was not until the mid-1980s that the process
was rewritten with an eye toward achievement of a particular
goal, a goal you have now reached.
So for the first time we look at an interesting mix of
outlooks. We have budget projections for a surplus as far as
the eye can see beyond our normal projection period, combined
with the certainty that, absent policy changes you will be
faced with a demographic tidal wave which will overwhelm those
surpluses.
So what do you want your budget process to do? You want it
to allow you to look at the long term, to think about the
trade-offs and the big drivers, and to think of that not solely
in terms of the ones we think of as long-term commitments--not
just Social Security and Medicare--but also other issues. For
example, the decision to be the world's superpower carries with
it some long-term cost implications that we sometimes fall into
the trap of pretending are annual decisions.
We like a budget process that gives you all the information
and structure to consider trade-offs. Should we spend more or
invest more on consumption? You would like to be able to make
trade-offs between missions and tools, and you would like a
process that is enforceable and permits you to control results,
hold all of us accountable, and at the same time is
transparent. These are not consistent goals.
I would like to focus specifically today on the two
elements of the bill before us which we had a fair amount to do
with developing. One is its focus on the very long term, and
the second is its approach to budgeting for insurance. I have
some technical comments on some other parts of the bill in the
written statement, and we would be happy to continue to work
with your staff as you move ahead in markup.
The focus on the long term has long been an interest of the
General Accounting Office. Indeed, in 1992, we were the first
of your support agencies to do some modeling, looking out 50
years at what would happen if you imagined a computer that
could just make the budget keep going, but you allowed some
interaction with the economy. Now, this is an unrealistic set
of assumptions--let me be clear about that--and sure enough, it
showed you couldn't do it. The world explodes.
What we see if you update the model to reflect the current
situation which we have done periodically at the request of
various Members, is that the combination of a good economy and
some very tough decisions by all of you has, in fact,
dramatically changed the situation. But we still face an
unsustainable long-term fiscal policy, and I think the benefit
of the provision in this bill to look out over the very long
term for everything is that it permits all of you to look ahead
and see what are implied commitments, what the budget looks
like as a whold, not just parts in isolation.
The Social Security Trustees' report tells you what Social
Security looks like. They do a very good job of telling you the
system has a problem on its own terms, but they do not in the
Trustees' report tell you what happens if you fix it on its own
terms to the rest of the budget, to the economy.
We have a great many programs where we don't look out that
far because we feel ourselves limited to things where we can
measure precisely, and no 75-year projection would be better
than giving you a sense of direction and order of magnitude.
But I think this is critically important as you begin to look
further and further ahead and make more and more commitments
that, in fact, have long-term implications.
I would like to talk a little more specifically about
insurance. For a lot of reasons having to do with control, we
use what is loosely referred to as a cash-based budget. Cash is
harder to game, you can count it and frankly, the difference
between accrual and cash for things like your salary and my
salary is trivial. But we discovered in the 1980s that for
credit, the difference between cash and accrual was a dramatic
difference. The budget in the 1980s showed a direct loan just
like a grant. All the money went out and we ignored that it
would be repaid. Conversely, loan guarantees looked free; you
could put any loan guarantee you wanted in the budget, and it
was free. The fact that some of those would be defaulted and
money would flow out later, well, that was the future, somebody
else's problem.
So in 1990, as part of the Budget Enforcement Act, you all
enacted the Credit Reform Act, and we now try to look at the
estimate of what the government is actually on the hook for in
credit programs: what is the subsidy. These estimates are not
great, but they are a lot better than what we used to do.
Insurance is harder. Right now the Pension Benefit
Guarantee Corporation looks like a cash generator to the
Federal Government. It is a profit center, because we count the
premiums that come in on a cash basis, and in the years we
don't have to pay out, it doesn't look like it costs us any
money. I would suggest there is almost no plausible scenario
under which, over the long term, PBGC is a profit center, it is
not set up to be a profit center; and it makes much more sense
for us to begin to think about the insurance commitment the
Federal Government is making when it issues insurance.
What kind of risk are we assuming for the Federal budget?
In the abstract, a model that is almost exactly based on credit
makes a lot of sense. The problem is, we know how to do it for
credit--not very well, but we know how to do it. There is lots
of experience out there with estimating loss ratios. We can
look at cohorts, you know, one group alone versus another,
until it makes sense.
Insurance is a lot harder to model. And an accounting
analogy doesn't work precisely. So the approach taken in this
bill has a lot to recommend it.
There is a fairly slow phase-in period during which OMB and
CBO are required to attempt to do the numbers, to display them
as additional information. It requires that OMB, CBO and GAO
comment on progress. It sets FY 2006 as a date certain for
putting those into real budget numbers. I presume that is to
create a huge incentive for the agencies to get it right.
However, I think there are problems with a two-year sunset.
It puts insurance in for 2006 and it triggers off at the end of
2007. I think you may wish a sunset, that is, you may wish a
trial period at which point Congress votes explicitly on
whether they think this is working, but I think 2 years is
probably too short.
Those are the two areas of this bill on which your staff
asked me to focus. I will be glad to answer any questions you
may have.
[The prepared statement of Ms. Irving follows:]
[GRAPHIC] [TIFF OMITTED] T7496.033
[GRAPHIC] [TIFF OMITTED] T7496.034
[GRAPHIC] [TIFF OMITTED] T7496.035
[GRAPHIC] [TIFF OMITTED] T7496.036
[GRAPHIC] [TIFF OMITTED] T7496.037
[GRAPHIC] [TIFF OMITTED] T7496.038
[GRAPHIC] [TIFF OMITTED] T7496.039
[GRAPHIC] [TIFF OMITTED] T7496.040
[GRAPHIC] [TIFF OMITTED] T7496.041
[GRAPHIC] [TIFF OMITTED] T7496.042
[GRAPHIC] [TIFF OMITTED] T7496.043
[GRAPHIC] [TIFF OMITTED] T7496.044
[GRAPHIC] [TIFF OMITTED] T7496.045
Mr. Linder. Just the fact that we are looking at long-term
potential liabilities is a plus. Do you have a number at GAO in
terms of what our underfunded liabilities are with respect to
retirement programs?
Ms. Irving. The answer on the Federal is, we can find it. I
don't have it off the top of my head.
Mr. Linder. We have had numbers bandied around here for
years of 6 to 12 trillion.
Ms. Irving. Many estimates are made using different
assumptions. Some estimates of Social Security are based on a,
closed system, which assumes you are getting no new entrants.
Those numbers tend to be the highest.
I know there is a debate in the community of people who are
interested in improving the numbers. I think using huge scary
numbers makes it worse. I think it is better to look
realistically at the fact that you have some pension
liabilities that you know how to count, and Social Security,
which is sort of a different animal, and then you have sort of
the implied commitments that we don't know how to account for:
deposit insurance, some of the other insurance programs.
Let me be clear. The numbers that you would use under risk
assumed will probably be wrong, but they will at least be in
the right direction. I mean, I don't think it matters if it is
ten when it really should be twelve, but it matters if it is
plus three when it should be minus five.
But I will get you what we have on that, sir.
Mr. Linder. The question was raised earlier, by Mr.
Sessions I think, about dynamic versus static scoring; and my
understanding that is not a legislative solution, that is a
solution determined by the various agencies that do estimating
based on their best judgment. But we learned, I think, a pretty
big lesson on the cuts in capital gains taxes that brought
dramatic increases in revenues. You see nations since 1984 to
1996, Caribbean nations, dramatically cutting marginal tax
rates, increasing their revenues. We have had some experience
here with that.
Are we moving toward more dynamic scoring, a more honest
assessment of the tax burden that we impose on business and
individuals? Does it have an impact on the future size of the
economy?
Ms. Irving. The discussion of "dynamic" versus what is
misleadingly called "static scoring" I think is often a
misleading discussion because we fall into the trap of
implicitly accusing CBO and Treasury of doing really static
scoring. Really static estimates would be--to use a really bad
example--taking a 50 cent cigarette tax per pack and,
multiplying it by the number of cigarette packs bought last
year to get a revenue estimate. No one does that kind of static
scoring. Estimators would assume that there will be a reduction
in the number of cigarette packages bought, so that, to that
extent, what I would call "first order effects" are generally
taken into account.
In terms of the longer-term issues or the broader issues of
impact on the economy, there are of course two sides of this
issue. It is mostly raised in terms of tax cuts, but there are
a great many people out there who believe that there are some
spending increases that also should be scored dynamically once
you start down that road.
In addition, capital gains is a really interesting one
because the other way to get an increase in capital gains
receipts is to announce a prospective capital gains rate
increase. We know that if you enacted a tax increase for two
years from today, you would get dramatic realizations over the
next two years. One of the issues in other countries is that in
many of the countries where you see dramatic responses from
changes in tax burdens, their tax burdens are so much higher
than the ones we are discussing now, and these things tend to
have decreasing marginal impact. There is a real difference
going from a 90 percent tax rate to a 50 percent, compared from
going from 50 to 40. For most estimators it feels like a
slippery slope when one person calls up an amendment saying it
will generate investment and another person says, "Oh, but if
it is spent on airports, we will get more."
CBO did an interesting paper on this about two years ago.
I am glad to say at GAO one hard and fast rule is, we don't
score. You don't need a third set of numbers.
Mr. Linder. We may have some questions submitted to you
later for your review.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T7496.046
[GRAPHIC] [TIFF OMITTED] T7496.047
[GRAPHIC] [TIFF OMITTED] T7496.048
Mr. Linder. Mr. Hastings.
Mr. Hastings. I just wanted to understand what you were
saying about long-term planning and forecasting. The two
obvious ones of course are Medicare and Social Security. The
assumption is that there will be no changes, but if there are
some changes, then of course the dynamics will change.
Give me some examples of other long-term commitments that
we have that we don't address fully. I think I heard you say
that we don't do a good enough job on that, so give me some
examples of that.
Ms. Irving. Social Security and Medicare are obviously the
800-pound whatever you want to call them in the budget, and
they are the ones that would have the greatest effect on the
macroeconomy. In terms of choices within the government, we do
a mixed bag on our Federal pension obligations; that is, we
have begun to include them within the budget to recognize those
cost estimates. I think even though we write insurance
contracts as one year contracts sometimes, I think it defies
belief to think of flood insurance as a one year commitment and
renew it every year. So I think it would make much more sense
to think about most insurance programs as long-term
commitments, and we don't. We just show those on a cash basis.
I also think that there is this interest--the reason I like
the idea of the broad budget as a whole simulation out for 75
years, making some assumptions about discretionary, is that
there are an awful lot of things that are in fact annually
appropriated, but are de facto long-term commitments.
We need to take into account our role in the world. We may
change how much we spend on defense every year, but we are
never going to go to a tiny defense budget. We are not going to
give up our role in the world as a leading power.
I think it is unlikely we will shut down the FBI or the
Justice Department or the Immigration and Naturalization
Service, and yet by modeling only the long-term legal
commitments, we pretend those are annual decisions that could
be as low as zero.
One of the things I think is a good idea in this bill is
showing long-term estimates for the budget as a whole. It is
not that the numbers are right, but it gives you some rough
idea of what the size of it would look like and how the
composition would change if you just kept everything even.
Do not misunderstand me. These are not real estimates;
these are order of magnitude and progression and scope, context
providers.
Mr. Hastings. Projecting into the future is an inexact
science. If anybody here could do that with some certainty, we
wouldn't be sitting here.
Ms. Irving. Exactly.
Mr. Hastings. Thank you very much.
Mr. Linder. Mr. Sessions.
Mr. Sessions. Thank you, Mr. Chairman. I probably would be
sitting here and we would be in trouble if we could project
that.
I note at the very beginning that I am impressed with not
only your testimony, but also that you serve on the Board of
Directors for The Concord Coalition. I admire that--
Mr. Linder. You have the wrong one.
Mr. Sessions. You are not Martha Phillips? I am just having
a tough day. This is what happens when you have your staff guy
not here. There is nothing wrong with me.
That is what struck me that I was going to go into because
I have, following along with what Mr. Linder said, I heard your
discussion and debate that you had about what I thought was
very interesting, that John followed up on, where I was talking
about the circumstance where we have a tax cut and it raises
revenue rather than costing money; and I was interested that
you turned that around where you almost wanted to turn us into
tax collectors, rather than being for the taxpayer.
Ms. Irving. Actually, I am glad you raised that. If I--
Mr. Sessions. Well, I heard you say, as a matter of fact,
since you are interested in revenue, if you are going to raise
taxes, you get more money.
Ms. Irving. Well, but I was pointing out--
Mr. Sessions. That is why I found it interesting.
Ms. Irving. I can understand it. I was actually attempting
only to make an analytic point: if the question about dynamic
scoring was that someone had scored a capital gains tax cut as
losing money, and then the next year it brought in more money--
Mr. Sessions. And that did happen.
Ms. Irving. Yes, I was trying to say that it is also true
that that does not, in and of itself, tell you that a capital
gains tax is a good or bad idea.
Mr. Sessions. Why is that?
Ms. Irving. Because if your reason for supporting a capital
gains tax cut was that you were going to get more revenue the
next year, that would also be true if you announced a future
raise.
Mr. Sessions. But why would we turn this Republican
Congress into tax collectors when we are the opposite?
Ms. Irving. Well, Mr. Sessions--
Mr. Sessions. It is not to get revenue.
Ms. Irving. But I presume that the reason to advocate a cut
in capital gains taxes is not because it produces more revenue
the next year, but because you think it does something for the
economy. The analytic question I was presented with was really
a multiplication issue.
Mr. Sessions. Here is why we would, because we could do it
without having to pay for it. Yes, it does produce all of those
things, but we are really not doing it to produce revenue. We
want it to be neutral.
Ms. Irving. Mr. Sessions, I was presented with the
arithmetic statement that pushing this button gets you this
much more revenue; I was merely saying that you also get more
money by pushing a different button. Therefore the debate
between those two buttons is a debate broader than whether you
get more revenue; it is a debate having to do with what would
be an appropriate tax level.
Mr. Sessions. That would lead us to the next question.
There is an estimate that 62 percent of taxes in this country
will be paid by 1 percent of the tax--of the citizens.
Mr. Linder. Thirty-three. The top one percent pay 33
percent of the taxes.
Mr. Sessions. The figure I have seen is 62 percent will pay
one percent of the taxes this year.
Mr. Linder. I think the numbers are wrong. I think the
number is the top one percent.
