[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
BUDGETING IN THE CONGRESS: REFLECTIONS ON HOW THE BUDGET PROCESS
FUNCTIONS
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HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, JUNE 22, 2005
__________
Serial No. 109-8
__________
Printed for the use of the Committee on the Budget
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house04.html
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COMMITTEE ON THE BUDGET
JIM NUSSLE, Iowa, Chairman
JIM RYUN, Kansas JOHN M. SPRATT, Jr., South
ANDER CRENSHAW, Florida Carolina,
ADAM H. PUTNAM, Florida Ranking Minority Member
ROGER F. WICKER, Mississippi DENNIS MOORE, Kansas
KENNY C. HULSHOF, Missouri RICHARD E. NEAL, Massachusetts
JO BONNER, Alabama ROSA L. DeLAURO, Connecticut
SCOTT GARRETT, New Jersey CHET EDWARDS, Texas
J. GRESHAM BARRETT, South Carolina HAROLD E. FORD, Jr., Tennessee
THADDEUS G. McCOTTER, Michigan LOIS CAPPS, California
MARIO DIAZ-BALART, Florida BRIAN BAIRD, Washington
JEB HENSARLING, Texas JIM COOPER, Tennessee
ILEANA ROS-LEHTINEN, Florida ARTUR DAVIS, Alabama
DANIEL E. LUNGREN, California WILLIAM J. JEFFERSON, Louisiana
PETE SESSIONS, Texas THOMAS H. ALLEN, Maine
PAUL RYAN, Wisconsin ED CASE, Hawaii
MICHAEL K. SIMPSON, Idaho CYNTHIA McKINNEY, Georgia
JEB BRADLEY, New Hampshire HENRY CUELLAR, Texas
PATRICK T. McHENRY, North Carolina ALLYSON Y. SCHWARTZ, Pennsylvania
CONNIE MACK, Florida RON KIND, Wisconsin
K. MICHAEL CONAWAY, Texas
CHRIS CHOCOLA, Indiana
Professional Staff
James T. Bates, Chief of Staff
Thomas S. Kahn, Minority Staff Director and Chief Counsel
C O N T E N T S
Page
Hearing held in Washington, DC, June 22, 2005.................... 1
Statement of:
Prepared Statement of Hon. Bill Frenzel, guest scholar,
Brookings Institution, and former Member of Congress....... 5
Allen Schick, Ph.D., Professor, University of Maryland....... 11
Richard Kogan, Senior Fellow, Center on Budget and Policy
Priorities................................................. 20
Prepared statement of:
Mr. Frenzel.................................................. 7
Mr. Schick................................................... 15
Mr. Kogan.................................................... 25
BUDGETING IN CONGRESS: REFLECTIONS ON HOW THE BUDGET PROCESS FUNCTIONS
----------
WEDNESDAY, JUNE 22, 2005
House of Representatives,
Committee on the Budget,
Washington, DC.
The committee met, pursuant to call, at 10:01 A.M., in room
210, Cannon House Office Building, Hon. Jim Nussle (chairman of
the committee), presiding.
Members present: Representatives Nussle, Crenshaw, Putnam,
Diaz-Balert, Hensarling, Simpson, Bradley, Spratt, Moore,
Edwards, Baird, Cooper, Allen, Case, Cuellar, and Kind.
Chairman Nussle. Good morning and welcome, everyone, to
today's hearing on the congressional budget process.
Some of you may feel like this is Groundhog Day--it is. We
welcome back those true warriors in the effort to reform the
budget process and am pleased that we have several experts to
participate in today's hearing.
First, former Congressman and former ranking member of this
committee back when the Republicans were in the minority, Bill
Frenzel from Minnesota. Who was well-known in his time here for
his expertise in a wide range of issues and particularly for
his knowledge of the budget process in terms of history and
context as well as policy and even the practical politics of
what has to happen. Bill, welcome back.
We also have Professor Allen Schick, who was actually
involved in the development of the Congressional Budget Act and
has since written some of the most perceptive analysis on the
history and context of the congressional budget process that
you can find.
Finally, Richard Kogan, who is well-known as a fierce
partisan but also very capable and expert in the budget process
and for his commitment to the integrity of that process. We
welcome him back as one of the most knowledgeable individuals
in the field.
We welcome all of you to the committee.
Every few years or so, we hear from a handful of experts on
the congressional budget process and most of these experts will
say that the process has completely fallen apart or it has lost
its usefulness, it is irrelevant, and some might even say it is
dead. Of course, these declarations tend to be more frequent in
those years when we have missed the deadlines, run past the
speeding limit signs, lump several appropriation bills into one
big omnibus package, or certainly when one of the Houses of
Congress has failed to even pass a budget.
In fairness, I don't think anyone, myself included, would
argue that the budget process is perfect or it works perfectly
through every step of the overall process every year. But I do
think most would agree that, while admittedly in some years
more than others, it has served as a critical tool for Congress
over the last 30 years.
So before we get too far into the myriad discussions I know
are ongoing on how we might reform the congressional budget
process, I thought it would be a useful exercise to kind of
step back and take a comprehensive look at the current process.
These include various aspects and implications both for policy
and in practical operations of the Congress, why we have the
process, and why we need it in the first place.
The Budget Act of 1974 for the first time gave Congress an
actual process for budgeting rather than a series of piecemeal
responses to Presidential spending requests. It empowered
Congress to set its own priorities which heretofore, prior to
the 1974 Budget Act, really was not something Congress had
determined in its macro sense. It empowered Congress to set its
priorities, whether or not it agreed with the President, and
set in motion the policy choices that it needed to follow. It
gave Congress the means to determine spending by setting a
limit on total spending, by directing spending to what had been
determined as the Nation's most important priorities, and by
the power to enforce the agreed-upon spending limits through
points-of-order.
Of particular consequence this year, the Budget Act gave
Congress the means of addressing mandatory spending within the
context of an overall budget plan.
So, in short, the Budget Act empowered Congress to control
the purse by determining its own priorities, policies,
establishing a systematic means to organize its decisions, set
policy goals, and combine all of this into one blueprint, the
budget. This was done to guide Congress throughout one of--not
only the coming fiscal year but, for that matter, into the
future.
Let us take this year as an example. We have got
appropriation bills moving through the House at a record pace--
it is nice that we are setting this so-called record pace; it
is too bad that that doesn't happen more often. For the first
time since President Reagan was in office, we are providing for
the most critical priorities first, with an actual reduction in
many nonsecurity discretionary spending programs.
At the same time, we have got eight different authorizing
committees working; talking; and considering having hearings on
reform for the actual mandatory spending programs that are
looking at actual savings and reform proposals. They are
working in as challenging an area as Medicaid and also looking
to strengthen our Nation's defined benefit pension. All of this
was laid out in a budget process.
While in the interest of reform, this did not start there
in every case. It is the budget that really has given the work
of reform a much-needed push or calendar, if you will, and set
a schedule for determining to tackle some of the Federal
Government's biggest challenges in the coming years.
This year is far from over, and we have got a lot of
difficult work ahead. But as far as the budget years go, so
far, I would say, so good and so much for the claim that the
budget process is dead.
All of that being said, I will be the first to admit that
things don't go this smoothly every year; and the year is not
over yet. But it is particularly important, I think in those
years when Congress's priorities might not be as clear or its
will as strong, that we need a strong, solid budget process to
keep us headed in the right direction.
As I noted a moment ago, there are various discussions
going on generating enormous ranges of ideas on how the budget
process could or should be reformed. With suggestions ranging
from adding a point-of-order here or there or scrapping the
whole thing and starting over. I would guess that every member
of this committee has at least one idea that they feel must be
included in order for the definition to suggest that we have
reformed the budget process successfully.
It is no secret that I have my own ideas on the right way
of doing it, the correct way of proceeding, and I could easily
round up a group of like-minded witnesses to tell us how great
my ideas are. But, as I am sure you will gather from our panel
today, that is not what I did. I genuinely believe that it is
in all of our best interests to ensure that we not only have a
solid grasp of what we have already done, but we also need to
keep an open mind about what we actually need before we start
making decisions on how we should change it.
So I want to stress once again that the purpose of today's
hearing is to really take a comprehensive look at the budget
process. This is about how we use it to make decisions, not
about the decisions themselves. Again, it is about the rules
that we go through, not how those rules are applied to actual
substantive or policy decisions.
How does it help us determine priorities, set agendas,
guide Congress' work throughout the year? Why do we have it?
Why do we need it? In a big-picture sort of way, is it working,
or why not? I think that is the critical, important discussion,
in and of itself; and it is a much-needed step if we are going
to lay the groundwork for budget process reform.
While I have no doubt that members might be tempted to use
their time to tout their own personal ideas for specific
reforms. I will ask that members of the committee try and
recognize the importance of having this broad 30,000-foot
discussion first before we turn to some of those specific
proposals, and I will try and do that as well.
With that, I would just welcome our panelists and look
forward to a good discussion for those of us that are
interested in this topic and turn to my friend, Mr. Spratt, for
any comments he would like to make.
Mr. Spratt. Thank you very much, Mr. Chairman; and thank
you in particular for calling this hearing and for selecting
this panel. If we wanted variety and vigor of ideas, depth of
experience and perspective, we couldn't have a better panel
than the panel before us today. I thank all of you for coming
and for presenting us with some provocative ideas.
For a good period of time in the 1980s and the 1990s, the
whole notion of budget process was treated with some disdain.
That was largely because we invoked the idea often, but we
never achieved its purported objectives, and that is moving the
budget from huge deficits into eventual balance. Then, in the
1990s, after adopting the Budget Enforcement Act of 1990 and
1991, putting some teeth in the budget process, we finally
began to move toward success and in 1998 achieved what was
thought unthinkable just a few years before: We actually
balanced the budget. In the year 2000, we had a surplus of $236
billion.
We have lost that path, and lots of folks are saying--and,
in fact, one of the most frequently invoked phrases around this
town is, we are on an unsustainable course, compiling deficits,
stacking debt on top of debt with no abatement in the near term
and no end in sight.
So we ask ourselves, where is the budget process today? If
it worked in the 1990s--and in looking back retrospectively it
appears to have worked. Even Alan Greenspan sat where you sit
and said, I was a skeptic in 1990, 1991, and 1993. I thought
all of this was a diversion, sort of a red herring away from
the substantive subject of what do you cut and where do you
raise taxes. But he said, looking back, I realize that this was
a significant part of the successes of the 1990s.
Nevertheless, we have allowed two of the key budget process
rules that helped us get where we got in the 1990s, the PAYGO
rule and discretionary caps, go by the way, expire in the year
2002; and we have got a situation right now which the American
people and Members of Congress have an awfully difficult time
defending. How do we come to grips with a problem so compelling
as a deficit of $412 billion that shows little sign of abating
over the next years? That is the primary concern we have got
before us now. How do we get our hands around the deficit again
and do in the first decade of this century what we did in the
last decade in the last century of the 1990s?
There are other functions or offices of the budget that we
pay all too little attention to. We haven't perfected that much
since 1974. For example, disaggregation is a huge problem with
respect to policymaking and with respect to fiscal policy in
particular.
One of the purposes of the budget, it seems to me, budget
resolution is to try to give us something so we can keep our
eye on the ball and determine whether or not we are moving
toward our objectives. And that is not just a balanced budget
but a budget that has programmatic allocations that reflect
what we think this country needs for education, for health
care, for defense, for lots of other things. We don't have with
the appropriation bills that we pass every year that kind of
clear picture of where programmatically our resources are being
put, and the budget ought to serve that function.
Secondly, we do very, very little analysis of generational
burdens. I wonder which generation under existing budget
policies is bearing the burden and to what extent we are
shifting forward the burdens of programs that we are passing
today. Are we investing enough or consuming too much? We ask
that all too infrequently in the budget process.
So one reason for having a budget process is to force us to
focus upon these issues: programmatic allocations, investment
versus consumption, defense versus domestic needs. All of these
things we need to do in some kind of methodical, systematic
way; and, above all, we need to do it within the bounds of a
sensible and prudent fiscal policy that doesn't stack debt on
top of debt and leave our children with an enormous amount of
debt to bear.
So the topic before us is of compelling importance, and we
look forward to your testimony and your contribution to what we
should be doing, what we can be doing to perfect the budget
process and to move the budget back toward sensible goals.
Chairman Nussle. Welcome to our panelists again. We will
begin by welcoming to the committee its former member and
ranking member of the committee, Bill Frenzel. Welcome back to
the committee. All of your testimony as written will be placed
in the record, and you may all three proceed as you wish giving
us your best counsel and advice. Welcome back.
STATEMENT OF THE HONORABLE BILL FRENZEL, GUEST SCHOLAR,
BROOKINGS INSTITUTION, AND FORMER MEMBER OF CONGRESS
Mr. Frenzel. Thank you very much, Mr. Chairman. I served in
the days of quill pens, and technology is baffling, Mr.
Chairman.
Chairman Nussle. Those were better days, I think.
Mr. Frenzel. And thank you, Mr. Spratt. I will stipulate
that both of your ideas are wonderful, and that I am for all of
them.
I was here when the Budget Act was adopted. I guess I am
one of those persons who has always been a skeptic, and I was
at the time.
As I look back on it, there was, you know, a variety of
intents and purposes being laid upon the Congress. As you know,
congressional intent is very difficult to determine. Those
people who drafted the bills and shepherd them through the
Congress had one set of intentions. There were plenty of
resisters. They had different intentions. There were latecomers
with their intentions. Eventually, the bills were passed with
overwhelming majorities.
Most of the people that voted for them hoped that they
wouldn't ever amount to anything. Those people who drafted the
bills hoped that they would be able to improve them in the
future. But their achievement in passing it in the first place
I think dwarfs anything that has been by those of us who have
followed. I think we would do them greater honor if we could
make more frequent alterations in the budget process and try to
take the process in the direction that at least the drafters
intended, whether the rest of the members did or not.
I think most of you at least know of the history of
impoundments and the congressional reaction to the impoundments
of Presidents Johnson and Nixon. Really that is what drove the
budget through the Congress, although the drafters had much
broader ideas than simply stopping impoundment.
The trouble that we got into right in the beginning was
that a number of the budget philosophers at the time were very
nervous about a new system. Even those who were most
enthusiastic about the budget were nervous about a new system
that would unsettle what had gone before. And so, early on, the
concept of a baseline was conceived.
As we talk about Congress actually setting priorities,
which was one of the statements in the committee's paper, or
taking a comprehensive approach, the baseline, of course,
drives you to do what you did last year. And while the Congress
has been able to make changes, particularly beginning in 1987
running down military expenditures and then later building them
up again, those changes come very slowly. The baseline causes
old programs to overwhelm new ones, and to establish new
programs and new priorities becomes exceptionally difficult.
Congress wanted to regain the priority setting. They were
jealous of the President's powers. But what they gained was
simply, in my judgment, quite a slavish devotion to last year
plus colas and demographics. It is never easy to allocate
resources. Nobody ever wants to raise taxes very much. So,
particularly in times of difficulties, it is hard to establish
new programs.
I think Congress has been keenly disappointed from time to
time that it hasn't been able to move priorities, but there are
always old programs, that need to be funded at ever-increasing
levels, that stand in the way.
Also mentioned in your paper is this theory of the
comprehensive approach to the budget. Well, in those days--I
think 1974 was the last year where discretionaries still
exceeded mandatories--we didn't think a lot about entitlement
spending. We thought about it, but it didn't seem to be a huge
problem. And while taking a comprehensive look at the budget
was one of the alleged virtues of the budget process, Congress
didn't think about it that way.
It simply was not very anxious to take on any of the
entitlements. They just wanted to watch them sit there. The
real battle was over discretionaries. As long as the
appropriators were able to exert enough influence so that their
ability to make allocations and choices was not reduced very
much, they were able to live with the budget.
For me, the main purpose of the budget process and the
Budget Act is to control spending. That was, I think, among the
least of the concerns of the Members of Congress who voted for
the Act in 1974. As a matter of fact, you will recall that we
were all Keynesians then, and the Congress used the Budget Act
to spend more money than presidents wanted to spend.
So controlling of spending was not a big deal. Neither was
enforcement.
Most of the people that I talked to at the time prayed that
reconciliation would never be used. Most of the people I talked
to did not understand what the budget was, and I will have to
admit I didn't.
But having tried reconciliation in 1980 and not having
committed suicide, the Congress entered into it in 1981 in a
big way. The other enforcement tools of the caps and PAYGO of
1990, that Congressman Spratt referred to, were great
improvements, But now they have been allowed to expire, and
there is not a lot of enthusiasm to get them renewed.
It is a fact that Members of Congress would like all these
enforcement tools to be renewed--just as soon as each one gets
his/her most recent bill passed. Then the enforcement will
block other Members' spending and tax cuts.
There are a lot of tools available, but they need to be
kept enshrined in the law. We haven't done a terribly good job
of that.
I have already mentioned entitlements, but I need to say
again there is the same reluctance today for Congress to really
look at them. We just let them slide forward. there is nothing
wrong with the Budget Act in this regard. We look at them, we
wave at them, we bless them, cry over them, whatever, but there
is certainly no congressional will to make many changes. We
look them over carefully and decide they are just perfect the
way they are.
The one thing that is mentioned in the committee paper
where the Budget Act had a much greater effect than anyone
believed is the idea of setting the congressional agenda. I
think the drafters of the Budget Act would be aghast at how
much the budget dominates the congressional calendar. I am
surprised myself. Mostly, we pass a budget, break our neck to
do that sometimes, and then we pass appropriations, and then we
rest and go home. It certainly dominates everything we do.
Well, in conclusion, Mr. Chairman, Mr. Spratt, and members
of the committee, the drafters, in my judgment, talked about
all these great benefits, and political scientists and
economists have found many more that the Budget Act can do, but
I don't think that was the general purpose in the Congress for
passing the Act. However, now that you have it and you find
that it can do these extra things for you, I think it needs to
be improved from time to time.
I have come before you with lots of specific suggestions.
They are spread all over the record of the last 10 years, and I
would simply reiterate that I think they are all worthwhile.
Let us go back to the very beginning. The people who
drafted the Budget Act knew it was weak. They got as much as
they could out of the Congress. They hoped to get a lot more,
and they hoped their successors would get even more. I hope
that you, as one set of their successors, are a lot more
successful than my generation, and that you make the changes in
these laws that are necessary to put the good control
mechanisms into law, and leave them there.
Because there is always this strong incentive for Congress
to resist order and discipline, and budgeteers will always be
struggling, often vainly, to keep what I think is a relatively
weak budget system in operation. The urge to spend, the urge to
cut taxes, the urge to get my program--and if I have to be for
yours to get mine, we can do that, too--is overpowering; and
you are the last line of defense.
I am delighted that there is still some interest in serving
on this committee. I hope at least some of you are volunteers.
I wish you great luck and look forward to your questions. Thank
you.
Chairman Nussle. Thank you, Congressman Frenzel.
[The prepared statement of Bill Frenzel follows:]
Prepared Statement of Hon. Bill Frenzel, Guest Scholar, Brookings
Institution, and Former Member of Congress
Mr. Chairman, and Members of the Committee, I am a Guest Scholar at
the Brookings Institution, but this testimony is my own and does not
represent any position or conclusion of the Brookings Institution.
It is true, Mr. Chairman, that I was a Member of Congress when the
Budget and Impoundment Act of 1974 was passed. However, I was then a
very junior member of an oppressed minority, so I cannot take any
credit for being a mover and shaker in the development of the Act,
although I tried to be. In fact, I was an interested observer, whose
recollections grow ever more dim with each passing year.
As is true with every enacted bill, congressional intent, like
truth, resides in the eyes of all the beholders. There are many
different interpretations of intent. I will try to describe what I
thought was intended with reference to the Broad Perspectives laid out
in the Committee's statement of Hearing Purpose. Some of my impressions
were gained at the time, and some came in later discussions with
members who I thought were among the principal drivers in the House,
notably Dick Bolling for the Democrats and John Rhodes for the
Republicans.
