[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
KEY BUDGET PROCESS REFORMS
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, DC, MARCH 16, 2006
__________
Serial No. 109-17
__________
Printed for the use of the Committee on the Budget
Available on the Internet: http://www.access.gpo.gov/congress/house/
house04.html
______
U.S. GOVERNMENT PRINTING OFFICE
27-128 WASHINGTON : 2006
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
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
DANIEL E. LUNGREN, California ARTUR DAVIS, Alabama
PETE SESSIONS, Texas WILLIAM J. JEFFERSON, Louisiana
PAUL RYAN, Wisconsin THOMAS H. ALLEN, Maine
MICHAEL K. SIMPSON, Idaho ED CASE, Hawaii
JEB BRADLEY, New Hampshire CYNTHIA McKINNEY, Georgia
PATRICK T. McHENRY, North Carolina HENRY CUELLAR, Texas
CONNIE MACK, Florida ALLYSON Y. SCHWARTZ, Pennsylvania
K. MICHAEL CONAWAY, Texas4 RON KIND, Wisconsin
CHRIS CHOCOLA, Indiana
JOHN CAMPBELL, California
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, March 16, 2006................... 1
Statement of:
Hon. Don Nickles, former chairman, Committee on Budget,
assistant Republican leader, U.S. Senate................... 4
Hon. Charles W. Stenholm, former ranking member, Committee on
Budget, U.S. House of Representatives...................... 10
Hon. William E. ``Bill'' Frenzel, guest scholar, Brookings
Institution; former Member of Congress, and former ranking
member of House Budget Committee........................... 18
Prepared statement of:
Mr. Nickles.................................................. 7
Mr. Stenholm................................................. 12
Mr. Frenzel.................................................. 19
KEY BUDGET PROCESS REFORMS
----------
THURSDAY, MARCH 16, 2006
House of Representatives,
Committee on the Budget,
Washington, DC.
The committee met, pursuant to call, at 10:00 a.m., in room
210, Cannon House Office Building, Hon. Jim Ryun presiding.
Members present: Representatives Ryun, Wicker, Campbell,
Ryan, Chocola, Simpson, Spratt, Edwards, Baird, Cuellar, and
Cooper.
Mr. Ryun. Good morning. And let me welcome everybody to the
hearing this morning.
It is my understanding that we are going to have a series
of votes on the floor this morning. Once votes commence on the
floor, the hearing will stand adjourned.
I ask unanimous consent that members who are unable to
question the witnesses prior to the hearing's adjournment be
allowed 7 days to submit questions for witnesses.
Without objection, so ordered.
Welcome, everyone, to today's hearing on budget process
reform. I am pleased to have with us several experts to
participate in our discussion today, including, first, former
Senator and assistant Republican leader and former chairman of
the Senate Budget Committee, Don Nickles, welcome this morning,
one of the most knowledgeable people out there on this issue as
well as a steadfast leader on spending control in Congress.
Former Congressman and former Budget Committee ranking
member back when Republicans were in the minority, Bill
Frenzel, is joining us this morning as well, well known for his
institutional knowledge of the budget process in terms of
history and context as well as policy and politics. Bill,
welcome back today.
We also have with us former Congressman Charlie Stenholm,
who in his time here was co-chair of the Blue Dogs, and
actively pushed for bipartisan legislation on budget process
reform. He is currently serving on the Board of Directors of
both the Concord Coalition and the Committee for Responsible
Federal Budget. Welcome all.
Last June, this committee heard a hearing to examine
congressional budget practices. That hearing served as a useful
first step in reflecting on how budget process reform works.
Today's hearing will draw on what we have learned from the
hearing as well as focus on several key areas for potential
reform, emergencies, line-item veto, sunset commission, and
finally earmark reform.
I will take a moment to provide a brief overview of the
budget process. It may be redundant for those of you who have
served for years in this Congress, but I believe it is useful
to briefly reflect on the current process and why we have it
and why it needs to be here 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 the President's spending requests. It empowered
Congress to set its own priorities, whether or not they agreed
with the President, and to set in motion the policy choices
that need to follow.
It gave Congress the means to determine spending by setting
a limit on total spending, by directing spending to what they
had to determine the Nation's most important priorities, and by
the power to enforce agreed-upon spending limits through points
of order.
In short, the Budget Act empowered Congress to control the
purse by determining its own priorities and policies and
establish a systematic means to organize its decisions, set
policy goals, and combine all of this into one blueprint, the
budget, to guide Congress through not only the coming fiscal
year but into future.
Take this year's for example. We had an occasion to use the
emergency designation for certain spending initiatives,
specifically relief to victims in the 2005 Gulf Coast
hurricanes and the War on Iraq.
The Budget Act defines when it is appropriate to use such
an emergency designation and gives the authority to do so.
Clearly such natural disasters as last year's devastating
hurricanes meet the emergency's definition as it was intended.
I think most would agree, however, that not every item
Congress has categorized as emergency necessarily meets a
reasonable definition as such. And if this designation is to
have the intended effect of serving as a budget control, we
have got to work on doing it to determine how it can be better
used.
On the issue of earmarks, while it may be easy to support
abolishing earmarks on a conceptual level, it has proven much
harder to do so in practice. It is my hope that our witnesses
can lend some insight on how to best address this particular
issue.
The other two areas of reform that will be addressed today
are the line-item veto and sunset commissions. On both of these
issues, there is ongoing discussion as to whether either would
be a help or a hindrance to Congress' efforts to conduct their
business and control spending.
I look forward to hearing the thoughts of our witness on
both of these issues.
Once again, the purpose of today's hearing is to take a
focused look on certain key areas of budget process reform,
specifically emergencies, earmarks, line-item veto, and sunset
commission.
While I imagine the members may have other constructive
ideas for budget process reform, I would ask that we do our
best to stay focused on these particular issues today.
With that in mind, I turn to Mr. Baird for opening comments
he might have. Mr. Baird.
Mr. Baird. I thank my good friend and I want to thank our
witnesses, Senator Nickles, Representative Frenzel, and
Representative Stenholm. It is great to see you again. Thank
you for your leadership on this issue for many, many years. I
think if we had been listening to some of your ideas over the
years, we might not be in the pickle we are in today.
Today's hearing comes in the midst of a congressional
consideration of the President's budget and the congressional
budget resolution. Unfortunately, the budgets that we have seen
thus far, the President's budget and the resolution that the
Senate is considering, make the deficit worse, not better.
Given these budgets and the Republican budgets that we have
seen over the last 5 years, which includes some of the largest
deficits in the history of this Nation, it is disappointing but
not surprising that yet another debt ceiling increase is on the
Congressional agenda this week.
Unfortunately, however, changes to the budget process,
which are the topic of today's hearing, are unlikely to provide
a substitute for the willingness to make the hard choices
necessary to craft a budget that returns to balance.
In fact, most of the process changes advocated in recent
years by the administration would have at best a minor impact
on the deficit.
There is, however, one budget process change that would
likely have a substantially positive impact. Unfortunately, our
friends on the other side of the aisle have consistently
opposed renewing it. I am referring here to the effective two-
sided PAYGO rule, the PAYGO budget rules in place during the
1990s.
There is a widespread mainstream consensus including Alan
Greenspan, the Committee for Responsible Federal Budget, and
the Concord Coalition in favor of PAYGO which, along with
discretionary spending caps, clearly contributed to the fiscal
progress made during the 1990s.
Unfortunately, the majority party allowed PAYGO to expire
in 2002 and the administration and congressional Republicans
have since advocated applying PAYGO only to mandatory spending
and not the tax cuts. That leaves a huge gap in the budget
enforcement system, allowing administration proposals to drive
the deficit much higher over the next 10 years.
Democrats support the balance and effective PAYGO system
used in the 1990s. Reestablishment of two-sided PAYGO rules
would be a good step toward putting the budget back on the
right track. At the same time, it is important to keep in mind
that the most important step would be for the President to
propose and Congress to adopt budgets that actually return to
balance.
House Democrats have done this in recent years.
Unfortunately, the administration and congressional Republicans
have not. Perhaps we need to return to the model of 1997 when
we saw the benefits of having everyone at the table and putting
everything on the table.
Republicans and Democrats, the White House, and the
Congress worked together, were able to produce a plan to bring
the budget back to balance. Unfortunately, that kind of
bipartisan approach is not one that the current administration
has undertaken.
We are left then with a series of budgets that persist in
making the deficit worse and do nothing to bring the budget
back to balance. It is always helpful to discuss how the budget
process might be structured more beneficially, and I look
forward to today's testimony.
I would like to conclude with a brief story. Last month, I
was at a high school and one of the young people asked me a
little bit about the deficit. And I explained how the deficit
works and the debt works. And he asked me how much the debt
was. And I said, well, the debt is about $8.2 trillion. And the
young person's jaw dropped and his eyes got wide and he said,
well, who is going to pay for that. And I pointed to him and he
did this. He just put his hands on his head and dropped his
head to his desk. And the other kids sat that there shaking
their heads.
No responsible adult would pass on physical pain to their
children rather than taking the physical pain themselves. But
this Congress repeatedly passes fiscal pain on to our children
rather than enduring it ourselves and it is time we stop. And I
look forward to your suggestions for how we do that. Thank you.