Mr. Sessions. Well, let's say that I can produce something
that says that, and I can get it sent over here; regardless of
whether I am right or wrong, would your philosophy be that we
should have 40 percent, 30 percent, or 1 percent of people in
this country paying taxes?
Ms. Irving. Mr. Sessions, except as a private citizen, I
would not have a philosophy on that issue. There is a very
clear line--
Mr. Sessions. But you are an economist. I am not trying to
attack you at all.
Ms. Irving. Actually, my degree is in public policy, which
is a mixture of economics and government. But there isn't an
analytically single right answer to that number; it is
fundamentally a value and a policy call.
I don't have a view on that as an analyst. That is a
decision about the appropriate tax structure for the United
States, which is appropriately a decision for our elected
representatives to make.
Mr. Sessions. Well, what is interesting is that we don't
even know what the correct answer is.
Ms. Irving. That actually is probably an answer Treasury
could give you.
Mr. Linder. The numbers I have seen, the bottom 50 percent
of the income earners pay about four percent of the taxes. The
top one percent pay 32.5.
Mr. Sessions. Thank you.
Mr. Linder. Thank you very much.
Ms. Irving. Thank you.
Mr. Linder. Our last panel this morning is comprised of
Professor Tim Muris, Martha Phillips and Robert Greenstein.
Ms. Phillips is a member of the Board of Directors of The
Concord Coalition, a bipartisan, nationwide grass-roots
organization founded by former Senators Warren Rudman and Paul
Tsongas. She served as the Executive Director during the
Coalition's first six years, October 1992 to 1998. Ms. Phillips
is also currently a member of the Medicare Advisory Committee
of the National Academy of Social Insurance; the Advisory Board
of The Brookings Institution's Economic Studies Program; and
the Advisory Committee of the Commonwealth Fund's Program on
Advancing the Well-Being of Elderly People.
Before joining Concord, Ms. Phillips was a Republican Staff
Director for the House Committee on the Budget from 1986
through 1992. From 1977 through 1985, Ms. Phillips was the
Deputy Minority Staff Director of the House Ways and Means
Committee, where she also served as Staff Liaison to the Budget
Committee. From 1974 to 1976 she was the Staff Director of the
Republican Policy Committee, and from 1969 to 1973 she worked
for the House Republican Research Committee, where she served
as the Committee Staff Director as well as staff to several
task forces. Prior to that, she worked for the U.S. Office of
Education and for Representative Melvin Laird.
Mr. Greenstein is the Founder and Executive Director of the
Center for Budget and Policy Priorities. Considered an expert
on the Federal budget and, in particular, the impact of the
taxing budget proposals on low-income people, Mr. Greenstein
has written numerous reports, analyses, op-ed pieces and
magazine articles on poverty-related issues. He appears on
national television news and public affairs programs and is
frequently asked to testify on Capitol Hill.
In 1996, Greenstein was awarded a MacArthur Fellowship. The
MacArthur Foundation cited Greenstein for making the Center "a
model for a nonpartisan research of policy organization." In
1994, he was appointed by President Clinton to serve on the
Bipartisan Commission on Entitlement and Tax Reform.
Prior to founding the Center, Greenstein was Administrator
of the Food and Nutrition Service at the U.S. Department of
Agriculture, where he directed the agency that operates the
Federal food assistance programs with a staff of 2,500 and a
budget of $15 million.
Mr. Greenstein received his undergraduate degree from
Harvard and has done graduate work at the University of
California, Berkeley. In May of 1991, Mr. Greenstein received
one of the six Public Achievement Awards awarded by Common
Cause. In 1995 he was one of the two recipients from the Center
on Law and Social Policy's 25th Anniversary.
Professor Muris has been teaching law at George Mason
University since 1988 after serving three years as Executive
Associate Director of the Office of Management and Budget.
Prior to that he served in various capacities at the U.S.
Federal Trade Commission and in the office of the Vice
President. He has also taught at the University of Miami and
was the Law and Economics Fellow at the University of Chicago
School of Law.
You all have been very busy, and I am tired.
STATEMENTS OF MARTHA PHILLIPS, THE CONCORD COALITION; PROFESSOR
TIM MURIS, GEORGE MASON SCHOOL OF LAW; AND ROBERT GREENSTEIN,
CENTER FOR BUDGET AND POLICY PRIORITIES
Mr. Linder. Please begin, Ms. Phillips.
STATEMENT OF MARTHA PHILLIPS
Ms. Phillips. Thank you. I am pleased to be here today on
behalf of The Concord Coalition in support of this bill. We
commend the bill's sponsors for this set of proposed reforms.
Some people look at a bill and think the glass is half
full; others say it is half empty. We think that although there
are some things that we might change in this bill, on balance,
it is a very useful piece of legislation. The Concord Coalition
is pleased to support it and pleased also that it has been
developed on a bipartisan basis.
The budget process no longer focuses on reducing or
eliminating gaping economically damaging deficits, so the
central problem is maintaining sufficient control to prevent
the off-budget Social Security surpluses from being diverted to
other purposes in the name of emergencies or just good old
fashioned pork and to prevent temporary surpluses in the rest
of the government accounts from being used as down payments on
expensive, long-term commitments that will continue long after
those surpluses disappear.
A second problem that this bill really doesn't touch on is
the need to act very soon to prepare for the retirement of the
baby boom generation. As previous witnesses have said, we know
it is coming and we have to get ready. At least this bill
provides a foundation to help us get ready, although it doesn't
directly deal with it.
The last Congress gave us several examples of what is wrong
with the budget process and what needs to be fixed: the costly
and appalling end-game bargaining--which really is a budgetary
game of chicken rather than a deliberate, careful allocation of
taxpayers' hard-earned dollars, the emergency provision abuses,
the tendency of Congress to expand entitlements or even create
new ones, whether on the tax side of the ledger or on the
spending side, and the failure to recognize long-term unfunded
liabilities.
The bill proposes several changes to address these
problems. Concord likes changing from a concurrent resolution
to a joint resolution. We think that makes a lot of sense.
Realistically, however, the bill anticipates that sometimes a
joint resolution might not be possible, to achieve, and so it
provides fallback of a concurrent resolution.
I very much like the idea of streamlining the budget
resolution to get away from what, frankly, are sort of hokey 20
functional categories are not very useful. It is kind of
interesting to go through the tables and look at the functions,
but they do not have anything to do with enforcement later in
the game. Each functional category is a mixture of credit,
mandatory, discretionary, all mixed up. While it is useful to
have that information, it is not an enforcement tool.
So pare back the budget resolution to the things that
really count, which are the big aggregates--spending, taxes,
deficits and debt, or surpluses; and then your control areas--
entitlements or mandatory, whatever you want to call it;
defense, nondefense, and then this new idea of creating an
emergency fund. I think that makes a lot of sense.
I agree with those who say it will take a little longer
perhaps to reach agreement on a joint resolution. Even getting
both ends of Pennsylvania Avenue to agree only on how much
spending, and how much revenue there should be might not be
done quickly. Therefore, Concord would favor a two year
process. When a new Congress comes in, produce one budget plan
at a summit at the beginning of the two year cycle; decide on
what the aggregates are going to be. You can still have an
annual appropriations sequence if you want to within that
framework, but once every two years is often enough to produce
a budget plan.
One thing for sure is, that a two year cycle would cut in
half the chances for fiscal mischief. You would have the budget
resolution locked in, and it would run for the duration of the
Congress. So I wouldn't dismiss the two year budget out of
hand.
I very much like the automatic CR. It changes the "or else"
from one that says, "or else we will close down the government
and blame it on you," to one that says, "or else you are going
to be stuck with last year's level."
Frankly, there are going to be people who want more money
than last year for this and less money than last year for that,
and they are going to be stuck with last year's level if they
ca not get an agreement. From a taxpayer's point of view and
the perspective of people who need government services, being
stuck with last year's level is a lot better than some of the
things that we have witnessed in recent years either with
government close-downs or the gluttony of $24 billion of
emergency spending, most of which is not emergency, but merely
the price that has to be paid to get out of town. An automatic
CR avoids all of that.
I would suggest, though, that you might want to change the
language when you set the automatic CR at last year's level not
to count last year's emergency appropriations. If you had the
proposed automatic CR this fall, for example, you would be
stuck with last year's level, including most of that $24
billion. So you might want to redefine that when you make up
the bill.
Abuse of the emergency procedures has become the most
egregious and flagrant disregard of the spirit of the budget
process that there is. This loophole has become large enough to
accommodate not only a Mack truck or a Sherman tank, but even
an entire bachelor enlisted housing complex at a base in
Bahrain. This is not the way to go.
There are two problems with emergency spending, an old one
and a newer one. The old one is that we pretend we aren't going
to have any emergencies next year, and so we don't appropriate
any--or very much--money for them to occur. That is ridiculous.
Scarcely a year goes by without a catastrophic fire, flood,
drought, earthquake, tornado, hurricane somewhere in the
Nation; and in America, we respond by helping the victims.
But rather than setting aside sufficient funds in advance
in the Appropriations Committee through the appropriations
process, we give disaster relief just the smallest maintenance
diet; spend all the rest of the money that is allowed under the
cap on other, higher priorities; and then when emergencies
happen, say, "oh, my gosh, this is an emergency; we have to
have still more money." Part of this is happening because the
caps are so tight and you need this money for other things, so
you spend it on other things, and then you have nothing left
for legitimate emergencies.
So Concord likes the idea of peeling back out of the
discretionary cap an emergency reserve fund. How much? I think
the rolling five year average is as good as you are going to
get. Then you put some definitions on when the resources can be
released. If there is an emergency, then an allocation goes to
the Appropriations Committee or the other appropriate
committees, and the resources are released. That would help
deal with the more recent budget hypocrisy, which is the newer
problem of just adding on emergency spending because the caps
are too tight.
That is simply what is going on. We really need to deal
with this emergency procedure.
The temptation to create new entitlements or tax
expenditures, or expand existing ones is much greater now that
everybody thinks we have surpluses--the politicians, the press
and the public. We have money to spend, so why can't we have
entitlements? Concord Coalition believes that these permanent
taxes on future resources are the chief budget problem.
Appropriations are subject to limits called "caps," and
spending for appropriated programs has to be debated each year;
programs have to compete to justify their share of the pie.
Entitlements don't have to go through this process. They
have been likened to appropriated programs that have died and
gone to heaven. They just automatically get their money, even
if you couldn't justify them in light of today's priorities.
The bill attempts to address this situation by subjecting
new entitlements to annual appropriations. They would be
annually appropriated. The bill would bar enactment of new
entitlements lasting longer than 10 years. It would require
oversight review of all programs, including existing
entitlements, at least every decade. And it would require 10-
year cost estimates to give an idea of where an entitlement is
going. Finally, it would encourage reductions in existing
entitlements by permitting the resulting savings to increase
discretionary appropriations.
Ms. Phillips. Regarding this last point, we would oppose
the reverse, i.e., letting reductions in discretionary spending
be used to pay for entitlement increases or be used to pay for
tax cuts. Your former colleague Bill Frenzel, who was the
Ranking Republican on the Budget Committee, used to remind me
that "tax cuts are forever, but discretionary cuts last only
until the next supplemental." So you are making a trade-off.
You go back and revisit discretionary decisions every single
year, and in the meanwhile continue to spend money on a
permanent commitment even when the savings may long since have
disappeared.
Spending the surplus is the really big new issue in front
of us and why I think this bill is particularly well designed
to grapple with this issue.
It is too tempting in an era of perceived surpluses to
create new entitlements and enact tax cuts. The Concord
Coalition believes that surpluses attributable to the Social
Security Program should be reserved for that program. They
should not be diverted to routine spending or used to pay for
tax cuts.
But what about surpluses in the rest of the government's
accounts? Here again, Concord strongly favors using the rest of
government surpluses to reduce the public debt.
With the retirement of the baby boom generation looming
only a decade off, having as small as possible a public debt
will make it easier to cope with the enormous strains that our
economy is going to face when that happens.
Second of all, reducing the debt frees money for private
investment in things that will make us more productive, and as
you saw on the business page of the Post this morning,
productivity is where we get our higher wages and higher
standard of living without setting off a round of inflation.
When the boomers retire, for each young person coming into
the work force you are going to have somebody leaving for
retirement. You are going to need all of the productivity
increases you can get because you are not going to be enlarging
the size of your work force.
There has been some question whether the pay-as-you-go
discipline on tax cuts and entitlement increases would apply
when you have surpluses in the rest of the government. There
have been letters from officials saying "yes", letters saying
"no", letters saying, "we are not quite sure." H.R. 853 makes
clear that pay-go still applies when there are surpluses. That
is a good thing.
However, the bill would permit those surpluses to be added
to the pay-go scorecard, and you could use those surpluses in
the rest of the government accounts. One of Concord's concerns
is that although we admit that this is a valid debate and there
may be some things that you want to use surpluses for, like
government investment in productivity (I am not sure that there
are such things, but it is possible), also you could use
surpluses to establish discretionary caps at higher levels than
the freeze level allowed in this bill, which is unrealistically
low.
Surpluses could be used, and here is one that I would
probably favor: to prefund our obligations to pay Social
Security and Medicare when the boomers retire. That would be a
very responsible thing to do. But we are concerned that you
would use the rest of government surpluses to fund long-term,
virtually eternal commitments, maybe prescription drug coverage
for everybody under Medicare, or long-term care, or something
else that is fairly compelling. Then the surpluses would be
smaller than you thought or, in fact, nonexistent.
When you think of what makes a surplus go away, it is
probably a recession. So what do you do? Do you say, "sorry
folks, we have a recession on, so we are going to take back
that tax cut we gave you three years ago?" I don't think so.
The bill says if you do use the anticipated surpluses, you
are going to have to have offsets. If the surplus goes away,
you are going to have to come up with offsetting legislation to
pay for the money that is not there anymore, or reverse your
legislation and undo it, or you get a sequester. We have had
sequesters before, and I would think that would give
legislators a lot of pause before spending every penny of
surplus. Concord would oppose using the surplus just for
routine spending because it is easier to spend money than to
say no, especially when people think that we have surpluses.
Surpluses, if they occur at all, and we are not sure that they
will materialize or last very long, are a rare and precious
resource. Letting them trickle away through the lack of budget
discipline would be the height of generational
irresponsibility.
[The prepared statement of Ms. Phillips follows:]
[GRAPHIC] [TIFF OMITTED] T7496.049
[GRAPHIC] [TIFF OMITTED] T7496.050
[GRAPHIC] [TIFF OMITTED] T7496.051
[GRAPHIC] [TIFF OMITTED] T7496.052
[GRAPHIC] [TIFF OMITTED] T7496.053
[GRAPHIC] [TIFF OMITTED] T7496.054
Mr. Linder. Mr. Greenstein.