SETTING PRIORITIES
The conditions under which the Budget Act arose were dominated by
the Congress' desire to overcome the Presidents' use of the implied
power of Impoundment. Presidents Johnson and Nixon had made heavy use
of impoundment, and members were enraged that money for their
transportation projects had been stopped, especially to be used in
carrying out military actions that many opposed.
That feeling set the tone for much of the discussion about
``Congress' need to set its own priorities''. The frequent battle cry
was that Congress, possessor of the constitutional Power of the Purse,
needed to reestablish its primary role in setting national priorities.
Congress had an appealing rationale for battle it knew it could win
against a weakened President.
Parenthetically, I will add here that Congress has made little use
of the Budget for priority setting. Part of the reason was that a
number of early Budget philosophers, prominently Senator Ed Muskie,
insisted on using baselines tied to existing programs, plus COLAs, plus
demographic changes. Once the baseline theory was set in concrete, it
became almost impossible for new programs to compete with old ones.
Presidents could occasionally push through new initiatives, often
with the help of friendly Congressional majorities. Congress could
modify them, but it could seldom inaugurate new programs of its own.
The old programs, escalated, claimed all the resources. Particularly in
times of fiscal difficulties (most of the time), there were simply no
funds for worthy new programs and projects. As long as the budget is
tied to the baseline, it will be hard for the Congress to alter
priorities, and impossible to budget for outcomes.
If Congress really wants to play in the priorities game, it has to
find a way to liberate itself from baselines, and from the continuing
domination of old programs. If you can't change the baseline, you can't
change priorities. Congress has been reluctant to change either one.
COMPREHENSIVE APPROACH TO BUDGET
In the early 1970s, there was a growing realization inside and
outside of Congress, that, unlike the Executive Branch, Congress had no
way to develop an overall Budget plan. Congressional spending was
merely the cumulative result of individual pieces of legislation, each
passed without much reference to any of the others. It was already
obvious then that there was no framework for Congress to establish a
general fiscal policy.
Many people in Congress who commented on the Act through its
development made mention of the need for a comprehensive approach to
the Budget. How could Congress set priorities rationally unless all
spending could be reviewed at once? But most of them were thinking
about spending in a different way than we do today. 1974 was the last
year in which Discretionary Spending was greater than Mandatory
Spending plus Interest. Most people who mentioned the ``comprehensive
approach'' were thinking of discretionary spending, rather than
mandatory.
Then, as now, appropriators were suspicious of the process, and
believed that they could provide whatever comprehensive approach might
be needed themselves. They insisted that the Budget Act not shift their
traditional control of allocations to others, especially the Budget
Committee. Appropriators were strong then, and they prevailed, but they
are even stronger now because directed spending on ``earmarked''
projects has become the rule rather than the exception.
However, appropriators may look at this question differently now.
They may have a different set of incentives. Their traditional
bailiwick, discretionary spending, has grown (too fast in my opinion),
but much less swiftly than mandatories. When Entitlement and Interest
are combined, nearly 2/3 of spending is mandatory now, and it has
become the growth engine for spending. The appropriators' 1/3 of
spending is getting squeezed further each year. The comprehensive
approach to Budgeting might be a bit more attractive to them now, as a
potential tool to protect their discretionary spending. They have few
other defenses against the rapidly rising mandatories which are
consuming resources formerly dedicated to discretionaries.
Certainly, for Budget observers, insulated from jurisdictional
disputes within the Congress, the huge, impending deficits are a
powerful argument in favor of the need to look at everything before
making judgments on anything.
CONTROLLING SPENDING
In 1974, Republicans were especially concerned about controlling
spending and eliminating deficits (that was then). The country had
endured only 4 years of deficits, and deficits did not extend into the
future ``as far as the eye could see''. But, wailing about deficits and
spending has always been an important minority function, and
Republicans were in the minority at that time.
Democrats were less interested in this aspect of Budget Process. We
were ``all Keynesians'' then, after all, and the majority was much more
interested in stimulation, and, to a lesser extent, priorities, and
than in control. In fact, in its early years, the Budget Act was used
by the Democratic majority to increase spending above that requested by
Republican Presidents. House Budget Committee members used to insist on
putting new projects by name into Budget Resolutions, or at least into
the Committee language that accompanied the Resolutions. Those attempts
did not always survive the scrutiny of the gimlet-eyed appropriators,
but they were a hallmark of the Committee in the 1970s.
Over the years, Congresses have wrestled with the notion of using
the Budget to control spending and deficits (which to me is supposed to
be the real purpose of the whole exercise), but the struggles seldom
came to any good conclusion. We can all toll the litany of failed
attempts, but I won't do it here. For now, let it suffice to note that,
in my judgment, the only control features that were other than
sporadically successful, were the discrete caps and the PAYGO features
of the BEA 1990, and an occasional Reconciliation Bill.
There are many other suggestions for control, some of which may be
effective that may be effective, but this Committee well how tough it
is to amend the Budget Act, so we may never experience them. For my
part, I am convinced that if the Budget Act, or the Budget process,
cannot help Congress control spending and deficits, its other functions
are probably not worth the time, effort and money that we are currently
investing in it.
Nevertheless, I am aware of the fact that the Budget Act's
``Framers'' were very careful to see that the Act did not seek a
specific policy outcome regarding the deficit. Their intent, I believe,
was to assert the role of Congress in setting fiscal policy and
priorities rather than to dictate what the policy should be. I believe
that they either overestimated Congress' fiscal sobriety, or
underestimated its fiscal inebriation. Either way the Act was too
permissive. Had it been written at the end of the 1980s, in a period of
despair after 20 years of deficits, it might have contained a heavy
anti-deficit thrust.
In 1974, I said on the floor of the House that the Act ``Won't
guarantee a balanced Budget, even though it makes balanced Budgets more
attainable''. I got the first part right, and the second, wrong.
ENFORCEMENT
Few elements are more basic to Budget systems than enforcement.
Under the Budget Act, Congress has tried, in several different ways to
enforce its Budget, but the results of the enforcement mechanisms used,
described charitably, have been mixed.
In 1974, many important Members of Congress expected that the
Reconciliation Process might never be used. Most hoped it would not. In
1980, Congress tried it for the first time, and survived. So the
process was not an unknown when it was employed in 1981 with reasonable
effectiveness to impose spending reductions suggested by President
Reagan. Naturally, the Congress, authorizers, taxers, and appropriators
alike, hated the experience.
Not the least of the complaints was that the Congress was obliged
to use its own process to enact, not its own priorities, but those of
the President. And that, of course, happened again in the 1993 with the
Clinton Economic Agenda, and in 2001 with the Bush Tax Cuts. On the
latter two occasions, the Congressional majority was of the same Party
as the President, so complaints were noticeably fewer.
The experiments with Gramm-Rudman-Hollings sequesters were
exciting, but there was precious little enforcement. Whenever a
sequester threatened, the Congress found a way to dodge the bullet. I
suspect that this will always be true because ultimately Congress
cannot, and usually will not, be bound. Stated another way, Congress
can't even keep it promises to itself.
Even the Spending Caps and Pay-Go systems can ultimately be
defeated, waived, ignored or allowed to expire each time Congress
finds, as it inevitably does, that spending needs are compelling, or
tax cuts are irresistible. My notion here is that Congress should build
as many of these enforcement mechanisms as possible into the Budget
process, with the hope that some of them may help sometime, but with
understanding that all together they will seldom be helpful in
controlling spending, or in enforcing Budgeteers' dreams.
ENTITLEMENTS
Entitlements were large and growing in the early 1970s, but
Congress did not see them as a problem. The Budget Act did provide a
regular opportunity for Congress to review the growing entitlement
programs, but few people in 1974 harbored any inclinations about making
changes or even doing any real oversight. Later Congresses had similar
feelings. Today entitlement review has seems even less appealing.
The ``third rails'' of Social Security and Medicare have proved
highly resistant to oversight and change. Congress was willing to make
many small adjustments to reduce Medicare expenses in the 1980s, but
none of them were important in the cosmic scheme of things. The big
changes have all been increases.
Without the Budget Act, there is no way to make Congress address
the Entitlement programs unless the country runs out of money. But
there is no immediate prospect that Congress will use the Budget
Process to take a serious look at the two big entitlements, or any
other ones, either now or in the near future.
Review of entitlements ought to be mandated. Sunsets would help.
But, whatever the rules, there is little reason to believe that
Congress would want, or dare, to take them on. The Budget Act gave
Congress a way to tackle them, but Congress would prefer not to do so
until and unless the bankruptcy conditions of Social Security in1982
and 1983 are reproduced.
CONGRESSIONAL AGENDA
I would be very surprised if the people who worked on the Budget
Act of 1974 had any idea that it would so dominate the Congressional
agenda. Setting that agenda and work plan is one thing the Budget Act
has accomplished. There have been some years in which the Congress
works on little else but the Budget and the Appropriations Bills that
flow from it. When no Budget is passed, Congress just gulps and then
revs up the spending machine.
Much of the criticism of the Budget process is that it has
overwhelmed the legislative process. To me that is a positive
development. The budget provides coherence and order to the process.
The legislative process needed some order and discipline. Prior to
1974, each committee worked on whatever it felt like working on, unless
the majority leadership could persuade it to handle pressing issues.
The result was not exactly whimsical, but neither was it in any sense
orderly.
Today, committees may feel that they would like to get out from
under the Budget, but at least there is some system and plan than
governs their actions. I don't believe that this was expected in 1974,
but it is the one way in which the Act has had a real effect on the
Congress.
CONCLUSION
In general, I have to celebrate the courage and success of the
``framers'' of the Budget Act. They were visionaries who wanted a
stronger law, but produced the best one possible in the environment
that existed in 1974. They were astonishingly successful, given the
conditions prevailing at the time.
The Act was passed by a majority of Members of both Parties, many
or most of whom hoped that it represented the least change that could
then be accepted. They were right. It did not, and could not, produce
the results that outside observers expected from a Budget process.
The ``framers'' knew it was not enough, but they hoped it could be
developed through later years. It is the fault of those of us who
followed that the Act has not been improved significantly. Like all
organizations, the change-resistant Congress avoids risk and stays with
processes and jurisdictions it knows, and likes.
Of the things we would like the Budget to do--restore Congressional
control, set priorities, control spending, enforce limits, address
entitlements, and set the Congressional agenda--only the last has been
realized. To achieve the other purposes of Budgeting, substantial
changes must be made in the Budget Act. But even more fundamental
changes must be made in the attitude of Congress about its willingness
to submit to fiscal discipline.
To set priorities--The majority must be willing to lead, and
Congress must be willing to take risks. The baseline does not have to
be scrapped, but major alterations will be needed from time to time.
To control spending, and enforce Budget limits--Control and
enforcement mechanisms are available. Congress has to enshrine them in
law, and use them.
To review entitlements--The Congress could do it anytime, but
without a forcing event, like bankruptcy or sunset, It probably won't
get done.
Budgeteers have tried for years to do all these things, but every
year conventional Congressional wisdom easily defeats what seem to me
to be desirable changes. It will take strong, dedicated, optimistic
Budgeteers to stay the course and, ultimately, carry the day. I hope
there are some left.
Chairman Nussle. Professor Schick, welcome back to the
committee. We are pleased to receive your testimony.
STATEMENT OF ALLEN SCHICK, PH.D., PROFESSOR, UNIVERSITY OF
MARYLAND
Mr. Schick. Thank you very much, Mr. Chairman. I am pleased
to be here because I was a midwife at the creation of the
process 30 years ago. Like other midwives, what you care about
mostly is a successful delivery; and you don't pay much
attention to how the baby grows up and what it turns out to be.
But, at creation, what Congress did was to establish a
process which is like a Rorschach. It can be whatever you want
it to be, because it does not prescribe any particular
budgetary outcome. It is an enabling process. The process does
every year what Congress wants it to do.
As a consequence of this decision in 1974, the process has
turned out differently in virtually every year, not only
substantively in terms of spending, deficits, and revenues, but
also in terms of how the budget resolutions move through
Congress. It changes with shifts in the political and economic
winds. It moves this way, that way, and that is literally what
the Budget Act of 1974 prescribed: Let the process be what
Congress makes of it.
Now that itself is very hard, because Congress is beholden
and sensitive to the American people; and our voters are
conflicted--some people would say schizophrenic--on the budget.
They want smaller government, and they also want bigger
programs. The budget process, unlike appropriations, unlike
revenue bills, has to square these contradictions in public
opinion; and it is not easy to do so. Doing so requires a
majority in Congress to pass the budget resolution. That has
always been the burden of the majority party, at least in this
Chamber. In the House, the minority party has been the loyal
and sometimes not-so-loyal opposition to the budget resolution;
and the majority party has had to twist arms, provide
sweeteners, promises, and whatever else it takes to enable the
budget resolution to make it through.
In some years the budget resolution literally has been the
driving force in Congress, forming, shaping, defining, and
confining the legislative agenda; in other years it has done
virtually nothing. Some years, it has made all the difference;
in other years, none at all. Some years, you wouldn't notice if
the budget resolution has not passed.
The difference between the years in which the budget
resolution has made all the difference and the years in which
it has made none has almost always been defined by
reconciliation. When there are no reconciliation instructions,
the budget resolution merely rubber-stamps what would happen
anyway. When there is reconciliation, the resolution has the
opportunity to define what Congress does in that year.
The process has gone through four distinct phases over the
last 30 years.
The first, launching phase, was between 1975 to 1980.
Congress had reconciliation, but it was an entirely different
process than was used subsequently. It was a limited process
confined to appropriations enacted that year, in that session--
it did not work as initially intended.
The problem in this inaugural stage of congressional
budgeting was what to do about revenue and spending under
existing law? That was the key problem. Regardless what the
budget resolution specified, if legislative committees which
have jurisdiction over existing law did nothing, then
legislative inaction always prevailed over budgetary action. In
other words, the budget resolution specified the amount of
revenues and spending, but what mattered really was what
existing law dictated.
Congress in this first stage from 1975 to 1980 lacked a
means of changing existing law. That led to reorienting the
reconciliation process from that year's appropriations to
existing law, thereby opening the second stage of the
congressional budget process that lasted from 1980 to 1990.
During this period, reconciliation appeared almost every year
in the budget resolution. In some years, as Mr. Frenzel
indicated, such as 1981, reconciliation had a truly significant
impact. In other years, reconciliation made only slight changes
in existing law. But in most of the years of that decade there
were reconciliation instructions, there was a reconciliation
bill, and that was an empowering feature for the budget
committees and the budget process.
The third stage occurred during the 1990s, when Congress
actually changed the charter of congressional budgeting. In
contrast to the original concept, which was that Congress could
do whatever it wanted, whatever the majority voted, the Budget
Enforcement Act of 1990 tied the hands of Congress through
discretionary spending caps and PAYGO rules. The budget process
was turned into a means of implementing the pre-made decisions
of the Budget Enforcement Act of 1990. That was the period, as
Mr. Spratt indicated, that the budget process turned deficits
into surpluses.
Once the surplus arrived, Congress changed its behavior,
not only Congress but the President certainly as well. The BEA
(Bureau of Economic Analysis) rules remained the same; they
lasted until 2002, but enforcement of those rules withered with
the arrival of budget surpluses. Both Congress and the
President found means--such as emergency legislation, advanced
appropriations, and other tricks of the trade, to spend more
and tax less, while pretending to live within the rules.
The final current stage, began in 2001 with disabling and
then expiration of the BEA rules and use of reconciliation
almost entirely exclusively for revenue legislation and, as the
committee members know, for cutting rather than increasing
revenues.
So these are the four stages of the budget process.
Looking back at them, we can draw half dozen conclusions
about what the process has accomplished; my bottom line is the
budget process has changed Congress more than it has changed
budgetary outcomes.
First, it has contributed to elevated partisanship and
conflict. I am not going to claim that the budget process is
the sole reason for this escalation of conflict. Polarization
in Congress between the two parties has many causes. But
clearly the fact that Members are voting on the budget
aggregates, especially the surplus or deficit, and are voting
on whether to cut the deficit by trimming spending or by
boosting taxes, has fueled political strife. These are great
divides between the parties. They are things that Democrats and
Republicans fight about, in contrast to line items, which are
things you deal with in appropriation bills.
Notice the different voting patterns on appropriations and
budget resolutions. Budget resolutions squeak through with few
votes to spare, with the minority voting against and the
majority hoping that it does not have too many defections. In
contrast, many appropriations bills pass by lopsided majority.
There is something in an appropriation bill for just about
everyone.
Since my task today is not to make any specific
recommendations, I am not going to recommend that we turn the
budget resolutions into a vehicle for earmarks. But if you did,
Congress would pass different budget resolutions that would
have both parties' fingerprints on the final version and might
even pass by a vote of 410 to 19, something like that,
everybody would regard the budget process as a success.
Second, the budget process has led to an enlarged role of
party leaders. Again, there are other factors at play, but the
role of party leaders in this Chamber and in the Senate is far
greater on substantive matters, on actual revenue and spending
decisions today than it was three decades ago.
At the start of the process 30 years ago party leaders
concentrated on counting and corralling the votes. Today, they
cut some of the major deals, and dictate some of the major
terms of the budget resolution. We have had in this committee
and in others as well a transfer of legislative power from
committees and their chairs to party leaders.
Third, echoing what Mr. Frenzel said: In some sessions,
budget-related measures have crowded out other legislation. The
great losers in the budget process have been authorizing
legislation and their committees. The volume of free-standing
authorizing legislation has significantly dropped over the last
30 years. In some years, one can count on the fingers of a hand
the major pieces of authorizing legislation that have made it
through Congress. There are factors other than the budget
resolution which account for this trend; the most important is
recourse to omnibus legislation, including omnibus
reconciliation bills.
Fourth, House/Senate differences have become more
pronounced, particularly in recent years, and these have been
the main factor in some years that Congress has failed to
complete action on a budget resolution. On many matters, the
House and Senate are pulling in different directions. Maybe I
should phrase it a little differently. The majority party of
the House and Senate are pulling in different directions, and
that has complicated passage of a budget resolution.
Fifth, in some years, scoring has swallowed up the budget
process. It would not be an overstatement to say that
congressional budgeting has turned mostly into a scoring
exercise, and that has elevated the importance of baselines. It
The Congressional Budget Office, CBO, has become the high
priest, so to speak, of the scoring process. It has created a
cottage industry on Capitol Hill and in the K Street corridor
on how you structure legislation to get the score that you
want. Provisions are phased in or then sunseted, back-loaded,
or front-loaded so that CBO produces the score that you want.
This practice is highly damaging, I believe, to the legitimacy
of congressional budget process. I don't have a solution for
it, but basically we have empowered the scorers of the process,
rather than the makers of policy.
That leads to my next point, which is that baselines are
not neutral ways of counting budgetary matters. They have
exerted a strong influence on budgetary outcomes. Mr. Frenzel
noted in his statement that the baseline has reinforced the
innate incrementalism in the process and made it more difficult
to change programs. I believe that baselines have had an even
stronger influence; they have made it more difficult to cut
spending. It is as simple as that.
The Medicaid issue in this year's budget resolution
illustrates how baselines affect budget decisions. Suppose the
headlines in the papers would have read that over the next 5
years, annual Medicaid spending will rise by more than $100
billion. Cutting it would have been much easier. As a matter of
fact, the governors have come up with a plan to cut more than
the $10 billion than the budget resolution specified. But
because the baseline builds in spending increases, it is
exceedingly difficult to cut $10 billion. As you know, the task
is much more complicated in the Senate than in this Chamber.
The construction of the baseline may be neutral, but use of the
baseline is rarely neutral in congressional budget outcomes.
Because of the prominence of scoring, even in years that
the budget process has languished in Congress, CBO has
flourished. CBO and the budget process were created in the same
law, but CBO is always high on the pedestal. I described it a
little while ago as the high priest of congressional budgeting.