Mr. Ryun. We will begin with our first witness this
morning, Former Senator Don Nickles.
STATEMENT OF DON NICKLES, FORMER CHAIRMAN, COMMITTEE ON BUDGET,
ASSISTANT REPUBLICAN LEADER, U.S. SENATE
Mr. Nickles. Thank you very much, Mr. Chairman.
I have had the pleasure of knowing and working with Bill
Frenzel and Charlie Stenholm for a long time and I respect them
greatly.
And let me just say, although Chairman Nussle is not here,
I had the pleasure of working with him for years. He is an
outstanding Chairman and outstanding Congressman and
Representative of the House. He always represented the House
very well, and it was my pleasure to work with him. I think we
had some successes and maybe some failures too, and hopefully
we can talk about some of those.
I appreciate some of the comments that Representative Baird
just mentioned. I happen to be one who thinks you should put
everything on the table.
Mr. Chairman, I have an extensive statement. We do not have
time for that, so I will ask you to insert that in the record.
Mr. Ryun. Without objection.
Mr. Nickles. And just make a few comments if I might.
One, a lot of people like to say the budget process is
broken. It is not broken. It works. The budget only does about
three things and we make it a lot more complicated than we need
to.
The budget sets discretionary caps. And, Representative
Baird, that is the most important thing it does on
discretionary spending. It puts a cap. That is more important
than PAYGO. It is more important than anything else you do. It
is vastly more important than earmarking. If your goal or
objective in earmarking reform is to cut spending, caps are a
hundred times more important. So I just want to make that
perfectly clear.
Earmarks have gotten way out of hand. I am embarrassed. I
used to be on the Appropriations Committee decades ago. And
there were earmarks then, but the multitude of earmarks has
exploded. It is way out of hand, and it needs discipline.
But you are not talking about saving money with earmark
reform. Saving money will be done by caps, enforceable caps,
and the will to enforce the caps. And it is easy not to enforce
them. It is easy to let things go by and maybe not raise a
budget point of order or so on. But if you have enforceable
caps on discretionary spending, you will save a whole lot more
than you will in any type of earmark reform.
And I do not mind you having earmark reform, the more power
to you. I would think good earmark reform would just be telling
Members of Congress ``do not ask for so many.'' Ask for a
couple. Ask for a few. But do not get carried away. And it has
certainly gotten carried away and it is embarrassing.
But if you eliminate some earmarks and you still have the
same cap, you are going to spend the same amount of money, so
you really did not save any money. So you need the caps. The
caps are the most important thing.
Emergency spending has gotten out of hand. One of the
things in the last budgets that I was responsible for in 2003
and 2004 as far as the Senate is concerned, was the War on Iraq
and Afghanistan, which we always classified as an emergency. I
can see maybe the first year or two being an emergency, but it
really should be put in the budget in the future. And I did not
do that in my budgets, my fault, I probably should have done
it, but we did not.
Emergency designations are also abused. I mean, this
Congress this year already passed LIHEAP as an emergency.
LIHEAP is not an emergency in my opinion. I did pass a rule
that requires emergency spending to have 60 votes in the
Senate. And most of my remarks frankly will relate to the
Senate because our rules are a little bit different.
That was a good thing to do, but you still have to enforce
it. It was not enforced effectively this year, because somebody
made the budget point of order and it was not sustained. I
raised a lot of budget points of order in the Senate.
Under the FY 2004 budget that Congressman Nussle and I were
primarily responsible for, Senators raised 82 budget points of
order and all but four were sustained. And we saved about $1.7
trillion in spending.
I also want to address PAYGO because a lot of people make a
big deal out of it, but they, in my opinion, do not totally
understand it. At least in the Senate, there is a multitude of
budget points of order. Of those 82 budget points of order,
only three were PAYGO points of order. PAYGO has been
misconstrued as a bigger issue than it really is.
Some people say, well, from 1990 to 2002, PAYGO was really
a godsend, but it was not. Not one sequester was ever enacted
because of PAYGO, not one. We did wipe off the books $736
billion worth of PAYGO balances that increased deficits. That
was just wiped off at the end of the year. A lot of people
don't know that. But each year one of the last Appropriation
bills just wiped that out, cleaned the slate, more or less, to
avoid the sequester.
Now it may have had a positive impact by giving Members a
reason not to offer an amendment that would violate PAYGO
knowing it might trigger a sequester. But in reality, lots of
amendments were offered and passed that became law that
violated PAYGO that were just wiped off the slate at the end of
the year. And as I said, not one enforcement action was ever
done in that period of time.
PAYGO in the present situation, in my opinion, is
unbalanced to the disadvantage of those people who want to
extend present law on taxes. Spending under the baseline rules
is assumed to continue even if the program expires, however
this is not so in taxes. Congressman Stenholm and I were
talking about the Farm Bill. The Farm Bill expires the end of
next year, but it is assumed to continue. So under PAYGO, you
do not have to come up with new money to pay for a new Farm
Bill. A little editorial comment, I think we spend too much
money on the Farm Bill.
But on taxes, we have a 15-percent tax on dividends and
capital gains that we passed in 2003 that I was the principal
sponsor of in the Senate. That tax cut happened because this
body and the Senate passed a Budget Resolution that allowed it
to happen. Those tax cuts expire at the end of 2008.
Well, under the current baseline rules, to extend those tax
cuts for 2009 and 2010, you would have to come up with new
revenue to pay for them.
Further, these tax cuts are considered under obscene
scoring provisions that do not take into account the real
economic impact of dynamic scoring, even though some people say
we have it. The scorekeepers underestimated substantially what
we did in 2003 with cap gains because it raised about 50
percent more money than they estimated it would.
And so my point is PAYGO really makes it difficult to
extend cap gains and dividends, but it is not difficult to
extend the Farm Bill or extend any other spending program. And
I find that inequitable--that is not right.
Now, you might be able to figure out a way to solve this
problem, but it will have to be bipartisan. One of the
important things and one of the things I love about Bill
Frenzel and Charlie Stenholm is their bipartisanship, and you
cannot make budget reform unless you do it bipartisan.
Congress is considering several things in budget reform.
Whether you are talking earmarks or line-item veto or changing
other rules, I encourage you to do it and I encourage you to do
it in a bipartisan way. I encourage you to do bipartisan
budgets.
I was unsuccessful in getting a bipartisan budget--well, I
take it back because Zell Miller, who is a very courageous
Democrat from Georgia, did support our budgets the last couple
years. So we had bipartisan budgets, but we only had one
Democrat.
I wanted to have a bipartisan budget in the Budget
Committee. But due to the makeup of the committee or whatever,
I was not successful. Maybe again I failed in that effort, but
I tried. And I would encourage you all to try. I know with the
makeup of Congress and the climate and so on, it is difficult
to do. But if you are going to have lasting, long-term, real
budget reform, it needs to be bipartisan for it to really be
successful.
And then just a comment on a couple of these rules. You
mentioned line-item veto. I supported it when it was previously
enacted. We gave it to the Clinton administration. The Supreme
Court declared it unconstitutional. Now different people are
coming back and saying let us do it a little differently with
enhanced rescission where Congress has a second look at the
vetoed items. Fine. You will not save a lot of money that way,
but it is good policy.
It is kind of like earmark reform in that respect. If you
want to do earmark reform, great, but really just have
discipline. I would hope the Appropriation Committee members
would just limit the number of earmarks, people restrain
themselves because it has been embarrassing. But, again, I do
not think it will really save a whole lot of money.
The most important thing is budget caps. Budget caps work.
Even in 2004 when we did not pass a budget, a Congressional
Budget Resolution, we passed a cap on discretionary spending. I
put it in the FY05 DOD Appropriation Bill and we had
enforceable caps.
And guess what? That year we stayed on the budget number.
We stayed on our discretionary number and we made budget points
of order to save money. And we saved billions and billions of
dollars because that was the most important. That was how we
controlled discretionary spending.
So I would just encourage you, when you are putting
together a budget, you have discretionary caps, you have
entitlement spending, and you have how much money you are going
to tax. And all three of those are important. That is what this
Committee is about. That is what governing is about. And that
is what the Budget Committee does.
So, Mr. Chairman, thank you very much for allowing me to
join you today.
Mr. Ryun. Thank you for your comments.
[The prepared statement of Don Nickles follows:]
Prepared Statement of Hon. Don Nickles, Former Chairman, Committee on
Budget, Assistant Republican Leader, U.S. Senate
INTRODUCTION
Chairman Nussle, Ranking Member Spratt, and distinguished members
of the House Budget Committee. Thank you for inviting me to join you
today to discuss proposals to improve the Federal budget process.
In 1980 I was elected to the seat held by Senator Henry Bellmon
upon his retirement. Senator Bellmon was a leader in creating the
modern Federal budget process and the budget committees, and I was
proud to serve many years on the Senate Budget Committee. I am
particularly proud of my final 2 years in the Senate when I had the
privilege to chair the committee, where I enjoyed working with you,
Chairman Nussle, and your staff on two budget resolutions.