STATEMENT OF ROBERT GREENSTEIN
Mr. Greenstein. Thank you, Mr. Chairman. I think I am the
critic of the bill on the panel. I should start by saying that
I think there are a number of useful provisions in the bill
that improve the budget process, such as the changes in the
treatment of Federal insurance programs. But I think there are
a number of provisions that would pose serious problems and
that the problems outweigh the positive aspects, and therefore
I am a critic of the bill as a whole.
The things I am most concerned about, a number were just
alluded to by Martha Phillips in her testimony, and I want to
start where she left off and talk about the changes that the
bill would propose in the pay-as-you-go rules.
As she noted, H.R. 853 would essentially allow projected
surpluses to be used instead of real offsets to fund tax cuts
or entitlement increases. I think there are two principal
concerns there. The first is that both from the standpoint of
big picture government policy, but also from the standpoint of
future deficits down the road when the baby boomers retire, the
most important decisions we have are what are we going to do to
ensure the long-term solvency and fiscal stability of Social
Security and Medicare, and Medicare is part of the on-budget,
not the Social Security budget.
Most experts I know think that to resolve the Medicare
solvency problem, because the hole is so great, we are going to
need a combination of reforms that at the present time are
maybe too controversial to pass in the program, and additional
resources, that we are going to need both.
I am concerned about the provision of H.R. 853 that would
allow the entire non-Social Security surplus to be consumed by
tax cuts and entitlement increases before we have resolved
Social Security and Medicare. We may find to get bipartisan
agreement, we need a portion of the on-budget surplus for, as
Martha said, prefunding some of Social Security and Medicare.
It is not that I am suggesting one can't touch any dime in the
on-budget surplus, but to say, as this bill does, that 100
percent of the projected surplus can be used before we settle
Social Security and Medicare I think is imprudent.
Now, adding to the imprudence is the fact that projected
surpluses, as Martha just said, may not materialize to the
degree that CBO projects. CBO has a very important chapter in
its new report about how uncertain its projections are. CBO
notes that if its projections five years into the future are
off by the average amount that its projections five years into
the future have been off as a percentage of GDP for the last 15
or 20 years, then its projections for five years from now could
be too high or too low by several hundred billion dollars a
year.
For 2004, CBO projects a $63 billion surplus in the non-
Social Security budget. Let's assume that they were off by $60
billion, a fraction of the average that they have been off 5
years in a row. Let's assume that H.R. 853 passed and Congress
passed tax cuts or entitlements increases that consumed the 63
billion. We get out
to 2004, and you either have to raise taxes or cut other
entitlements or lower the discretionary caps by $60 billion a
year, which is larger than the first-year savings of any budget
plan, including the Contract with America budget plan which
Congress has considered. No plan has ever cut as much as $60
billion in the first year.
Alternatively the bill says if you couldn't raise taxes or
make these cuts, there would be a sequester that would be
concentrated in certain programs. A $60 billion sequester would
result in complete elimination for 2004 of payments in farm
price supports, crop insurance, the social services block grant
and the 4 percent payment to Medicare providers. You wouldn't
allow that to occur. So at the end of the day, as sometimes
happened when there were big sequesters threatening under
Gramm-Rudman in the late 1980s that the Congress and the
President couldn't tolerate, we changed the rules, and we
allowed the deficit to return.
If one is to change the rules so that on-budget surpluses
can be used to finance without any other offsets tax cuts or
entitlement increases, I think we should very seriously have a
limitation, and here is an off the top of the head thing. Maybe
we could say you can use to finance tax cuts, or entitlement
increases 80 or 90 percent of the projected surplus for the
first year, then 70, then 50, then 30, then 10. But to say that
a projection eight years out in the surplus, the whole thing
can be used now for entitlement increases and tax cuts when we
have no idea how much of that is going to materialize I think
is very fiscally imprudent.
The other major problem that I see with the bill is that
although this is not the intention, I am sure, of the authors,
I think it would have the effect of squeezing discretionary
spending. As Martha suggested, the level of the caps is already
unrealistic politically.
First, I think the aspect of the bill that would
effectively allow lowering discretionary caps in order to fund
tax cuts or entitlement increases is unwise for the very reason
Bill Frenzel mentioned that Martha quoted: Discretionary
changes are temporary; tax cuts and entitlements are permanent.
This is aggravated in the bill by a provision that says
that in computing the amount of the projected surplus for the
next ten years, CBO is to assume that once the caps expire, the
discretionary spending is just frozen all of the way out.
If you compare the discretionary spending assumptions under
H.R. 853 to the current CBO baseline, they are $436 billion
lower over the next ten years because they assume that we have
the caps through 2002 which go down, and then we have a hard
freeze at the 2002 level through 2009.
My purpose is not to debate for discussion purposes what is
a cut and what is an increase one should or should not adjust
for inflation, but the fact of the matter is that Congress is
not going to pass appropriations bills that are frozen ten
years in a row. A ten year freeze at the current CBO inflation
assumptions is a 23 percent real cut in services by the tenth
year. That is not going to happen. And by using that assumption
to compute the surplus, we artificially inflate the projected
surplus, which can lead to too big a tax cut, too big of
entitlement increases passing, and then we get to the outyears
and we can't sustain the discretionary levels. Maybe the
economy has weakened and our budget estimates are off. We have
seen in the last several years how uncertain revenue
projections are. We have just learned in the last week that the
hoped-for July surprise this year is probably not going to
happen, and we get out there and either of several things could
happen.
Mr. Linder. Excuse me. I am leaving to go vote, and Mr.
Hastings will act as pro temp Chairman.
Mr. Greenstein. The surpluses are now gone, and one cannot
raise the discretionary caps, and we can't meet some basic
needs in defense and basic areas.
Alternatively, the Congress could raise the discretionary
caps, but that would trigger a sequester in Medicare and farm
price support payments and the like. Or the most likely
outcome, we would raise the caps, change the rules and run the
deficits.
So for these reasons, and one or two other quick ones and
then I will conclude, I am concerned with the delays that this
would cause in appropriations bills. I think it is unwise to
repeal the provision of law that says if there isn't a budget
resolution by May 15th, that appropriations bills can start to
move. I think that is particularly unwise in years in which
there is a discretionary cap in place. In years in which there
is a discretionary cap already in place, the budget resolution
is largely superfluous for purposes of discretionary spending,
and if the President is of one party, and Congress is of
another party, and they can't work out an agreement on budget
resolution until August or September, the appropriators should
not have to wait that long to start to move a bill.
I am also concerned that the automatic continuing
resolution is a year-long automatic continuing resolution. It
is one thing to say if an agreement cannot be reached by
September 30, there is an automatic continuing resolution for
30 days, but to have an automatic continuing resolution for a
year long makes it too easy for Congress never to work out an
agreement on the appropriations bill and just have the auto CR
take effect. Even if you want to freeze the overall
discretionary level for the bill as a whole, in any
appropriations bill from year to year, some programs should be
cut, and some should be increased. Needs change. To have an
automatic year-long CR I think reinforces the status quo and
makes it unlikely that we will adjust to needs as they change.
Finally, the lockbox provision in the bill goes too far. It
provides that if either House passes a reduction in an
appropriations bill, the amounts of the reductions must be
averaged, and the discretionary caps are lowered by that amount
for all years in which there is a cap. This means if there is a
one-time pork barrel project, and you want to cut it, you can't
cut it without lowering the discretionary caps for all of the
years for which a cap remains. That leads you to either of two
results. It is either too hard on the discretionary caps, or it
makes it harder to pass cuts in projects for which otherwise
you would have a majority to vote.
Let's suppose you have a pork barrel project, except that
within that majority you have people that don't want to cut a
one-time project if it means a cut in the discretionary caps
for 5 years. So for that reason they vote against it, and you
can't get a majority to cut the pork barrel project.
To conclude, I think there are a number of serious problems
in the bill, and while I think there are some useful
provisions, I think the serious problems outweigh the useful
provisions, and if one had to either move the bill as a whole
or not move it, I think we would be better off not moving it. I
think it would create more problems than it would solve. Thank
you.
Mr. Linder. Thank you.
[The prepared statement of Mr. Greenstein follows:]
[GRAPHIC] [TIFF OMITTED] T7496.055
[GRAPHIC] [TIFF OMITTED] T7496.056
[GRAPHIC] [TIFF OMITTED] T7496.057
[GRAPHIC] [TIFF OMITTED] T7496.058
[GRAPHIC] [TIFF OMITTED] T7496.059
[GRAPHIC] [TIFF OMITTED] T7496.060
[GRAPHIC] [TIFF OMITTED] T7496.061
[GRAPHIC] [TIFF OMITTED] T7496.062
[GRAPHIC] [TIFF OMITTED] T7496.063
[GRAPHIC] [TIFF OMITTED] T7496.064
[GRAPHIC] [TIFF OMITTED] T7496.065
[GRAPHIC] [TIFF OMITTED] T7496.066
Mr. Linder. Professor Muris.
STATEMENT OF TIM MURIS
Mr. Muris. Thank you very much, Mr. Chairman. I realize it
is the end of a long morning, so let me just make a few points.
The first point is that, despite surpluses, we need to
reform the budget process. The rise and fall of large deficits
was the result of three major surprises. The first was the
unexpected and deep recession of the early 1980s, the second
was the end of the Cold War, and the third was the unexpected
surge of revenues in the late 1990s. The surpluses resulted in
spite of, not because of, the budget process.
Before the mid-1970s, when large deficits of two percent of
GDP occurred, they were rare. When they did occur, there was a
quick correction. The deficit quickly disappeared. But
beginning in the mid-1970s, large deficits began, and they
continued for over two decades. The system had become
inflexible.
What are the flaws and how does this bill, which I support,
address them? The most important flaw and the hardest to fix is
the Balkanization of spending authority. When most of the
spending went through one committee--the appropriators--there
was no persistent deficit problem. By the mid-1970s, with the
rise of entitlements, there was no one in charge. It is what
economists call a common pool problem. When someone owns all of
the fish in a lake, that person will not allow the lake to be
overfished. When no one owns the fish, there is too much
fishing.
A colleague, Mark Crain, and I tested States that had one
committee in charge of spending and compared them to States
that had spending authority Balkanized. We found in the
Balkanized States spending grew six percent a year faster.
H.R. 853 takes some positive first steps to dealing with
this problem. The joint resolution is a good step because what
it puts more focus on the totals. A law signed by the President
in is more important and will have more influence than the
congressional budget resolution.
The bill is also good because it makes it harder to create
new entitlements. The requirement of reauthorization is
beneficial. I would add to that a default rule. For example, if
you did not reauthorize, your spending was ten percent below
the previous year's level.
The bill does have a default rule for appropriations--
default at last year's level. This is one provision that I
would change. I would recommend the lower of the President's
request for an account or what either House or both Houses have
passed.
This provision is meant to deal with the shutdown problems
that have occurred recently if Congress were to send last
year's level to the President and send it to him repeatedly,
however he could not shut the government down with the argument
that, he wants 100 percent, not 90 percent or 95 percent. That
is not a credible position. Congress could send that bill to
the President every day and force him to shut down the
government and do a Leslie Gore, "it's my party and I will cry
if I want to." The President could not sustain that position.
If you are going to have an automatic continuing resolution, it
ought to be one with some more bite to it, and my proposal
would do that.
The next flaw that the bill addresses is the baseline
system. We have several problems with this system. Although it
is often said to measure current services, that is the cost
tomorrow of today's government, it does not. For example, the
Medicare baseline is significantly greater, almost double what
a measure of current services would be.
A second problem, there is the misleading use of the word
"cut." When the public hears "cut," they are comparing it to
last year.
Third, there is a series of baseline games in which
particularly the Finance and Ways and Means Committees have
invented the Sistine Chapel of the budget art in finding "cuts"
that even by the peculiar logic of the baseline are not cuts.
H.R. 853, by focusing on last year's level and by focusing on
the reasons for future growth, goes far in addressing these
problem. I recommend that in addition you eliminate all
discussion of words such as "cut" or "decrease" from project
growth." Moreover, when counting for pay-go purposes, that you
eliminate the games.
Incidentally, in terms of pay-go, I would support the
provision that my colleague on the panel says exist in terms of
sequesters that make the process look more like Gramm-Rudman.
Unfortunately I do not find that in the current legislation.
Pay-go now only applies to policy changes and not to economic
and technical changes. Although I wish it did, these changes in
the bill do not make pay-go apply to economic and technicals.
Speaking of additional flaws that the bill addresses, the
caps are porous for a variety of reasons. In fact, domestic
discretionary spending has had healthy increases under the
caps. Discretionary spending as a whole has not had healthy
increases, but that fact is largely attributable to the end of
the Cold War, which can hardly be credited to the passage of
the Budget Enforcement Act.
Your bill addresses emergencies, which is the biggest
loophole, and I commend you for that. The Senate provision,
which takes a different tack is good as well.
An additional issue that you should address are so-called
user fees or filing fees. Under the cap these fees, which now
fund much of the regulatory state are free because the caps
count net outlays and budget authority. One of the things that
they are net of are these so-called "fees." In fact, most of
these filing fees under appropriate budget scoring would be
called receipts and not filing fees, but the committees have
coerced the scorekeepers into calling them filing fees.
I recommend that you eliminate that practice, and adjust
the caps upward so as to not penalize anyone. In the future you
will then deter this incredible increase that we had in the
1990s which started in the 1980s, filing fees.
Finally, let me echo something that the CBO Director said
this morning. It has been over 30 years since the report of the
President's Commission on Budget Concepts. The intervening
period reveals the difficulty. It would be very useful to have
budget experts consider these topics in the abstract and devise
rules as opposed to trying to deal with them on the fly when
the various issues arise. The issues of how to score various
Social Security plans, the continuous use of the tax system to
produce outlays, and other issues could be usefully addressed
by a budget concepts commission. Thank you.
Mr. Linder. Thank you.