It does the score keeping; it maintains the baseline. CBO has
performed these tasks with integrity, with professionalism, but
it is wrong in denying that it is a player in the process.
Finally, the budget process has strengthened the
President's capacity to influence congressional decisions. I
recall the scene on the floor of the House in 1973 and 1974
where Members of Congress described the new process as a
declaration of budgetary independence from the President.
Things have not worked out that way. The budget process has
given the President a cordon sanitaire to move his priorities
and his programs through Congress. That has largely been done
through the reconciliation process. Most reconciliation bills
reflect the demands of the President on Congress.
In one way, reconciliation itself has been a powerful tool
of Congress, in one other way a weak or inadequate tool. It is
weak in that reconciliation is almost entirely a means of
changing the financing of programs, but not substantive policy.
Let us take Medicare, which has been the most reconciled
program over the last 20 years. There have been thousands of
changes to Medicare enacted in reconciliation bills. Almost all
have been financing changes, such as adjustments to the
premiums under part B, and adjustments of payments to
providers. But with the exception perhaps of 1997, when home
care was significantly changed under the reconciliation
legislation, the programmatic structure of Medicare has
remained intact.
Now there is a reason why reconciliation cannot itself
change programs, and that is because its time frame is too
abbreviated. The typical reconciliation instructions give
committees only a few weeks to recommend legislation that meets
the require ``score.'' So the inevitable incentive of
committees rescoring to reconciliation is to find financing
changes that satisfy the reconciliation instructions.
Committees don't have the leisure, the incentive, or the
opportunity to take a hard, deeper look at the program and
decide how it should be restructured.
That is not necessarily a criticism of reconciliation.
Because if reconciliation were able to drive those deeper
changes, then indeed it would shape not only the agenda of
Congress but its legislative output as well, and I think that
would be an undesirable concentration of legislative power and
activity in a single process.
So here we have it, Mr. Chairman. Congress has been living
with the process for 30 years. Thirty years ago, the question
was, will it survive? Today, the question is, is it worth
surviving?
Thank you.
Chairman Nussle. Thank you, Professor Schick.
[The prepared statement of Allen Schick follows:]
Prepared Statement of Allen Schick, Ph.D., Professor, University of
Maryland
Mr. Chairman, it is a pleasure to testify at these hearings and to
provide historical perspective and reflections on the evolution of the
congressional budget process during the past 30 years. Having been a
midwife at the creation of the Budget Committees, I recall the heady
optimism of the early years of the new process, and have witnessed the
ups and downs of congressional budgeting over the years. In fact, the
concluding chapter of one of my books was initially labeled ``The
Manic-Depressive Budget Process''. Of course, the editor objected that
people are manic-depressive, not processes. My reply was, ``You
obviously haven't observed congressional budgeting.''
Congressional budgeting is a somewhat different process every year
because fiscal and political conditions vary from 1 year to the next.
One year, fiscal austerity is the dominant sentiment, another it is to
finance the unmet needs of the American people. One year, Congress and
the President have the same budget priorities, the next they diverge.
The outward shell of the process--a concurrent resolution on the
budget--has persisted through three decades, but the way Congress uses
its budget tools has changed. Looking back at the history of this
Committee, one can identify four distinct phases of congressional
budgeting. The first stage inaugurated the process and established
budgeting as an ongoing responsibility of Congress. The second added
reconciliation and targeted deficit reduction as the number one
priority. The third saw congressional budgeting enveloped in preset
rules, the Gramm-Rudman-Hollings laws of 1985 and 1987, and the Budget
Enforcement Act of 1990. The current state sees congressional budgeting
principally as a vehicle for reconciliation and for adjusting annual
spending limits. Each state has left imprints on congressional
budgeting; today's process is an amalgam of developments over the past
three decades.
(1) Getting Started (1987-80). The first stage was characterized by
the building of new budget institutions and the adoption of budget
resolutions as an expression of congressional independence from the
President and its responsibility for budget policy. The new process did
not dictate any particular budget outcome. It did not require Congress
to balance the budget, nor did it prescribe revenue or spending levels.
It permitted Congress to take any action a majority wanted, provided it
acted within the framework of the budget process. The architects of the
Congressional Budget Act assumed that a responsible Congress would
require the Federal Government to operate within its means. But this
aspiration was dashed by the economic adversities which coincided with
the launch of congressional budgeting.
Party line voting emerged early in the House. The very first budget
resolution it produced (for fiscal 1976) squeaked through 200-196. The
majority party carried the full burden of corralling enough votes to
get the resolution through, with almost all minority Members voting
against adoption. majority party leaders intervened to assure passage,
but their main role was to persuade recalcitrant Members to back the
process, even if their main role was to persuade recalcitrant Members
to back the process, even if they didn't approve of the policies
expressed in the budget resolution. This was not an easy chore, for
adopting the resolution meant that the majority party--the Democrats in
those days--had to vote for chronic budget deficits. They had to do so
at least two times a year because the original Budget Act provided for
both a Spring resolution before appropriations were considered and a
Fall resolution, after appropriations bills were enacted.
During the early years, the Senate took a bipartisan approach, with
Democrats and Republicans joining ranks to support the nascent Budget
Committee. This show of support enabled the Senate Budget Committee to
challenge other committees when they disregarded the policies set in
the budget resolution. Yet the new process had one fundamental
weakness: it did not regulate the revenues or spending generated by
existing laws, even when these amounts varied from the levels specified
in the budget resolution. Legislative committees frequently thwarted
the budget process by doing nothing. Legislative inaction triumphed
over budget action.
(2) Budgeting with Reconciliation (1980-90). In 1980, Congress
responded to this problem by redeploying the reconciliation process. As
envisioned in the Budget Act, reconciliation was to come into play in
tandem with the Fall budget resolution. It would adjust amounts in
appropriations and other measures that were at variance with the levels
set in the budget resolution. Because of its narrow scope,
reconciliation was limited to 20 hours of floor time in the Senate.
This form of reconciliation proved unworkable, for it was impractical
for Congress to roll back expenditures that it had approved only weeks
earlier in appropriations bills.
Congress transformed reconciliation in 1980 by attaching it to the
first rather than the second resolution, and thereby reoriented it from
dealing with that years' legislation to dealing with revenue and
spending under existing law. The budget resolution came to be regarded
as a key instrument in combating high budget deficits. Congressional
independence receded in importance, and the President gained a powerful
tool for influencing legislative action. In 1981, Ronald Reagan
adroitly used reconciliation to reshape Federal tax and spending
policies.
Reconciliation boosted the budget process, but it alarmed many
other legislative committees which were concerned that it would empower
the Budget Committees to dictate what they did. The chairs of almost
all House committees voiced their opposition to reconciliation in an
open letter to the Speaker. Over time, however, many committees came to
view reconciliation as a vehicle for legislation that could not be
passed in free-standing bills. The Senate responded to this tendency by
adopting the Byrd Rule, which limits the types of provisions in
reconciliation bills. It is a complex rule that Senate conferees often
use to their advantage in resolving differences in reconciliation bills
passed by the two chambers.
Shifting reconciliation to the first budget resolution rendered it
useless for Congress to adopt a second resolution, and this measure was
discarded in amendments to the Budget Act. Reconciliation (and other
factors) spurred Congress to lengthen the time horizon of the
resolution. Initially set at only 1 year, the time frame was stretched
to 3 years, then five, and after several adjustments to 10 years. This
time frame has become the standard used by CBO in constructing baseline
budget projections.
Reconciliation probably contributed to political polarization in
Congress, especially in the Senate which previously has bipartisan
cooperation on budget resolutions. Reconciliation was used to make
major changes in revenue and spending policies, matters on which the
two parties often disagree. One should note, however, that polarization
has been fed by multiple factors, and that it probably would have
occurred even if Congress had not broadened its budget process.
(3) Budget Enforcement (1990-2000). The discretionary caps and
PAYGO rules enacted in 1990 substituted fixed constraints for
congressional discretion. In contrast to the original design, which
empowered Congress to adopt any budget policy supported by majorities
in the House and Senate, the BEA rules restricted Congress' power to
appropriate and legislate changes in revenue or mandatory spending
legislation. With key elements of budget policy fixed in law, the
budget resolution came to be regarded as a means of facilitating
passage of reconciliation bills. In some years, the budget resolution
was crammed with ``sense'' of the House of Senate statements that had
political value, but did not influence legislative action.
During this period, the budget process was the most important
action taken by Congress in some years, and among the least important
in others. In some years, it made all the difference, in others none
whatsoever. The budget resolution drove the legislative agenda when it
contained reconciliation instructions; it merely rubber stamped what
would have happened even if Congress did not adopt a resolution.
Through reconciliation, the resolution reshaped budget policy in 1990,
1993, and 1997. (President Clinton vetoed a 1995 reconciliation bill
passed by Congress.) There was no reconciliation bill in 1998 and, for
the first time since the budget process was introduced, Congress failed
to adopt a budget resolution.
Both BEA and reconciliation require Congress to score the budgetary
impact of legislative actions. In some years, scoring has been the
dominant feature of congressional budgeting, impelling committees and
Members to configure legislation so as to get favorable scores. Some
observers believe that scoring has diminished attention to the
substantive implications of budget policy; others are concerned that
budgetary legerdemain has impaired the credibility of the process.
Scoring determines the fate of legislation and has made much of
budgeting into an arcane exercise. Generations from now, the Medicare
``donut'' will be a testament to the power of the scorekeepers.
(4) Budgeting for tax cuts (2001- ). Since 2001, the foremost
purpose of congressional budgeting has been to facilitate enactment of
tax cuts through the reconciliation process. With expiration of BEA,
the House or the Senate have used the resolution to cap discretionary
spending or to impose some form of PAYGO.
Differences between the House and Senate have become more prominent
in recent years, and partisan fissures have deepened. In some years,
the two chambers have been unable to resolve differences in conference,
and have gone their separate ways by adopting ``deeming'' resolutions
in lieu of a regular resolution. This device has preserved the budget
process, but it is a poor substitute for the real thing. The more they
rely on deeming resolutions, the less incentive the House and Senate
have to hammer out budget policy that is endorsed by both chambers.
There may no loss of enforcement when each chamber goes it alone, but
there is a loss of legitimacy.
Over the years, party leaders have become dominant players in
congressional budgeting. The majority leadership has the burden of
producing sufficient votes to pass the resolution. The House Budget
Committee is beholden to the leadership and has less margin for
independence than its Senate counterpart. In the House, Party leaders
cut key deals and dictate many of the terms that produce the votes
needed for passage. This pattern has spread to other areas of
legislative activity, and has as much to do with the contemporary
structure of the House as with characteristics of the budget process.
what the budget process has (and has not) accomplished
A fair assessment of the budget process must take account of both
the objectives of the 1974 Act and the transformation of the U.S.
economy and Congress that began just about the time that the process
was launched. Evidently, the process did not put an end to deficit
spending, nor did it halt the rise in mandatory entitlements. Using
these outcomes as measures of budgetary success or failure would be
unfair because the budget process cannot do what Congress does not want
it to do, and Congress itself cannot do what voters do not want. Beset
by conflicts in Congress and contradictions in public opinion,
budgeting has muddled through under an implicit contract that the
necessary votes will be forthcoming to pass the resolution provided
that ongoing programs are preserved. When the needed votes appear
lacking, the resolution is sweetened by accommodating additional
spending. In several recent years, this implicit contract has broken
down, because of conflict between the House and Senate or within the
ranks of the majority party.
In budgeting, Congress must navigate through the minefields of
public opinion, trying to reconcile the inconsistent demands of voters
who want both smaller government and bigger programs. The task is
easier when the economy is buoyant and revenues are trending upward.
When these favorable conditions are absent, Congress usually prefers to
spare contested programs, even if the result is a bigger deficit. With
these overall conclusions as background, let us consider three inter-
connected questions: (1) What has been the impact of the budget process
on budget outcomes? (2) What has been the impact on the conduct of
budgeting, including relations between Congress and the President? (3)
What has been the impact on Congress, including relations between the
House and Senate, the role of party Leaders, the overall level of
conflict within Congress, and relations between the Budget Committees
and other committees?
Budget Outcomes. The Budget Act empowered Congress to take a
comprehensive view of Federal revenue and spending; it did so by
requiring the House and Senate to explicitly vote on total revenue,
total spending, the public debt, and the surplus or deficit. Before the
Budget Act, the totals were merely the arithmetic sums of past and
current decisions. The totals were not voted, nor were they explicitly
taken into account when the House or Senate acted on revenue and
spending measures.
Budget totals are an amalgam of old and new decisions. At times,
Congress has effectively used the budget process to drive policy
changes in revenue or spending through the House and Senate. In
general, the policy changes voted in the budget resolution have been
more dramatic on the revenue side of the ledger than on expenditures.
Major changes in revenue were triggered by the budget resolution in
1981, 1990, 1993, 2001, and 2004. Smaller changes were driven through
Congress in half a dozen other years. Some of the changes have boosted
revenues, others have cut them. While the substantive merits of tax
legislative are almost always maters that divide the two parties, there
can be no doubt that the budget process has facilitated major shifts in
revenue policy that might have been more difficult to enact if Congress
had lacked this device.
The spending side of the budget has exhibited much more stability.
Congress has been no more successful than the President in curbing
incrementalism in Federal spending. Both discretionary and direct
spending exhibit incremental tendencies, but it is useful to
distinguish them in assessing Congress' control of the purse. Through
the budget process, Congress has effectively decided the annual amount
of increase in discretionary appropriations. Aided by BEA rules during
the 1990s, the budget resolution limited the increase to the amount
allowed by the spending caps. It is instructive, however, that with the
arrival of budget surpluses in 1998, Congress changed its behavior,
even though the BEA rules remained on the books for another 4 years.
Congress, on its own initiative or prodded by the President,
accommodated more spending in the budget resolution than BEA provided,
using the emergency escape route and other bookkeeping devices to stay
within the rules while breaching them. Budget rules and the budget
process made a difference, but only when they were reinforced by
political will in the executive and legislative branches.
Discretionary spending has been effectively regulated through
section 302 allocations to the Appropriations Committee, each of which
subdivides available amounts among its subcommittees. There is no
comparable process for direct spending, almost all of which is
accounted by mandatory entitlements which are controlled by statutory
formulas and eligibility rules. The fundamental difference between the
two types of spending is that discretionary expenditure requires annual
appropriations while mandatory expenditures, including increases above
the previous year's level, occur even if Congress does nothing.
As noted earlier, Congress reoriented reconciliation in 1980 to
deal with this problem. But while reconciliation has been deployed
frequently to change the amount spent on particular entitlements,
especially Medicare and Medicaid, it has rarely been used to change the
structure of programs. Most reconciliation-driven changes have been
financial adjustments, such as increases in Part B Medicare premiums
and decreases in payments to providers. Reconciliation's time frame--
typically a few weeks between adoption of the budget resolution and
committee recommendations--does not allow a serious review of complex
programs.
Entitlements are a significantly larger share of total Federal
spending today than they were 30 years ago. Most budget projections
show their share rising over the next 30 years if current law remains
intact. PAYGO has been a reasonably effective means of regulating new
or expanded entitlements; it has had no effect on the incessant rise in
spending under existing law. There is a fundamental reason for this,
which goes beyond the machinery of budgeting to relations between
government and citizens. Most entitlements are a voluntary surrender of
budget control by the executive branch and Congress in order than
citizens have strong, credible commitments from government that they
will receive promised financial assistance when they are old, disabled,
ill, unemployed, and so on. This tradeoff tells us that in the
political coin of the United States, protecting the financial security
of American households is deemed more valuable than upholding budget
control. Because this is a political ``contract'', it can be undone
only when Congress and the President have the political will to change
its terms.
Congress has had occasional success in dealing with deficits, but
the evidence is that the shortfall must be quite large before it acts.
Deficit spending has been the norm in 26 of the Budget Act's 30 years,
and it is likely to be the outcome for quite a few more years. The ill-
fated Gramm-Rudman-Hollings laws taught us that Congress cannot control
the deficit unless it takes effective steps to regulate revenue and
expenditures. But Gramm-Rudman-Hollings was not a fair test of deficit
control because it was not coupled with revenue and spending controls.
This may be the most effective formula for taming big deficits.
Not all budget deficits are alike. Some occur when the economy is
weak, others when it is strong. Some shortfalls are truly small and
have no measurable impact on financial markets, others are quite large
and expose the United States to serious financial risks. The fact that
the current bout of deficit spending has occurred at a time of low (and
sometimes declining) interest rates has made it difficult to get
political leaders to see it as a problem. Moreover, a body of economic
literature argues that deficits matter less than marginal tax rates,
and that it would be preferable to have a smaller government with a
bigger deficit than a bigger government with a small deficit. With
analysts and political leaders divided on this issue, and Americans not
yet regarding deficits as urgent, Congress has not paid attention.
The Conduct of Budgeting. The budget resolution is more than a mere
``sense of the Congress'' resolution, but less than a full-blown
budget. Nothing has to stop if Congress fails to complete action on the
resolution. When it is adopted, as has happened in all but a few years,
the budget resolution guides section 302 allocations and
reconciliation. President Bush has proposed that the budget resolution
be enacted as a joint (rather than concurrent) resolution. If adopted,
this change would make the President a formal partner in Congress'
budget process. The present role of the President is informal and
political, and arises out of the fact that he can veto appropriations
and reconciliations bills, as well as other budget-related measures
passed by Congress. The President already exerts considerable influence
on congressional budgeting, and in some years he is the dominant
player. The exuberant hopes of 1974 that the budget resolution would be
a declaration of congressional independence from the White House have
been dashed by the realities of American politics.
Yet, even as a political partner, the President does not get all
that he wants. The budget resolution impelled Congress to make
significant changes in the tax cuts enacted in 2001 and 2004 and in the
Medicare expansions enacted in 2003. Formalizing the President's budget
role through a joint resolution is likely to have collateral effects
that go well beyond relations between the two branches. One should not
be surprised if a joint budget resolution were to become a vehicle for
other legislation, or if conflict between the two branches would block
final passage.
Congress now has much more budgetary information than it had prior
to the 1974 Act. CBO has become an authoritative, independent source of
data and analysis for Congress, and scoring has given Congress timely
estimates on budget impacts before it acts. In budgeting, ignorance is
not bliss, but information does not by itself change what Congress
does. Yet there are instances where the supply of new types of budget
information has almost certainly changed legislative behavior. Foremost
is the baseline methodology used by COB to project the revenue,
spending or deficit impact of pending or completed legislative actions.
This is not the place for assessing the baseline's importance as
Congress' measuring rod, but there can be no doubt that the baseline
has not been a neutral device. Even though the underlying methodology
may be neutral, the uses to which baselines are put are not.
Timing is a critical element in budgeting, if only because the
process recurs each year. In some years, long delays in finalizing the
budget resolution have allegedly held up action on other measures.
These delays are often due to conflict within Congress and difficulty
faced by the Budget Committees and party leaders in securing the votes
needed for passage. Inertia has also taken a toll, as have political
decisions to defer contentious issues until late in the session. This
year's accelerated schedule shows that the House can operate within the
prescribed budget calendar.
Impacts on Congress. The budget process has changed Congress more
than Congress has changed the way it budgets. The budget process has
contributed to elevated conflict in Congress, while boosting (as
already discussed) the role of Party Leaders. It also has complicated
relations between the Budget Committees and other congressional
committees.
Congressional budgeting frames the legislative agenda for each
session, compelling leaders to set aside blocks of time for the budget
resolution and any ensuing reconciliation bill, the various
appropriations bills, revenue measures, and other budget-related
legislation. Nowadays, Congress produces many fewer free-standing
public laws than it once did. Elevated conflict is the main culprit,
but the time demands of congressional budgeting also have crowded out
much authorizing legislation. In the contemporary Congress, it may be
easier to pass an omnibus bill that sprawls over more than a thousand
Statute pages and covers dozens of topics, than to obtain approval of a
bill that pertains to only one subject.