We dealt with some very difficult issues those 2 years; some
successfully and some not. However our efforts in 2003 resulted in a
budget and a tax bill which I believe contributed substantially to the
growth and vitality our economy is enjoying today. That budget
resolution, and the tax reconciliation bill which accelerated tax
relief and reduced capital gains and dividend taxes, passed the Senate
only by the affirmative vote of the Vice President breaking the tie.
That was indeed a close one, but well worth the effort.
Passing a budget is hard work, and it should be since it defines
the priorities of the Congress. However it is also one of the most
fundamental responsibilities of the Congress to pass a budget and to
live by it.
Tough budget enforcement is very important. When I chaired the
Senate Budget Committee in the 108th Congress, there were 82 points of
order raised to enforce the budget. I am pleased to say that only 4 of
those points of order were waived, a 95 percent success rate. All
together, those points of order saved $1.7 trillion in deficit
spending.
Even in 2004 when the House and Senate did not agree on a budget
resolution, we did successfully impose a spending cap/allocation on the
appropriations bills for that year in the defense bill passed just
before the August recess. When the Senate considered the Homeland
Security appropriations bill the week following the recess, 10
different amendments which would have increased spending by billions of
dollars were defeated thanks to that spending allocation. Budgets do
make a difference.
It is important to note that in the evolution of the budget
process, almost every major rewrite has been bipartisan in nature. From
Gramm-Rudman-Hollings which created the concepts of deficit targets and
sequesters, to the Andrews Air Force budget agreement in 1990 which
created discretionary spending caps and pay-as-you-go; these efforts
were notable for their bipartisanship. Since 1990, Congress has
extended some budget enforcement, allowed some to expire, and tinkered
around the edges, but the main elements of the process have been
essentially unchanged. Real, lasting reform of the budget process will
require both parties to work together.
I will comment briefly on some of the budget process proposals
currently under consideration. However I want to begin by emphasizing
that the budget process can never be a substitute for political will.
This committee has been hearing testimony for years about the fiscal
crisis presented by the retiring baby-boom generation. That crisis is
no longer on the horizon * * * it is here now * * * and there is no
budget process you can devise to replace the difficult political effort
that will be required to address this problem.
BUDGET RESOLUTION REFORMS
The annual budget resolution and the process to enact it could be
improved in a number of both technical and significant ways.
Many have suggested biennial budgeting, which my former colleague
Senator Pete Domenici has long advocated. Members may not recognize it,
but Congress has actually lived with biennial budgeting since 2001.
Both the 107th and 108th Congresses enacted budget resolutions for the
first year of the session (2001 and 2003), and then failed to agree on
a budget resolution for the second year of the session (2002 and 2004).
I hope for the sake of Chairman Nussle and Chairman Gregg that the
109th Congress will not suffer the same fate, but perhaps history is
trying to tell us something.
Others have suggested making the budget a joint resolution that
would be signed by the President. While I have some concern that this
would further slow the budget process, and increase the likelihood of
stalemate, I do believe that having the legislative and executive
branches on the same page earlier in the year could be valuable.
Finally, I would recommend that members consider other more
technical changes to make the budget resolution, and the budget
committees, more effective and more relevant.
Involve Committees in the Budget Process: Currently,
authorizing and appropriations committees are directed to submit their
``views and estimates'' to the budget committees prior to consideration
of the budget resolution. Unfortunately, few committees take this
process seriously. I believe putting the committees on record early in
the process would improve budget enforcement, so I would recommend that
committees be required to vote to report their ``views and estimates'',
and those views should include specific recommendations for increases
or decreases in their committee allocation.
Revise Contents of the Budget Resolution: Currently,
committee allocations are the focus of budget enforcement, but almost
no members (and few staff outside of the budget committees) ever see
the committee allocations because they are only published in the
conference report's statement of managers. The budget resolution
amendment process and debate would be much more relevant and serious if
members had to take money away from one committee's allocation to give
it to another committee. The major functional budget categories
currently detailed in the budget resolution text could be replaced with
specific committee allocations for budget authority, outlays, contract
authority, and revenues.
LINE-ITEM VETO/EXPEDITED RESCISSION
I have long been a supporter of both the Constitutional line-item
veto and the various iterations of enhanced or expedited rescission
authority. I am pleased that President Bush has initiated a renewed
push to enact expedited rescission authority, and I encourage this
committee to give it favorable consideration.
Although called the ``Legislative Line-Item Veto Act'', the
President's proposal is basically just an expedited variation of the
current rescission process. Essentially, the President will be allowed
to send certain items of discretionary spending, mandatory spending, or
targeted tax benefits back to Congress for a second vote. These
proposed rescissions will receive privileged consideration in both the
House and the Senate, but ultimately Congress retains the final
decision, which should allow this authority to pass Constitutional
muster.
I should note, however, that although these proposals hold some
promise to reduce overall spending, members should not expect any
President to balance the budget with this new authority.
EARMARK REFORM
Earmark reform is an easy issue to advocate generally, but much
more difficult to implement specifically. I served several years on the
Senate Appropriations Committee, including as ranking member on the
Interior Appropriations Subcommittee which receives a host of earmark
requests. I encourage you to legislate carefully in this area, and
consider the following issues.
Disclosure: I rarely ever saw a successful earmark that
wasn't accompanied by a press release from its advocate, so some would
say disclosure already exists. However, a more formal disclosure
process could be healthy, and may help eliminate projects which truly
can't stand the light of day.
Report Language: Some proposals have suggested that
Federal agencies disregard earmarks in report language or require all
projects be included in bill language. I am not sure this would change
the dynamics of earmarks much, but it would certainly make
appropriations bills much larger and more complex.
Power of the Purse: The legislative branch should always
consider very carefully any significant limitations on their ability to
manage and control executive activities. What may seem to make sense
now could have implications to the balance of power that may not even
have been contemplated.
BUDGETING FOR EMERGENCIES
Congress is frequently required to respond to emergencies ranging
from disaster recovery to military confrontation. Unfortunately, we
have failed to develop an adequate way to budget for and control this
spending. When the discretionary spending caps were created in 1990,
the concept of the ``emergency designation'' was created to give
Congress a safety-valve to exceed the spending caps.
Unfortunately, the emergency designation became a simple way for
Congress to avoid the caps for spending which was not really an
emergency. I am proud to have worked with my former colleague Senator
Phil Gramm to create a supermajority hurdle for the use of the
emergency designation in the Senate which is still effective today.
The President has proposed refining the definition of an emergency
to limit it to a necessary expenditure that is sudden, urgent,
unforeseen, and not permanent. While I agree a tighter definition would
be helpful, I am disappointed that the President has continued to
request all funding for the War on Terror as an emergency. Congress has
spent some $323 billion in this manner since 2001, and while I
certainly hope this spending is ``not permanent'', I cannot agree that
it is sudden or unforeseen.
Senate Budget Chairman Judd Gregg has attempted in his latest
budget resolution to limit emergency spending for fiscal year 2007 to
$90 billion. While I congratulate this attempt to limit the global
scope of emergency spending, I am somewhat concerned that budgeting a
specific amount for emergencies will almost guarantee that it will be
spent regardless of need.
SUNSET COMMISSION
The President and many Members of Congress have proposed various
proposals to require periodic reviews and reauthorization of Federal
programs. The President's proposal would create a seven-member,
bipartisan Sunset Commission that would assess the performance of
agencies and programs on a 10-year schedule and recommend reforms or
termination.
I have long been frustrated by Congress continued fascination with
creating more and more new programs, and believe a Sunset Commission
could help Congress with its oversight responsibilities.
PAY-AS-YOU-GO
Finally, I would like to mention a budget process issue which seems
to dominate much of the debate * * * pay-as-you-go.
The ongoing effort to re-impose a pay-as-you-go enforcement regime
is hailed by many budget pundits as a return to the budget discipline
of the past. The truth is that the old pay-as-you-go rules were never
an effective deficit deterrent, and many of their current proponents
simply have an anti-tax-cut agenda unrelated to deficit reduction.
From 1990 to 2002, not a single sequester enforcement action was
ever invoked under pay-as-you-go to ``pay'' for the spending and tax
cuts Congress added to the deficit. In fact, over $736 billion was
wiped-off the pay-go scorecard at the end of each year to prevent such
enforcement from taking place.
Few realize that pay-as-you-go is largely duplicative of the Budget
Act's variety of enforcement tools. Of the 82 points of order raised in
the Senate in the 108th Congress, only 3 were pay-as-you-go. The large
majority of the points were either related to committee allocations,
the discretionary spending caps, or emergency spending designations.
The real goal of many pay-as-you-go supporters is to stop the
extension of current-law tax relief that expires in 2010. Since the
siren-song of higher spending has always been more irresistible than
the allure of tax cuts, they know that they can easily clear the
procedural hurdle to expand government spending while retaining immense
leverage over the content and duration of future tax relief.
CONCLUSION
Again, thank you Mr. Chairman and the committee for the opportunity
to discuss these issues.
Mr. Ryun. I would ask our witnesses perhaps if they are
going to submit their comments for the record, you know, we
will give unanimous consent on that, but make your remarks
somewhat brief because we do have members that would like to
try and ask a few questions. And we are expecting some votes on
the floor.
