Full text of "Budget process reforms : hearings before the Legislation and National Security Subcommittee of the Committee on Government Operations, House of Representatives, One Hundred Third Congress, second session, June 29; and August 4, 1994"

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BUDGET PROCESS REFORM

Y 4. G 74/7: B 85/20

Budget Process Reform 103-2 Hearin..

HEARINGS

BEFORE THE

LEGISLATION AND NATIONAL
SECURITY SUBCOMMITTEE

OF THE

COMMITTEE ON

GOVERNMENT OPERATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

SECOND SESSION

JUNE 29; AND AUGUST 4, 1994

Printed for the use of the Committee on Government Operations

W..

BUDGET PROCESS REFORM

HEARINGS

BEFORE THE

LEGISLATION AND NATIONAL
SECURITY SUBCOMMITTEE

OF THE

COMMITTEE ON

GOVERNMENT OPERATIONS

HOUSE OP REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

SECOND SESSION

JUNE 29; AND AUGUST 4, 1994

Printed for the use of the Committee on Government Operations

U.S. GOVERNMENT PRINTING OFFICE
85-810 CC WASHINGTON : 1995

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-046985-6

COMMITTEE ON GOVERNMENT OPERATIONS

JOHN CONYERS,
CARDISS COLLINS, Illinois
HENRY A. WAXMAN, California
MIKE SYNAR, Oklahoma
STEPHEN L. NEAL, North Carolina
TOM LANTOS, California
MAJOR R. OWENS, New York
EDOLPHUS TOWNS, New York
JOHN M. SPRATT, JR., South Carolina
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
KAREN L. THURMAN, Florida
BOBBY L. RUSH, Illinois
CAROLYN B. MALONEY, New York
THOMAS M. BARRETT, Wisconsin
DONALD M. PAYNE, New Jersey
FLOYD H. FLAKE, New York
JAMES A. HAYES, Louisiana
CRAIG A. WASHINGTON, Texas
BARBARA-ROSE COLLINS,, Michigan
CORRINE BROWN, Florida
MARJORIE MARGOLIES-MEZVINSKY,

Pennsylvania
LYNN C. WOOLSEY, California
GENE GREEN, Texas
BART STUPAK, Michigan

Jr., Michigan, Chairman

WILLIAM F. CLINGER, JR., Pennsylvania

AL McCANDLESS, California

J. DENNIS HASTERT, Illinois

JON L. KYL, Arizona

CHRISTOPHER SHAYS, Connecticut

STEVEN SCHIFF, New Mexico

CHRISTOPHER COX, California

CRAIG THOMAS, Wyoming

ILEANA ROS-LEHTINEN, Florida

DICK ZIMMER, New Jersey

WILLIAM H. ZELIFF, JR., New Hampshire

JOHN M. MCHUGH, New York

STEPHEN HORN, California

DEBORAH PRYCE, Ohio

JOHN L. MICA, Florida

ROB PORTMAN, Ohio

BERNARD SANDERS, Vermont
(Independent)

Julian Epstein, Staff Director
FRANK Clemente, Senior Policy Advisor

KEVIN Cronin, Associate Counsel

Mechita O. CRAWFORD, Staff Assistant

MATTHEW R. FLETCHER, Minority Staff Director

MONTY TRIPP, Minority Professional Staff

LEGISLATION AND NATIONAL SECURITY SUBCOMMITTEE

JOHN CONYERS, Jr., Michigan, Chairman
CARDISS COLLINS, Illinois AL McCANDLESS, California

STEPHEN L. NEAL, North Carolina WILLIAM F. CLINGER, JR., Pennsylvania

CAROLYN B. MALONEY, New York JON L. KYL, Arizona

TOM LANTOS, California DICK ZIMMER, New Jersey

CORRINE BROWN, Florida

James C. Turner, staff Director

(II)

CONTENTS

Page

Hearing held on:

June 29, 1994 1

August 4, 1994 245

Statement of:

Andrews, Hon. Rob, a Representative in Congress from the State of
New Jersey 196

Barca, Hon. Peter, a Representative in Congress from the State of Wis-
consin 281

Brewster, Hon. Bill, a Representative in Congress from the State of
Oklahoma 213

Castle, Hon. Michael N., a Representative in Congress from the State
of Delaware 249

Conyers, Hon. John, Jr., a Representative in Congress from the State
of Michigan, and chairman, Legislation and National Security Sub-
committee: Opening statement 1

Cox, Hon. Christopher, a Representative in Congress from the State
of California 231

Crapo, Hon. Michael D., a Representative in Congress from the State
of Idaho 214

Deal, Hon. Nathan, a Representative in Congress from the State of Geor-
gia 174

Durbin, Hon. Richard J., a Representative in Congress from the State
of Illinois 140