[The prepared statement of Mr. Muris follows:]
[GRAPHIC] [TIFF OMITTED] T7496.067
[GRAPHIC] [TIFF OMITTED] T7496.068
[GRAPHIC] [TIFF OMITTED] T7496.069
[GRAPHIC] [TIFF OMITTED] T7496.070
[GRAPHIC] [TIFF OMITTED] T7496.071
[GRAPHIC] [TIFF OMITTED] T7496.072
[GRAPHIC] [TIFF OMITTED] T7496.073
[GRAPHIC] [TIFF OMITTED] T7496.074
[GRAPHIC] [TIFF OMITTED] T7496.075
[GRAPHIC] [TIFF OMITTED] T7496.076
[GRAPHIC] [TIFF OMITTED] T7496.077
[GRAPHIC] [TIFF OMITTED] T7496.078
[GRAPHIC] [TIFF OMITTED] T7496.079
[GRAPHIC] [TIFF OMITTED] T7496.080
[GRAPHIC] [TIFF OMITTED] T7496.081
[GRAPHIC] [TIFF OMITTED] T7496.082
[GRAPHIC] [TIFF OMITTED] T7496.083
[GRAPHIC] [TIFF OMITTED] T7496.084
[GRAPHIC] [TIFF OMITTED] T7496.085
[GRAPHIC] [TIFF OMITTED] T7496.086
[GRAPHIC] [TIFF OMITTED] T7496.087
[GRAPHIC] [TIFF OMITTED] T7496.088
[GRAPHIC] [TIFF OMITTED] T7496.089
[GRAPHIC] [TIFF OMITTED] T7496.090
[GRAPHIC] [TIFF OMITTED] T7496.091
[GRAPHIC] [TIFF OMITTED] T7496.092
[GRAPHIC] [TIFF OMITTED] T7496.093
[GRAPHIC] [TIFF OMITTED] T7496.094
[GRAPHIC] [TIFF OMITTED] T7496.095
[GRAPHIC] [TIFF OMITTED] T7496.096
[GRAPHIC] [TIFF OMITTED] T7496.097
[GRAPHIC] [TIFF OMITTED] T7496.098
Mr. Linder. Are you aware that the continuing resolution
that is in this budget proposal is the reason that the
President vetoed the bill 2 years ago? Are you aware of that?
That is the reason he chose for it, because it was a rather
important bill, and it was put on there so we wouldn't get into
the same circumstance that we got in before, and it was the
cause of the veto.
I am interested in Balkanizing the spending authority. I
came from many years of experience in legislature, and I
wondered why we had both authorizing and appropriating
committees and the Budget Committee. In your proposal would you
get rid of the Budget Committee or the authorizing committees
or the Appropriations Committee?
Mr. Muris. The Budget Committee was passed as a weak
attempt to deal with the problem. By the time the Budget
Committee was created, the horse was out of the barn, as they
say.
What happened was, realizing that they could not get
control over the totals through the one committee, Congress
created the Budget Committee.
There are several steps you could now take. The steps you
already plan to take are useful. You took a first step towards
consilitdation with welfare reform. I would make those programs
discretionary and create a new subcommittee of the
Appropriations Committee. Let the authorizers be part of the
appropriations process.
Historically we have one precedent for doing this. The
appropriators lost control at the end of the 19th century, and
they regained control again in the 1920s. Even though this
sounds very dramatic, your bill takes some first steps, and
what happened with welfare reform shows that you can end
entitlements. The Budget Committee would not be needed
ultimately in this world, but it exists now as a weak
substitute.
Mr. Linder. A couple of you talked about reauthorizing. My
experience in sunsetting departments and agencies, it doesn't
work. They always get reauthorized because of the intense
pressure and the lack of interest, so it is a one-sided
lobbying operation. It takes a lot of time. I don't recall in
the legislature anything being sunsetted.
Mr. Muris. Part of the problem depends on what the default
rule is. If the default rule is zero, that is a very difficult
choice. If you have a minor reduction as a default rule, as
exists in food stamps right now, where there is a provision for
a pro rata reduction, there might be real opportunity for
change. I certainly agree, that it should not be a meaningless
exercise, and it is mostly a meaningless exercise if the choice
is zero on the one hand or nothing happens at all if there is
failure to reauthorize.
Mr. Greenstein. I note that food stamp provision has never
been invoked in 22 years.
Mr. Linder. We dramatically increased food stamps in the
last 6 years in spite of the fact the number of people dropped
dramatically.
Mr. Greenstein. Food stamp spending increased between 1989
and 1994 or 1995. It has dropped dramatically. It has decreased
very dramatically since then. In fact, it is billions of
dollars per
year below the CBO projection of what it would cost when the
welfare law was passed. The number of people on food stamps has
dropped about 9 million in the last 4 years. Both participation
and costs are much lower.
Mr. Linder. Ms. Phillips, you talked about enforcement
mechanisms. In your judgment, are the enforcement mechanisms in
the new proposal sufficient?
Ms. Phillips. I think this bill moves in the proper
direction. A lot of ideas have been raised this morning that
are not in the bill, other things you could do. But we are
really now in the realm of trying to enforce the existing laws.
I think the emergency set-aside is probably the singler best
doable, gettable piece that you have in this bill.
I would hope that the people in Congress and elsewhere who
see parts of this bill that they don't like, rather than just
bringing all guns to bear and trying to stop it dead in its
tracks, would work together--this bill started with a
bipartisan sponsorship--and work together on the things that
can be agreed on.
Enforcement in the name of the game, but enforcement can
only be as good as you want it to be. You can always pass
another law that says, never mind, we are going to raid the
refrigerator at midnight, and we don't care how many locks you
put on. We have keys to every one of them. If you have the
votes, you can do it; You can overturn any enforcement
mechanism. It is as much an exercise in the spirit of the law
and understanding why it is important to be able to say no as
anything that you can put into a law. If the law gives you
excuses, if the law sets limits and says you can only do this
much and no more, then you have got a situation where you are
enforcing those limits, and maybe that enables you to muster
the will.
But as other witnesses have said this morning, we have the
baby boom heading toward retirement, and last I heard they are
planning on getting benefits. Any way you look at the numbers,
whether they are a little optimistic or pessimistic, we are not
prepared for the aging of our population or the strains it will
put on the budget. We know it is coming, and it is going to be
a huge strain on our economy. It is too easy to focus on what
good things you can do between now and the next election, but
15 years from now you are going to say, why they didn't make us
be fiscally responsible back in 1999.
Mr. Linder. Your coalition seems to view tax increases and
spending cuts as equal participants and neutral irrespective of
reducing deficits.
Ms. Phillips. Our position is that you have to be
responsible, and if you really want the tax cuts because you
think it is the responsible thing to do, and you don't have a
recession, you are not at war, and you are enjoying a
prosperous peacetime economy, then if you want those tax cuts,
you ought to be willing to cut back your spending commitments
so you have a balanced budget at a lower level.
If you don't want to cut back your spending, and you want
to have spending back where it was at 23, 24, 25 percent of
GDP, then you have to be willing to raise taxes to that level
to pay for it.
We are in an extremely prosperous peacetime economy. It
doesn't get better than this. What in the world can be the
excuse for running deficits in the rest of the government, much
less raiding the Social Security surplus, which we already know
our fiscal policies are not even up to the job that lies ahead?
So that is where we are coming from. If that is what it comes
to, and you have to have a tax cut in order to be responsible,
we would support it if you are willing to make the spending
cuts to get government down to the level of revenues.
Back in 1992, when Concord was formed, people were very
cynical about the possibility that anybody could ever balance
the budget, and in order to have any credibility, Paul Tsongas
and Warren Rudman had to come up with their Zero Deficit Plan
for the year 2000. Ironically, we proposed balance at 20
percent of GDP on revenues and 20 percent on expenditures at a
time when revenues were at about 18 percent and expenditures
were 22 or 23 percent. We brought them to the middle. People on
the left didn't like us because we cut spending, and people on
the right didn't like us because we proposed raising revenues.
Twenty percent is about where we ended up balancing. The
country is going on pretty well.
Mr. Linder. That is not where we are today.
Ms. Phillips. A little more than 20 percent.
Mr. Linder. About 22.
Mr. Greenstein. I think it--
Ms. Phillips. I think GDP is going to be better than you
think, so that keeps it a little lower.
Mr. Linder. Mr. Hastings.
Mr. Hastings. John, you mentioned that the sunset laws
don't work in Georgia. I have to tell you when I was in the
legislature, we did get rid of one commission. It was the Grist
Mill Commission, and it was put in place in 1890, and the last
grist mill we had in Washington was in the 1930s. So there is
some success out there.
Ms. Phillips. When I came to the Budget Committee staff,
revenue sharing was still on the books. That was an entitlement
that was created to give excess Federal revenues to the States,
but it turned out there were no excess revenues to share.
Finally they repealed that entitlement, but it took three
separate stakes through the heart. That entitlement would not
stay dead, and people kept trying to bring it up again and
again.
Mr. Linder. I was in the State legislature at that time,
and we kept spending programs going on that we had started with
the revenue-sharing money and then picked up the bill
elsewhere.
Mr. Hastings. One of the areas that I happened to focus on
here, and I tend to focus on, we were talking about spending in
terms of GDP and the whole economy and so forth, and I tend to
focus on what the average tax burden is for each individual.
When you add local, State and Federal--and, of course, Federal
is the biggest component of that, that figure has gone up, it
is around 38, 39 percent on the average--and what disturbs me
as we go into a global economy, where we have to admit we are a
global economy, we cannot pretend that it is not there, it
makes it harder for us to compete in that global economy unless
people have more discretionary dollars to spend.
So when I look at tax cuts, I look at it from that
standpoint recognizing it has an impact on the Federal budget,
but also recognizing that we will continue, I hope, to lead the
world, but the only way we can do that with a smaller
population is to have more dollars for us to invest around the
world. So I tend to look at it from that standpoint, and I know
that is off the subject.
Mr. Greenstein, you mentioned that you are probably the
only one opposed to the process, and then I had to go vote, and
I came back as you were wrapping up. I wanted to ask you--if
you said this, I apologize for having to ask you again. You
didn't say that you were defending the status quo or the status
quo is good. And if you didn't say that, what do you think some
reforms ought to be in the budget process, because I think most
people will agree that it is broken.
Mr. Greenstein. Let me start by saying on the one hand I
think there are improvements that can be made. So I am not
simply saying keep the status quo. I would disagree that the
budget process is broken. There are problems in it, but it has
actually worked much better in the last 10 years than we often
give it credit for.
The Budget Enforcement Act of 1990 had two major elements.
It set discretionary caps. I don't hear most people talk about
abandoning the concept of discretionary caps. And while it is
true that they got stretched in last October's bill, and the
emergency designation was overused, and frankly that has
happened again in the current supplemental, I think that is a
reflection of the fact that the current caps are unrealistic.
But if you look at the last 9 years as a whole, most of us
predicted in 1990 those caps would not last very long, and they
would be breached by much larger amounts than they did. They
held much better than any of us forecast they would.
Similarly, the pay-as-you-go rules have been very
effective. They have frustrated both people who want
entitlement expansion and people who want tax cuts. Martha and
I feel that they have served their purpose. I remember in the
early 1990s when we had projections of $600 billion deficits.
Clearly there have been faster rates of economic growth, and
revenues have been faster than forecast, but we also should
give a lot of credit to the fact that the caps and the pay-go
rules really contributed a lot.
In that context, part of the testimony that I made when you
were voting was that one of the things that I am most concerned
about in the bill is I think it weakens the pay-as-you-go rules
too much. It allows the entire projected non-Social Security
surplus to be used for either tax cuts or entitlement increases
without any offsets. When you take into account the fact that
in the past our projections of both surpluses and deficits, for
more than a year or two into the future, have been way off, I
think it is much too fiscally dangerous to say that 100 percent
of a projected surplus can be used in this fashion. We ought to
maybe allow a fraction of the projected surplus to be used in
this fashion, with the fraction declining the farther you get
into the future, because projections are more uncertain farther
into the future, and the farther you get into the future, the
more question there is about whether the projected surplus will
actually materialize.
The kind of thing that is in this bill that I think is
useful is reform of Federal insurance programs. I think there
are some problems with exactly how it deals with emergencies,
but we clearly need some tightening up. I think what we need in
the emergency area is a combination of more realistic
discretionary caps and tighter enforcement of them by not
allowing the emergency designation to be misused.
Now, I am a critic of the bill, but I will say a positive
thing here. It has a provision which makes sense, which says
its changes in the emergency provisions only take effect after
the caps are changed, because it recognizes that its provisions
to change the emergency rule aren't realistic in the context of
the current law. The kind of thing that I think could be--and
this doesn't take a wholesale change--the kind of thing that
needs to be modified in the emergency area of the bill is if
you have used up the projected surplus, and you are right in
balance, and what is clearly a big emergency comes along, it
could be a national disaster or a foreign military involvement
that the United States is called upon to respond to, if that
entails spending above and beyond the emergency reserve the
bill calls for, the bill has a provision that the Budget
Committee can determine whether it is truly an emergency or
not.
The problem is that there is a conflict between two
provisions of the bill here. If you are in balance, and
something like a foreign involvement comes along, and the
Budget Committee determines this really is an emergency that
entails going beyond the reserve, under the bill, if not
offset, that would trigger a sequester. I am not sure that was
intended. It may be the unintended effect of two different
provisions of the bill. I only noticed this in the last 48
hours. I had not noticed this combined effect when I first read
the bill months ago.
I think the bill ought to say if it is really an emergency,
it doesn't have to be offset, but it really has to be an
emergency. Instead, where we are now is, we classify things
that are not emergencies as emergencies, and then a number of
Members of Congress say emergencies need to be offset because
of the designations. I think those are examples of things where
we do need improvement in the process.
As I went through my concerns, I said that the things that
I think are problematic are more serious than the improvements.
But if we can do a bill with the improved parts in it, it is
useful to make improvements in the budget process. Those two
areas, emergency insurance and accounting for insurance
programs, are clearly areas where we can make strides.
Mr. Hastings. It appears to me, and your explanation of
that, what drives some of those decisions are policy decisions
that every Congress would have to face regardless of what the
process is, policy decisions on what the priority is in one
area, and what we are simply putting in place is a check
someplace along the line you have to answer A before you
proceed to B.
It appears, to me anyway, some of the criticisms that you
have, those are smaller things than the idea that we need to
start this process early on. I have no doubts, however, that
can get done, but we will have to see about that. Policy
decisions we are going to be faced with, I suggest that when
the reserve is set up, somebody will set up a new definition of
emergency, I should say, and there will be a big fight. But
these decisions are faced by every Congress regardless of what
process we have in place.
Mr. Greenstein. Sure, but the budget rules have a big
impact. Without the caps, we would spend more on discretionary
programs. Without the pay-go rules, we would have expanded
taxes and entitlements more, and we would still have budget
deficits.