Now, we are going to change the order just slightly and ask
that Congressman Stenholm would go next. Congressman, we
welcome your comments.
STATEMENT OF CHARLES W. STENHOLM, FORMER RANKING MEMBER,
COMMITTEE ON BUDGET, U.S. HOUSE OF REPRESENTATIVES
Mr. Stenholm. Thank you, Mr. Chairman. Delighted to be
here. I wish you would put me on the 5-minute clock, so you can
stop me at that point. I am used to that.
But let me say, I am here, as you mentioned in the
introduction, representing myself this morning. And all the
views you hear are mine and mine alone and would acknowledge
that that contributed to me being here as a former Member. One
of my proudest moments was passing the Balanced Budget
Constitutional Amendment in 1995 in a bipartisan way.
One of the saddest was standing in the back of the Senate
watching it be defeated by one vote. Had it passed, we would
not have been able to enact the budget game plan that we are
now under that has given us the biggest deficits in the history
of our country, but that is hindsight.
I want to commend Democrats and Republicans on this
Committee who have put forward plans, the Blue Dog 12-point
Plan, the Republican Study Committee Plan. Chairman Nussle had
a plan in 1999. You take the best components of each of those
three, work together in a bipartisan way, and you will find a
way to begin dealing with the deficits.
When we talk about budget enforcements, let me just state
the obvious: budget enforcement rules are not a substitute for
making the tough decisions and tough choices that the Congress
has to make. Mr. Simpson and I were talking about that a moment
ago, the frustration that many of you have on this Committee.
But it takes political will.
And as you heard Senator Nickles talking about, the need of
bipartisanship, which has been totally absent in the last 5
years in this body--3 of which I can say personally.
And to my Republican friends, with all due respect, if you
are sincere in what you say--and I believe that you are--you
should not have a problem with reinstating PAYGO for taxes as
well as spending because it would force Congress to actually
make the spending reductions before you have the tax cut. It
seems to be logical. But I do not know why we have had such a
fuss about that. PAYGO is extremely important.
This committee may want to consider changes to the baseline
rules to treat future tax cuts the same as entitlement
legislation. I agree with one exception to what Senator Nickles
was saying. The reason that tax cuts are back on the table is
because Congress chose to use them for budget reduction
purposes, to stay within a budget.
If you would do the same on all of it, put it in the
baseline and have tax cuts considered in the baseline. But we
took the savings from the tax cut in the 2001, 2002 area and
now you have got to pay for them, which is what some folks have
had a difficult time doing.
Statutory limit on discretionary spending, you bet. It
worked. But make them realistic. Make them what you will have,
218 votes, and that requires bipartisanship, so that you will
in fact enforce those limits.
I would quite frankly say you have done a pretty good job
on discretionary spending, so folks have got to quit pointing
to discretionary spending as being the one area that you
balance the budget because everyone knows it is entitlements.
And you have got to look at defense and homeland security in
the same breath or otherwise you cannot possibly cut enough out
of discretionary spending in order to get anywhere close to a
balanced budget.
Increasing the debt limit, oh, that is always a fun one.
You are going to get to do that. Well, you all are probably
going to get to avoid that, but the Senate is going to have to
go on a vote in doing that. But that is wonderful.
But, you know, it should bother folks, the $8.2 trillion
debt. And, you know, all of this hullabaloo about our ports and
who owns the ports, I remember voting with President Reagan
going through the $1 trillion debt limit.
At that time, in 1981, foreigners owned 26 percent of our
debt held by the public. Today, of the $8.2 trillion,
foreigners own 48 percent. And thank goodness they do. And in 5
more years, we will owe $11,500,000,000 plus and foreign
interests will own debt held by the public, almost 60 percent
of that. This ought to bother us, but it does not seem to do it
with the debate going on today.
Eliminating low-priority programs, a great idea. Sunset
legislation, another great idea. Let me propose a novel
thought: after the election of the Congress in November of this
year, take the first 6 months next year doing oversight.
Eliminate all fund-raising activities. Make it totally illegal
to raise one dime for your next election. Spend the first 6
months doing the work you were elected to do. Have oversight.
Deal with the problems of authorizing and trying to make the
match of budgeting.
I think we would be surprised. If you do it in a bipartisan
way, we would actually do something about deficits instead of
just talk about them.
Just moving on, the long-term fiscal problems, let us start
taking a look at the long-term aspect, not just the short term.
Social Security, Medicare, Medicaid, we ignored them last
year. I was sorely disappointed. I thought last year since we
had a President who had had the courage of putting Social
Security on the table and we had bipartisan support for doing
something. And my party was just as guilty as the other party--
let me just say that--of politicizing it. But no more so. But,
boy, we cannot keep postponing the inevitable without paying
some dear prices.
Mr. Ryun. Let me interrupt just a minute, if I may, just so
we can move to let the next member have an opportunity. Thank
you.
[The prepared statement of Charles W. Stenholm follows:]
Prepared Statement of Hon. Charles W. Stenholm, Former Ranking Member,
Committee on Budget, U.S. House of Representatives
Mr. Chairman, Congressman Spratt and Members of the Committee, I am
Charlie Stenholm, former Member of Congress from the 17th District of
Texas and currently a Government Affairs Advisor at Olsson, Frank and
Weeda. I am also a member of the Board of Directors of the Committee
for a Responsible Federal Budget and the Concord Coalition. This
testimony is my own and does not represent any position or conclusion
of any of these organizations.
I am particularly pleased to be on a panel with Bill Frenzel
talking about ways to improve budget discipline. I served with Bill for
many years in Congress, where he was one of the most respected voices
on budget policy. I am now proud to serve with him on the board of the
Committee for a Responsible Federal Budget.
In my 26 years in Congress, I worked with many members on both
sides of the aisle, including several members of this committee,
fighting to leave a better future for our children and grandchildren. I
am very pleased that Members of Congress are taking an active interest
in exploring ways to restore discipline and accountability in the
budget process.
One of my proudest moments in Congress was when the House passed
the Balanced Budget Amendment to the Constitution, and one of my
greatest disappointments was when the Senate fell one vote short of
approving it. A Balanced Budget Constitutional Amendment and strong
budget enforcement rules would protect the rights of future generations
who are not represented in our political system but will bear the
burden of our decisions today. If a Balanced Budget Amendment were
already in the Constitution, we would not have been able to enact the
budget policies advocated by the majority that have resulted in a rapid
increase in our national debt over the last 4 years.
THE OPPORTUNITY FOR BIPARTISANSHIP
I want to commend the Democratic and Republican members of this
committee who have put forward serious proposals to enforce fiscal
discipline. Jeb Hensarling and Paul Ryan have been leaders keeping this
issue on the front burner. On the Democratic side, Jim Cooper and
Dennis Moore have done yeoman's work in putting forward proposals to
establish greater fiscal discipline. While there are some differences
in the approaches, I believe that the authors of these proposals share
a common goal of bringing greater discipline to the budget process. I
believe there is a real opportunity for bipartisan cooperation on
meaningful budget enforcement legislation.
The Blue Dogs' ``Twelve point plan for restoring fiscal sanity''
includes many proposals I advocated while I was in Congress. The Blue
Dog plan is a package of three legislative proposals: A Balanced Budget
Amendment to the Constitution, legislation reinstating and
strengthening statutory budget enforcement rules and changes in the
rules of the House of Representatives to improve the transparency and
accountability of the legislative process.
The Blue Dog twelve point plan is a credible, balanced package that
offers the potential for bipartisan agreement on meaningful reforms.
Many of the provisions in the Blue Dog plan were included in the Family
Budget Protection Act proposed by the conservative Republican Study
Committee or the budget process reform legislation authored by Chairman
Nussle in 1999.
I would encourage the Committee to look at the common elements of
these three plans as well as other budget process changes with
bipartisan support as the starting point for budget process reform and
continue bipartisan discussions to find common ground on other issues.
Serious proposals for reform should not be rejected by one part or the
other simply because they were proposed by a member of the other party.
THE NEED FOR STRONG AND BALANCED BUDGET ENFORCEMENT MECHANISMS
Budget enforcement rules are not a substitute for making the tough
choices that will be necessary to restore fiscal discipline. If there
is not the political will in Congress to maintain fiscal discipline,
any budget process rule or statutory enforcement mechanism can be
evaded in order to enact politically popular legislation that would
increase the deficit.
The value of budget enforcement rules is to establish the
presumption in favor of fiscal discipline and placing greater
accountability for actions that undermine fiscal discipline. Budget
enforcement rules can raise a red flag for legislation that would
increase the deficit and hold all of us accountable for our decisions.
If it is the will of the majority to pass legislation that would make
the budget situation worse, Congress should be forced to accept
responsibility for doing so.
If we are truly serious about restoring fiscal discipline, budget
rules must apply to all parts of the budget, both spending and
revenues. All parts of the budget must be on the table. Everyone needs
to be pulling--we can't do it if some folks are riding. It is
irresponsible and politically unrealistic to propose budget rules that
apply to one part of the budget but not others. Applying budget
discipline to all parts of the budget is necessary to earn the
bipartisan support that will be necessary to enact and maintain
effective budget enforcement rules. Exempting part of the budget from
budget discipline will undermine the credibility of any enforcement
mechanism.