Edwards, Hon. Chet, a Representative in Congress from the State of
Texas 210

Hastert, Hon. J. Dennis, a Representative in Congress from the State
of Illinois 209

Johnson, Hon. Sam, a Representative in Congress from the State of
Texas 257

Kasich, Hon. John R., a Representative in Congress from the State of
Ohio 104

Klein, Hon. Herb, a Representative in Congress from the State of New
Jersey 289

Lewis, Hon. Tom, a Representative in Congress from the State of Florida 354

Mineta, Hon. Norman, a Representative in Congress from the State of
California 365

Minge, Hon. David, a Representative in Congress from the State of Min-
nesota 275

Obey, Hon. David R., a Representative in Congress from the State of
Wisconsin 66

Orion, Hon. Bill, a Representative in Congress from the State of Utah 171

Penny, Hon. Tim, a Representative in Congress from the State of Min-
nesota 107

Sabo, Hon. Martin Olav, a Representative in Congress from the State
of Minnesota 17

Schumer, Hon. Charles E., a Representative in Congress from the State
of New York 220

Stenholm, Hon. Charles W., a Representative in Congress from the State
of Texas 109

Synar, Hon. Mike, a Representative in Congress from the State of Okla-
homa 356

Traficant, Hon. James, a Representative in Congress from the State
of Ohio 378

Walker, Hon. Robert, a Representative in Congress from the State of
Pennsylvania 305

Waxman, Hon. Henry A., a Representative in Congress from the State
of California 296

Zeliff, Hon. William H., Jr., a Representative in Congress from the State
of New Hampshire 272

(III)

Letters, statements, etc., submitted for the record by:

Barca, Hon. Peter, a Representative in Congress from the State of Wis-
consin: Prepared statement 283

Castle, Hon. Michael N., a Representative in Congress from the State
of Delaware: Prepared statement 252

Clinger, Hon. William F., Jr., a Representative in Congress from the
State of Pennsylvania: Prepared statements 13, 247

Conyers, Hon. John, Jr., a Representative in Congress from the State
of Michigan, and chairman, Legislation and National Security Sub-
committee: Opening statement 4

Cox, Hon. Christopher, a Representative in Congress from the State
of California: Prepared statement 239

Crapo, Hon. Michael D., a Representative in Congress from the State
oi Idaho: Prepared statement 217

Deal, Hon. Nathan, a Representative in Congress from the State of Geor-
gia: Prepared statement 176

Durbin, Hon. Richard J., a Representative in Congress from the State
of Illinois: Prepared statement 152

Harman, Hon. Jane, a Representative in Congress from the State of
California: Prepared statement 211

Johnson, Hon. Sam, a Representative in Congress from the State of
Texas: Prepared statement 259

Klein, Hon. Herb, a Representative in Congress from the State of New
Jersey: Prepared statement 291

Lewis, Hon. Tom, a Representative in Congress from the State of Florida:
Prepared statement 355

Mineta, Hon. Norman, a Representative in Congress from the State of
California: Prepared statement 368

Minge, Hon. David, a Representative in Congress from the State of Min-
nesota: Prepared statement 278

Morella, Hon. Constance A., a Representative in Congress from the State
of Maryland: Prepared statement 215

Murtha, Hon. John P., a Representative in Congress from the State
of Pennsylvania: Prepared statement 143

Obev, Hon. David R., a Representative in Congress from the State of
Wisconsin: Prepared statement 72

Orton, Hon. Bill, a Representative in Congress from the State of Utah:
Prepared statement 183

Sabo, Hon. Martin Olav, a Representative in Congress from the State
of Minnesota: Prepared statement 23

Shelby, Hon. Richard C, a Senator in Congress from the State of Ala-
bama: Prepared statement 232

Stenholm, Hon. Charles W., a Representative in Congress from the State
of Texas: Prepared statement Ill

Synar, Hon. Mike, a Representative in Congress from the State of Okla-
homa: Prepared statement 358

Traficant, Hon. James, a Representative in Congress from the State
of Ohio: Prepared statement 380

Walker, Hon. Robert, a Representative in Congress from the State of
Pennsylvania: Prepared statement 307

Waxman, Hon. Henry A., a Representative in Congress from the State
of California:

Information concerning increases in Medicaid 303

Prepared statement 298

Zeliff, Hon. William H., Jr., a Representative in Congress from the State
of New Hampshire:

Information concerning pork in the earthquake supplemental 102

Prepared statement 195

APPENDDC
Material submitted for the hearing record 401

BUDGET PROCESS REFORM

WEDNESDAY, JUNE 29, 1994

House of Representatives,
Legislation and National Security Subcommittee

of the Committee on Government Operations,

Washington, DC.
The subcommittee met, pursuant to notice, at 11:05 a.m., in room
2154, Rayburn House Office Building, Hon. John Conyers, Jr.
(chairman of the subcommittee) presiding.