Members of Congress complain about the budgetization of legislative
debate; that is, defining issues and producing measures in terms of
their budget impacts rather than their substantive objectives. This
complaint may be overstated, but there is little doubt, as I previously
suggested, that scoring determines the fate of much legislation.
Sometimes, it appears, the score is the only thing that matters, as
Members and lobbyists vie to get a score that will facilitate passage.
By now, insiders are well versed in the tricks of the trade, how to
adroitly use sunsets (or phase-ins and phase-outs) to generate a
favorable score, how to show tax cuts as revenue increases by front-
loading provisions that add revenue and backloading those that subtract
revenue. I am not criticizing the way the game is played, but I do wish
it did not have to be played at all.
It is not hard to figure out that congressional budgeting fuels
friction within the House and Senate. In most years, most
appropriations bills pass by lopsided margins, while the budget
resolution makes it through with few votes to spare. Appropriations
bills disaggregate spending issues into line items, the budget
resolution aggregates them into fiscal totals. Democrats and
Republicans, liberals and conservatives who disagree on the aggregates
often agree on the line items, either because they logroll one another
or because they favor the spending item. Democrats and Republicans do
disagree on whether the budget deficit should be reduced by raising
taxes or trimming expenditures. They cannot paper over these conflicts
by layering the budget resolution with earmarks, as they do on
appropriations bills.
Escalation of budgetary conflict affects not only the political
parties, but relations between the House and Senate as well. In some
years, the House and Senate passed different resolutions and could not
patch over their disagreements in conference. The deeming resolution
mentioned earlier are an artful device that enables each chamber to go
its own way.
CONCLUDING THOUGHTS
The budget process has survived because enough Members want it to
and because the majority leadership invests it with enough support to
pull the resolution through. This is not the ideal situation for
congressional budgeting, but it will have to do until the process is
redesigned or Members get more enthusiastic. One should not expect a
reformed process to function much differently than the current one,
though adorning it with BEA-type rules can lessen conflict by pre-
deciding some key issues. A Government that takes in and spends more
than $2 trillion every year needs a budget process to structure and
discipline congressional decisions. Having a more tranquil process
might help a bit, but with so much at stake each year, one should not
be surprised if the budget process continues to limp along for another
three decades.
Chairman Nussle. Richard Kogan, welcome back to the
committee. How many years did you work here?
Mr. Kogan. I was on the majority staff for 16 years and the
minority staff for 4 years, for a total of 20. But it was the
same staff in each case.
Chairman Nussle. Well, welcome back to the committee; and
we are pleased to receive your testimony.
STATEMENT OF RICHARD KOGAN, SENIOR FELLOW, CENTER ON BUDGET AND
POLICY PRIORITIES
Mr. Kogan. Mr. Chairman, I am very glad to be home. Mr.
Chairman, Mr. Spratt, it is very nice to see you again. As I
said to Tom Kahn when I submitted this testimony, I have
material in here that is bound to annoy virtually everybody,
proving my fierce bipartisanship.
I would also like to start with two disclaimers. The first
is that, while I work for the Center on Budget and Policy
Priorities, these views are my own and not necessarily those of
the Center; and the second is that Allen Schick and I did not
collaborate on any of our testimony but nonetheless reached
somewhat similar conclusions.
I would also like to say that I have ignored the request
not to make recommendations, but I suppose you knew that about
me before I was invited.
I have three main points that I would like to make in my
testimony.
First, the congressional budget process was originally
designed to make Congress an equal partner with the President
when it comes to budgeting; and unless you think that
presidents are too weak and Congress is too powerful, I
encourage you to resist the many budget process proposals that
would strengthen the President and weaken Congress.
Second, the Congressional Budget Act has, probably
unexpectedly, allowed presidents to get away with budgets that
are incomplete or irresponsible or both. President Bush is
especially guilty of this lack of leadership, but every recent
President has designed partially phony budgets and then passed
the buck to Congress, dumped it in your lap.
Third, no budget process can force the President and
Congress to enact deficit reduction. Rather than trying to do
that, it is far better to design specific deficit reduction
plans--increases in taxes, cuts in programs--and then use the
budget process to enforce compliance with those plans, to
prevent backsliding after those plans are implemented.
OK, I am going to elaborate on these three points. So let
me start with the first one, the relationship between the
President and the Congress.
When the Budget Act was enacted in 1974, its intent was to
announce that the President's budget was not the only game in
town; Congress could devise and adhere to its own budget plan.
Given this history and intent, it seems strange to me and
probably inappropriate for Members of Congress to deliberately
design reform plans that would weaken the Congress vis-a-vis
the President.
I am just going to mention a number of ideas that have been
suggested in recent years that would have that effect; and if
you want know more about them, I describe them in my written
testimony.
One that would do this would be an automatic continuing
resolution. Another would be a joint budget resolution. A
third, in a more obscure way, would be the appropriations
lockbox. Fourth would be biennial budgeting. Fifth would be any
combination of line-item vetoes, enhanced rescission, or
restrictions on omnibus legislation. All of these ideas would
strengthen the President and weaken Congress; and my normal
question to any of you, regardless of party, is why would you
want to do that?
But let us move on to my second point, which could be an
answer to the question of why you might want to do that.
My second point is really a question. Has the Congressional
Budget Act allowed the President to run and hide? History
demonstrates that it is very hard to achieve any major deficit
reduction without Presidential leadership. Congress can't do it
on its own when the President is sitting there and saying,
``Oh, I am sorry, I am planning to veto your major budget plans
for the year.'' Currently, President Bush is in a state of
official denial about deficits, and perhaps self-denial as
well.
Let me turn your attention to a table which is on page 3 of
my testimony. This table is taken directly from this year's
Presidential budget, but it was in an obscure document that
perhaps the President didn't notice. It shows OMB's (Office of
Management and Budget) long-range extrapolations of the
President's own policies. And it shows that under those
policies the debt held by the public would rise from its
current level of about 39 percent of GDP to more than 100
percent of GDP in 2050 and around 250 percent of GDP by 2075.
Of course, this can't happen. We won't allow the United
States to become basically held by creditors. What this table
means is that the President's policies do not lead to an era of
surpluses. If things are improving temporarily, and they are,
it is a temporary improvement while we are still surrounded by
a sea of large deficits.
OK, given this OMB projection, there is an obvious need for
long-term change in the fundamental structure of the budget. It
seems to me that both tax increases and program cuts, programs
that are dear to the hearts of Democrats and maybe Republicans,
and tax increases, which are unpopular everywhere, are
necessary. There won't be any deficit reduction unless
President Bush stops denying this reality and starts to scale
back both his own spending priorities and his own tax cuts.
Given the difficulty of deficit reduction, a willingness to
negotiate directly with the leaders of both parties is probably
necessary. This is, I think, a fiercely bipartisan statement.
Well, how does this discussion I have just had of exploding
deficits relate to the congressional budget process? In my
mind, one unintended consequence of congressional budgeting is
that by repositioning the budgetary spotlight away from the
President and onto Congress with the creation Congressional
Budget Act and annual budget resolutions, the Budget Act has
allowed the President--any President, all Presidents--to get
away with increasingly irresponsible budgeting.
You have just heard me criticize President Bush pretty
heavily for his incomplete and disingenuous budget. But
President Reagan had his ``magic asterisks,'' unspecified cuts
to be proposed at a later time. The first President Bush had
his ``flexible freeze'' and ``black box,'' which are two other
phrases for unspecified future spending cuts. President Clinton
frequently employed mechanical formulas with respect to his
outyear appropriations numbers, which allowed him to deny that
there was any policy content to those numbers while in effect
saying, ``Here are future spending cuts which will be specified
later,'' the same thing that President Bush and Reagan had done
before him. And they have gotten away with it because the
budgetary spotlight has not been focused entirely on the
President and the press has not spent its time examining every
nuance of the President's budget or every failure of the
President's budget but has immediately turned its attention to
Congress; what will Congress do next?
To my mind, this ability of the President to avoid the
toughest decisions has been an unfortunate side effect. I think
the Budget Act should come with a warning on the bottle that
says ``side effects may include loss of Presidential
leadership. If this condition persists for more than 4 years *
* *''
Well, anyhow, the diagnosis poses an obvious question: Has
the improvement in congressional budgeting been great enough to
justify this bad side effect? My answer on balance is very
mixed. On Mondays, Wednesdays, and Fridays I say, no, history
suggests that good public policy is not the necessary result of
the Congressional Budget Act. So, therefore, I am not so sure
that there is really an improvement in congressional budgeting
to counteract the loss of Presidential leadership.
The Budget Act has given a determined majority more tools
to get its way on budgetary matters. It has allowed more
coherent budget plans to be concocted and enacted. The Budget
Act has helped strengthen the leadership and weaken all other
committees. The Budget Act has helped diminish the role of
individual members as citizen legislators and diminish the role
of committees as repositories of acknowledged expertise. So one
result is that Congress, both the House and the Senate, are a
giant step further from being the deliberative legislative
bodies that they were to some extent before, and a giant step
closer to being parliaments, in which their main role is to
ratify decisions made by party leaders.
Among the other side effects, the Budget Act has helped
foster partisanship. So to put this simply, the Budget Act
makes it easier to implement budgets, whether responsible or
irresponsible. It has given the leadership and this committee
stronger tools, which is like giving the military bigger and
smarter bombs. The real question is whether it has made any of
us wiser in the use of those tools, and my answer is: Not
necessarily.
OK, so as I see it, when Congress makes budgetary mistakes,
as it did in 1981, 2000, and 2003, the Budget Act facilitates
bigger and costlier mistakes than would otherwise be the case.
So let me make a modest proposal. I noted in my first point
that many budget process ideas would weaken Congress and
strengthen the President. I concluded in my second point that
the Budget Act has two unfortunate side effects: increased
Presidential poltroonery and increased congressional
partisanship, without necessarily producing better budget
outcomes.
My suggestion, therefore, is to take these points to their
logical conclusion and repeal Title 3 of the Budget Act, put
yourself out of existence, leave CBO in place, and go back to
this system that existed from 1790 to 1974, where the President
was the player; and most particularly from 1933 to 1974, where
the President's budget was the budget.
Having said that, I think it is very unlikely that this
committee will decide to put itself out of existence; and, to
be honest, my heart says I don't really mean what I just said.
I served too long here. My heart is really with you, despite
the fact that I can't convince myself that the outcomes are
necessarily any better than they would be without you.
So, therefore, I am backed into my third position; and my
third position has to do with the third point I made before,
which is that the budget process cannot force Congress and the
President to do what they are unwilling to do but can enforce
budget agreements once those agreements are made.
Here again, history is a useful education. Congress enacted
Gramm-Rudman-Hollings, which was a doomsday machine designed to
say, ``Here are the disasters that will happen to you,
automatic sequestration of very popular programs--veterans
education, farm price supports, Medicare and so on--if you
don't enact a deficit reduction plan. It is up to you to
negotiate one.''
Did this work? Did this make President Reagan come to the
Democratic leadership in the House of Representatives and the
Republican leadership in the Senate and negotiate major deficit
reduction plans? No, it did not. What happened instead is that
OMB engaged in official lying about budget projections to make
it look as though they were intending to meet the targets, and,
in fact, the budgetary targets under Gramm-Rudman-Hollings were
missed by huge amounts, first by tens of billions of dollars a
year, then by hundreds of billions per year.
Once official lying of that magnitude became so great that
people couldn't swallow it, they simply set aside Gramm-Rudman.
The system didn't work. You can't make people raise taxes and
cut spending if they don't want to. And you can't make them
agree with people that they really disagree with on
philosophical and substantive grounds if they don't want to.
So, therefore, I would suggest that other attempts to do
that, particularly attempts like the draconian entitlement cap
that is in H.R. 2290 and would force approximately $2 trillion
worth of entitlement cuts over the next 10 years, 20, or 30
times the cuts in the congressional budget that was agreed to
this year on in the President's budget, that is not going to
work. Actually, from my point of view, I think my conclusion
that it can't possibly work is good news because if it did
work, I would hate the results.
Saying that that sort of entitlement cap can't possibly
work leads me to conclude that we are left with a prescription
that says, at the very least, ``Change the congressional budget
process so that it does no harm.'' In this regard I would go
back to the PAYGO rules that were established in 1990, which
say basically, stop cutting taxes, stop increasing
entitlements. Don't do that without paying for their full
costs.
This suggestion has been debated enough times in recent
years and it doesn't need elaboration, but a second related
suggestion to it, a sort of a smaller version of it, is to stop
using the reconciliation process--which is a fast-track
process. This is the only sort of legislation that cannot be
filibustered in the Senate, and which, broadly speaking, is not
subject to open amendment in the Senate--stop using
reconciliation to make the deficit worse. Limit reconciliation
to its original use from 1980 through approximately 1997, when
the net effect of each reconciliation bill was to make deficits
smaller rather than larger; not tax cuts and entitlement
increases in reconciliation, but the opposite. And that, I
think, is a change that is completely consistent with the
original thinking behind the Budget Act, though not necessarily
the words in the Budget Act.
I might add that I have heard that some people say that
PAYGO rules or reconciliation restrictions of this sort don't
need to be applied to revenues because tax cuts pay for
themselves. This isn't true. There is a table on the back page
of my testimony that compares various different business cycles
since World War II on. The business cycle of the 1990s had
economic growth that averaged 2 percent of GDP per person per
year. The business cycle of the 1980s had economic growth that
averaged 2 percent per year per person; the same, even though
one was a business cycle in which there were large tax cuts at
the beginning, and the other was a business cycle in which
there were large tax increases at the beginning. Since the tax
cuts or increases did not affect economic growth one way or the
other over the entirety of cycle (though they will have had
Keynesian short-term effects) the conclusion is that there
isn't really much long-term feedback effect from revenue
changes, and that, therefore, tax cuts lose revenues and tax
increases gain revenues.
This can be seen more directly by looking at the growth of
revenues in the 1990s and comparing it to the growth of
revenues in the 1980s. Specifically income tax receipts grew at
an average of 4.2 percent per year per person in the 1990s and
.2 percent per year per person in the 1980s. Tax cuts lose
revenues. This is the conclusion that the ``starve the beast''
crowd reached. After all, there is no point in cutting taxes to
put the Government on a starvation diet if it doesn't succeed
in starving Government. This is where Grover Norquist is
completely correct. Tax cuts lose revenues. (If he were wrong,
he would probably favor tax cuts anyway, though for other
reasons.)
This concludes my testimony. To summarize, because my heart
is with Congress and not with the President, I really don't
want you to weaken yourself for the sake of strengthening him.
I really don't want you to put yourself out of business or do
all of those other little changes that would have the effect of
hamstringing you and your ability to deal with the President.
And despite the unfortunate side effects of the Congressional
Budget Act--Presidential evasion and increased partisanship--I
would keep the existing system. I would merely weaken its
ability, your ability, to use the budget process to make the
budget situation worse than it already is.
Chairman Nussle. Thank you.
[The prepared statement of Richard Kogan follows:]
Prepared Statement of Richard Kogan, Senior Fellow, Center on Budget
and Policy Priorities
Mr. Chairman, Congressman Spratt, I am very pleased to be invited
home. In my testimony today, I'd like to make three points about the
congressional budget process and pending proposals to alter it.
First, the congressional budget process was originally designed to
make Congress an equal partner with the President. Unless you think
Presidents are too weak and Congress too powerful, you should resist
the many proposals that would weaken Congress and strengthen the
presidency.
Second, the Congressional Budget Act has, perhaps unexpectedly,
allowed Presidents to get away with budgets that are incomplete,
irresponsible, or both. President Bush is especially guilty of this
lack of leadership, but every recent President has designed partially
phony budgets and then passed the buck to Congress.
Third, no budget process can force the President and Congress to
enact deficit reduction. It is far better to design specific deficit
reduction plans--specific program cuts and specific tax increases--and
then use the budget process to enforce those enacted plans.
I will now briefly elaborate on these three points.
CONGRESS AND THE PRESIDENT
To begin with, the congressional budget process was designed to
alter the relationship between the President and Congress. When the
Congressional Budget Act was enacted in 1974, its intent was to
announce that the President's budget was not the only game in town;
Congress could devise and adhere to its own budget plan. When I first
arrived in Washington, the phrase ``over budget'' meant that Congress
was considering legislation that cost more than the President had
requested. The congressional budget process has changed the meaning of
that phrase; now, ``over budget'' usually means ``more costly than the
congressional plan.''
Given this history, it seems strange indeed, and probably
inappropriate, for Members of Congress to deliberately design
``reform'' plans that would weaken Congress vis a vis the President.
Let me list some pending proposals that would weaken Congress and
strengthen the President.
An automatic ``continuing resolution,'' which would
automatically extend the current level of appropriations into the next
fiscal year if new appropriations bills were not enacted by October
first. Such a proposal would make it far easier for a President to
justify vetoing an appropriations bill whenever he prefers the status
quo to the increases or cuts approved by Congress.
A ``joint'' budget resolution, which would give the
President the authority to veto the congressional budget resolution.
After a veto, the President's budget would be the only benchmark left
standing. This proposal would work especially badly when different
parties control the two branches of government.
An appropriations ``lockbox.'' Under a lockbox proposal, a
transient majority, through its vote on an appropriations amendment,
can reduce for the entire year the amount allocated under a
Congressional budget plan to the Appropriations Committee. This
violates the first rule of politics: a deal is a deal. If the lockbox
procedure were implemented, members of the Appropriations Committee
would have far less reason to support any budget plan; budget gridlock
would be more likely; again, the President's budget would be the only
benchmark left standing.
Biennial budgeting. The annual appropriations process is
the one sure way that Congress can get the attention of the executive
branch and push it to respond to specific Congressional concerns.
Nothing awakens a cabinet secretary as rapidly and effectively as a
threat to cut his staff.
Line-item vetoes, enhanced rescissions, and restrictions
on omnibus legislation. The President has the power to veto legislation
if he does not agree with some aspect of it. Congress, in
counterbalance, has the power to package legislation, which increases
the likelihood that the President will sign legislation that contains a
few policies that Congress desires but he does not. Line-item vetoes,
enhanced rescissions, and restriction on omnibus legislation would each
weaken the effectiveness of congressional packaging.
has the congressional budget act allowed presidents to run and hide?
History demonstrates that that it is very hard to achieve any major
deficit reduction without Presidential leadership. Currently, President
Bush is in a state of official denial, and perhaps self-denial as well.
A little-known analysis contained in the President's own budget
document reveals that under his own policies, the current shrinking of
the deficit will be temporary. Table 13-2, on page 209 of OMB's
Analytical Perspectives, shows that unsustainable and unmanageably
large deficits will reappear--deficits that will cause the burden of
debt service to consume an ever-increasing share of national income.
(See table on page 3.) Specifically, OMB projects that under the
administration's policies, the debt will grow from its current level of
39% of GDP to more than 100% of GDP by 2050 and about 250% of GDP by
2075. Of course, this cannot happen; tax increases, spending cuts, or
both will have to be enacted before we reach national bankruptcy.
And yet the figures in this OMB table present too rosy a picture,
if that is possible. OMB's extrapolations are based on the President's
budget, which a) completely omits the costs of Iraq, Afghanistan, and
the international war on terror, b) includes no costs in any year for
relief from the Alternative Minimum Tax, and c) presumes that the role
of domestic appropriations in the economy can be reduced over the next
5 years to a level that has not been seen since before the New Deal.
These domestic cuts are so embarrassing that OMB programmed its
computers to ``white out'' the program-by-program funding levels--
though not the grand totals--for every year after the current year.
In my view, there will not be any major deficit reduction
legislation unless President Bush stops denying reality and decides to
scale back both his spending priorities and his tax cuts. Given the
difficulty of deficit reduction, a willingness to negotiate directly
with the leaders of both parties is probably necessary.