RETURNING TO WHAT HAS WORKED--PAYGO AND SPENDING CAPS
My philosophy on budget issues has always begun with some simple
West Texas Tractor Seat Common Sense--When you find yourself in a hole,
the first rule is to quit digging. Dealing with our budget deficit must
begin with reinstatement of budget enforcement rules to take away the
shovels from Congress and the administration.
Any serious effort to restore fiscal discipline should begin with
reinstating the pay as you go budget enforcement rules and
discretionary spending limits restricting the ability of Congress and
the President to enact legislation that would increase the deficit.
These budget enforcement rules, which Congress and the President
enacted in 1990 and extended in 1997 with bipartisan support, were an
important part of getting a handle on the deficits in the early 1990s
and getting the budget back into balance.
Reinstating paygo rules and discretionary spending limits would not
by balance the budget, but doing so would represent an important first
step in bringing discipline to the budget process by prohibiting policy
changes that would further enlarge the deficit. They have been tested,
and they worked. They didn't always work perfectly, but there is no
question that they significantly improved the responsibility and
accountability of the budget process.
The principle of paygo--if we want to reduce our revenues or
increase our spending, we need to say how we would pay for it within
our budget--is something all families understand. If we want to reduce
our revenues, we need to say what spending we will do without. If we
want to increase spending, we need to say where we will come up with
the revenues for the new spending or what other spending we will do
without.
The concept of applying PAYGO rules to all legislation--spending
and revenues--has received support from both sides of the aisle since
it was originally enacted. ``Two-sided'' PAYGO was originally enacted
in the bipartisan budget agreement of 1990 and extended in the
bipartisan balanced budget agreement of 1997. Furthermore, it was
included in the budget passed by the Republican Congress in 1995.
Applying pay-as-you-go rules to tax cuts does not prevent Congress from
passing more tax cuts. All it would require is that Congress must
identify another source of revenue or spending reduction if it wants to
enact or extend a tax cut.
Those who want to extend expiring tax cuts or make the tax cuts
permanent should be willing to put forward the spending cuts or other
offsets necessary to pay for them. Similarly, those who want to spend
more in certain areas need to be willing to say where they would cut or
how they would raise revenues to pay for their proposals.
I would say with all due respect to my Republican friends that if
you are sincere in what say about controlling spending, you should not
have a problem with reinstating pay as you go for taxes as well as
spending because it would force Congress to actually cut spending to
accompany tax cuts instead of just promising to cut spending in the
future. The problem is that the actions of the majority in Congress
haven't matched the rhetoric. Congress and the administration have cut
taxes without cutting spending, and have charged the difference to our
children and grandchildren by increasing the deficit.
There has been an argument that applying paygo is biased against
tax cuts because the costs of extending entitlement programs are
included in the baseline and would not need to be offset, while
extending expiring tax cuts would be scored as a new cost that would
need to be offset. That argument ignores the fact that Congress got
credit for savings on paper by establishing the sunset. By contrast,
applying a sunset to entitlement legislation does not achieve any
savings. The baseline assumes the extension of entitlement programs
because, unlike tax cuts, the costs of extending entitlement programs
are scored and subject to budget discipline at the time they are
enacted.
The tax cuts enacted in 2001 and 2003 are expiring because Congress
included a sunset provision when they were initially enacted to limit
the official cost. This was done in part to circumvent budgetary limits
in place at the time. The cost of the tax cuts would have been several
hundred billion dollars higher over that period if the tax bills had
not included sunsets. Those additional costs were not subject to budget
limits when the tax cuts were originally enacted. Making tax cuts
permanent without considering their budgetary impact over the long-term
and exempting their costs from budget enforcement would mean that those
costs would never be subject to budget discipline.
The Committee may want to consider changes to baseline rules to
treat future tax cuts the sam as entitlement legislation--score the
costs of the tax cut as if it is permanent, and then include the costs
in the baseline. That would eliminate the incentive to use sunsets to
artificially limit costs. But since the costs of extending the tax cuts
was not scored when they were enacted, those costs should not be in the
baseline. Put another way, Congress should not have gotten credit for
``savings'' by establishing a the sunset, but since
Congress took credit for those ``savings'' then it should be
charged with a cost when the sunsets are repealed.
I would encourage the Committee to examine ways to prevent budget
gimmicks intended to circumvent PAYGO rules. Potential improvements of
PAYGO include prohibiting spending or tax legislation that delays costs
outside of the 5 year window, prohibiting the use of ``directed
scorekeeping'' in which legislation directs CBO to use certain
assumptions to provide a more favorable budget estimate and requiring a
separate vote to exemp legislation from PAYGO.
Congress should also establish a statutory limit on total
discretionary spending, with flexibility to shift funds within the
overall limit. I believe there would be bipartisan support for
legislation establishing discretionary spending limits at reasonable
levels if they were accompanied by PAYGO rules which applied discipline
to the rest of the budget, including revenues.
The cap should be set at a level which will impose an attainable
amount of spending restraint. I would suggest that separate vote be
required to increase spending above the discretionary spending limits,
instead of including an increase in spending limits as part of an
omnibus appropriations bill as has been the case in the past.
Statutory limits on discretionary spending enforced by
sequrestration can be an effective tool for fiscal discipline if they
are set at reasonable levels. However, discretionary spending limits
can actually work against fiscal discipline if they are set at
unrealistic levels. The discretionary spending limits enacted in 1990
and extended in 1993 were quite successful in restraining discretionary
spending. By contrast, the much more restrictive spending caps enacted
as part of the 1997 budget agreement proved to be unrealistic and were
effectively ignored, leaving no credible restraint on discretionary
spending in place.
INCREASING THE DEBT LIMIT
There has been a great deal of attention over the last few days
about the need to raise the debt limit for the fourth time in 5 years.
While raising the debt limit is something that Congress must do,
increasing the debt limit should be accompanied by a full and open
debate about the fiscal policies that have made the increase necessary
and a discussion about what should be done to stem the tide of red ink.
The House of Representatives has been able to avoide this type of
debate through the so-called Hastert rule, which provides that an
increase in the debt limit shall be deemed to have passed without a
separate debate or vote when the budget resolution conference report is
adopted. This rule should be repealled and replaced by a requirement
that the debt limit be subject to a full debate in committee and on the
House floor.
In addition, I believe that any long-term increase in the debt
limit should be accompanied by a plan to restore fiscal discipline. I
would propose that Congress approve a short term increase in the debt
limit to avert the imminent crisis and provide for a longer increase in
the debt limit contingent upon Congress taking action to reinstate
paygo rules and other budget enforcement mechanisms.
EMERGENCY SPENDING
The emergency designation was established in 1990 to allow spending
above spending limits in response to unforseen emergency needs. Between
1991 and 1997, the emergency spending designation was used primarily to
cover the costs associated with natural disasters, averaging roughly $7
billion a year. However, in recent years the amount of emergency
spending has increased dramatically. Between 1998 and 2002, emergency
spending averaged $32 billion a year as the emergency spending
designation was used to circumvent spending limits. Emergency spending
has turned into a giant loophole for non-emergency spending.
Congress should establish criteria for emergency spending and
require the President and appropriations committee to provide
justifications for emergency spending based on the criteria. Previous
proposals have sought to define emergency spending as spending for the
prevention or mitigation of, or response to, loss of life or property,
or a threat to national security that is sudden, urgent, unforseen and
temporary.
The budget should also include a rainy-day fund-something that 45
states currently do. A rainy day or reserve fund would require Congress
to set aside funding levels reflecting the average costs of past years'
disasters to prepare for unforseen disaster related costs. While the
costs of responding to Hurricane Katrina would have exceeded the amount
in the rainy day fund, at least we would have been starting froma
better fiscal position.
IMPROVING THE ACCOUNTABILITY OF THE BUDGET PROCESS
Budget rules only work if they are enforced. Unfortunately, budget
act waivers have become a routine part of the legislative process. Both
the Blue Dog Twelve Point Plan and the Republican Study Committee
Family Budget Protection Act include provisions increasing the
accountability of the legislative process by making it harder to waive
the Budget Act.
The Blue Dog plan would strengthen the Budget Committee's oversight
role by requiring the budget compliance statements from the Budget
Committee accompany every bill that is reported out of committee for
consideration by the full Congress. The Rules Committee would be
required to specifically list all budget act waivers and provide a
justification for the waiver instead of providing a blanket waiver
without explanation. The Blue Dog plan would also require a separate
vote to waive major budget act poits of order. The Republican Study
Committee plan would go even further, requiring a two-thirds vote to
wave points of order. I encourage the Committee to give serious
consideration to these and other proposals to increase the transparency
and accountability of the budget process by shining sunlight on budget
act waivers and requiring Members to take responsibility for waiving
the budget act.