Part of what I am saying is, while there are a number of
small areas like the emergency designation where the bill
tightens the process, I view the bill as a whole as weakening
fiscal discipline primarily because of the changes it makes in
the pay-go rules, which I think go too far.
Mr. Hastings. With the Balkanization, I would agree with
you, Professor, on that. I think our problem is 435 Members
here. That is the problem.
Mr. Linder. Mr. Sessions.
Mr. Sessions. Mr. Chairman, I would like to ask unanimous
consent to have submitted in the record this document which
would support your theory of dollar amounts used, and I
appreciate the opportunity to do that.
Mr. Linder. Without objection.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T7496.099
[GRAPHIC] [TIFF OMITTED] T7496.100
Mr. Sessions. I know that we are into a whole bunch of
processes. Is there any belief that the Congress is addressing
properly the Social Security issue, any one of you, by us
trying to have a resolution to take Social Security off budget
to where all of the money and interest would flow? Are we going
to get any credit for that?
Mr. Greenstein. It is already officially off budget.
Ms. Phillips. It has been taken off budget three different
times by acts of Congress, signed into law by the President.
Mr. Linder. Most recently in 2001.
Ms. Phillips. It was done in 1983 to be effective later,
and in the 1985 Gramm-Rudman Act they did it again and said, we
want it to start right away. It was later reaffirmed again and
again. But, until you can get people to forget the existence of
Social Security and its surpluses, you are going to know that
they are there.
Mr. Sessions. So what can we do then? Is that the first
responsible act, or are you saying that it was not responsible?
Ms. Phillips. I think the responsible thing to do is to
address the tough issues. We have unfunded liabilities that far
exceed anything we think taxpayers in the future are going to
be willing to finance, particularly because you can't just look
at Social Security alone, you have to recognize that almost
every one of these people also expects to be getting Medicare,
and that this is a double burden.
Mr. Sessions. What is the first step that you recommend?
Ms. Phillips. Some combination of--to be officially Concord
neutral, getting the future expenditures and future revenues
more in line. I would suggest that because you have an unusual
situation of a bulge in the elderly population beginning in ten
years followed by a permanent aging of the population, having
each generation to the greatest extent possible prefund some or
quite a bit of its own benefits is good for the economy and is
generationally responsible.
Mr. Sessions. If you prefund, isn't that the same as taking
it off budget and keeping it in a fund?
Ms. Phillips. Only when it is entirely out of the budget--
it has been off budget since the first surpluses in Social
Security began to build up after the 1983 legislation. We
started seeing appreciable surpluses in 1985. We spent them. It
has been off budget. But if you have Social Security surpluses
safely off budget, and over here, on the budget, you run big
deficits, economically the effect is to use the Social Security
surpluses to finance the on-budget deficits.
Mr. Sessions. But we are not doing that anymore.
Ms. Phillips. We will see.
Mr. Sessions. What is the first step? Is the first step
hitting a home run or learning to walk?
Ms. Phillips. The first step is addressing the problem in
the unfunded liability in the program. That is extremely hard
because it means telling younger people now what many of them
already suspect, which is that Social Security is not going to
pay them the "huge" $12,000 that people are getting from it
today on average. It is going to be less.
Mr. Sessions. So you don't think that it is practicable to
take it off budget?
Ms. Phillips. We have already taken that step a couple of
times. If you want to do it again, I have no problem with it.
If doing it a fourth time makes you live up to the rule, great.
But I am a little cynical that four times is going to be magic
when three times hasn't been.
Mr. Greenstein. I largely agree with Martha. I think there
might be some process things that you could do with points of
order and supermajority points of order that would help.
Having said that, if you look at some of the proposals that
are around now, they are all far from foolproof. The bill that
Mr. Herger and Mr. Shaw introduced attempts to say that you
could not use the Social Security surplus for other spending,
but there is an exception for any legislation that Congress
classifies as Social Security or Medicare reform legislation,
and there is no definition what that means. The bill that
Senator Abraham and Senator Domenici have introduced ties
itself to specified levels of the publicly held debt, but there
is a view which I think may be shared by the Treasury, Senator
Roth, and perhaps Chairman Archer, that that approach poses too
great a risk in terms of default and the debt.
The bottom line, I think, as Martha has said, is that the
only way to address the problem is to address the problem.
Martha and I have differing views on exactly what to do in
Social Security, but I think we would share the view or share
the concern that both parties are too attracted to what we
would call the free lunch approaches, trying to solve the long-
term imbalance between benefits and payroll tax revenues
without raising revenues or cutting benefits. Both parties are
looking at approaches that pour tons of money from the rest of
the budget into the retirement system. It is unclear where that
money comes from when the baby boomers retire.
At the end of the day we have to be willing to do some
benefit modification, some payroll tax increases or a
combination of the two, or we are going to have an approach to
fixing retirement security that either won't last, will cause
overly large reductions in basic government functions or overly
large tax increases, or eventually will bring back deficits in
a big way. That is the single most distressing part of the
debate. Each party is afraid that if it proposes any
substantive structural changes, the other party will jump on it
and attack it. I think that is preventing us from making
progress.
Mr. Linder. Professor Muris?
Mr. Muris. The most important step is to make the economy
as big as possible to make it easier to support the baby boom.
There are three steps we can take.
First, we ought to guarantee that the Social Security
surpluses cannot be spent. The way to do that, is to set up
individual retirement accounts so that the money is committed.
Second, we need to take the on-budget surplus and give that
back to the people in tax cuts. They will use that money better
than the government would.
Third, one of the reasons that the economy has been so
robust is that we have had an incredible amount of indirect
deregulation through things like internationalization, the
Internet, and computers. We ought to make sure that the plans
in Washington to regulate fail. Moreover, we ought to have
significant regulatory reform that would further encourage
increased productivity in the economy.
Mr. Sessions. Well, obviously I am pleased to hear that. I
will tell you that part of your observations, and I will not
call them cynical observations, part of your observations, I
believe, are very true, and that is we--even looking at the
Republican side, there is some unpredictable behavior as to
what we are really after. But yet I would like to tell you that
we will be, as with the last debate that was made--that we are
attempting to increase the amount of wealth held by the middle
class of this country and to encourage behavior that would
include savings and allowing the individual to have that $2,000
in their pocketbook.
I am an optimist, and I believe we are going to create a
circumstance where we will continue to have good fishing and
good economy. That will come with the fiscal restraint that you
do talk about.
Thank you, Mr. Chairman.
Mr. Linder. Just one more question. The strength of Social
Security was that it was 40 employees for every one retired in
1935. It is now approaching two for one. Can the structure
survive? Can just the basic structure survive?
Ms. Phillips. Not the way that it is now structured.
Something has to give. There is a big long-term problem out
there. This bill is helpful, but the problem is still out
there.
Mr. Linder. I am so much opposed to raising the payroll tax
because you are asking so much more from fewer and fewer
people. Five million people have opted out of Social Security.
There are fewer and fewer payers for more and more retirees.
Ms. Phillips. You cannot solve this problem on the payroll
tax. It is already the largest tax for most working-age
families.
Mr. Linder. Seventy-four percent.
Ms. Phillips. If you are talking about payroll tax
supporting Medicare Part A and Social Security, it doesn't take
much imagination to get you up to 35-40 percent payroll tax
when the full brunt of the aging process has occurred. That
simply is not going to happen in the United States of America,
so we have to deal with the benefit side, and we have to deal
with having each generation to the extent possible prefund its
own benefits.
If I had my druthers regarding what to do with the
surpluses, I would park them in individual accounts or some
sort of a mechanism where the Treasury pays it right to the
retirement accounts of every worker age 45 and younger, which
unfortunately would leave me out. It could only be used to
finance retirement benefits. That way you would get it off the
Federal books so it could not be used for anything else. It
would be increasing national savings, which would help the
economy grow. It would also be there as a partial funding to
make it possible then to say, okay, now that you have got this
nice nest egg building up from the surpluses from the first
decade of the century, we can peel back the government benefits
a little bit because your grandchildren can't pay for them.
Mr. Greenstein. Let me say that there are fundamental
debates on what would be a better way to go, should one convert
part of Social Security to individual accounts or not do that.
I think that is not the way to go.
I did want to say that if you look at the long-term
figures, you cannot sustain Social Security without any
changes. You can sustain it within what I would call the
current basic structure. You have to be willing to make some
changes in the benefit formula. You can do it without raising
the payroll tax rates. You have to be willing to make some
changes, but you don't have to replace it with something else
such as individual accounts. There is a debate on whether one
should or shouldn't, but what is clear is that you have to do
something. We cannot simply leave it exactly as it is now.
It is also clear that you can solve Social Security's
problems without any benefit or tax changes if you pour in
enough money from the rest of the budget, but then you squeeze
the rest of the budget too much. So if you want to be able to
deal with other issues as well, you have to be willing to make
some changes in Social Security.
Mr. Muris. I teach graduate students, who are mostly in
their 20s, and when you talk to them about Social Security they
laugh. Their cynicism is appropriate, unless we make the
fundamental change that I talked about before to guarantee that
those benefits will continue. Again, far and away the most
important step is concentrating on policies that make the size
of the pie as big as possible.
Mr. Greenstein. Where we would differ on that last comment
is whether you have to do that through individual accounts or
you can do more prefunding of the Trust Fund, but we would all
agree that we should advance-fund.
[Questions and answers submitted for the record]
[GRAPHIC] [TIFF OMITTED] T7496.101
[GRAPHIC] [TIFF OMITTED] T7496.102
[GRAPHIC] [TIFF OMITTED] T7496.103
[GRAPHIC] [TIFF OMITTED] T7496.104
[GRAPHIC] [TIFF OMITTED] T7496.105
[GRAPHIC] [TIFF OMITTED] T7496.106
Mr. Linder. Thank you all. The hearing is adjourned.
[Whereupon, at 12:25 p.m., the committee was adjourned.]
H.R. 853, THE COMPREHENSIVE BUDGET PROCESS REFORM ACT OF 1999
----------
Thursday, May 13, 1999
House of Representatives,
Committee on Rules,
Washington, D.C.
The committee met, pursuant to call, at 9:30 a.m. in Room
H-313, The Capitol, Hon. David Dreier [chairman of the
committee] presiding.
Present: Representatives Dreier, Goss, Linder, Pryce, Diaz-
Balart, Hastings, Myrick, and Reynolds.
The Chairman. The Rules Committee will come to order. We
are here for the further consideration of hearings on H.R. 853.
Yesterday we had a fascinating group of outside witnesses as
well as the lead authors of the legislation. Today we have set
aside time for Members to testify on comprehensive budget
process reform. We are very pleased to welcome our first
witness, the distinguished gentleman--who wants to go first?
Both of you are distinguished gentleman.
Mr. Gekas. I am yielding.
The Chairman. We are happy to recognize the very
distinguished gentleman from Michigan, Mr. Smith, and we look
forward to your--what you told me is a two minute presentation?
Mr. Smith. Yes, sir.
The Chairman. It wasn't my request. Your time has just
begun.
STATEMENT OF THE HON. NICK SMITH, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MICHIGAN
Mr. Smith. Mr. Chairman, I appreciate that Rule 23, the
"Gephardt rule," is repealed in here. But what appears is that
you have replaced it with provisions that you can increase the
debt limit as part of the overall joint resolution.
And so on page 8, section 8, my interpretation of that
provision of the bill says that you can still increase the debt
subject to the debt limit, which would be sort of clouded in
with the whole composition of the budget resolution. I don't
see that as much different than what we have now.
So I think there should be serious consideration, or at
least I would request that an amendment be allowed so that we
can vote on an increase on the debt limit separately. It just
seems that it is so important in terms of where this country
goes, the imposition that we put on future generations by
clouding, whatever the correct word is, by incorporating a
couple sentences in a huge joint resolution on the budget
provisions that the debt limit will be automatically increased.
So I think it would be a lot more reasonable if Members
stood up and took a position as a separate vote on increasing
the debt limit, simply because I think it is such an important
part of not only our economic future and the reasonableness and
honesty of government, but still making it a--having a little
separate, more separate consideration for an issue that is so
important; that is, raising the debt limit that our kids and
grandkids are going to have to pay back.
John, what I just said was my interpretation of this
legislation still puts an increase in the debt limit, the
national debt subject to the debt limit, and includes it as
part of the whole joint resolution as a provision that can be
there. I would just think that this should be a separate vote.
The Chairman. Thank you very much, Mr. Smith. We appreciate
you being here.
Mr. Gekas.
STATEMENT OF THE HON. GEORGE GEKAS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA
Mr. Gekas. Thank you. This is not news to the gentleman
from Georgia or the gentleman from Florida nor to the gentleman
from California.
The Chairman. Possibly it is to the gentleman from New
York. So he should--
Mr. Gekas. Maybe I should make my remarks to him. I think
the record does require me to postulate the rationale.
The Chairman. The record doesn't require that. You do
whatever you feel is appropriate.
Mr. Gekas. In doing so, I am also making clear to the
gentleman from New York what the legislation does. We have
termed this legislation euphemistically as "instant replay."
That is, at the end of a fiscal year, if an appropriations
bill, any 1 of the 13, or all 13, have not been enacted by the
Congress, then the next day, October 1, is an automatic instant
replay of last year's budget.
What does this do? This ensures that there never again will
be a government shutdown. The legislation that is before us for
your consideration amply considers that and incorporates it
into the total budget picture that you are trying to formulate
in this legislation. I am very appreciative of that.
Since 1977, there have been some 17 separate shutdowns of
government. That number is intolerable. That is almost once
every year, almost every year. The most egregious one, and I
reemphasize that every time that I have an opportunity to speak
about it, when Desert Shield was being organized, when our half
a million troops were being deployed to the deserts of the
Middle East, during that period of time in December of 1990,
while they were with musket in hand, our young people over in
that desert, the government shut down. That is intolerable.
They were actually armed, ready to do conflict for a government
that didn't exist in one fashion, did not exist. We cannot
sustain that. We cannot tolerate that.
What our legislation here does, what your legislation does
is guarantee that that won't happen again.
One other thing. It is not just the Federal employees who
are very supportive of this legislation--as you can imagine
they would be, because it would mean that they would not have
to worry about when to come to work, if to come to work, and
when their next paycheck is to arrive. That is part of the
mystique of all of this anyway. But more importantly perhaps,
or equally as important, is the fact that contractors who do
business with the government, they in their continuum of
providing goods and services, come to a halt. It is costly to
them. It is costly to the government and the taxpayers and
causes havoc in the private workplace where these contractors
depend sometimes very heavily on the revenue from a government
contract to keep going in their business.