Present: Representatives John Conyers, Jr., Carolyn B. Maloney,
Al McCandless, and William F. Clinger, Jr.

Also present: Representatives Henry A. Waxman, John M.
Spratt, Jr., and William H. Zeliff, Jr.

Legislation and National Security Subcommittee staff present:
James C. Turner, staff director.

Full committee staff present: Julian Epstein, staff director;
Frank Clemente, senior policy advisor; Kevin H. Cronin, associate
counsel; Mechita O. Crawford, staff assistant; and Monty Tripp, mi-
nority professional staff.

OPENING STATEMENT OF CHAIRMAN CONYERS

Mr. Conyers. The Subcommittee on Legislation and National Se-
curity will come to order.

Today is the beginning of a series of hearings on budget process
reform proposals before the committee, with a number of Members
seeking to testify. We have our distinguished chairman of the
Budget Committee here already, and so we will make some opening
statements and proceed as quickly as we can.

The committee will consider the creation of a deficit "lockbox" in
which discretionary caps are automatically lowered by the amount
of an amendment to reduce spending in a tax or appropriation bill.

Other options address spending controls for entitlement pro-
grams, the eliminating of the budget baseline in which program
costs are automatically adjusted to reflect inflation and limiting the
authority for emergency spending above the discretionary cap
spending level.

Last year, Congress enacted an approximately $500 billion deficit
reduction package through budget reconciliation. The projected
budget deficit for 1995 is expected to fall to about $170 billion, over
$100 billion more in deficit reduction than the level forecast for
1995 when the President took office. If the 1994-1995 forecasts
hold, the deficit will decline 3 years in a row for the first time since
the White House was occupied by Harry Truman.

(l)

The deficit, as measured as a percentage of the Nation's gross do-
mestic product, has decreased under the present administration.
The fiscal year 1993 deficit was estimated to be 4.3 percent of GDP,
the projected fiscal year 1995 figure is expected to decline to 2.6
percent GDP. The administration appears to be proceeding toward
meeting their commitment to cut the deficit in half as a percentage
of GDP by the end of the Clinton term.

In August, the CBO will issue its revised deficit forecast for fiscal
year 1994, and current economic data suggests that Federal reve-
nues are exceeding previous projections, while entitlement spend-
ing has dropped below forecast levels. Consequently, the fiscal year
1994 deficit, which was projected to be $291 billion when President
Clinton was inaugurated, may be less than $200 billion. This CBO
update suggests a significant improvement in the deficit outlook for
future years.

Currently, the budget deficit is governed by the Budget Enforce-
ment Act of 1990, which sets declining spending caps for discre-
tionary spending and a pay-as-you-go enforcement scheme for enti-
tlement spending and revenues. Those opposed to creating addi-
tional budget process reforms argue that the deficit reduction is a
result of tough decisions about spending priorities, rather than
budget process changes.

It is argued that process reforms are gimmicks which don't work,
are subject to manipulation, allow Congress to put the Federal
budget on automatic pilot, and abdicate responsibility for difficult
and unpopular decisions to cut spending. They point to the failures
of the Gramm-Rudman laws to control spending and the success of
President Clinton's budget program as evidence of this argument.

However, proponents of additional reforms argue that, while the
budget process reforms in and of themselves are often imperfect
and no substitute for decisionmaking, they create the overall dis-
cipline needed to force the difficult decisionmaking process to
begin. As evidence, they point to the Budget Enforcement Act, ar-
guing that it created the context and deficit reduction goals around
which the budget debate revolved.

Among the key budget process reforms that will be considered
are the following: H.R. 3266 and H. Res. 407, the A-to-Z spending
cut plans offered by our colleagues, Mr. Andrews and Mr. Zeliff,
which would provide a minimum of 56 hours' debate in which
Members could offer amendments to cut spending from appropria-
tions bills or entitlement programs. The legislation directs OMB to
automatically reduce the discretionary spending cap by an amount
equal to any cuts approved by an amendment.

Our colleagues, Mr. Stenholm, Mr. Penny, and Mr. Kasich, have
introduced H.R. 4434, the Common Cents Budget Reform Act,
which has four major components — baseline budget reform, expe-
dited rescission, adjusting discretionary caps to reflect cuts in ap-
propriation bills, and to limit the emergency designation.