ELIMINATING LOW-PRIORITY AND UNNECESSARY SPENDING
One small step that would help restore a small measure of fiscal
discipline is enactment expedited rescission legislation strengthening
the ability of Presidents to identify and eliminate wasteful or low-
priority spending items in appropriations bills or targeted tax
preferences in tax bills.
The Line-Item Veto proposal proposed by President Bush is virtually
identical to expedited rescission legislation I first offered in 1993
requiring Congress to vote up or down by majority vote on rescissions
submitted by the President. Expedited rescission legislation embodies
an idea which many Members, both Democrats and Republicans, have
advocated for years. Senator Carper was an early leader on this issue,
working with Dick Armey, Tim Johnson and others to find a bipartisan
consensus on this issue. Last year, I joined with Congressman Paul Ryan
to offer an amendment granting the President expedited rescission
authority. This approach has now been embraced by President Bush.
Many of us who opposed the original Line-Item Veto as an
unconstitutional shift of power from the legislative branch offered
expedited rescission or ``modified line-item veto'' as a Constitutional
alternative. In fact, when the House of Representatives initially
passed the Line-Item Veto Act in 1995, I offered an amendment that
would have added expedited rescission authority as a fallback that
would be available if the Line-Item Veto was ruled unconsitutional. The
majority rejected my amendment, and when the line-item veto was struck
down the President was left without an effective tool to eliminate low-
priority spending. I can't help but wonder what would have happened if
Republicans in Congress had joined me to enact expedited rescission
into law over a decade ago. Perhaps expedited rescission could have
prevented the explosion of earmarks that has occurred over the last 10
years.
Expedited rescission legislation would bring greater accountability
to the budget process so that individual appropriations and tax items
may be considered on their individual merits. The current rescission
process does not make the President or Congress accountable. Congress
can ignore the President's rescissions, and the President can blame
Congress for ignoring his rescissions. I believe that it is appropriate
to strengthen the President's ability to force votes on individual
budgetary items. This reform will not make a significant dent in our
deficit. But it will have a very real cleansing effect on the
legislative process and will take a step toward reducing the public
cynicism about the political process.
Expedited rescission authority can be an important tool for
eliminating wasteful spending, if the President uses this tool. I have
been disappointed that President Bush has not exercised his authority
under current law to send Congress a rescission list of low-priority
spending and pork barrel projects that he wants Congress to eliminate.
I would encourage the President to make use of his rescission authority
whether or not Congress enacts expedited rescission
Another tool that Congress should consider to eliminate low-
priority spending is sunset legislation to provide for a regular review
of the efficiency and public need every Federal agency, department and
program. This would require agencies to justify their existence to
taxpayers and Congress and provide an opportunity for Congress to
consider changes in operations of an agency and the programs it
administers, create new efficiencies, and eliminate obsolete programs
or offices.
Not only would sunset legislation provide for abolishment of
obsolete Federal agencies and streamline others, it would encourage
Congress as well as agencies to look for ways to improve programs to
better serve taxpayers. A similar law is used in nearly half of the
states including Texas, which has eliminated 44 agencies, saving Texas
taxpayers $720 million.
ADDRESSING LONG-TERM FISCAL PROBLEMS
As serious as our near term budget problems are--and they are very
serious--the long term problems we face as the baby boom generation
begins to retire in 2008 are even greater. We need to bring more
attention to the long-term liabilities facing our nation as part of the
budget process.
Budget process rules should focus more attention on long term
fiscal challenges and make it harder for Congress and the President to
enact policies which make the long-term fiscal gap worse. The
President's budget and congressional budget resolution should include
more information about the unfunded liabilities of Social Security and
Medicare and the long-term fiscal gap. I would also encourage the
Committee to examine the possibility of incorporating accrual
accounting into the budget process where appropriate as a supplement to
current budget presentation.
The Senate has taken some steps to bring attention to long term
fiscal issues in the budget process by establishing a point of order
against legislation with long term costs the exceed $5 billion over a
10-year period after 2015. The Medicare Modernization Act set in place
a mechanism to monitor the costs of the Medicare program. The effort to
focus greater attention on long term fiscal problems is encouraging.
However, these rules would have more credibility if the same level of
discipline and review was applied to the revenue side of the ledger.
I had hoped that last year would be the year that Congress and the
President would take action to address the financial challenges facing
Social Security, but neither party seemed interested in a serious
discussion about the tough choices that will be necessary. These
challenges will continue to get worse and become harder to address the
longer we wait. And the challenges facing Medicare and Medicaid are
even greater.
The experience of last year convinced me that we need to establish
a bipartisan commission to objectively review all the options for
reforms of our entitlement programs and make recommendations to
Congress and the President. Senator Chuck Hagel, a Republican from
Nebraska and Congressman John Tanner, a Democrat from Tennessess,
introduced legislation that would establish such a commission. Creating
a bipartisan commission to examine the challenges that the Baby Boom
retirement will have on entitlement programs presents an opportunity to
get a fresh start on the debate and move toward a solution.
There is justifiably cynicism in Washington about proposals to
establish a commission to study an issue. There are bookshelves filled
with dust-covered reports from commissions that went nowhwere. This
commission may be destined for the same result. But this commission has
the potential to move the debate forward if the President follows
through on his pledge to address the issue in a bipartisan manner and
continues to make addressing the long-term challenges facing
entitlement programs a priority.
Finding a politically viable and equitable solution to these
challenges will require bipartisan discussions in which all options are
on the table for consideration. The Commission should have one basic
ground rule--all option should be on the table and members of the
Commission should not go into the process with preconditions about what
must be included or excluded from a final solution. Everyone must
resist the temptation to immediately shoot down ideas they don't like.
Let an idea fly in the public debate long enough to consider its
merits.
I agree with former Treasury Secretary Rubin that the commission
should be allowed to examine rolling back tax cuts and other options to
increase revenues. Increasing taxes to meet the growing costs of
meeting our obligations to Social Security, Medicare and Medicaid as
the baby boom generations retires is a legitimate option that the
commission should be allowed to consider. Likewise, keeping taxes at
current levels will require substantial changes to scale back the costs
of these entitlement programs. In all likelihood the solution will
require a combination of changes to restain spending and increases in
revenues. The Commission should be allowed to consider and discuss the
full range of options and debate the tradeoffs.
The budget process can play a role in ensuring that the
Commission's work recieves the attention it deserves. The appointment
of a commission should be accompanied by a procedure requiring
congressional consideration and vote on the commission recommendations
either as part of the budget process or in separate legislation. To put
even more teeth into this requirement, budget rules should prohibit the
consideration of any tax cuts or entitlement spending increases with
long term costs until Congress has addressed the existing long-term
fiscal challenges by approving the Commission's recommendations or an
alternative approach to closing the long-term fiscal gap.
As this Committee examines ways to improve budget enforcement, I
wanted to raise a concern about an effort to circumvent budgt rules.
House and Senate conferees on the reconciliation tax bill are
reportedly considering a proposal to ``pay for'' the costs of a short-
term tax cut through 2015 by enacting a long-term tax cut that would
raise revenues in the short term budget will reduce revenues--and
increase the deficit.
Using this transparent gimmick to evade the Senate rule prohibiting
reconciliation bills from increasing long term deficits would undermine
respect for, and the effectiveness of, budget procedures intended to
promote long-term fiscal responsibility, including procedures aimed at
limiting increases in entitlement costs in years outside the budget
window. Enacting a provision that worsens the long-term fiscal outlook
in the name of complying with budget enforcement rules is a vivid
illustration of the myopic thinking that currently characterizes, and
distorts, the budget process.
CONCLUSION
As I said at the beginning of my testimony, budget process reforms
can be a tool to help Congress restore fiscal discipline. To be
effective, however, budget enforcement mechanisms should have
bipartisan support and must apply to all parts of the budget. Perhaps
most importantly, there must be a commitment to enforce whatever budget
rules that are established. No amount of budget rules and enforcement
mechanisms will suceed in restoring fiscal discipline if Congress is
willing to rely on waivers, budget gimmicks or other ways to circumvent
budget rules.
I hope that this Committee follows up on this hearing by beginning
bipartisan discussions to reach a consensus on changes to improve the
budget process. I am willing to help in any way that I can.
Mr. Ryun. I would like at this point to turn to Former
Congressman Bill Frenzel who was the Budget Committee Ranking
Member. Welcome. We look forward to your comments.
Mr. Frenzel. Thank you. I ask that my statement be entered
in the record.
Mr. Ryun. So ordered.
STATEMENT OF WILLIAM E. ``BILL'' FRENZEL, FORMER RANKING
MEMBER, COMMITTEE ON BUDGET, U.S. HOUSE OF REPRESENTATIVES
Mr. Frenzel. Mr. Chairman, I am delighted to be here. I am
a guest scholar at the Brooking's Institution and a Co-Chairman
of the Committee for Responsible Federal Budget, an oxymoronic
group, of course.
But the testimony is my own and does not represent any
position or conclusion of the other groups. It will not shock
you, I am sure, to find that my testimony is remarkably similar
to that of my two colleagues here at the witness table.
I would like to proceed directly into the items that the
Chairman has mentioned. The first one is the emergency
limitations. The emergencies are a way that the Congress have
found to break its promise to itself each year in the budget.