TABLE 13-2.--LONG-RANGE MODEL RESULTS
(As a percent of GDP)
----------------------------------------------------------------------------------------------------------------
1995 2005 2015 2025 2035 2045 2055 2065 2075
----------------------------------------------------------------------------------------------------------------
Receipts....................... 18.5 16.8 18.5 19.1 19.6 20.2 20.9 21.5 22.0
Outlays:
Discretionary.............. 7.4 7.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9
Mandatory:
Social Security........ 4.5 4.2 4.4 5.4 6.0 6.0 6.1 6.2 6.4
Medicare............... 2.1 2.4 3.3 4.6 6.0 7.0 7.9 9.1 10.4
Medicaid............... 1.2 1.5 1.9 2.1 2.3 2.6 2.8 3.0 3.3
Other.................. 2.2 2.8 2.0 1.7 1.5 1.3 1.2 1.1 1.0
--------------------------------------------------------------------------------
Subtotal, mandatory........ 10.1 10.9 11.6 13.8 15.8 16.9 18.0 19.5 21.2
Net Interest............... 3.2 1.5 1.9 2.0 3.1 4.8 6.9 9.7 13.3
--------------------------------------------------------------------------------
Total outlays............ 20.7 20.3 19.4 21.8 24.8 27.6 30.8 35.1 40.4
Surplus or deficit (-)......... -2.2 -3.5 -0.9 -2.7 -5.2 -7.4 -10.0 -13.6 -18.4
Debt held by the public........ 49 39 36 38 59 90 130 181 249
----------------------------------------------------------------------------------------------------------------
How does this discussion of exploding deficits relate to the
congressional budget process? Well, one unexpected consequence of
congressional budgeting is that, by repositioning the budgetary
spotlight away from the President and onto Congress, the Budget Act has
allowed Presidents to get away with increasingly irresponsible
budgeting. You have just heard me criticize President Bush for his
incomplete and disingenuous budget. But President Reagan had his
``magic asterisk''--unspecified cuts to be proposed at a later time.
The first President Bush had his ``flexible freeze'' and his ``Black
Box,'' two other terms for unspecified future spending cuts. President
Clinton frequently employed mechanical formulas for his outyear
appropriations numbers, allowing a downward path in total while denying
that there was any ``policy content'' to any particular outyear budget
cut. In short, while the Congressional Budget Act strengthened the
congressional role in budget making, it also made it easier for
Presidents to avoid the toughest decisions because the press and the
public have had their budgetary attention diverted to the congressional
spectacle. The Budget Act should come with a warning on the bottle:
``Side Effects May Include a Loss of Presidential Leadership. If this
Condition Persists for More than Four Years * * *''
This diagnosis poses an obvious question: has the improvement in
congressional budgeting been great enough to justify the bad side
effects? My answer is no. History demonstrates that good public policy
is not the necessary result of the Congressional Budget Act. Broadly,
the Budget Act has given a determined majority more tools to get its
way on budgetary matters and has allowed more coherent budget plans to
be concocted and enacted. The Budget Act has helped strengthen the
leadership and weaken all committees; the Budget Act has helped
diminish the role of individual members as citizen legislators and
diminish the role of committees as repositories of acknowledged
expertise. One result is that Congress--both the House and the Senate--
are a giant step further from being deliberative legislative bodies and
a giant step closer to being parliaments, whose main role is to ratify
decisions made by its party leadership. Among other side effects, the
Budget Act has helped foster partisanship, but without the useful
British assumption that the minority is by definition loyal. To put
this simply, the Budget Act makes it easier to implement budgets,
whether irresponsible or responsible. When Congress makes mistakes, as
it did in 1981, 2001, and 2003, the Budget Act facilitates bigger and
costlier mistakes.
So let me make a modest proposal. I noted in my first point that
many current budget process ideas would weaken Congress and strengthen
the President. I concluded in my second point that the Budget Act has
had at least two unfortunate side effects--increased Presidential
poltroonery and increased Congressional partisanship--without producing
better budget outcomes. My suggestion, therefore, is to take these two
points to their logical conclusion: repeal Title 3 of the Congressional
Budget Act--abolish the Budget Committees, budget resolutions,
allocations, reconciliation, and all that, and return to the days in
which the President's budget was the budget, and Congress, in committee
and on the floor, would act on the various Presidential proposals
piecemeal. (I would keep CBO, which seems an unalloyed good.) This
proposal would strengthen the President more effectively than the many
ideas I initially discussed, while getting rid of the unfortunate side-
effects of the Congressional Budget Act.
However, because I do not expect this Committee to agree to self-
immolation, and because I have too much residual affection for the
constructive role of this Committee can play, in the remainder of my
testimony I take a different approach to the budget process reform.
``LIQUID COURAGE'' VERSUS ``DO NO HARM''
By 1985, the Congress had had enough of the outsized and permanent
structural deficits caused by the 1981 Reagan tax cuts combined with
the Reagan defense increases. In a fit of desperation, Congress enacted
Gramm--Rudman-Hollings, a doomsday machine designed to produce
automatic ``sequestration'' so unpalatable that even President Reagan
would negotiate tax increases and defense cuts, while even a Democratic
House would negotiate cuts in Democratic entitlement programs such as
Social Security, Medicare, and Medicaid. Broadly speaking, GRH was a
major failure. Serious negotiations did not occur. Instead, OMB and the
Congress employed wildly unrealistic estimating assumptions and
accounting gimmicks to pretend they were trying to meet the GRH
targets. When the lies and gimmicks went beyond the capacity of even
the most cynical to swallow, GRH was set aside.
Once Congress and President Bush (the first) agreed to scrap GRH,
they also agreed on an ambitious plan of entitlement cuts, defense
cuts, and tax increases. And they created a new structure to enforce
that agreement, a structure of appropriations caps and a PAYGO rule
applied to future tax and entitlement legislation. Two rounds of
deficit reduction that were not forced by the process, but whose
outcomes were enforced by caps and PAYGO, plus an unfortunate increase
in income inequality, led to 8 years in a row of improved budget
outcomes for the first time in US history, and 4 years in a row of
balanced budgets.
The point of this history is to reinforce the conclusion that no
budget process can make the President and Congress do the right thing,
which is to take major and significant unpopular actions in the face of
permanent structural deficits. The experience with GRH demonstrated the
futility of that idea. The threat of automatic across-the-board cuts in
popular programs is not enough to get antagonists to the bargaining
table, because the threat can never be made credible. The more extreme
the threat, the less credible it is. No matter how it is designed, the
budget process cannot provide the ``liquid courage'' needed to make
members take hard votes. Easy votes and press releases are so much more
fun.
In this context, the entitlement cap included in a recent budget
process proposal, HR 2290, is simply a worse and more unfair version of
GRH, and is at least as likely to fail. That cap would require roughly
$2 trillion in entitlement cuts over the next 10 years. The cuts would
be 20 to 30 times as great as those in the President's recent budget or
this year's congressional budget plan, which are themselves politically
troubling. This idea cannot work.
Nor should it work. Entitlement cuts of even a quarter this
magnitude would significantly increase the number of Americans with no
health insurance or with health insurance that covers only a small
fraction of the costs of getting sick. The cuts would increase the
depth of poverty for many children, elderly persons, working families,
and persons with disabilities, and drive many others into poverty. It
would threaten the disability benefits and pensions of veterans, the
price stabilization programs for farmers, the unemployment benefits of
those who are laid off, and the pension and disability benefits for all
current and future Federal retirees, civilian and military alike. Yet
this approach to deficit reduction is completely one-sided: neither the
entitlement cap nor any other aspect of HR 2290 would do anything to
scale back the very generous tax cuts I have received, none of which I
needed, or the far more extravagant tax cuts the very wealthy have
benefited from.
What can work is a less ambitious but fairer budget process agenda,
in which the rules are changed to diminish the ability of Congress to
use the budget process to increase the structural deficit. I call this
the ``do no harm'' approach.
My first and most significant suggestion is to reinstate the two-
sided PAYGO rule, which would provide a point of order against any
legislation that either increases entitlement costs or decreases
revenues, relative to current law, during the current and the budget
year, the sum of the current year plus the next 5 years, or the sum of
the current year plus the next 10 years. This idea has been debated at
some length recently and so does not need further elaboration, but the
idea is still fundamentally meritorious in a time in which all
reputable forecasts including those by OMB, CBO, and GAO show large,
permanent, structural deficits. And despite the fact that a PAYGO rule
is much less ambitious than, say, and entitlement cap, even a PAYGO
rule won't hold unless both parties and both branches want it to.
I also recommend a less ambitious version of the PAYGO rule.
Currently, the ``Byrd Rule'' prevents the Senate from using the fast-
track reconciliation process to make the deficit greater in years after
the budget window covered by the reconciliation directive. However, the
Byrd Rule does not have such a restriction for years covered by the
reconciliation directive--in those years, the Senate can use this
mechanism to make the deficit worse. I recommend changing the rule so
that reconciliation can only be used to enact legislation that, in net,
reduces the deficit. That was its original use from fiscal 1980 through
fiscal 1999.
I might add that HR 2290 is precisely wrong with respect to the
reconciliation process; that bill would amend the Byrd Rule to allow
reconciliation bills that permanently increase the deficit.
I have heard it suggested that PAYGO rules or reconciliation
instructions should not apply to tax cuts because tax cuts ``pay for
themselves.'' This is utter nonsense. I recently examined average
economic growth rates and average revenue growth rates over the course
of the business cycles since World War II. The table below shows the
results: economic growth during the 1980s, with its very low marginal
income tax rates for the well off, was no better and no worse than
growth during the 1990s, during which much higher marginal tax rates
were imposed on the well off. And since real economic growth was the
same during these two periods--an average of 2.0% per year per person--
it follows that the tax cuts of the 1980s did essentially nothing to
pay for themselves over the long run.
This can also be seen by looking at the average annual growth rate
of revenues, and especially income tax revenues, over these periods.
The tax increase of 1990 and 1993 generated substantial increases in
revenues, while the tax cuts of 1981 and 2001 produced unusually low
revenues. To put it most simply, tax cuts do not pay for themselves;
all they do is lose revenues. The ``starve-the-beast'' crowd
understands this perfectly well. After all, if tax cuts paid for
themselves, they would in no way constitute a starvation diet. This is
one fundamental way in which Grover Norquist is correct--tax cuts lose
revenues. And that is why their cost must be covered within budget
constraints such as PAYGO rules.
ECONOMIC GROWTH AND REVENUE GROWTH DURING SELECTED PERIODS
(All economic and revenue figures are expressed as average annual growth rates, adjusted for inflation and
population growth, i.e., average real per-person growth rates)
----------------------------------------------------------------------------------------------------------------
Growth of Growth of total
Growth of income payroll, excise, Growth of total tax receipts if
Fiscal years GDP growth tax receipts estate, & other tax receipts capital gains are
tax receipts excluded
----------------------------------------------------------------------------------------------------------------
1948-1979 2.4% 1.8% 3.1% 2.3% n.a.
1979-1990 2.0% 0.2% 2.9% 1.3% 1.3%
1990-2000 2.0% 4.2% 1.9% 3.2% 2.9%
2000-2015 2.0% 0.1% 0.8% 0.4% 0.6%
----------------------------------------------------------------------------------------------------------------
Note: revenue and economic projections through 2015 are from CBO and assume the 2001 and 2003 tax cuts will be
extended and AMT relief will be enacted.
Chairman Nussle. I want to thank our panelists.
I am going to defer my questions until later, and I would
recognize Mr. Hensarling to begin the questions.
Mr. Hensarling. Thank you, Mr. Chairman. And in keeping
with your wishes and trying to keep this at somewhat of a
30,000-foot-view, I think I would like to start out with what
some may consider an obvious question, perhaps not so obvious
to others, and that is what is the purpose of having a budget?
I would think for most American families and for most
businesses it is all about making choices about relative
priorities and placing a ceiling on one's spending.
If you accept that definition, presently we spend a lot of
time in this committee debating 20 budget functions which do
not correlate to our appropriations bills and are not otherwise
enforceable. We all recognize that over half of our spending we
characterize as mandatory and is not captured within our
budgeting process. And although we have come very, very close
as of recent, I am not sure the memory of man runneth to the
contrary, and us actually meeting the ceiling that we have
placed into our budget.
So I really have a twofold question here. No. 1, what
should the purpose of the Federal budget be? And once you
define that, give me one or two ideas of what we need to do to
meet that definition.
Congressman, could we start with you? And it is an honor to
have you back here, sir.
Mr. Frenzel. Sure. Thank you very much, sir.
I think that the purposes and uses of a budget were set
forth very well in the committee's paper on the purposes of the
hearing, which include empowering Congress to control the
purse, setting priorities, controlling spending, enforcing
spending limits, addressing entitlements and providing a
congressional agenda and work plan. I think all of those are
reasons or rather functions of the budget and reasons why the
Congress should have a budgeting process and should improve the
ones that it has.
Every unit, from an individual to a family, to a
corporation, association, cooperative, whatever, needs to know
what its plans are, what its resources are, what its expected
outgoes are, et cetera. And Congress should be no different
from the rest of the world.
The problem, of course, is that most individuals and
families don't have real budgets. They have some idea of what
the concept is. And Congress, in the Budget Act, has got at
least some tools that it can use to serve each of those
functions.
In answer to the second question--or maybe the implied
second question is, what do you do to make it better? I think
you have heard a lot of suggestions today. In my judgment, the
prime need has been always to control spending and to enforce
whatever limitations you put on spending. And the reason for
that is that the incentives in Congress are so overwhelmingly
in favor of increasing the size of government and increasing
programs, et cetera. I think you have to--I think one of the
first things you have to do is control the spending through the
device of the mechanisms that at least a number of speakers
have mentioned today, including Congressman Spratt----
Mr. Hensarling. If I could follow up on your point about
controlling spending, and my apologies to the other two
gentlemen, but I see that 5 minutes is traveling rather quickly
here. But right now we have Medicare growing, predicted to grow
in the next decade by 9 percent, Medicaid 7.8, Social Security
5\1/2\. We recently received some rather sobering projections
from the Pension Benefit Guaranty Corporation about unfunded
obligations there. Can we have a meaningful budget process that
does not capture these long-term obligations? And shouldn't the
American people be aware of the implications?
We have seen a recent GAO (Government Accountability
Office) report that says, I believe, by 2035, if we don't do
something to control these entitlements, that we are going to
have to double taxes on our children and grandchildren just to
balance the budgets. So the question is can we have a
meaningful budget process reform without capturing these long-
term obligations? And, Mr. Schick, I will give you a chance to
answer that question in 3 seconds.
Mr. Schick. Congressman, I think you mentioned only one of
the purposes of budgeting, which is to make choices. By the
way, I disagree with my colleague Mr. Frenzel that every family
should have a budget. I think that budgets and romance do not
mix, and families can be split by budgeting the way Congress is
split by it. So keep families out of the budget situation.
But in addition to making choices, a fundamental purpose of
budgeting in a democracy is to keep commitments, commitments to
people, to voters, to citizens, to families, to people who are
ill, disabled, employed, unemployed, today's workers, and
tomorrow's pensioners. That is no less a function of budgeting
than making choices.
It turns out that these two purposes, keeping commitments
and making choices, often clash with each other, so you have
got to balance the two. But imagine a Congress of the United
States in which every budget was constructed on a blank piece
of paper; it had complete freedom to do what it wanted. The
result might be to have a great Congress and have a lousy
Nation. So I think it is very important to balance new choices
and past commitments.
Now, what should Congress do? I would go a little further
than Mr. Kogan, and would not only bring back BEA, combine it
with Gramm-Rudman-type constraints on deficits. That is, with
deficit targets; but I would change Gramm-Rudman so it is tied
to actual rather than to projected deficits; I would keep
reconciliation; and use it principally to restrain deficits by
curtailing expenditures and, when needed, boosting revenues. So
that what you would end up with is a bilateral BEA, which I
believe is entirely right, because a process which targets only
the revenue or the spending side of the budget would be
discredited very quickly; it won't have the across-the-board
political support necessary to work.
The ideal then, is a budget process that treats direct
spending and revenues the same way, has discretionary caps, as
well as deficit targets keyed to actual deficits, and
reconciliation.
Chairman Nussle. Mr. Spratt.
Mr. Spratt. Thank you, Mr. Chairman. And again, to our
three witnesses, thank you for some excellent and provocative
testimony.
Let me focus on the whole issue of the reconciliation,
because originally it was the enforcement provision and the
resolution, and it when was removed, we have been searching
ever since for some form of enforcement that would keep us to
the budgetary outline that we had adopted earlier in the fiscal
year.
Richard Kogan, or all of you, do you think that we have
perverted the meaning of reconciliation, even as it exists
today in a more limited form, by allowing it to be used for tax
cuts that are--whose passage through the Senate is facilitated,
even though they add to the deficit?
Mr. Kogan. Mr. Spratt, on balance I do. The technician in
me likes the idea that reconciliation exists as a way of
implementing whatever the budget plan is, but my conclusion in
looking over the last 30 years is that because the
Congressional Budget Act strengthens Congress's tools to both
do good and do bad, because mistakes are now doozies as opposed
to smaller mistakes when they occasionally occur, it would be
the better part of wisdom to limit reconciliation to what I
think most people thought they were talking about in 1980 and
1981 when they were first implementing it, limit reconciliation
to cutting entitlements below their current law projections and
raising taxes above their current law projections, at least in
net, so that, at a minimum, the reconciliation process meets
the stricture that I talked about at the beginning, which is to
do no harm.
To back up a step, in the previous set of questions, one
witness said that the purpose of congressional budgeting was to
restrain spending. And I think that is a necessary part of any
budget, but it is not the sole purpose, because, of course,
that leaves totally out of the picture the question of whether
we have sustainable and manageable deficits, whether the
deficits are fair to future generations, whether the increase
in debt is good for the United States and necessary, or whether
it is bad and unnecessary, and so on.
Deficits are not the difference between spending. They are
the difference between spending and revenues, and so both of
these pedestals of budgeting need to be looked at, need to be
taken equally seriously. Their effects are equally important,
and they need to be equally constrained, and in this case, in
answer to your question, equally constrained through
restrictions on what can be done in the reconciliation process.
Mr. Spratt. Professor Schick, would you agree that the
reconciliation rule should be such that within the budgetary
time frame, there had to be deficit reduction achieved?
Mr. Schick. Mr. Spratt, I would not call the use of
reconciliation for tax cuts a perversion of the process,
because the bare words of the Congressional Budget Act clearly
allow reconciliation to be used in any direction.
Nevertheless, I strongly agree with the sentiment that you
have expressed, and that is that the text of the Budget Act be
revised so as to limit reconciliation to measures that reduce
the deficit. And I say so for a few reasons. First, I believe
fundamental tax reform such as has been enacted in this decade
should not rely on the expedited process of reconciliation.
Secondly, I believe that using reconciliation in this way, as
Mr. Spratt has suggested, would give the House some version of
the Byrd rule, a de facto Byrd rule. Members of this committee
know that the Byrd rule has actually empowered the Senate vis-
a-vis the House in conference on reconciliation bills. The
Senate can plead weakness, its hands are tied because of the
Byrd rule, and therefore the House has to recede on
disagreements. So I would endorse your proposal that
reconciliation be reserved for deficit reduction.
Mr. Spratt. Mr. Frenzel.
Mr. Frenzel. I am going to reserve on that, Congressman. I
think when you have a rule, you have got to understand it is
going to work in a couple of ways, sometimes not to your
liking. And I need to think about that a little longer.
Mr. Spratt. Well, let me ask you, if we reinstated the
PAYGO rule, do you think it should be reinstated in its
original form so that it applies to tax cuts as well as
entitlement increases?
Mr. Frenzel. I do.
Mr. Spratt. Thank you, sir.
Now, let me ask you, Richard, Mr. Kogan, you talked about
the effects of the reconciliation rule on passage of tax cuts
through the Senate. Namely, it waives--it allows the time for
debate to be limited and prevents the proposal from being
filibustered. What about the House? Why not have a similar rule
apply in the House where all tax legislation originates? Is
there some problem with that?