On top of that, maybe a simple thing, but it was brought
home several times. The shutting up of the Washington Monument
or the Smithsonian Institute is a slap in the face to the
American citizens. To go to the door of one our institutions
and then be told that the government has shut down, they cannot
enter. Although that is not--that won't bring the end of the
world, it does show a crumbling, a little crumbling of our
system that shuts off other citizens from their institutions.
Anyway, these are the basic tenets of what we do. I have
reviewed the provisions in the bill and they are--they do
exactly what we intend them to do.
One other fact which I cover very well: That is that the
obligations that the government has as to Social Security,
Medicare, et cetera, already set by other law, are unaffected
by this, and they are guaranteed at whatever level their own
computer indicates is due. So that the instant replay of last
year's numbers may not apply to Social Security, but in all
other respects, we have a continuing process that prevents
government shutdown.
Well, I don't know that Doc Hastings has heard this.
The Chairman. Mr. Hastings has heard this.
Mr. Gekas. I wanted to repeat it.
The Chairman. We have a spectacular record that was
developed on this issue. You see what we have done?
Mr. Gekas. Yes, it is excellent. I am very happy about
that.
The Chairman. We appreciate your tenacity. It most likely
would not have been incorporated in the bill if it were not for
your regular appearances before the Rules Committee. However,
we want to say there are other ways to get it to appear in
legislation other than appearing before the Rules Committee.
Mr. Gekas. I suppose there are.
The Chairman. We appreciate your efforts on this very much,
Mr. Gekas.
Mr. Gekas. I do want to thank the three men who are facing
me here because they have been here with me from the beginning
on this. And now the two others are going to be imbued with the
same fervor as the gentlemen from California, Florida, and
Georgia.
The Chairman. Thank you very much.
[The prepared statement of Mr. Gekas follows:]
[GRAPHIC] [TIFF OMITTED] T7496.107
The Chairman. Mr. Goss may have a question.
Mr. Goss. I think I understand it.
The Chairman. We are starting to understand it.
Mr. Goss. The issue is not one of comprehension. The issue
is one of how to deal with it and how to take a good idea and
put it into affect. I think that you know that has been a part
of our goal. As I think that you know in our process, this has
gotten a lot of attention. I can assure you that it is going to
get a lot more, whether we want it or not, as we go along. We
hope that you will be ready to explain it to some others.
Mr. Gekas. We will.
The Chairman. Mr. Linder.
Mr. Linder. I do appreciate the issue.
The Chairman. Mr. Hastings.
Mr. Hastings. There was a witness that was critical of that
provision of the bill, saying that this would cause the
Congress to take the path of least resistance and therefore
that would be the path that they would take, rather than to
face up to the issue and pass appropriations bill. What do you
respond to that?
Mr. Gekas. We reject that. Each fear brings new areas and
new areas of concern. The appropriators and Members of Congress
that see something that needs to be changed in the next fiscal
year are not going to be satisfied permanently with last year's
numbers or last year's speeches with a particular piece of
legislation.
So this dynamism that the Congress has normally will carry
to today when it comes to making sure that next year's
appropriations bill does have features that are required by a
majority of the Congress, even though for temporary purposes we
have fallen back to the instant replay.
Mr. Hastings. Thank you.
The Chairman. Mr. Reynolds.
Mr. Reynolds. I would just thank the gentleman for his
insight and time.
The Chairman. Mr. Reynolds is such a bright guy that he
grasped it with your first presentation. They have improved
over the years. We thank you very much and look forward to it.
The Chairman. I just saw Mr. Barton. I believe he is our
next witness and we are happy to welcome the gentleman from
Texas, Mr. Barton. You are welcome to summarize your remarks.
STATEMENT OF THE HON. JOE BARTON, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TEXAS
Mr. Barton. Thank you, Mr. Chairman, other members of the
committee, especially our Minority friends, here in spirit if
not in person. I have testified before this illustrious group a
number of times on budget process reform. I think with Chris
Cox, myself, and Mr. Nussle a lot of progress was made in the
last Congress--Mr. Goss, I should put his name in the loop. He
worked very hard. So I do have a written statement and I will
put it in.
The Chairman. Without objection it will appear in the
record.
Mr. Barton. The main thing that I would ask you to do is I
think this Congress really, really needs to move the bill. The
process that we were working under was passed in the mid-
seventies.
It enhances the expansion of entitlements. It enhances the
ability of a few Members, late in the session, to do back-room
deals. It gives the President unusual power, again in light of
Congress, if not to extort the Congress, to make it very
difficult to maintain the spinning of the caps and things like
this.
I have not introduced a comprehensive bill in this
Congress. I am going to do that in about two weeks. I am
working on it right now. If you take the package that Mr.
Nussle and Mr. Cox and myself, Mr. Salmon, and Mr. Goss put
together the last Congress, we probably need to fine-tune it a
little bit, but I think that would be an excellent package.
Some of the elements are that I think we should go to a two
year budget process. Not everybody agrees to that but we
operate on a two year cycle. It would be good to have a two
year budget process. I think that you eliminate the
supplemental and you put in a rainy day fund to set aside a
certain amount each year. You put definitions about what
qualifies for emergency spending.
And then in my bill, again this is somewhat controversial
and I know the Chairman has a concern about this, but I put in
a supermajority requirement in order to override the definition
to take money out of the emergency supplemental account.
I guess I will kind of end it there. I will put the
testimony in the record. I would be happy to answer questions.
I do again encourage you to try to move a bill as soon as
possible. This would be one of the most important things this
Congress could do is to change the budget process.
The Chairman. Thank you very much.
[The prepared statement of Mr. Barton follows:]
[GRAPHIC] [TIFF OMITTED] T7496.108
[GRAPHIC] [TIFF OMITTED] T7496.109
The Chairman. As you know, that is why we are sitting here.
It is a priority for us. You use the term "fine-tune." I think
that we can do that, I hope, and come to an agreement.
Mr. Barton. I stand ready to work with whatever group this
committee or others may put together to make this happen.
The Chairman. Thank you very much. We appreciate that.
Mr. Goss.
Mr. Goss. I also want to very much compliment the gentleman
from Texas for his willingness to find middle ground. I know
there are some things in your kit bag that you care very much
about that you have been willing to leave out there so that we
can get something good, but maybe not perfect in your eyes.
That is the process this year. We have pledged to do that.
Mr. Barton. Could I ask the Chairman a question? What is
your timetable, Mr. Chairman? Do you have a definite timetable
on this issue?
The Chairman. Well, as you well know, definite timetables
around here do have a tendency to move. But it is our hope to
see the Budget Committee proceed with hearings on this next
week. The Budget Committee is going to be holding hearings next
week. And beyond that, about 2 weeks following their hearings,
we look forward to marking this up.
Mr. Barton. Oh, good.
Mr. Goss. My staff has been told to do this in June. I hope
that is possible.
Mr. Barton. That is good news.
The Chairman. Mr. Linder. Ms. Pryce.
Ms. Pryce. Thank you, no.
The Chairman. Mr. Diaz-Balart. Mr. Hastings.
Mr. Hastings. No questions.
Mr. Barton. I think that I am going to see your smiling
face in about 15 minutes.
The Chairman. Mr. Reynolds.
Mr. Reynolds. No questions.
The Chairman. Thank you very much, Mr. Barton. Thank you
for your hard work on this issue.
The Chairman. We are happy to now have the very
distinguished cardinal, the gentleman from Ohio, who has some
strong thoughts on this issue, Mr. Regula.
STATEMENT OF THE HON. RALPH REGULA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Regula. Thank you very much.
The Chairman. It appears that you have no prepared remarks.
Mr. Regula. I will send them over this morning. I didn't
get back to the office, with school kids visiting from Ohio,
but you may even have a copy here. I am here to speak about the
two year budget. I worked with it as a legislator in Ohio. I
have introduced legislation to establish a two year budget in
every session since I have been here.
Let me say as a Chairman of an appropriations subcommittee,
I am even more aware of how important it is. I do a lot of
oversight. We have had six or seven oversight hearings this
year. I think that
if you are going to have good management, you need to find out
what is happening and you need to visit, in my case, parks, of
course, and so on.
What I would see with a two year budget is you could do a
lot better planning and the people in the field could do a lot
better planning, because I know park superintendents don't know
until maybe the middle of October what they are going to have
for the year. Then pretty soon they are trying to put together
next year's budget. They therefore cannot contract efficiently
because they can only contract for a year at a time. They are
in a one year time frame. In Congress we just don't have enough
time to do oversight.
What I would think would contribute significantly to
improving management would be to have a two year budget,
because you can deal with the interim problems with the
supplemental, as we are trying to do right now. We finished up
about 1:30 this morning and we are back in today. It is
contentious and, of course, the supplemental becomes a train
that is going to leave station. Our brethren on the other side
find it very convenient.
In any event, if you could do a two year time frame the
first year of the session would be used to make budget and
appropriations decisions. The second year could be used to do
oversight to bring people in to talk about what works and what
doesn't work. I find oversight hearings extremely valuable and
it is good discipline for the agencies because they have to
come up and justify their management. What I try to do and I
think the other Chairmen do likewise, is to get some management
discussions during these hearings. There is no reason when you
are operating with a trillion and a half dollar budget you
shouldn't think about management. Every company in the world
does it or they don't survive.
We have instituted a number of changes as a result of
oversight hearings. For example, just a couple weeks ago we had
the GAO do an oversight report on the Everglades. We are going
to spend as you know, Mr. Goss, probably--I think probably 20
to $25 billion before we complete that project. So we sent the
GAO down, they did oversight over the project, they came in and
testified before the subcommittee. We gave the opportunity for
others involved to come in too. As a result, we will make
hopefully better decisions in the allocation of the resources.
So I see a lot of pluses to a two year budget. I believe
President Bush supported it. There is just a certain amount of
lethargy that keeps it from happening. Of course, frankly, some
Members probably like the fact that an annual budget gives you
more control because obviously you have got a bite of the apple
every year. When you are on the Appropriations Committee the
annual budget has some leverage involved; but I just think in
terms of managing and being cost effective as a government on
behalf of the taxpayers, a two year budget makes sense.
We are making some changes on the way parks get their money
for buildings and the way that they manage their construction
budget. It is not that we will necessarily save a lot but we
will be able to do more things that members would like to have
done because we can spread the money further and get what I
call more bang for the buck. So that is why I feel strongly
that a twp year budget would be a good way to go.
And one last thing, in 1987 we had in effect a two year
budget agreement. It wasn't exactly a two year budget, but it
was a projection of where we would be. In 1988, was about the
only year that we got all thirteen appropriations bills out on
time because we had a road map in place. We could think in
terms of the two year cycle, and it worked. I would guess that
we could well end up with another omnibus this year. That is
not a good way to manage the federal budget and federal
programs.
[The prepared statement of Mr. Regula follows:]
[GRAPHIC] [TIFF OMITTED] T7496.110
[GRAPHIC] [TIFF OMITTED] T7496.111
The Chairman. Thank you very much, Mr. Regula. The only
question that I would pose is how--do you envision the
appropriations process on two year cycles?
Mr. Regula. Yes. You would appropriate for a two year
cycle, because that would give the executive branch the ability
to manage in a two year cycle. They could contract for services
for two years and get a better price, obviously. And then the
second year would be used to pass needed supplementals but
would also be used more importantly for oversight and for
visiting facilities.
The Chairman. As you know, one of the priorities of this
Congress has been policy and programmatic oversight, and trying
to focus on that. I happen to concur that your proposal is one
way to deal with that.
Mr. Goss?
Mr. Goss. I do, too. The problem is that no one is running
from the debate on it at all. It is just that we don't hear the
drumbeat. Some friends on the other side say, push, push, but
we are just not hearing it. We are trying to find stuff that we
can put in that is good for the process of reform.
This is something that I find, when you start toying with
it, is they haven't really given it the kind of thought that we
have given it and people have to deal with these problems. I
have looked at the pluses and minuses on it and I am convinced
that there is time for a debate on it. I think this would be
right to have a debate. I don't know how the debate would come
out, but sooner or later--
The Chairman. Would you yield for just one quick question?
I wonder how your colleagues on the Appropriations Committee
would respond.
Mr. Regula. I think they would like the idea, because you
certainly do a much better management job. I would daresay that
private industry wouldn't even think about trying to operate on
a one year cycle in terms of budgeting projections for plant
improvements, et cetera, et cetera. I would hope your committee
will bring in a couple of CEOs or CFOs to say from a management
standpoint how they do it and how it works out in the private
sector.
Mr. Goss. I thank you, Mr. Chairman. I know that the
business cycle, and how you do it and when you do it and time
of year is very important. I agree that there is a lot of
technical information that we need.
In my own bill, the intelligence bill, we are required by
law, because of the extra level of oversight needed, to do the
oversight annually. I frankly don't want to change that. You
have got to be on top of that to do the oversight job. But the
leverage that is involved with the budget, I think is very
important. I agree with you on things that out and about in
normal business activity, day in and day out in this country,
if we can improve management, this is a tool that ought to be
looked at.
Mr. Linder. I agree with you.
The Chairman. Ms. Pryce.
Ms. Pryce. Thank you, Mr. Chairman. I think that you have
significance for this committee. I am happy to hear an
appropriator come forward and say that this is a good way to go
because I have seen some resistance or perceived resistance
from that committee. It is good to have you here to show us
that you all are not of that ilk. Thank you very much.
The Chairman. Mr. Diaz-Balart.
Mr. Diaz-Balart. It really makes a lot of sense.
The Chairman. Mr. Hastings.
Mr. Hastings. I agree with you, too. I have always felt
that that is the way to go, precisely because of the reasons
you said and because of the oversight aspect. You just don't
have that many steps and pressures, particularly in your area
that you deal with, contentious as they are. So if you put
something in place and you don't know if they work or not
because--well, I just think that you are right on. I appreciate
it.
The Chairman. Mr. Reynolds.
Mr. Reynolds. No questions.
The Chairman. Thank you very much Mr. Regula.
Mr. Goss. May I give one piece of advice?
The Chairman. Mr. Goss.
Mr. Goss. You have heard here a little bit of an outpouring
of appreciation for your wisdom. We find that our colleagues on
the Budget Committee don't share that.
The Chairman. Respect for his wisdom?
Mr. Goss. I would very much appreciate it if you would
spend some time with them.
Mr. Regula. I understand.
The Chairman. Thank you very much, Mr. Regula.