Obviously we need to repair this loophole.
The President has furnished a string of adjectives to try
to describe what an emergency is. Like pornography, I guess we
are not always sure we can describe it, but we sure know when
meet it.
I would think that descriptive limitation would be helpful.
I do not look for this change to save tons of money because if
Congress decides it wants to declare an emergency, it will
always do so.
Nevertheless, the tougher you can make the language, the
tighter you can draw the noose around this loophole, the better
it will be and the easier it will be for you to achieve the
budget goals that you seek.
Expedited rescission, or line-item veto, is the famous
power shift that the old-time Congressmen bemoan. I would
simply like to right the balance that we wrecked in 1974 when
we took away the President's power of empowerment. I would
prefer a Constitutional Amendment with a real line-item veto.
What the President has suggested looks to me about as close
as you can come to what the Congress might be willing to give
and what the courts may be willing to sustain in the form of
law.
I call your attention to George Wells' op-ed in the Post
this morning wherein he describes some of the Constitutional
questions about this particular bill.
Sunset--here is another one that may not amount to
anything. But at worst, it will do nothing; at best, it might
in fact cause the Congress to take a look at and let some
agencies and programs actually expire. I think it is a worthy
endeavor and I urge you to go ahead with it as best you can
knowing that it may not work for you. But our fiscal condition
is bad enough so that I believe that we have to make
experiments and we have to take some chances.
Earmark control, that is a question that is likely going to
be decided outside of this Committee, perhaps in a bill dealing
with lobbying, gifts, and travel. Earmarks really irritate the
public and erode its confidence. Again, the control system that
the Congress is willing to put on them is likely not to save a
lot of money. But anything you can do to make them less
obvious, less obscene, will be a great help to the process.
If we do nothing, earmarks are going to eventually kidnap
the whole Appropriations process. Then all we will be
appropriating are the earmarks. You can do anything from
banning them to disclosing them, to points of order. Whatever
you do, I think, will be a plus. And if nobody else takes on
earmarks, I hope within your jurisdiction that you can find a
way to do so.
I am going to close, Mr. Chairman, with a discussion of the
discretionary caps and PAYGO. I agree pretty much with my
colleagues. I think with Senator Nickles, probably I give
discretionary caps more importance. And nevertheless, I do
support PAYGO and I support it the whole way.
I concede Don Nickles' argumentation that taxes do not get
a fair shake under the current baseline system. Nevertheless, I
think they have to be included in some way to make it a good
system.
Mr. Chairman, you have got a miserable job this year. God
bless you and good luck.
[The prepared statement of William E. Frenzel follows:]
Prepared Statement of Hon. William E. Frenzel, Guest Scholar, Brookings
Institution; Former Member of Congress, and Former Ranking Member of
House Budget Committee
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.
Your summons, Mr. Chairman, indicated that I was invited to testify
on ``the key budget process reforms that are currently being proposed
in the House of Representatives''. Even a simple listing of all
suggested reforms is a tedious process, so I shall confine my oral
testimony to the reforms which seem most likely to dominate the budget
discussions this year: (1) Emergency Limitations; (2) Line-Item Veto
(Expedited Rescission); (3) Sunset Commission, (4) Earmark Control, and
(5) Discretionary Caps and Pay-Go.
My written testimony will include all the reforms I consider useful
and important. Should I stray from the reforms which are the
Committee's priorities, I am sure the Members will redirect my feet
back on to the path of righteousness.
Last year, I testified on the Budget Process. The discussion and
questioning focused on setting priorities, controlling spending, and
Budget Act enforcement. Despite some good work by this Committee, my
own impression is that no real improvements were adopted. The Act and
its processes still do not seem to be serving any of the purposes noted
above. The Deficit and the Public Dept continued to grow rapidly. Most
observers predict no change this year.
EMERGENCY LIMITATIONS
Defining an appropriation as ``an emergency'' is one of the
traditional congressional dodges to avoid limits already established.
Critics say that it is a way for Congress to avoid keeping promises
made to itself.
The President's Budget calls for a multi-adjective definition of
Emergencies--necessary, sudden, urgent, unforeseen and not permanent.
Those are all good words, and I would add as many more as anyone found
helpful to confine the emergency designation to real emergencies.
Most catastrophes, which Congress feels require amelioration by the
immediate application of Federal expenditures, are predictable. We
can't predict the events, but we know about what the costs are going to
be each year. Over the years, we know pretty well what the average
costs of fires, floods, hurricanes, droughts, and other catastrophes
are. We ought to set up a reserve in each year's Budget to cover these
expenses. The obvious emergencies, like Katrina, can be dealt with in
the usual ways.
My own recommendation is to start with the President's definition,
and then augment it with whatever additional constricting language you
can find to narrow the remaining emergency loophole as much as
possible. If this amended procedure reduces the annual emergency costs,
the savings will be small, but you will have reduced a major irritant
in the Budget Process.
EXPEDITED RECISSION
From a Legislator's point-of-view, the Line-Item Veto, or any form
of it like Expedited Rescission, is usually seen as a ``power-shift''
which causes a erosion in the legislative branch's Constitutional Power
of the Purse. Because I favor a Constitutional Amendment to create a
real Line-Item Veto, I have never been moved by the argument that the
Legislature ought to be concerned by the loss of power, or the change
in the balance of power.
To me, the real power-shift occurred in 1974. Then, Congress
stripped the President of his power of Impoundment when it passed the
Budget Act. Therefore I strongly support the strengthening of the
President's currently feeble power of rescission. I would prefer the
real Line-Item Veto, a Constitutional Amendment, but I think the
President has asked for about as much as the Congress is likely to give
him, and as much as can pass constitutional muster in the courts.
SUNSET COMMISSION
The President's Budget message repeats his request, made last
summer,
for legislation creating a Sunset Commission and a Results
Commission. Both have great promise, but both will be difficult to
pass. At best, a Sunset Commission could force restructure or
termination of agencies and programs in which the President recommends
changes on a predetermined schedule unless they were reauthorized by
the Congress.
In my day, it was said old programs never die because old
Congressmen never die. Presumably it is not much different today. Both
types of Commission, although they would operate differently, would
pose problems similar to those posed by the Base Closing Commissions.
These are all tough decisions for Members, especially for
Appropriators, but both could be a great help to this Committee and its
work of enhancing national fiscal sobriety.
These Commissions may be frightening because they represent a leap
into the unknown, but every attempt to improve our fiscal position
ought to be carefully examined and at least given some kind of
operating test.
EARMARK CONTROL
Earmarks are likely to be decided outside of this Committee,
probably in a bill dealing with lobbying, gifts and travel. But they
are so much in the news these days that it is impossible not mention
them. When I came to Congress, they were plenty of Earmarks, but their
growth in recent years has been startling.
Without a lot of discussion, let is suffice to say here that some
sort of control must be imposed lest the Earmarks kidnap the whole
Appropriations Process. The control could be any thing from a ban to
mere disclosure. The control could apply to all Earmarks, or only to
those which creep into Conference reports without benefit of hearings,
votes or authorization.
My only advice here is to suggest that if Earmarks are not
controlled elsewhere, this Committee ought to examine the alleged
problem, and take some action appropriate to its budget jurisdiction.
DISCRETIONARY SPENDING CAPS AND PAY-GO
I was one of the purple-hearted veterans of the Andrews Air Force
base Budget Summit which produced the two limitations on spending; (1)
Caps on Discretionary Spending, and (2) the Pay-as-you-go restrictions
on Mandatory Spending and Taxes. As I have often testified before this
Committee, I liked them both then and I like them now. I have not
recanted.
However, the Senate has just narrowly defeated an attempt to
reinstate Pay-Go in the Senate Budget Resolution, and it now is
apparent that, whether there is a budget Resolution or not, there will
be no Pay-Go in the FY '07 budget process.
Even so, I repeat my annual recommendation for this Committee to
approve it.
OTHER PROCESS REFORM SUGGESTIONS
Many other suggestions have been made and remade over the years.
Budget process changes can't make miracles, and they cannot save a
Congress from causing fiscal harm to the nation and its economy. Each
of them has been calculated by its backers to make our Budgets more
responsible. Most of them would probably be of some modest amount of
help.
The ones we are sure of, Discretionary Caps and Pay-Go, have been
tested and proved to be somewhat effective. Other plans to control
mandatories would include caps or targets, which, if touched or
exceeded, would force a special oversight process. I do think that
would be terribly effective, but it might help a little. Points of
Order against mandatory spending which causes a deterioration in
unfunded obligations would also help.
The Joint Budget Resolution, seen by some observers as another
power-shift, would also help by involving the President in the budget
process at an earlier stage. A 2-year Budget Resolution has never
appealed to me as helpful to improved fiscal controls, but it has many
supporters.
An Automatic Continuing Resolution to be effective if
appropriations were not enacted at the beginning of the new Fiscal Year
is a plan I like, especially if the CR levels are set beneath last
year's spending.
Not in the Budget, but supposedly a favorite of the President is an
Entitlements Commission. That is, I think, not really within your
jurisdiction, but might help the country's fiscal condition. Earmarks,
also probably beyond your reach, can be most quickly controlled through
use of Points of Order.