One problem, of course, is the Rules Committee, and I would
like all of your ideas as to what we can do to have rules
around here that are enforceable and invulnerable to being
overridden by the Rules Committee. But why not have it
applicable in the House as well?
Mr. Kogan. The House and the Senate are so fundamentally
different bodies that it is not clear to me that this is a
meaningful question with respect to the House. You could easily
have a rule, a PAYGO rule or a rule on reconciliation, with
respect to the House, but it can just as easily be waived by
the rule, the special order for consideration of the
reconciliation bill, which is waived by agreement by majority
vote.
As you well know, when the Democrats were in the majority,
the Rules Committee had two Democrats for every Republican
member, plus one. And now that it is the other way around, the
Republicans have two Republicans for every Democratic member
plus one. And the Rules Committee is picked by the leadership
at least in part for its loyalty, so that what is going to
happen becomes a leadership decision.
A PAYGO rule, therefore, will only work, only be enforced
in the House, if it is a rule that the leadership shook hands
on. In the case of 1990, when the PAYGO rule was first designed
and implemented, Mr. Foley was negotiating on behalf of House
Democrats. He shook hands on that rule, and he used his
position in the leadership to continue to enforce it for as
long as he was in power.
But in the House the ethic really is that whatever gets 218
votes deserves to pass, and that the majority needs to govern,
and that the House with its 435 Members, as opposed to the
Senate's 100 Members, needs to be able to limit debate in some
way. So the whole notion of the Senate having a special
procedure for reconciliation doesn't really mean anything in
the House, where every bill is considered under special
procedures designed by the Rules Committee.
Unless we are going to turn the House of Representatives
into the Senate--which, first of all, if you recommended it,
wouldn't happen; and secondly, I don't think the House of
Representatives wants to become like the Senate--unless you are
going to turn the House of Representatives into the Senate, the
question about whether there should or shouldn't be a PAYGO
rule in the House isn't really an important question. My answer
is, ``Yes, of course.'' But the real purpose of espousing a
PAYGO rule or a rule in the Budget Act that says that
reconciliation directives can only be used for deficit
reduction is to make the Senate, which must follow those rules
or get 60 votes--to make the Senate be the implementer of that
type of budget constraint.
Mr. Spratt. One final question to the whole panel. You
talked mainly about budget processes, budget tools that are on
the table now, have been tried in the past, or at least are
frequently discussed and recommended as improvements to our
existing process, but nothing that really pushes the envelope
greatly. I guess we have got enough difficulty making the state
of the art work.
But we run the biggest cash budget in the world, the
Federal Government, and that allows us to ignore the looming
liabilities for major entitlement programs that, had they been
taken seriously in 2001, might have tempered the enthusiasm for
the tax cuts that were passed then. Do you think we should have
some kind of annex to the budget, some kind of major mechanism
that reminds Congress, brings home to us every year what the
accrual liabilities are, what the present value of our major
liabilities are that need to be addressed in the foreseeable
future so that we take that into consideration in forming our
budget?
Mr. Frenzel. I do. If you--to look forward more than a
couple of years is infinitely dangerous because estimators have
great difficulty predicting what is going to happen tomorrow.
Nevertheless, using a 5- or even a 10-year time frame is not
adequate, and there ought to be, I think, some kind of system
at least to look out into those outyears as we do for Social
Security and certain other programs, at least so the Congress
is aware and there is a record of what this is going to do to
us.
I don't think that you want to restrict what we do today
too far out because I think that is dangerous, and I am really
nervous about our estimates. But I think we have to know, to
look at programs over the longer term.
When your party was in the majority, you always gave us
out-loaded spending programs. When my party was in the
majority, we give you out-loaded tax cuts. And I guess that is
part of the game, but in every case we should know what is
going--to the best of our ability, what is going to happen out
in those long outyears.
Mr. Spratt. Mr. Schick. Dr. Schick.
Mr. Schick. Yes. The ideas you suggested have merit,
present value calculations and accruing liabilities and taking
a long-term perspective. But standing against these is one
statistic which I think every person in this room recalls, the
$5.6 trillion surplus which was projected in January 2001.
When you build long-term projections into budget rules, you
have an enormous amount of instability in budget outcomes,
which are sensitive to changes in interest rates, and other
assumptions. Basing budget decisions on long-term projections,
which swing wildly from one year to the next may turn budgeting
for rank-and-file Members of Congress into a technical
exercise, and lead to manipulation of the underlying
assumptions in ways that would go far beyond the manipulation
which is currently practiced.
Mr. Kogan. Mr. Spratt, you asked whether it would be
helpful to include in the measurement of the budget a long-term
picture, not just going out 10 years, but going out
considerably beyond that, perhaps on a present-value basis. And
the previous questioner also pointed to the long-term problems
that we have, and I included in my testimony a chart from OMB
outlining, I think, in an overly rosy way how horrible the
long-term problems are. Certainly the Comptroller General has
been going around to the country almost lighting his hair on
fire trying to get people to focus on this problem.
My answer, therefore, is the same as Mr. Frenzel's. Yes, I
think it would be useful if CBO not only did periodic, every
other year, long-term graphs, but also created an annual
summary present-value measure of the mismatch between revenues
and expenditures. Over the long term I estimate it to be
something like 5 percent of GDP, even worse than our current
deficits, which are 2\1/2\ to 3 percent of GDP over the mid
term, even though things will get better temporarily before
they get worse again. And my estimate is by no means the most
pessimistic out there.
I think having such a long-term figure estimated annually
by CBO and OMB, and perhaps including that figure as an
informational item in the budget resolution, will help people
not get carried away by one quarter or 3 years of good news,
because the looming deficits are not going to go away unless we
make major changes in both the spending and tax side of the
budget.
Whether one should attach budget procedures to that long-
term estimate, whether one should try to control legislation
based on its marginal outyear effects in the far distant
future, is a much, much harder question, and I am undecided on
that. I have spent actually a lot of time on that question. I
was in a 2-hour meeting yesterday discussing exactly that
subject. If you do have long-term procedural constraint, you
must also, however, maintain the short-term procedural
constraints: the rules that say that over 1 year do no harm,
over 5 years do no harm on a cash basis, over 10 years do no
harm, as well as over a much longer period, do no harm. You
should not, under any circumstances, abandon the short-term
measures and constraints and focus solely on a long-term
measure.
Mr. Spratt. Thank you very much.
Chairman Nussle. Let me ask unanimous consent that all
members be allowed to place statements in the record today.
Without objection, so ordered.
Mr. Putnam.
Mr. Putnam. Thank you, Mr. Chairman. And thank you for
putting together this hearing.
I want to talk a little bit about the history of the act.
In managing the rule on this year's budget, I had the
opportunity afterwards to talk to both Mr. Young and Mr. Obey
about it, and their comments were very similar to some that you
made, Mr. Kogan, and essentially, in their view anyway, it
worked--the whole process worked better before 1974. And in
particular when there was a deficit, they were much smaller,
and I think your words were, ``the mistakes were small. Now
they are doozies.'' Why is that? What fundamentally changed
that caused the errors to be greater?
Mr. Kogan. I think, as I said before, one aspect of the
Budget Act is that it gave the leadership and the Congress,
and, in essence, this committee, any determined majority,
stronger tools. And with stronger tools you can simply make
more changes. The older practice was a practice in which the
President's budget may have been a coherent whole, logically
designed hard choices made by the President, detailed work done
by OMB. Once it reached Congress, it was divided into many
pieces, and each committee acted independently. That seemed
incoherent to political scientists. But I suggest that it
actually had a useful conservative effect because a lot of
uncoordinated committees were going off, each in their own
separate way; there was less likely to be a stampede all in one
direction or a stampede all in the other direction.
It is conservative in the same sense that the existence of
both the House of Representatives and the Senate is a
conservative approach to legislating. It makes it harder to
pass legislation, any legislation. And the existence of the
Senate as a nonmajoritarian body (because they are not
representing people, but rather acres) also makes it harder to
enact legislation, because the House membership will, in
essence, represent different interests than the Senate
membership will on many occasions.
And the existence of a functioning legislature versus a
President--who also wants to enact things--that may be of
opposite parties, a situation that doesn't exist in a
parliamentary system, also is a conservative structure. All of
these conservative effects make it harder to do anything for
good or for ill.
In a country like the United States, which has had
basically 200 years of good luck, except for what we did to
ourselves in the Civil War, it is probably useful to have an
inherently conservative legislative structure that makes it
hard to take lots of actions. Here we are, the richest and most
prosperous country in the world. We have got something good
going for ourselves. The major mistake would be to mess it up.
And so that is why I think I am advocating in an inherently
conservative position, which is that I am not happy that the
Budget Act has given the leadership stronger tools.
Beyond that, however, I think that the Budget Act, by
fostering partisanship, also raised the stakes for
accomplishing something. Each party felt in Congress as though
it had to say, ``Here is our budget, we are going to implement
it. Boy, let me show you, American public, what we can do for
you.'' And the other party almost by definition had to say,
``We disagree. We have a different philosophy.'' The other
party, for the purposes of product differentiation, had to
stress differences.
Here is where Congressman Obey, I think, was prescient. It
was in 1973 and 1974 when the Budget Act was being created that
he looked at the composition of the House Budget Committee,
which had been designed by the Joint Study Committee on Budget
Control as a permanent committee that would have 15 Members, 5
from the Ways and Means Committee, 5 from Appropriations, and 5
from all others.
Congressman Obey looked at the senior members of
Appropriations and Ways and Means and saw that the Democrats
were all conservative southerners, and Republicans were
Republicans, and that these two committees had 10 of the 15
slots. Mr. Obey said, this is a committee that doesn't
represent, A, my views, and, B, what were then the majority
views in the House of Representatives, which were northern
Democrats and, I might add, liberal Republicans.
He said, this committee is all wrong. He said, and he said,
I think, publicly, budgeting is inherently a partisan exercise
in which the two parties lay out different agendas. We need to
remake the Budget Committee to reflect that reality. I am
willing, he said, to go along with the Budget Act only under
the following conditions. (This is amazing that a Member with 3
years of seniority at that point could command such respect,
but he really did.) He said, we need to make the Budget
Committee work as a partisan body, and I am going to do it in
the following ways. I am going to insist that there be a
leadership representative on the Budget Committee. I am going
to insist that the chairman be picked not on the basis of
seniority, but by each party by vote. I am going to insist that
there be rotating membership. And I am going to insist that it
be a larger committee; the same number of Ways and Means and
Appropriations members, but much larger representation from
other committees. That was a way to keep, from his point of
view, all of the most senior conservative Southern Democrats
from dominating the committee. He got his way on all of these
changes, and, therefore, from day one, the Budget Committee in
the House of Representatives was a partisan committee.
Not so in the Senate. In the Senate, when the Budget
Committee was set up, in the first series of budgets Senator
Muskie and Senator Bellmon, the Democratic chairman and the
ranking Republican, produced a joint mark which they negotiated
between themselves, laid it down before the committees, got
their members to vote yes, generally almost unanimously, and
then got the Senate to approve these budgets by 80 votes to 20
votes.
Ultimately, though, the Obey view of the world held sway,
and I think that while he is sort of a genius of a political
analyst, I think the resulting partisanship has been bad for
the House of Representatives and this institution.
Mr. Putnam. Is it a good or bad idea that we have term
limits on this committee, for all three witnesses?
Mr. Schick. Let me go back to the previous question and
join it with this one. Yes, you can make bigger mistakes when
you have a comprehensive budget process that looks at
priorities, aggregates, revenue spending, et cetera. In fact,
Congress has made big mistakes under the process that allows it
so. But I suggest that before dismantling this process,
Congress should review the two causes of the Congressional
Budget Act of 1974. One was mentioned by Mr. Frenzel, conflict
with the President over impoundment. But there was a second
cause which was equally relevant, and that was a 7-year war
between the appropriations, tax, and authorizing committees in
Congress. The three sets of committees fought over who was
responsible for deficits, and what to do about them. Congress
almost broke down over that in terms war. It couldn't deal with
the deficits of those days. So the 1974 Budget Act was a treaty
within Congress about how the various committees--authorizers,
appropriators, revenuers--should act on budget matters.
The second point is I believe that Mr. Kogan's history is
incomplete in the following way: The main objective of Mr.
Obey, and the DSG, the Democratic Study Group, which produced
its own plan, was to create a weak House Budget Committee. That
is what they cared about the most. They wanted a House Budget
Committee that could not do very much. Look at the DSG reports
of 1973 and 1974, they attacked the proposed Budget Committee
as a supercommittee. That was the label that they gave to it.
They didn't care whether it was partisan or not partisan. They
wanted a committee which was so weak that it couldn't act
independently, and they succeeded from 1975 to 1980. That was
the first stage I mentioned before. It was only when
reconciliation was introduced that this Budget Committee had
some teeth.
And since we mentioned Mr. Obey, it would be instructive to
look at his attitude to reconciliation in 1982 to 1984 and how
he wanted to change the congressional budget process in
response to that development.
So here is the problem for you. Without reconciliation,
this committee is weak; as it cannot change existing revenue or
standing laws which drive budget outcomes. It can merely ratify
the status quo. Reconciliation is an imperfect process. It does
allow you to make big mistakes, particularly, and this is
important, when the President drives you in that direction.
We are talking today about the role of Congress, but we
should not leave aside the role of the President. All of us on
this panel have agreed that the budget process has empowered
the President. What we are in effect saying is the President's
own preferences have greater prospect of being enacted because
of the machinery of congressional budgeting. If you consider
reinstating PAYGO or other rules, don't simply ask what it does
to Congress; ask whether it sufficiently disciplines and
constrains the President so that he can behave in a responsible
manner.
To my mind, President Clinton would have been less bold in
moving Congress toward deficit elimination and also less
inventive in fudging some of the numbers, as Richard pointed
out before, without the BEA rules. BEA didn't simply change the
way Congress behaved, it also changed the way the President
behaved. Given the President's power vis-a-vis the
congressional budget process, his role has to be part of the
equation.
Mr. Frenzel. May I be heard for a moment, Mr. Chairman, on
that as well?
Chairman Nussle. Yes.
Mr. Frenzel. In 1972, that study committee was made up of
all appropriators of the House and the Senate. And naturally,
they had--I am sorry, and the taxers as well. That is correct.
And it is true that the DSG led the charge to weaken what was
then the Budget Committee.
The question, however, is do you make the House committee
permanent, or leave it the way it is? My first choice is to
make all the other committees like the budget. And my second
choice, since you aren't going to achieve that, is to make the
House Budget Committee permanent.
I have watched an unending chain of chairmen and ranking
members go into conference and complain that because of the
organization in their House, they were inadequately armed to do
business with the Senate. I think it would be much better to
permanentize the Budget Committee.
Mr. Putnam. Just a yes or no so that I am not getting in
trouble with my Chairman.
Mr. Kogan. I hate to give a yes or no because I have two
hands. But on balance----
Mr. Putnam. You took up my other 4\1/2\ minutes. I really
just need a yes or no.
Mr. Kogan. I apologize for stealing time. On balance I come
down where Mr. Frenzel does, because I think the advantages of
expertise, and also the greater likelihood that there will be
some give and take between the parties when you have a
permanent committee as opposed to a rotating membership,
outweigh the advantages of rotation, where the leadership can
make sure that the committee doesn't stray from accurately
representing each caucus.
Mr. Schick. I come down in favor of Mr. Frenzel's second
choice, which is to strengthen the Budget Committee by making
it permanent. I think the first choice would weaken everybody,
and I don't see any gain there.
Chairman Nussle. I for one, think we ought to spread the
love and joy around a little bit more. So, I think not making
it permanent would be my choice, just so we could spread the
love and joy. Don't you think?
Mr. Moore.
Mr. Moore. Thank you, Mr. Chairman. Thank the gentlemen for
being here this morning.
We have, as you know, a national debt approaching $7.8
trillion. We have had deficits for the past 3 or 4 years of
about $400 billion range, and--both figures are going the wrong
way. They are getting worse instead of better. Interest on our
national debt is substantial. I think it ranks, in terms of
categories of expenditures in our Federal budget, after defense
and Health and Human Services. PAYGO rules expired in 2002, and
yet when we tried to reimplement PAYGO rules, the majority
party says yes for spending increases, but no for tax cuts.
And I have been here since 1999, and I hear it is more fun
to be in the majority because maybe we could get something to
happen then to try to restore fiscal responsibility, because
the other party talks fiscal responsibility, and we are doing
exactly the wrong thing, from my perspective. We talk about
values a lot here in Washington and Congress, and yet it seems
to me that the highest Federal cost right now is tax cuts, more
than providing adequately for our veterans or for education
that we said we value so much, and yet we shortchange No Child
Left Behind about $9 billion the first year.
My question to you is, and I think I have heard the answer
from each of you, but I want to confirm this, do each of you
believe that PAYGO rules, if they are reimplemented or
reinstituted, should be on a two-sided basis and not just for
new spending?
Mr. Frenzel. I do.
Mr. Schick. I certainly do.
Mr. Kogan. Yes, I certainly do.
Mr. Moore. Would you please all talk to your friends in the
majority party and tell them that? And I am not trying to be
facetious here, but it is very, very frustrating when I--I
think these are good people. Ninety percent of the people in
Congress are really good people on both sides of the aisle. And
yet I think we have just somehow got to come to terms here with
the fact that we are putting our country in a very precarious
position, and we are passing on these tax cuts that we are
taking, we are passing on this huge, huge debt to our kids and
grandkids, which I think is immoral. We should not be doing
that. To me, fiscal responsibility is a family value and should
be a national value as well, and we are just doing the wrong
thing here.
Any thoughts about what we can do to try to reimplement
this rule?
Mr. Frenzel. I have great sympathy for you. And if there is
anybody on the committee I identify with, it is Mr. Spratt,
because I sat in that seat for a long time and was abused by an
aggressive majority which did what it needed to do, and I was
ground under the heel, as you are now experiencing.
All I can say is it is the job of the Minority to be the
conscience, to make the points that you are making, but if you
expect to--that somebody's going to listen to you, I have got
to inform you, the chaplain has gone ashore.
Mr. Schick. For two reasons I believe that it should be a
two-sided PAYGO rule. One is a budget rule doesn't have
sufficient legitimacy if it favors one party's position over
the other party's. A budget rule has to be neutral on its face,
embraced by both parties, and I would say that, sir, even if
there were no large budget deficit or looming unsustainability
in the future.
The second reason is that I believe the hardest but most
important thing, for a majority party to do when it changes the
rule is to consider how would something work out if it is no
longer the majority party at some time in the future. The
Democrats, when they controlled the House, invented the modern
Rules Committee. They did not envision that it would ever be
used against them. They didn't envision becoming the Minority
party. Well, we know how things have played out. And the same
thing pertains to budget rules. The majority party should
consider not what is simply in its current interest because it
is the majority party, but what is in its interest in fair and
foul weather as well.
Mr. Kogan. Yes. For all of the reasons that the previous
speakers have said, PAYGO rules should be two-sided. In fact,
if you made it one-sided, that would not be half a loaf, but
rather it actually, in my view, would decrease the likelihood
of enactment of major deficit reduction. And the reason is that
a one-sided PAYGO rule, which is really an entitlement cap at
current law, means that one faction of the House of
Representatives would have already received the budget rule
that they want, an entitlement cap at current law. They would
have no reason to negotiate any further.
To get real deficit reduction and agreement for unpleasant
tax increases and unpleasant program cuts, you need to give
both sides of any negotiation something else that they want.
You need to give the conservative side an effective entitlement
cap in the form of a PAYGO rule, and you need to give the other
side an effective rule against tax cuts that would drain the
Treasury. If you already have given away part of it, then you
are no longer going to have a successful negotiation for
deficit reduction.
Mr. Moore. Thank you.
Chairman Nussle. Mr. Crenshaw.
Mr. Crenshaw. Thank you, Mr. Chairman, and thank you all.