The Chairman. Now, we are pleased to welcome the
distinguished gentleman from Delaware, Mr. Castle. We are happy
to have you here and your remarks will appear in their record
in their entirety without objection. You are welcome to provide
any kind of summary that you wish.
STATEMENT OF THE HON. MIKE CASTLE, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF DELAWARE
Mr. Castle. Thank you very much, Mr. Chairman. I would like
the assumption that everybody here will read my prepared
remarks thoroughly and I will refrain from reading them myself.
And frankly, in your case and in the case of some of the others
here, what I have to say is not necessarily original or new to
a lot of people in this Congress. I have been talking about
some of these issues almost since the day I arrived here. I am
strongly in support of H.R. 853. I am only going to talk about
certain portions of it, but I don't know any part of which I am
not in support. I think the budgeting appropriation process is
without a doubt the engine that drives the Congress of the
United States. I think it is the portion procedurally of what
we do that is most out of whack with what it should be.
Frankly, it is my hope that you all, as I guess one-half of
this with the Budget Committee as esteemed Members of Congress,
lesser mortals such as myself, could never envision being on
the Rules Committee, but you have the ability to really carry
this. I just hope to the Lord that you will run with this. I
just think this is really, really important.
I am tired of the naysayers who say that we should not
change the budget process. I think somebody needs to take a
different look at it. I think that you all are in a position to
do that. So more than anything else, I would have to say that
if we are going to have a credible and responsive budget
process, I think that is what has to happen.
Just a couple of brief thoughts and I would answer any
questions that you might have. One is I heard Mr. Regula
testify to some of this, but I believe that the President
should be a part of this process. The President is part of the
financial process of how we spend money in the United States of
America in a big way, and in my judgment should be brought into
the process early on in terms of budget resolutions and signing
onto it. If he or she does not like that, then he or she can
veto it or come to the Hill and lobby or whatever it may be. I
just think that is an absolutely essential part of it.
When was the last time that we ever got through the
appropriations process without a series of summons at the White
House? And all of it springs from the budget resolutions which
would pass here. So I am strongly in favor of that. I am also
in favor of the two year budget and appropriations cycle. The
planning that is needed for the long-range things which are
done, in my view, needs longer term than one year, particularly
when that one year ends up being less than one year because
sometimes of the way that we go about our appropriations.
Obviously, you could make adjustments in a timely fashion in
off years if need be. But the whole concept of running two
years to me makes all of the sense in the world.
The part of the bill that I am most focused on from a
personal point of view, because I have my own legislation and
they adopted most of my legislation, is budgeting for
emergencies. I don't know how many of you stayed up last night
to see the conference discuss the emergency appropriations
which is going on right now. Apparently it ended at 1 o'clock
in some sort of a stalemate. I frankly don't watch a lot of C-
SPAN unless I am trying to figure out how I am going to vote on
something. I don't stay awake at nights watching it. If I did,
I would probably fall asleep. But there were people who were
galvanized by this. Some probably stayed up until 1 o'clock,
like watching a championship playoff game or something, who
couldn't take their eyes off of it. And they were just amazed
at what was going on here in terms of the people trying to pen
in every program in the world.
We don't have an emergency process in this Congress. We
simply don't have it. What about our States? The States all
basically have this. Just about all have some sort of emergency
process. They appropriate the money and they have a process by
which something is declared an emergency and then the money is
spent. Only in the Congress of the United States have we
reached the point where we ignore this altogether, and we have
found, because we have trouble with our caps and budget
resolutions in terms of what we appropriated to us, as we saw
recently in the House-passed bill with the extra military
expenditures. Only in the Congress of the United States do we
have the system to avoid it, the cap problems, that avoid
addressing the cap problems and is called add it to the
emergency spending and making everything an emergency. Any need
which is out there now becomes an emergency so that we could do
this.
I just think that it is an abhorrent process, one which is
an extraordinarily difficult one, made more difficult, I might
add, by this senate which believes in its filibuster rules they
have to get 60 votes for everything. I say let them filibuster
over there. Let them read from the Bible and the Constitution
for a while. Let's stand up to some of the actions that are
going on in the Senate of the United States.
That is my view of it all. The bottom line is it is a
process that I think is tried and true and failed completely.
It is up to us in the House to make the changes which are
necessary. I am not going to go through a lot of details of it.
I think that some of you have been through this with me before.
You know what we have tried to do. Essentially it is each year
to appropriate a sum of money that would be for emergencies. As
I said, they do it in the States now. That means that some
first year you have got to start this. You have got to find
that five or $6 billion dollars. You have got to squeeze it
into an already tight budget.
Our revenues are quite a bit higher than they were when we
set the budget caps. I am not one to necessarily be persuaded
that we have to hold the budget caps forever. Everyone winks
about that, that we are not going to have budget caps in the
end. I say we face this issue early on. What we need to do is
this. By the way, I am far from a big spender. I just truly
believe that we should spend adequately, and we are not doing
it. You have to have a rainy day fund. We can set the amount
based on looking back over five years or so. And it does come
out to about five or $6 billion. It doesn't take a Kosovo in
your consideration. You obviously have to have breakers on this
in a sense so that if something significant happens you can go
beyond it.
But you would do this, you would have a definition as to
what an emergency really is. You would have a panel that could
review true emergencies that would be able to supersede some
appropriator's interpretation of what an emergency may be,
which would be a process to go by. You wouldn't have to get
into this incredible offset fight that we have now with respect
to what we as a Congress, and particularly Republicans, are
trying to do.
I happen to believe in offsets now. But if you have it as
part of the appropriations process, you would get away from
that. I think that is something that we should do as well. It
also means, by the way, that communities which are devastated
by the tornados and hurricanes and earthquakes would get their
money in a faster sense. It also means there would be a review
process for that. I can tell you right now that those
communities, the smallest ones to the biggest State out there,
are submitting claims that are probably close to--I was going
to say "fraudulent," but strike that word and say "excessive,"
because they figure they get a percentage of this.
If we had some sort of system for review of emergency
requests, that would be extraordinarily helpful, too, something
that is missing as far as the Federal Government is concerned.
All of this has to be within existing budget limits. It
would be part of the budget process. Whether or not it ended in
that in terms of determination of who metes it out with
appropriations or budget is something that could be resolved by
any of you, I suppose, but I just think that we absolutely need
to address is. Frankly, this is about the third or fourth year
in which we are getting into a situation in which we going into
emergency spending as a way of trying to do things that we need
to do. We have a series of appropriations bills, I would say
two or three maybe four or five emergency appropriation bills
that aren't going to get done. We are going to sit down with
the White House sometime in October or November and have this
big combat and get a bill that none of us can handle, which
John and the Democrats as well as the Republicans are going to
say is excessive. It is just not a good way to go about our
business in my judgment.
I come to you, pleading with you, because this is something
that virtually everyone agrees on. It should be done. But there
is always some handful of people out there that have more power
than some of us do that manage to stop this. I would hope that
you all with the strength that you have would really run with
this and hopefully do something about it.
The Chairman. Thank you very much, Mr. Castle.
[The prepared statement of Mr. Castle follows:]
[GRAPHIC] [TIFF OMITTED] T7496.112
[GRAPHIC] [TIFF OMITTED] T7496.113
[GRAPHIC] [TIFF OMITTED] T7496.114
[GRAPHIC] [TIFF OMITTED] T7496.115
The Chairman. We appreciate your being here and for the
time and energy you have put into this. I have had discussions
with you about this before. I know that we will continue. We
are hoping that we will be able to move as expeditiously as
possible and have it in this legislation. Your thoughts will
certainly be taken into consideration.
Mr. Goss.
Mr. Goss. I would like to bottle that and spread it around.
It is very encouraging to hear that kind of enthusiasm for
this. I really mean that. This is not a task that has ignited a
lot of what I would call colleague interest, mostly people who
are concerned about it, and people say somebody ought to do
something. We seldom get a member ready to jump in the fracas
and I very much appreciate that.
Mr. Castle. I am equally as enthusiastic with the
intelligence authorization.
Mr. Goss. That fine.
The Chairman. Mr. Linder.
Mr. Linder. Did you have a two year budget in Delaware?
Mr. Castle. No, we did not. That is a good question,
actually. Most States do not. I never pushed for it, in
fairness, but we had a bond process. So all of your long-term
spending was tied up in that. You didn't have aircraft carriers
tied out over seven years, or whatever it may be. You had a
process by which any long-term spending you had was put into a
bond bill and understood from that point of view. Plus we would
report on the--in a longer-term sense, too, we had reports on
it. But we were handicapped by the Federal Government. We
weren't sure what they were going to do each year. We would
have to go back each year and review it. It is a smaller
problem, a more manageable process so we are able to do it.
I think there is a difference between the States and the
Federal Government. However, I think the States should be
looking more at this, too, in terms of longer-term planning.
But their processes, I think, lend themselves to a little bit
of longer-term planning now. It is a little bit of a simpler
process. We did not have it in Delaware. We are not pushing for
it in Delaware; that is, the present Governor is not pushing
for it.
Mr. Linder. Have you looked at the question of a capital
budget?
Mr. Castle. I have looked at that question. I am a capital
budget fan, obviously, in the way that you don't go into the
market necessarily quite as clearly in terms of debt. But I
think it helps tremendously with the planning. Most people know
where things are to separate all of that out and do it
separately. I am not sure that is in this bill or not, but I do
personally support that concept. I have not really reviewed it
in terms of how you would actually do it. I get personally
frustrated when you have long-term projects going on in the
Federal budget. I don't think it gives you a very good picture.
It takes a genius to figure out what the heck is in all of the
appropriation bills, as we all know. I think some sort of a
separate capital budget, long-term budget process, at least in
terms of designation, would be in order.
The Chairman. Thank you. Mr. Hastings.
Mr. Hastings. Did you have a capital budget in Delaware?
Mr. Castle. Yes, we did.
Mr. Hastings. Was that constitutional limits or bonded
indebtedness or constitutional indebtedness?
Mr. Castle. Actually, we did not. We had a very high bonded
indebtedness for various reasons which never made me very
happy. But we did have constitutional limits in terms of
expenditures. Delaware had an Economic Financial Advisory
Council. Boy, could we use that down here. We have got to get
something like it. Basically, it was made up of both political
parties, public and private experts, and they projected what
the revenue was going to be each year. You could not exceed
that revenue.
Mr. Hastings. By the Constitution?
Mr. Castle. Actually put in the Constitution. We had a
rainy day fund, which I think was equal to five percent of the
budget. Then we had another two percent set-aside which was a
little softer than the rainy day fund. We had a huge budgetary
problem back in the seventies. That is when all of this
happened. You could spend the two percent a little more easily,
but I don't think that we spent the rainy day fund yet. We
carried it over from year to year.
For various reasons, my recommendation here is to use it to
retire debt and then reappropriate it the next year. We carried
it over. We had two stops before you would get outside the
budget. We didn't even get close to that amount.
We have now, I think, the highest financial rating of any
State; if not the highest, the next category down. I think that
we just went to the highest with a handful of other States
because of a lot of the budget processes which we adopted. We
also, by the way, reduced our per capita debt tremendously in
spite of the fact--
Mr. Hastings. The reason that I ask that, Washington State
has a constitutional limit. I don't know what the figure is.
Statutory is lower, but you need some sort of mechanism like
that on capital funding. We don't have that here. By the way, I
was one of those that stayed up and watched Congress until I
saw my issue addressed, and then I went to bed.
Mr. Castle. I don't want to ask what the issue was.
The Chairman. Thank you very much. Mrs. Myrick.
Mrs. Myrick. I too thank you. I am real encouraged by what
you had to say. I agree with you completely. I think that some
of the points you made are especially important, having done a
budget for a city, not a State.
Mr. Castle. Maybe as big as Delaware.
Mrs. Myrick. It is anymore. But we had a separate capital
budget as well. It is very simple to do that. You know exactly
what you are spending and when you are spending it. It just
makes so much sense as well as the limits. We have a AAA bond
rating still, and had it for many, many years. That contributes
to it.
The Chairman. Thank you very much, Mr. Castle. We
appreciate you being here and again for your very thoughtful
remarks. We look forward to continuing to work with you on
that. Thank you.
The Chairman. We are now very happy to welcome as our final
witness today, the distinguished Ranking Minority Member, the
gentleman from South Carolina, Mr. Spratt.
STATEMENT OF THE HON. JOHN SPRATT, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF SOUTH CAROLINA
Mr. Spratt. Thank you, Mr. Chairman. I am happy to have
this opportunity. I am sorry I don't have the required number
of copies of my statement. I got a copy of it from my staff
last night. I took it home and worked on it until late last
night and managed to save it in such a way that I reinstated
the original document and wasted all of my effort.
The Chairman. Welcome to the 21st century.
Mr. Spratt. That is what you call leading with your left.
Mr. Chairman, I am grateful for the opportunity to testify
about H.R. 853 because the bill is comprehensive, wide-ranging
and covers all kinds of items. I think it is critically
important that we study it carefully and I would like to call
attention to several provisions of it. I don't want to slight
or diminish the work that Mr. Nussle and Mr. Cardin and others
on the task force put into it, but I take exceptions to the
major provisions of the bill. There are parts of it that I
think are positive, but on the whole I am not convinced that it
moves the ball forward. I am a big believer that if it ain't
broke, don't fix it.
We last made major changes in the budget process in the
Budget Enforcement Act of 1990. Since 1992 this process has
helped us from a deficit of nearly $300 billion to a surplus
this year of more than $100 billion.
I am not here to tell you that we can't make improvements
or shouldn't make improvements in the budget process, but a
budget process that helps us improve the bottom line by $400
billion in seven years ought to enjoy some presumption that it
is working in the right way.
If there is a Congressional majority that can agree upon an
overall plan, the process that we have got allows that majority
to make a budget plan and implement it. We did that in 1997.
There is a will to do it. Last year we didn't do it because
there was not a will, not a common majority to get it done. If
we are in earnest and do have some kind of consensus, what we
have got in the budget process that is on the books now are
quite a few enforcement tools, so that the broader outlines of
the plan can be laid down, not just for 1 year but many.
We are typically now budgeting for at least five years and
this year we ran our projections of the budget in both houses
for ten years.
Let me mention four main concerns that I have with the bill
before you. The first is with the provisions of this bill that
we can statutorily--the Pay-As-You-Go requirement. The second
is with the automatic continuing resolution, the automatic CR.