One of my long-time favorite suggestions is the Budget Concepts
Commission. We have not had a significant dialog on this subject since
before the Budget Act of 1974 was passed. I think such weird concepts
and ``negative outlays'' need the harsh glare of sunlight, and
certainly the Functions themselves and their enumeration could stand
some rationalizing adjustments.
CONCLUSION
This is going to be tough year. The Senate may not be able to pass
a Budget Resolution of any kind. You will have your own particular
difficulties, which may be no less severe. I believe the House will do
it, and while you are at it I recommend that you pass all of the Budget
Reforms mentioned in the President's Budget, especially the ones noted
herein.
Mr. Ryun. Let me first of all thank all of our witnesses
for their testimony.
And at the moment, we are waiting to determine a little bit
about whether we are going to come back. We are serving
members. See, first of all, if the witnesses would be willing
to stay around.
So we will adjourn temporarily.
[Recess.]
Mr. Ryun. All right. I am going to go ahead and move with
the first question while we sort of survey everyone to see if
they are interested in coming back.
I will begin with former Chairman and Senator Nickles. You
had mentioned earlier--actually, I agree with you with regard
to earmark reforms. I know we need to work that through
carefully. I personally believe that when you put earmarks
through the regular process, then it is an acceptable way of
having member representation. But I know that there are some
abuses there.
What I really wanted to address is how you--your statement
when you said really if you want to enforce spending, look at
caps at discretionary spending. How would you enforce those
caps? You have had the experience on the Senate side. Tell us
what you might do to enforce those caps.
Mr. Nickles. Well, again, I know more about the Senate than
the House. But we were successful in working with Chairman
Nussle and Ranking Member Spratt and others. We did come up
with an amount, similar to the $873 billion that you are
working on this year. And we enforced that. We enforced it in
2004. We enforced it 2003. We lived by those limits.
Now, granted, defense went up 7 percent and homeland
security 10 percent. Other spending went up about 1 percent or
a little less. That was really pretty darn good, pretty
remarkable, particularly if you go back to President Clinton's
terms when discretionary spending went up about 14 percent.
So we made some significant headway in that limited part of
the budget. I happen to agree with my colleagues, though, you
have to do some things on entitlements. The Budget Committee
can do some things on entitlement.
Your question on discretionary spending, discretionary
spending in the Senate, we had budget points of order that we
could raise. If they were exceeding their allocation, their
Committee allocation, I would raise the budget point of order.
Usually I would do it or whoever is Chairman or Ranking Member
of the Committee could raise it. And they would have to have 60
votes to waive that budget point of order. And that is how we
did it in the Senate and that is how we would keep our
discretionary cap, and it did work. That is the reason why I
said that is so much more important if you are interested in
fiscal discipline.
Then the earmark issue. Earmarks are kind of looking at the
trees, but not the forest. Caps are looking at the forest. And
the total spending is what, I think, the Budget Committees are
really looking at. That is not so much the individual items.
The individual items, I think, are going to require some
discipline by the Appropriators.
Mr. Ryun. Thank you very much.
And in the interest of time, I am going to turn to Mr.
Spratt for any questions he might have.
Mr. Spratt. Let me just observe, Senator Nickles, a problem
in the House is points of order get mowed over by the Rules
Committee every day the rule is issued.
Just one question in the interest of time. Charlie
Stenholm, I think you would agree that even the enhanced
rescission itself could be subject to some abuse, used in a
partisan way, used in a vindictive way.
What are your thoughts or reflections on how we could
structure it so that it would not be usable by a President for
vindictive purposes or for blatantly partisan purposes?
Mr. Stenholm. Mr. Spratt, I am not sure that is one of the
points that we ought to put too much emphasis on because it can
happen. But that is the power of the President.
I opposed the line-item veto in 1995. I went with the
modified rescission order at that time because of the concern
of the constitutionality of it. And I always ask the question
to people when they say they are for line-item veto, did it
make any difference to you if it is President Reagan or
President Kennedy. And if the person looked me in the eye and
said, no, it does not make any difference, then I say you got
an honest position and I am for you doing that.
You know, it bothers me a little bit about who it is, for
the reason you mentioned. But the current proposal that
President Bush has submitted, I think, should be passed and I
think it should be given an opportunity to work because I think
if we had done it in 1995, I suspect the earmark problems as
proliferated would never have occurred.
Mr. Spratt. Thank you, sir. And thanks for taking time to
come testify.
Mr. Ryun. At this point, we will take one more question. At
this time, we will turn to Mr. Simpson for any question he
might have.
Mr. Simpson. Thank you, Mr. Chairman. I would like to have
a discussion. I do not know that I can ask one question because
it is--you have raised some interesting points, some of which I
disagree and some of which I obviously agree with.
You are right. If you are going to get control of this
budget, you have got to have discipline and you have got to
have caps that you stay within.
I kind of disagree on the earmark and the line-item veto.
And it is not whether it is any particular President. It is a
legislative versus administrative issue. And if the President
were not--maybe I could go for an enhanced rescission if we
said in every conference committee, the administration cannot
be represented.
But as you all know, a conference report is a compromise of
what the administration wants, what the Senate wants, what the
House wants. And to give then one individual in that compromise
the authority to rip parts of it out and send it back and vote
on that separately seems to me to break the deal that has been
written. And I do not think any of these things, these gadgets
that we are looking at will take the place of having some
discipline and making some tough decisions.
The problem I have in this whole process--and this is a
process--is that there is a disconnect between this committee,
the Budget Committee, the appropriations process, and the
authorizing committees.
And I was telling Charlie just before this that it
frustrates me that--I sat on the Appropriations Committee,
Labor, HHS, and Education. They come in and they say, okay, we
have got this much in education. We are going to spend it here.
We never go over and talk to the Authorizing Committee, who are
the experts on education, saying if you have got this much
money, where would you spend it.
And there needs to be a better engagement on how that all
works. And this committee, frankly, we are going to vote on a
cap on discretionary spending, we will go down to the floor. It
is really easy to vote on a cap. Hell, we could lower it a
hundred billion dollars and still vote on it and probably pass
it because nobody knows what it is going to do in the
individual appropriations and then you are not going to be able
to pass them when they come out.
Somehow we have got to reform, I think, the process of this
coordination between these three different areas.
And as far as earmarks go, I look at the numbers and they
have increased. Last year, we had $142 billion budget in Labor,
HHS. They proposed earmarking $2 billion of that, not one and a
half percent. To suggest the administration does not earmark,
the administration proposes a recommended budget. That is all
it is.
We are responsible for setting the budget and for Congress
to say we are going to have some priorities in here of how we
want to spend money relative to the administration and how they
want to spend money, there is one organization that says if--
that puts out pork in government--and they say if the President
did not recommend it, then it is pork, and that is just
nonsense.
It is Congress really saying we are going to have some
priorities in here too. But I guess I got in trouble with the
last few secretaries when I started asking them during hearings
about Presidential earmarks within this budget.
Are there wasteful ones? Sure. To suggest that we gave--I
do not know--$90 billion to Hurricane Katrina and they spent it
on $2,000 cards getting tattoos and other things, that there is
not waste if you give that money to the administration is
false.
Ultimately this Congress has to do one thing that we do not
do. We do not do enough oversight. And that to me is the bottom
line. We can save money if we do oversight and we do not do it.
So I appreciate your comments. I always like to learn from
those that have been here substantially. And you might disagree
with me on what I said. I would be happy to hear your response.
Mr. Frenzel. Well, I have a slightly different outlook on
the line-item veto. The President is a part of the process. He
can reject the bill.
Over the years, of course, Congresses have taken to
building very large bills, sometimes continuing resolutions
(CRs) that include almost the whole budget of the Government.
Those CRs make it very hard for a President to close down the
Government, although we saw one do it effectively in 1995.
It does seem to me that the President has been pretty
effectively robbed of his veto by this conglomeration of all
these wonderful earmarks and other wonderful appropriations.
And he needs a way to reclaim that power, which I think the
Framers wanted to give him.
So that is the way I look at it. I think he has lost
something along the way because Congress has been clever
enough. And when you say he should not be in the conference
committee because he breaks the deal, he has got the right
under the Constitution to break the deal. He can kill the whole
thing. But you have made it very difficult for him to veto the
whole bill.
Mr. Stenholm. Line-item veto gives the President one-third
plus one minority and that is where I totally agree with you,
Mike, on the concern.
But modified rescission order gives the President 50
percent. And if the Congress does not choose to override the
President on his decision, then Congress has made that
decision.
Now, it may not be your decision, but it would be 218 of
your colleagues that have made that decision. It seems to be a
reasonable compromise between the extreme line-item veto which
I agree with you the concerns there about the power it puts in
the President's hand and it has already been held
unconstitutional.
Mr. Ryun. The Chair is going to need to interrupt at this
point. We have a series of ten votes on the floor. I do want to
thank our witnesses for coming.
And at this point, I do now move that the committee stands
in recess subject to the call of the Chair. Without objection,
so ordered.
[Whereupon, at 10:45 a.m., the committee was adjourned.]