Let me go back to the process part and ask, Mr. Schick, you
mentioned something that was kind of interesting. You know, we
think of the budget process as making choices, and I think your
point was that it is also keeping commitments, and those two
are kind of in conflict. And yet it seems like maybe one of the
things, and this is in the form of a question--is there
something in the budget process that kind of forces us to lean
more toward keeping commitments? In other words, one of the
problems government has is once you fund the program, it takes
a life of its own. It goes on forever, and it seems like we
never really address that as much as we--we cut it a little
bit, or we increase it a little bit. We don't really say, do we
really challenge why we made this commitment in the first
place?
And so I guess that is the question. No. 1, is there
anything in the process that kind of perpetuates that? But more
importantly, is there anything that you all can think of that
we could put in the process that would make it easier or more
often we would actually challenge existing programs? I guess
one way obviously is just--there is only so much money, so then
the appropriators have to go figure out how to do it. But is
there something, some process, we could put in place in terms
of budget that would help the budgeteers look at programs, and,
as you say, is it a commitment we ought to keep on keeping?
Because there are probably some that we should, some that we
shouldn't, and that in part is like making a choice.
But can you all comment on that just from a process
standpoint that would really--whether it is mandatory or
discretionary, I mean, and probably more, and that is another
question, maybe, the mandatory part. But right now just from a
discretionary standpoint, are their process--do you sunset
programs, or do you--I mean, what are some things we might
consider?
Mr. Schick. Well, in my view, the process is overly biased
in favor of keeping commitments rather than making choices. It
is a clash between these two that creates good budgets. It is
much easier to keep commitments, obviously, than to make new
choices. But I do believe that there are certain features of
the current budget practices that strengthen the bias in favor
of keeping commitments and make it harder to take initiatives
that alter the path of spending.
What I am about to say is going to make no friends at the
Congressional Budget Office. The way baselines are now used,
puts commitments in concrete and makes it harder to change
them.
In contemporary budgeting, the computer that runs the
baseline gets the credit for spending increases, and Congress
gets the blame for spending cuts. That is basically the way the
baseline operates today. Imagine a world of budgeting in which
we didn't have baselines, and the question would be, how much
should we increase Medicaid? The example I gave earlier, over
the next 5 years, should we increase it by $20 billion or $40
billion or $100 billion? Congress would be making choices. I
hope it would also be keeping commitments, but the baseline,
the way it is engineered today makes it exceedingly difficult
for Congress to pay the political price for reopening some
commitments, even at the margins.
In this regard, I believe PAYGO itself was deficient
because PAYGO actually strengthened existing commitments. PAYGO
was triggered only with respect to new direct spending, not
spending under existing law. I believe that if we look at the
BEA process during the 1990s, the period that PAYGO was in
effect, we will not find significant inroads made to existing
commitments.
Mr. Kogan. This is probably the one area on which Mr.
Schick and I disagree most regularly. I have been disagreeing
with him on this issue for a few decades and will probably
continue to do so as long as both of us are kicking. Let us
look at it first from a CBO perspective and institutional
perspective.
To my mind, the fundamental budgetary question, not the
public policy question, that you, a Member, ask when someone
proposes some complicated change to Medicare is whether a yes
vote would be more expensive or less expensive than a no vote.
You really have to know the sign attached to your vote, and
that is by definition a question of existing law. The no vote
maintains existing law. The yes vote changes law. Does that yes
vote make Medicare more expensive than it would otherwise be or
less expensive than it would otherwise be? That is the only
possible budgetary question that I think you can ask and CBO
can answer; well, they can quantify it.
But if you take Mr. Schick's view in which--as I interpret
it--the baseline is not a reflection of current law, but a
reflection of something else, then saying whether a bill will
be above or below baseline doesn't tell you whether your yes
vote will increase spending above what it would otherwise be or
decrease spending below what it would otherwise be.
Likewise, with revenue, a complicated change in the tax
law, does it lose revenues, or does it gain revenues? You need
an estimate. And even if it is unstated, the question has to be
relative to existing law. And for that reason I think CBO is
doing the only thing it can possibly do, which is to tell you,
when it makes cost estimates, whether these bills will make the
laws more expensive or less expensive than they would otherwise
be, because that is what we do in Congress, we vote yes or we
vote no. I mean, that is the simplest way to define a Member of
Congress, as a voting machine. And that is, therefore, the
fundamental budgetary question that needs to be answered.
Would sunsets help? On balance I am against sunsets. Most,
a variety of major laws, and particularly the ones that are
most expensive and most problematic in the long term, are ones
that should logically be long-term commitments. It should
logically be that retirement and pension programs, in which you
pay in your entire life in the form of payroll taxes or other
taxes, and expect some sort of insurance and pension and health
coverage later, should be a commitment. We shouldn't say that
we are going to have you pay in for a decade or two decades,
but besides that there is zero promise that the program will
exist in any form whatsoever when you retire. It wouldn't be
logical.
And for the rest of the budget, it really doesn't matter.
Our entire budgetary problem over the course of the coming
decades is that Social Security, Medicare, and Medicaid will
grow faster than the revenue base. All other programs in
Congress taken together will grow slower than the revenue base.
There is no long-term problem even with the existing current
level of deficits were it not for Medicare and Medicaid, and to
a much lesser extent Social Security, and yet those programs,
by their design, should have benefit formulas and should be
permanent. So the real question is, do we examine these three
programs adequately?
Well, I think Mr. Schick answered that question. Medicare
is the most legislated program that exists. We look at it all
the time. The President, to his credit, is saying let us look
at Social Security, you know, at least partly as often as we
look at Medicare, though I don't like any of his proposals for
Social Security, but at least looking at it is the right thing
to do. And this Congress, to its credit, is saying we should
look at Medicaid. I think Medicaid is underfunded. But on the
other hand, given its cost trajectory, unless you would do what
I would do, which is raise taxes on myself to pay for Medicaid,
which I would happily do, then you have to start looking at
Medicaid cost growth and figuring out a way to deal with it.
This is why I think that sunsets is not a plausible answer, but
rather real budgeting is the answer.
Mr. Frenzel. Mr. Congressman, I think when you question
baselines, you raise one of the most important questions in
budgeting. I said in my earlier remarks that baselines actually
freeze in the past. They restrict the ability of Congress to
set priorities because Congress is tied to the priorities of
the past. Yes, you give COLA (cost-of-living adjustment),
demographic gain, the whole business, all wrapped up in this.
Net result is there is no room for new worthy projects, or
there isn't enough room for those projects.
The baseline theory was promoted very heavily when the act
was begun by liberals who believe they needed to keep--using
Mr. Kogan's argument that we had good programs that needed to
be maintained, and we couldn't, we couldn't let the Budget Act
pull the plug on any of them.
The result is, we have all become slaves to the baseline. I
think it ought to be amended, ought to be changed by act of
Congress, and do what you want with it. Give it a 10 percent
haircut every year. Start there.
The smartest guy about budgeting that ever came to
Washington was Jimmy Carter who said we ought to have zero-
based budgeting, start at nothing every year and see if you can
justify those programs. They laughed him out of town 4 years
later.
With respect to the concept of baseline, in 19--I think
67--my historians here will check me on this--I think President
Johnson appointed a thing called a Budget Concepts Commission;
and that is the last time we have ever had anybody, any
commission or really public group, try to talk about budget
concepts.
I think baselines are a great example of what a Budget
Concepts Commission could do to restore some order to
budgeting, and I will pass this on to you that this committee
ought to inaugurate legislation to create a commission.
Because, if it doesn't, some President will come along and do
it some time, and then you won't have any membership on the
commission. So I hope that we will take some action in this
regard.
With your question about sunsets, I would sunset
everything. And, obviously, that is an overstatement. There are
a few things that shouldn't be sunsetted. But we have no way of
looking at mandatory spending unless there is a crisis.
In 1982-1983, we ran out of money for Social Security; and
we made some necessary changes. Liberals and conservatives got
together, made a deal; and we did it. Obviously, it only lasted
25 years or so, and we are in trouble again, but 25 years isn't
bad.
Somebody said that Medicare is the most worked-on program
in Congress. Probably it is. But I can remember 10 years
working on Medicare and reconciliation, and the changes that
were made were infinitesimal, marginalia, and had no effect on
the program whatsoever other than in the immediate year saved a
couple billion dollars.
We really need a way to get to look at these programs.
Right now, it is a catastrophe that will do it to us. Maybe it
would not be a bad idea to sunset.
Chairman Nussle. We actually tried a concepts commission as
an amendment a few years ago. We weren't able to--so we may be
able to try that again. At least a worthwhile consideration, at
least I thought it was.
Mr. Frenzel. I think it is a good way for Congress to
defend itself against the appointment of a commission by the
President where you might not be participating.
Chairman Nussle. Mr. Edwards.
Mr. Edwards. Thank you, Mr. Chairman.
I have always respected former President Bush. Because in
1990 he realized that the future, the economy of this country
and the legacy we left for our grandchildren was more important
than a campaign promise he made of ``read my lips, no new
taxes,'' and I think that bipartisan summit that he brought
together in 1990 laid the first layer of foundation for
eventually having balanced budgets later in that decade.
Let me make a couple of observations why I think we are at
that place again where we absolutely must have bipartisan
cooperation, including the President's leadership, in solving
the budget deficit. Then I would like to ask each of you
whether you think the circumstances are such that we ought to
do once again what President Bush and Democrats and Republicans
in Congress did in 1990 with a bipartisan deficit budget
summit.
My first observation is this: We are at an impasse. We have
the largest deficits, nominal deficits in American history,
over a billion dollars a day; and if you look at the budget
projections, they go on out as far as the eye can see. I am
convinced it is so serious, if we don't do something fairly
soon, we are going to harm our short-term economy and our
grandchildren's future.
The second observation: Why are we at this impasse? I think
there are several reasons: health care costs, the war in Iraq,
September 11. No doubt about it. The bottom line is, on one
hand, Republicans simply don't have the political will or
ability in Congress to cut spending enough to pay for their tax
cuts. They could cut spending enough today to balance the
budget this year without a single Democratic vote in the House,
but the reality is they can't get the votes to do that, and
probably for good reason. The American people wouldn't accept
those values and those kind of draconian cuts.
Secondly, I think Republicans are afraid if they don't
extend the temporary tax cuts Democrats will find a way to
spend all that extra money.
The second reason we are in an impasse is that Democrats
that might be willing, such as Mr. Spratt and myself, be
willing to accept some entitlement limits and tough spending
cuts won't do it as long as there is no guarantee that those
tough spending cuts on the elderly and working low-income
families and children's health care, those cuts aren't made at
their expense simply to fund a $220,000-a-year tax cut for
somebody that makes $1 million this year on dividend income.
So we are at an impasse. They are in a position, for the
reasons I mentioned, not to give; and they can't unilaterally
solve the deficit problem. The political consequence would be
too draconian. Democrats aren't willing to make sacrifices
because we aren't sure that those spending sacrifices wouldn't
just fund more tax cuts for the wealthiest.
So where are we? I think, if we are serious, we ought to
agree--and I would sign a letter today, the chairman of this
committee or any other Republican member of this committee,
saying I would support a bipartisan budget summit, including
the President, Democrats, and Republicans in the House and
Senate, designed after the 1990 summit. If anyone has a better
idea, if my Republican colleagues have a better idea, I would
say to you that you don't need a single Democratic vote to
solve the deficit problem. But I think we are in this problem
now together. I won't focus on how we got there, but we are in
it together. I think neither party can afford the consequences
of trying to solve it singularly within their own party.
Let me, having made those observations, ask you your
thoughts. And, Mr. Frenzel, you may have been very intimately
involved in that budget summit. Is it time for us to try to
replicate the budget summit of 1990 on a bipartisan basis,
including the President, to solve this problem?
I will make one prediction. If we don't do this, we will be
having the same discussions 5 years from now, and the deficit
will still be over $1 billion a day, and our grandchildren will
have paid a terrible price.
Mr. Frenzel. Thank you, Congressman. That is a good
question. I was indeed present at Andrews Air Force Base. That
was one of the reasons I left Congress, was that unpleasant
experience.
I think any kind of bipartisan work is always something
that I would endorse; and any calls for bipartisan compromise
discussion, even a fist fight, are good if we do them together.
However, the conditions are not the same as they were then. In
that time, there was a Republican President; and there were
Democrat majorities in both House and Senate.
If you had a summit today, you would have a Republican
President dancing with his friends, the Republican majorities
in both House and Senate, and you would endure what I endured
at Andrews Air Force Base as the outside oppressed minority,
and the decisions would be made around you and through you and
over you. So, you know, the----
Mr. Edwards. What are the alternatives?
Mr. Frenzel. Negotiations at Andrews were between the
President's people and the Democrat managers in the Congress.
Mr. Kogan mentioned Tom Foley as being one of them.
I remember particularly them negotiating the caps between
then OMB Director Darmon and Senator Byrd, and that was really
an interesting confrontation. Darmon got his caps, but Byrd
sure got some high numbers in there before he surrendered. So
it is different. I think if you called a meeting now, all you
are doing is meeting three Republican power centers; and it is
probably not going to do what I think you would like to do.
Mr. Edwards. So the Republicans meeting on a bipartisan
budget summit couldn't agree to find a solution to the problem,
which is exactly my point. But I appreciate your observations.
I recognize it is a different situation.
Mr. Schick. Since we talked earlier about keeping
commitments--and commitments should be changed in order that
the budget be on a sustainable course in Congress and the
President be able to make choices. But every time you want to
make a significant change in commitments, you need the
fingerprints of both parties on it. Otherwise, you will not
succeed. This is a lesson that the 2005 Social Security episode
will remind us of, and is not the first time in American
history that this has occurred. That is why the budget summit
of 1990 worked. Each side gave something; each side got
something.
At some time in the future we will pay serious attention to
deficit reduction but only if we do it in a bipartisan mode. I
would not preclude bipartisanship even if the majority party
controls both branches of government. I think it can have an
open-door policy, an open-mind policy. The bilateralism which
we talked about, PAYGO rules, would be a good first step to
reassure the Democrats that they have something to gain through
negotiation, not simply being in opposition.
The other point I want to make is that changes can be made
in the budget process to sensitize us to whether we are on a
sustainable fiscal course. In my view, the current fiscal
course is not sustainable.
There are a number of countries where the government
actually produces--either annually, in the case of Britain;
every 5 years, in the case of Australia, a fiscal
sustainability report. The European Commission produces a
fiscal sustainability report on every member country every year
looking 30 to 50 years downstream.
Such a report should be modeled after the trustee's report
on Medicare, Medicaid, and Social Security. It should be
bipartisan. It would command public attention: Are we on a
sustainable fiscal course? So the report won't tell us what to
do about it, but it would call attention to the issue.
Mr. Kogan. At the risk of being flip, I think that the
problem is Hollywood and TV cameras in the House and the
Senate. I am glad you understand where I am going with this.
Mr. Edwards. Sound bites.
Mr. Kogan. Yes. And not just sound bites. Hollywood in the
form of entertainment defines struggle between good and evil,
the Jedi and the dark side of the force, and so on, as
something that is really fun to watch on TV or watch in a movie
theater. And I think that this tendency reinforces in the
American public the tendency to view political discussion as
our side against their side as though it were the Red Sox
against the Yankees, for example, as though the Yankees really
were the evil empire.
None of that is, of course, true. Compromise is a virtue
for its own sake. It is a virtue not merely because you can get
something accomplished that way, because you can get some
deficit reduction accomplished that way and deficit reduction
is needed, but compromise is a virtue because it reminds us
that we are all Americans and that differences of viewpoint are
just differences of viewpoint and are not fights between good
and evil, or the righteous and the nonrighteous, or people of
faith and people of lack of faith, or whatever. I think
Hollywood is leading us in the wrong direction because it is
training the American people to want a good fight and one side
to vanquish the other.
On top of this, this leads to the natural political theory,
which this President, despite his words, strongly believes.
Which is that you should try to make the smallest possible
winning coalition because then the spoils can be divided most
narrowly among your friends and you don't have to spread some
of the spoils among your opponents.
I wish it were otherwise. I think, ultimately, it is up to
the American public to stop this. It is the American public
which nominates and then elects the most rabid partisans.
Notwithstanding the way I was characterized, I only feel that
way when I am getting kicked in the shins. The rest of the time
I feel that I really would like to sit down with my
counterparts on the Republican side, close the doors, turn off
the TV cameras, work out a deal, and then try to sell it.
Closing the doors and working out a deal and turning off
the TV cameras is right. This is where Woodrow Wilson was
partly wrong when he talked about open treaties openly arrived
at. Yes, you have to know--you shouldn't have a secret treaty
that is never known until you are at war. But, short of that,
the process of sausage making really should take place within
the sausage factory and not out in the open as a form of blood
sport.
Mr. Edwards. Chairman, thank you.
If I could just say to you and take 30 seconds, since I
have gone over time, but it seems to me that one common thread
in all their comments is that there is an agreement that it is
going to require ultimately, because of the size of the
deficit, bipartisan solutions. And then the question would be
raised: If I were the Republican President and Republican House
and Republican Senate leaders, why would I want to require
Democrats? My answer to that is: It would require Democratic
input to give some credibility to some of the spending cuts so
that you are not crucified for making spending cuts as you were
last year when you offered a 1 percent cut and entitlement
programs.
Part of the question is, would Democrats be willing to come
to the table? I can't answer that. But I wish somebody in the
leadership in either party or both parties would try to make
that effort to bring us together.
Thank you, Mr. Chairman.
Chairman Nussle. Mr. Cooper, do you have questions for this
panel?
Mr. Cooper. Yes, Mr. Chairman, with your indulgence. Thank
you.
Chairman Nussle. Mr. Cooper.
Mr. Cooper. When I look at 435 House Members, 100 Senators,
I see a daunting prospect for fiscal discipline. Traditionally,
the President has exercised a veto to curb congressional
misbehavior. As you well know, this President has never used
the veto, the first president since James Garfield in 1881
never to have used the veto; and poor Garfield was only in
office for 6 months. We are in the fifth year of the Bush
presidency. So that sends a pretty powerful message to our
colleagues here.
There is another Presidential power that I want to focus
on. That is the rescission power. As I understand it, under the
Impoundment Control Act of 1974, Presidents have had an ability
to single out congressional spending within an appropriations
bill to send a message to Congress and, within 45 days, get a
vote, a simple up or down vote, simple majority vote--in other
words, it is filibuster proof in the Senate--on the targeted
spending item. President Clinton used this power 163 times and
in a divided government won 111 times. President Bush, to my
knowledge, has never used this power.
So if you take no vetoes and no rescissions, that sends a
pretty powerful message to our colleagues here that the usual
executive branch disciplinary techniques are not likely to be
used.
Now, to give President Bush credit, he has threatened a
couple vetoes. One is over about $10 billion in a highway bill.
Another is if we were to repeal the single greatest act of
fiscal irresponsibility in this age, the Medicare drug bill,
$8.1 trillion of unfunded entitlement spending supported by
this President. And that is why the Cato Institute, among
others, has entitled a recent report, ``The Grand Old Spending
Party--How the Republicans Became the Big Spenders.'' And this
is true even if you discount defense spending.
So my primary focus is this rescission power. Why hasn't
President Bush used it? Would it be a useful tool? Most
Presidents like to use all the tools in their arsenal. Here the
President has willingly foregone at least two of the major
tools that he has. And, you know, to me, an external restraint
is going to be helpful for this Congress if we are going to
make any budget process work.
Would any of the panelists care to comment?
Mr. Kogan. Mr. Cooper, let me start by talking specifically
about rescissions. What you described is known as the enhanced
rescission process, but it is not in law. Under the Impoundment
Control Act as it now exists, the President isn't guaranteed a
vote. He can send a rescission message to Congress, he can
withhold the funds for 45 calendar days of continuous session,
which tends to run about 60 to 90 days, but, after that, if
Congress does nothing, then he has to release the fund. OK? And
so Congress wins by doing nothing, which is one of the things
that Congress is exceptionally talented in doing. And,
therefore, that could be one reason that President Bush hasn't
felt that it would be a particularly useful way to go.