The third is with the movement that this bill would make
towards a joint resolution, a law rather than a concurrent
resolution. The final is with the way that this bill will take
the budget resolution and diminish it substantially, strip it
down to just a few bare bones essentials, aggregate spending,
aggregate revenues, and the resultant deficit of the surplus:
the 20 spending functions that are now typically the House's,
Congress's opening expression of our priorities. Our only real
programmatic statement of a budget would be put in the
committee report, diminish in staff. So would the
reconciliation instructions be taken down a notch by putting
them in the committee report rather than the text of the bill
itself.
Let me first mention weakening the so called Pay-As-You-Go.
I think you would agree this is one of the disciplines that has
helped us get from huge deficits to substantial surpluses. This
bill would repeal the requirement that entitlement increases or
tax cuts be fully offset. It will allow projected on-budget
surpluses to be used as offset.
Now, the problem is the same for entitlement increases or
tax cuts, but let's take tax cuts as an example. Suppose a tax
cut is enacted that uses up all of the projected on-budget
surpluses. You can understand easily these projections are
over-optimistic. Congress will be faced down the road with
several choices: a large tax increase, a large entitlement cut,
a large discretionary spending cut, sequester, none of them
pleasant choices.
Basically, I don't think that it is wise in any event to
invite the wiping out of our on-budget surpluses or even a
large portion of it until we have actually squared up and dealt
with Social Security and Medicare for the long term. I don't
think that it is safe to run our projections far into the
future, five, ten years. That has been notoriously unreliable.
Keep in mind that the CBO's projection of the surplus of twelve
months' time has increased by $750 billion over a period of ten
years. Anything that goes up by $750 billion in ten years can
come down by $750 billion because it is all in the commerce
construct. It is on paper. It is not a reality yet.
I have a problem, just willy-nilly across the board saying,
okay, we don't need this rule that has helped discipline us
since 1990. We can dispense with it now and allow on-budget
surpluses to fully offset even entitlement increases or tax
cuts.
This budget bill would also turn all existing discretionary
appropriations into capped entitlements. That may come as a
neurotic surprise to you, but by enacting an automatic
continuing resolution, that is the end result. That is the
effect. Congress, if we have this automatic CR will no longer
need to pass or even consider an appropriation bill. Right now,
failing to appropriate is mostly unthinkable. It happens
sometimes, but with an automatic CR, failing to appropriate
could become routine.
The risks are substantial to this institution, to both
houses. I beg you to weigh these risks. Let me just suggest a
couple of the unintended consequences that could ensue. We use
"must pass" bills like appropriations, a way to define
priorities each year, to get the President's attention, to make
the agencies of the government more responsive to us. But it is
poor tactics for us, I think as an institution, to give up
these vehicles. This is the way that we assert ourselves.
It would be unwise also, I think, to allow 41 Senators to
kill regular appropriation bills by way of a filibuster. That
is what an automatic CR would do. By the same token, it would
allow the President to kill a regularly approved appropriation
bill, if he preferred the status quo, by vetoing it. Then a
small minority of the Congress could sustain the status quo in
reference to any appropriation bill. These powers wouldn't
enhance the ability of the majority to run this institution.
In addition, this bill provides for something that I
understand the purpose of, but I am not convinced is achieved
by what it proposes; and that is, it calls for a budget
resolution which is now a concurrent resolution to be made a
joint resolution, which means the President would have to sign.
I took part in the negotiations in 1997 between the President
and the Congress. I think it was a constructive experience. I
think that it is something that we ought to emulate. I think
the President out to get engaged in the process earlier rather
than later. We don't need to have this all crammed into the end
of the year to be resolved in some patchwork process as it was
last year.
I am troubled by this provision to a joint resolution for a
couple of reasons. The first is I think if we require the
President to engage, we will just impede the budget process. We
are required by statute and by joint resolution in those years
where the President or the Congress, together or separately,
really don't want anything resolved early. They aren't ready to
make the compromises as we were in 1997 to reach a common
agreement. If you have a strong-willed President who has
decided that he is going to change the direction of the
government, he can throw a monkey wrench into the whole budget
process by simply extending the negotiations, holding out the
prospect of an agreement, and then vetoing the resolution
obstinately when it gets to him.
By the same token, Congress can spin its wheels
inordinately, trying to get a resolution like that. What
happens when the resolution fails? This bill says, well, we
don't have a fast track procedure so that if the President
vetoed the resolution, he could bring the same resolution as
the current resolution up on the House floor. In all
probability, if you go that far down the road towards giving
the President a resolution which you hope is a product of your
negotiations he might sign, you would probably make concessions
in it that you would want to withdraw before you put it into
the form of a concurrent resolution and offered it as your
resolution. You would want to start the negotiation over.
What does that mean? We are into June, July. We are
cramming the process into the latter months of the fiscal year
once again. I don't think that helps us at all. Ironically, the
bill, after having proposed it, we enhance the budget
resolution by making it a law, a joint resolution which the
President signs, turns around and diminishes the contents of
the bill and the statute of the bill by stripping out of the
bill the 20 function levels which, as I said, are the one
effort that we make to give some sort of programmatic statement
of our priorities across the board of Federal spending.
It also takes the reconciliation instructions and, with the
20 functional levels, puts them into the committee report,
taking them down a notch in legal significance. The remaining
resolution is a bare bones resolution. Now, we have engaged the
President, invited him to negotiate, put off the budget process
until we can reach some agreement, but what is the end result
of the agreement? Aggregate spending, aggregate revenues,
resulting deficit of surplus and some committee report language
about funding levels and reconciliation. All of this effort
comes to a very, very small end result, hardly worth achieving
if we are really going to have budget reform.
Let's go back to the one big compromise made in 1974
contained still in 302(b) look at the 302(b) allocation
process. If you are going to work towards a process where the
President and the Congress are building on the foundation of a
common budget where we have made our compromises and come to
some accord, then that budget resolution has got to contain the
elements of that accord.
When we got to the end of the balanced budget agreement in
1997, we had a problem as to how to state all of the things in
binding form, semi-binding form that we just agreed to. How to
do lay them out for a five year period of time? This bill
doesn't begin to address that. Instead it moves in the opposite
direction by reducing the budget resolution to some simple
numbers that don't begin to address all of the disputes that we
will have with the President over whether the money goes to
defense or education, health care, or highway building. So I
don't think that this is helping the process at all. I really
think it may move the ball backwards instead of forward.
Finally, Mr. Chairman, as I look at it, I am curious as to
why the bill skirts some of the bigger issues. You and I were
on the Hamilton committee dealing with legislative
reorganization. We batted back and forth on biannual budgeting
and didn't come to any clear settled conclusion about it. I
think the conclusion we came to is that if we had biannual
budgeting we would probably have a big appropriations process
one year and a mini-process the next year. The supplemental
would be a much bigger than the supplemental that we are doing
now. You wouldn't get away in the second year of the biannual
process of some sort of appropriation.
Social Security. You have got a bill that is moving, I
understand would deal with the segregation of the Social
Security surpluses. That is something that we seem to be
converging on the end at least, if not on the means, but there
are other trust funds, as Mr. Shuster reminds us. This is a
problem, too, that we should address. We have got a number of
trust funds, over 150 in the Federal budget, which are
dedicated and earmarked. The moneys that are collected and put
into these trust funds are supposed to be spent on the
dedicated purposes. But by and large, there are a lot of misses
between the cup and the lip. There are a lot of cases where the
money just doesn't get there because it is appropriated for
other purposes.
If we are going to do true budget reform, I think we
probably ought to take a systematic look at that. As I said,
anybody who wants to touch the third rail, 302(b), if we really
are going to do budget reform, if we are really going to
involve the President, that is the kind of allocation process
we should be talking about institutionalizing.
The Supreme Court also has invited us to do something when
they threw out the item veto. We have had expanded and enhanced
procedures on the floor. It is not the equivalent of an item
veto but it is better than what we have got under the existing
statutes. Certainly things like this out to be considered for
inclusion in this bill.
I have got a number of other things in my testimony which I
will file for the record, where I think there have been
positive contributions made by this bill and this task force.
But I urge you, plead with you, to weigh these changes
carefully and consider whether or not we are in many of these
cases moving the ball forwards or backwards if we adopt them.
The Chairman. So what do you really think of the bill?
Mr. Spratt. I wouldn't vote for it in its present form.
The Chairman. You have gone through extraordinarily well
virtually every item in it. As I listened, I wanted to see if I
could find something that you didn't touch on. One of those was
the emergency fund.
Mr. Spratt. I think they have got the basics of something
that we should consider, but the mechanics still need to be
worked.
The Chairman. What do you see as the problem with that?
Mr. Spratt. Well you can have big years of evaporations
that would skew the average. I will tell you a problem we have
had before with funding FEMA. If you put a lot of money in for
FEMA or for any Federal agency, and at the end of the fiscal
year if they haven't spent it, there is a great temptation to
find places and ways to spend it. I remember we used to fund
part of a--authorized part of FEMA's budget on the MILCON
Committee in Armed Services. When we gave them the actual
money, we found they spent it even though there weren't
emergencies. We looked to see what they were spending it on.
They were doing all kinds of paper consultancy contracts. All
over the Beltway somebody had a contract working with FEMA
because they had this money at the end of the fiscal year. So I
think we need to get some refinement as to how much we should
budget for emergencies, but clearly, we have got a good example
now as to why we need more teeth, more discipline in the
process of budgeting for extraordinary causes and emergencies.
The Chairman. Thank you, John.
[The prepared statement of Mr. Spratt follows:]
[GRAPHIC] [TIFF OMITTED] T7496.116
[GRAPHIC] [TIFF OMITTED] T7496.117
[GRAPHIC] [TIFF OMITTED] T7496.118
The Chairman. Mr. Goss.
Mr. Goss. Your testimony is obviously very helpful. It is
challenging. I think that we started out with a much bigger
idea and we ended up sort of fishing for supper or fishing for
a trophy. You are suggesting that we go back to fishing for a
trophy. I don't disagree with the overall goal. I just don't
think that we are going to be able to do it in one step. This
is something that is going to take a process of education,
constituent-building among our colleagues of what we are trying
to accomplish.
I do think the efforts that were made in the area we have
singled out for debate on this are ripe. I think that the abuse
on the emergency spending thing is egregious beyond
description, as we are seeing that as we sit here. I think the
problem of not getting the President on board up front is a
serious problem. I agree there are problems in what you do
downstream, but I still think it is worth getting in upfront.
I think that the items that we picked, the little fishing
that we are going after here, is a good place to begin this. I
hope that it is not the final work, but I hope there is enough
progress for people to say, yes, with a little effort we can do
better, and maybe with a little more we can do better yet. So
that is the way that I am looking at this.
Mr. Spratt. Let me call your attention to one problem that
is so bad you have to read it several times or you have to have
somebody like Richard Kogan on our staff to read it before you
can even discern what the problem is. The way that we read the
bill, this bill, assumes that after discretionary spending caps
expire in 2002 there is a presumption in forecast subjecting
future surpluses and deficits, that the level of discretionary
spending will be frozen at its level in 2002.
Now, with that forecasting assumption, you have inflated on
budget surpluses too. We all know, I think, that discretionary
spending caps are already too tight. We are bursting the seams
right now. To assume that these will be set at existing low
levels and not increase over time and that on-budget surpluses
will be a function of these is to assume, therefore, that on-
budget surpluses are going to be a lot larger than they really
will be. That invites big tax cuts to be offset by these on-
budget surpluses that are not likely to materialize or, for
that matter, entitlement increases, contributions to Social
Security.
Mr. Goss. What I guess we are trying to do is to get into a
box where we can set up a process that works a little better,
get a better result without some of the problems that we are
seeing. We are trying some things out.
I agree, if you take Alan Greenspan's pulse and you don't
like it, the whole thing falls out; or Robert Rubin resigns,
the whole thing goes crazy. What I want to do is try to get a
process that gives us a better handle so that when something
unexpected does happen, we don't have midnight sessions of the
Appropriations Committee and conference reports going on ad
nauseam, especially the Rules Committee, which fortunately our
wise Chairman--
Mr. Linder. --has kept to a minimum.
Mr. Goss. Has kept to an absolute minimum. We look at this,
and last year clearly was a benchmark. If we can't do better
than that, we probably ought to give up trying. That is the way
that I feel about it.
The Chairman. Thank you. Mr. Linder.
Mr. Linder. John, you mentioned the enhanced provisions or
veto. I would like you to comment on that. The growing body of
legal opinion is, I think, that the President already has the
authority to item veto under any act of Congress. Each item is
going to occur at some point or another in a subcommittee.
Mr. Spratt. Well, I will quote no less a constitutional
authority than Judge Bork, who said if the President has a line
item veto, why is it that no President has noticed it in the
last 200-odd years, including George Washington who presided
over the Constitutional Convention and wrote a letter clearly
stating that he did not have such authority. I think the
Supreme Court's decision pretty well sealed that. An enhanced
and expedited procedure simply says that the President likes
something in the bill, he can send it back up here and shine a
spotlight on it, make us vote on it within a fixed period of
time, and it would be enhanced to the extent that it could
apply to targeted tax provisions and things like that, as well
as spending items. It is, I think, a constructive substitute if
we can't have an item veto.
I voted for the item veto. When I voted for it, I said I
don't think this is constitutional, but I am willing to let the
Supreme Court say whether or not it is. They said that it
isn't. So we have got an alternative. I don't want to amend the
Constitution, but I think that we can have statutory enhancing
and expedited rescission that would give the President a little
more leverage and help him cull out appropriation bills of all
kinds of extraneous riders.
The Chairman. Mrs. Myrick.
Mrs. Myrick. Thanks for your really thoughtful testimony.
The service that you do on the Budget Committee is very fair
and I appreciate that. Again, the only other thing that I would
say is I tend to wonder and question that the budget process is
responsible for the balanced budget because I come from the
other side; that I think that we did a balanced budget in spite
of the budget process that we currently have.
Mr. Spratt. Well, the discretionary spending counts, the
PAYGO rules have helped. I was here before them and here after.
I think they made a difference.
Mrs. Myrick. I appreciate it.
The Chairman. Thank you very much, Mr. Spratt. We
appreciate you being here. Let me just state for the record
that we are expecting testimony from our colleagues, Mr. Obey
and Mr. Cox, and a couple of others so we plan to keep the
record open for that. I am told that we may even have some
testimony submitted from the Office of Management and Budget.
The Chairman. This concludes the hearing and your entire
statement will appear in the record, Mr. Spratt, without
objection. With that, the hearing stands adjourned.
[Whereupon, at 10:34 a.m., the committee was adjourned.]
-