Mr. Cooper. Are you implying that he is afraid of Congress?
Mr. Kogan. I'm implying that he wouldn't be successful, in
which case he would be annoying people without achieving a
budgetary goal.
Mr. Cooper. If the President were to single out spending
items--for example, Senator Grassley's $50 million indoor rain
forest in the great State of Iowa, that he would not be able to
prevail on that vote and get a simple majority of Republicans
in both Houses, and perhaps a lot of Democrats would join in.
Mr. Kogan. I have two questions. One is, why would the
Appropriations Committee in the Senate bring that bill to the
floor when the members of the Appropriations Committee have to
deal with Senator Grassley, the chairman of the Senate Finance
Committee, on all sorts of important issues? Why would they go
out of their way to antagonize the chairman of the Senate
Finance Committee over $50 million, which is not even a
rounding error with regard to the President's budget?
The second is, however, that right now the majorities in
the House and the Senate are small. You can't really afford to
antagonize any of your potential allies, and I think that that
possibly may be going through the President's mind.
If he had bigger majorities in the House and the Senate,
then he could probably much more easily pick out projects here
and projects there and programs here and programs there--it is
not just projects that are subject to rescission--and get away
with a temporary, even 1-year annoyance of a Member here and a
Member there and even a key Member somewhere else. But with
small majorities, you have to do everything you can to keep
them together if you want to govern on a purely partisan basis,
which this President does; and therefore he has to swallow
stuff that he otherwise would not be interested in swallowing.
Mr. Schick. The only time in the last 30 years that
rescission was effective was in the first year of the Reagan
Presidency. Throughout the entire history of congressional
budgeting, for every dollar rescinded by Congress pursuant to
Presidential proposal, Congress has rescinded $3 or $4 on its
own. The evidence is that the current rescission power does not
arm the President with very much, but I do think that the veto
power is extraordinarily effective both when it is used and
when it is threatened. And if we look at the SAPs, the
Statements of Administration Policy, where the President sets
out his position on pending appropriations bills we find that
the level of veto threats from the current President is far
lower than those from his predecessors; and I believe Congress
reads between the lines of these Statements of Administration
Policy and concludes, it has nothing to fear, and has license
to spend what it wants.
Having said this, I believe the President should have a
more active, vigorous veto posture. But, keep in mind what Mr.
Kogan said earlier, that over the next 30 or so years the
entire risk to the budget is concentrated in three programs,
and those programs are not subject either to rescission or to a
veto. Those are not effective tools for dealing with them. To
put the budget on a sustainable course, Congress will need
additional tools.
Mr. Frenzel. I think you have got some wonderful answers
from these panelists. I have always thought the rescission
power was a joke and it didn't give the Congress anything, it
left all the power with Congress. And I am astounded to hear
you say that President Clinton used it all those times. He
certainly did it quietly, because I don't recall any enormous
savings flowing from the----
Mr. Cooper. There were several billion dollars saved.
Mr. Frenzel. Well, a billion here and a billion there is
important, I think.
But I also agree with Allen on the subject of the veto.
Presidents--it is a very powerful weapon. A President should
use it occasionally, and I think fiscal sobriety is a great
cause for using the veto. I wish he would use it much more
frequently.
I think one of the restrictions is that Presidents and
their people never like to lose. They hate to be seen making a
big case and then get overridden, and there is probably some
natural reluctance, has been at least in some of the White
Houses I have been familiar with. But I think a President has
got to lead, and I certainly hope the President doesn't get
through his term in Garfield-like style.
Mr. Cooper. With the Chairman's indulgence, this is the
President who said he had a lot of political capital and he was
ready to spend it. Are you telling me that, unlike with
President Reagan who showed real leadership on rescission and
other Presidential powers, that this President hasn't been able
to find one misguided congressional spending project in 5 years
that he could perhaps muster a simple majority to uphold his
rescission of? Surely there is something that they could have
found to send a message to Congress that they will not tolerate
much foolishness. But no such message has been sent.
Mr. Frenzel. I don't deny that it is possible that he could
have found something, but I also wonder about the comparison to
President Reagan. I can only remember one veto of his, which
was promptly overridden. It was a highway bill which this
President is not threatening to veto. And, you know, veto is a
powerful weapon. It doesn't always work, though. And I wish he
would do it. I wish he would use rescissions. I think the
rescission is a cream puff of a weapon, and I would rather have
him concentrate on this.
Mr. Cooper. I thank the Chair.
Chairman Nussle. I have rarely had to try and defend a rain
forest in Iowa, particularly one that wasn't in my district,
but I am sure there were probably billions of dollars that went
to the Tennessee Valley Authority (TVA) that could have been
the subject of revisions, rescissions, vetoes or all sorts of
things. So I think there is probably enough largesse that goes
around to all States, I would just remind the gentleman.
This has been a great hearing, and I really appreciate the
spirit in which you have approached this. You have given I
think some very objective testimony to the members who were
here today and were interested in listening. One of the reasons
why I didn't want to ask questions to start with, is that I
wanted to have a chance to listen to all the give and take, and
I thought it was fascinating.
I have four categories of the advice you have given us
today. One is, the rules should be fair, that is kind of what
you have said. I realize that may sound overly simplistic, but
I think it is fair to say that.
In other words, the rules should fashion an objective
decision at the end of the day, not a subjective or partisan
outcome. I think all of you have said that, even though each in
your own right and in fairness are partisans and should be--I
am--we all are. I appreciate the way you are giving us the
advice, particularly in the PAYGO discussion. We peeled the
onion back beyond the should it be extended or should it not be
extended to the nuances of, if we are going to extend it, let
us talk about maybe some of the tangential issues that could
arise as a result. For instance, coming to a surplus back in
1990 which was not contemplated, it wasn't even close to
contemplated. Which in part precipitated the fact that we
allowed PAYGO to lapse because the rules to some extent were
not as relevant during the time of surplus as they were during
the times of deficit. You could argue that they are, but maybe
in a little bit different context.
The bottom line is you have given us some good advice that
the rules should be objective and not predetermine an outcome,
predetermine a tax cut outcome, predetermine a spending
increase outcome, predetermine a particular partisan
substantive outcome, and I think that is good.
The second is that we ought to have good information. Good
information, whether it was your baseline, whether it is what
CBO provides you on a bill-by-bill basis or as we look long
term. You have given us some great ideas in that regard.
In particular, I have been frustrated with the--and
Professor Schick, you in particular gave some great testimony
regarding this issue, as did Bill Frenzel, from a practical
standpoint of how just because of a score keeping outcome we
fashion a policy decision. Or, in order to achieve an arbitrary
financial outcome, we make what would otherwise be maybe a
nonsensical policy decision in the final throes of a
negotiation of a conference. Let us make it fit; and the way to
make it fit is to phase it in, apply it here, apply it there.
But, as a result you make, in some instances, huge mistakes in
the final determination of policy as a result of the making-it-
fit quotient.
The third one that I really liked is the issue and I will
give you equal time if I am misinterpreting any of these--
regardless of the rules or regardless of the final substantive
outcome of the budget process, enforce it is kind of what I
heard you say. And this should be a role that we do not shrink
from.
The final one is how do you make better choices, and that I
think is the toughest part. I think that is really what this
comes down to. And all of our machinations of trying to come up
with rules or good information, enforcement or whatever, it
still does come down to throwing everything out, is the
Constitution. That is 435 people in the House, 100 in the
Senate, and the President are trying to make choices, pluses
and minuses here and there, and policy determinations, because
the rules other than the Constitution can all be waived, can
all be broken, can all be changed, can all be fashioned in a
way to achieve something that one particular party or partisan
objective wants to achieve.
That is the tough part. There is almost no proposal that I
have come up with or that I have seen that really gets around
that final category, and that is how do we make better choices?
I have heard of a lot of reasons why we failed as a Federal
Government or as a Congress. I have heard everything from C-
SPAN, that I actually, before the discussion came up, wrote
down. I love C-SPAN. If they are carrying us, I am not making
any disparaging remarks because they may change my name under
the title or something like that. It is a great and fantastic
camera on the process. But, as you said, it has definitely
changed the outcome because we are on cameras.
The other ones I have heard are air conditioning and air
travel. As soon as air conditioning was created, the fiscal
year was expanded, and we were here longer into the summer. And
the other one is air travel because it allowed us to go home as
opposed to staying out here and having the conversations and
the discourse.
So now I add to that the Richard Kogan--and that is the
budget process has now made it more difficult for us. I haven't
heard that one before, but I am going to add that to my arsenal
of reasons why we are melting down.
But I am not sure I agree on the partisanship. I don't
know, this is something I have got to think about. I have been
thinking about it the entire time: Does the budget actually
make it harder for us to come together or not? And I guess I am
leaning in favor of your comments that it actually does.
I think--Mr. Edwards is no longer here. Otherwise, I would
say this to him, I think if he and I were locked in a room, 90
percent of the discussion would be over in the first 5 minutes.
We could come to--and I think that is true with Mr. Spratt and
with many of us, that on any good day, 60, 70, 80 percent of
the discussion about our budget priorities and choices could
probably be made fairly quickly.
All you have to do is watch the votes on the floor, and
watch the appropriation bills. We put in one of the toughest
budgets on discretionary spending in over a generation, and
they are passing on the floor with flying colors. Yet during
the budget discussion there was gnashing of teeth and wringing
of hands on all sides about how the cuts weren't good enough or
the cuts were too much. But now they are passing with 380 votes
to whoever is left to wave the flag against them, it is
amazing. Meaning to me that, as I say, 60, 70, 80 percent of
the discussion is done and could be done in a nonpartisan or
bipartisan way. It is those last little nuances that are the
toughest parts.
I don't know how you improve that, as I say, that fourth
category or how you could do it with a Budget Committee. I
don't think getting rid of the committee is the way to go. I
know you were giving that out as kind of a devil's advocate or
at least to be provocative. And it is a fair discussion,
because since it has been only in its inception since 1974, it
is always fair to review it.
But I do think you have given us some good suggestions
today as ways to move forward. I wish I could tell you that I
see a path toward making the reforms. I tend to agree with you
that if it is not done in a bipartisan way that it is going to
be very difficult to sustain them and have any kind of
predictability long term.
I am less worried about the partisanship than I am the turf
battles in achieving reform for the budget process, meaning I
am more concerned about what the Rules Committee's objectives
are or the Appropriations Committee or the Ways and Means
Committee or the other authorizing committees. I am probably
more concerned about those turf battles--some are partisan,
some are bipartisan turf battles--as I am the purely Democrat
versus Republican turf battles that go on around here. At least
in my judgment I have seen more difficulty in reaching
agreement as a result of those kind of jurisdictional turfs
than I have seen with purely partisan philosophical
discussions.
So much of your testimony was--I don't want to make it
sound like, therefore, it is irrelevant, but you have repeated
yourself often today. You have often repeated yourself over the
years. As Mr. Frenzel has said, this is--to some extent, he has
been here and done this many times. But we appreciate it,
because we do have a lot of new members, and we have a lot of
good staff. It is good to hear that historical perspective. It
is good for me, and I have heard it probably as much as any
member on the committee. So I greatly enjoyed and appreciated
your testimony today.
I will give you each a last word of summation if you would
like, either based on what I have said or any other comments. I
guess let me ask it in the way of a question. This may be
unfair, but since you have talked about it so much, I am going
to give each of you a magic wand. You have got one proposal
that you would give me as your advice of the one thing we could
do. I know it is an unfair question, but I am going to ask it
anyway because it is my prerogative. Kind of the one silver
bullet, if you will, of the thing you would change. Would it be
the baseline? Would it be PAYGO and caps? Would it be do away
with the committee and throw it all out and start over? Is
there one proposal that you could advise us as kind of the bane
or the frustration or the one thing that you would hope we
would definitely add as part of any proposal as we go forward?
Let me start with Richard, and we will go across and
opposite of the way you testified today.
Mr. Kogan. Thank you, Mr. Chairman.
I think I would start with my last proposal, which is to
limit reconciliation to achieving deficit reduction. Maybe put
a minimum deficit reduction target in the Budget Act. You know,
a half a percent of GDP or a quarter a percent of GDP by the
fifth year or something like that and say you don't do a
reconciliation bill unless that bill achieves that much deficit
reduction.
Chairman Nussle. On that point, since you have made it now
twice, isn't that different than--and I don't mean this as a
challenge, I am really not trying to say it that way. Isn't
that a different philosophical position than many Democrats
held in the 1980s where deficit targets were--and maybe they
are just different in your mind because you are focusing them
on reconciliation. But my understanding is that they are at
least similar enough that it is kind of a little bit of a
change in philosophy from the late 1980s?
Mr. Kogan. I think it is more a change in philosophy from
the early 1980s, but I think that is a valid point you make. In
the early 1980s, particularly, some Democratic leaders--I am
thinking specifically of Jim Wright--definitely wanted to use
the budget process to achieve a major expansion of what he
called anti-recession public works projects during the residual
effects of the early 1980s recession. And he also wanted to use
the budget process as a way of getting the Appropriations
Committee to actually change the priorities in appropriations
bills.
When the budget resolution took money from one function and
put it in another, which is, of course, nonbinding, he said, it
may be nonbinding, but this is a clear statement of what we
want. We want more in the Labor-HHS Appropriations bill
specifically for education programs but also for certain other
antipoverty programs. And I on behalf of the leadership am
going to you, the chairman of the Appropriations Committee, and
am going to tell you you are not doing your job if you just do
the appropriations bills the way you want to do them. You have
to do them the way we, in writing the budget resolution, want
to do them.
This wasn't really a reconciliation process, but
thematically it is similar to what you are talking about, using
the power of the Budget Committee and the budget rules to try
to accomplish goals that, in this case, both accomplished
spending increases.
In actual fact, in the 1980s, reconciliation itself was
only used for net spending cuts and net tax increases. So it
was only used for net deficit reduction. Sometimes the amount
of deficit reduction in a reconciliation bill was so little
that the inherent abuse that a reconciliation bill is to the
normal committee process of the House and the entire
legislative process in the Senate, made it sort of not worth
it. Reserve reconciliation for real deficit reduction, and then
do it, is basically my recommendation.
Chairman Nussle. Why is your--and I know you are not a fan
of President Bush, and that is pretty obvious. But why isn't
the thematic deficit target of cutting the deficit in half in 5
years not a deficit target? You know the number, I know the
number, and the American people know the number. The committee
is working toward that number. Why is that not a deficit
target?
Mr. Kogan. That is both a very good question and also a
very clever question. I was talking about deficit reduction,
and I defined it in my own mind, and probably not explicitly
enough in front of the committee, relative to a baseline. You
heard me make an impassioned statement that, by definition,
Congress has to know whether its votes are going to make
something more expensive or less expensive than it would
otherwise be. I want Congress to enact legislation that would
make deficits lower than they would otherwise be.
Under CBO and OMB projections, the deficit is going to fall
in half, more than in half all by itself if you do nothing. My
view is that that is inadequate because that is just a dip
before you get back to the long-run, overarching, unsupportable
difference between our spending commitments and our revenue
levels, and that we have to go beyond a 50-percent drop in the
deficit to help prepare ourselves for the baby boomer
retirement.
It is going beyond that 50-percent drop that I want. I want
to enact legislation that would raise taxes and cut
entitlements so that the deficit would fall faster and further.
Your budget and the President's budget actually retard the rate
at which the deficit would otherwise fall. From my perspective,
they increase deficits because your tax cuts are larger than
your entitlement cuts, even though the deficit will, after they
are enacted, if projections are accurate, probably fall in half
over that period. So we were talking in some senses past each
other.
Chairman Nussle. Professor Schick.
Mr. Schick. Yes. First, let me endorse what Mr. Kogan said
and offer an explanation. Congress does not need special
procedures for increasing the deficit, for raising spending, or
cutting taxes. The House and Senate can always marshal a
majority for them. It is much harder to cut spending or to
raise taxes. Therefore, I would reserve reconciliation for
those purposes and impose a Byrd-type rule in the House. I
think both Chambers would be advantaged.
But my silver bullet would be to combine aspects of Gramm-
Rudman and BEA, to create a budget envelope or fiscal
constraint for Congress, and here is why. If these rules are in
place, it is easier for politicians to make the tough choices.
What you don't want a budget process to do is to complicate the
life of someone who has to stand before voters and make hard
decisions.
Chairman Nussle. Something else to blame: I had to do it
because of this rule. Even though you know we can change it.
That is what you are saying, use it as the bad cop.
Mr. Schick. Preset rules which apply both to the President
and to Congress would make it easier to discipline the deficit.
As I said earlier, I don't believe Bill Clinton would have
behaved the way he did absent those rules.
Chairman Nussle. I am not sure he would have behaved that
way without a Republican majority, either.
Mr. Schick. One final point, back to reconciliation. I
recall that, in 1993, Democrats in Congress toyed with the idea
of making the President's health care proposal into a
reconciliation bill. If they had done so, his health reform
would have become law. We would have it on the books. Of
course, health reform did not contribute to deficit reduction,
but the President would have had a free path to employ it in
Congress.
For some reason, the leadership in Congress decided that it
was wrong to use reconciliation for this purpose. That
demonstrated that forbearance is the most responsible weapon of
a majority party.
Chairman Nussle. Mr. Frenzel.
Mr. Frenzel. Mr. Chairman, thank you for having us. I
suppose all of us who have been here before understand you are
sort of in the process of singing your swan song, and may I say
that I certainly have appreciated your work on the Budget
Committee. It is a miserable, frustrating job and one--when you
assume the gavel, you only then realize how limited the powers
of the Budget Committee chairman are. But you have conducted
the office with great skill and grace, and I thank you for
being willing to do it.
With respect to your queries, as you went through the list
of things that you thought you picked out of our discussion, I
would like to concentrate on the third one, which is enforcing
the choices. I think it is really important that the Congress,
having passed a budget, tries to keep its promises to itself.
The budget is nothing without the enforcement powers, and it is
so easy for Congress to lay things aside. A simple little
phrase like ``notwithstanding any other provisions of law''
sort of unlocks great doors to glory for spenders and tax
cutters alike. So I hope that that is something the committee
will concentrate on.
If I had one thing to do, I might choose what Allen did.
But since I think ultimately those are going to happen anyway,
I would like to get back to the thought about the baseline.
I somehow would like to release the Congress from the power
of that baseline and put the Congress back in charge of
priorities. Maybe you just start out by dumping the
demographics and the COLAs and just start with last year, and
even that would be a huge improvement. Again, marginal but
important. So I would suggest that is a way the committee might
look at the problem.
Again, I want to thank you and the members of the committee
for an enjoyable morning.
Chairman Nussle. I thank our witnesses and the members who
have participated today.
Mr. Frenzel. Oh, and by the way, I should have wished you
good luck in your next----
Chairman Nussle. That is nice of you but completely out of
order. There is no swan song yet, we have got work to do, and I
appreciate your advice on this work.
I have tried to move legislation on reforming the budget
process a number of years. This year may be no different than
that. We will hopefully have the opportunity to make an
attempt, if nothing else. But your ideas and good counsel has
been appreciated today and will be appreciated in ongoing
fashion. We realize--the people who are probably left in the
room more than any others--how important this process is and
how relevant it is to us. I think, in particular, Professor
Schick has been so significant to the last 30 years of
Washington, the Congress, and the Federal Government, and
sometimes in a good way, sometimes in maybe not quite so
positive way. But it has certainly been one of the most
significant--and if you don't understand it, if you don't
follow it, if you are not a student of it, you may miss some of
the relevance of what is happening in Washington at the time.
So I appreciate that.
I think you are exactly right, and it is why this hearing
is so important. But it may also be the least glamorous hearing
on the Hill, but I appreciate the testimony you have provided
us today.
Unless there is anything else to come before the committee,
without objection, we will stand adjourned.
[Whereupon, at 12:50 p.m., the committee was adjourned.]