Other legislative proposals include the Comprehensive Budget
Process Reform Act, H.R. 1138, introduced by Representative
Orton, which requires a balanced budget enforced through seques-
tration, unless Congress issues budget reconciliation instructions to
achieve the overage or waive the requirement by affirmative vote.

It includes additional budget process proposals creating a sepa-
rate operating and capital spending budget, instituting a biennial
budget cycle, automatically sunsetting legislation not reauthorized
within 5 years, creating expedited rescission authority for the
President, instituting performance-based budgeting and requiring
agencies to submit to OMB options for agency spending, which in-
cludes a 10 percent reduction for the prior year.

The Lock Box Act, H.R. 4057 introduced by our colleagues Mr.
Schumer, Brewster, Crapo, Edwards, and others would permit
Members offering amendments to reduce spending and designate
that the discretionary cap spending levels should be reduced by an
amount equal to any approved amendment.

The gentleman from California, Mr. Cox, has introduced the
Budget Process Reform Act, H.R. 2929, which would require a joint
budget resolution which must be signed into law, prohibit baseline
adjustments, require the support of two-thirds of the Members of
both Houses to spend in excess of the budget levels, and permit the
President to rescind spending in excess of the budgeted level. It
would convert entitlements into discretionary programs by requir-
ing that all appropriations, with the exception of Social Security
and debt interest, be for fixed sums and prohibit appropriations for
such sums as are necessary.

And finally we have H.R. 4189 and H.R. 4457; which address the
treatment of emergency spending. Mr. Castle's proposal would cre-
ate a budget reserve account to suspend the current emergency ex-
ception for funding natural disasters and national security emer-
gencies. H.R. 4457 introduced by Mr. Johnson, would create a look-
back provision in which emergency supplemental bills that reach
the discretionary spending cap result in automatic reductions in
the discretionary cap for the next fiscal year.

These are incredibly complex and very significant proposals for
change in the budgeting process, and I am happy that our Budget
Committee chairperson and the chairman of tne Appropriations
Committee are here.

[The prepared statement of Mr. Conyers follows:]

OPENING STATEMENT OF JOHN CONYERS, JR.

CHAIRMAN

LEGISLATION AND NATIONAL SECURITY SUBCOMMITTEE,
COMMITTEE ON GOVERNMENT OPERATIONS

HEARING ON BUDGET PROCESS REFORM

JUNE 29, 1994

Good morning. Today the Committee begins the first in a series
of hearings examining proposals to reform the Federal budget
process.

At the outset, I want to stress the importance of both deficit
reduction and a sound budget process. As we pursue deficit
reduction, we must also allow the President and the Congress enough
flexibility to make the wisest spending choices for the American
people. This is the careful balance that we on Government
Operations should remember as we consider budget process reform
proposals.

Congress now operates through a tightly controlled budget
process intended to reduce the federal deficit. This process limits
direct government expenditures through so-called "pay-as-you-go"
requirements, and it limits discretionary expenditures through annual
spending caps.

These mechanisms have not come about easily since the passage
of the Budget Act in 1974. In the mid-1980s both ends of
Pennsylvania Avenue fought over the Gramm-Rudman-Hollings
budget law. In the end we had little, if any, deficit reduction.

In 1990, in a bipartisan vote, we created a new procedure — the
Budget Enforcement Act. This was modified and extended for
another five years by President Clinton and the Democratic members
of this Congress who voted for the budget in 1993. As we consider
further and more sweeping changes in this process, it's wise to
review how well the BE A is working.

Last year, Congress enacted a $500 billion deficit reduction

package through reconciliation. Our strengthened economy and these
budget cuts will reduce the deficit in Fiscal Year 1995 to about $170
billion, over $100 billion less than the deficit level projected for 1995
when President Clinton first took office. This improvement
represents a 40% decrease in the projected deficit. If the 1994-95
forecasts hold, the deficit will decline for three years in a row, the
first time that's happened since Harry Truman held the White House.

Let's look at it another way. The deficit, as measured as a
percentage of our nation's economy, has decreased substantially under
President Clinton. In 1983 the deficit peaked at 6.3% of our nation's
Gross Domestic Product (GDP), the highest level since World War II.
The projected FY 1995 figure is expected to drop to roughly 2.4% of
GDP, the lowest level since 1979 and a decrease of nearly two-thirds
from the 1983 peak. The President appears to be well on his way to

meeting his promise to cut the deficit in half, as a percentage of
GDP, by the end of his term.

Such substantial levels of deficit reduction have not been
painless. All of us have programs that we cherish that have taken big
hits — Medicare, the Superconducting Supercollider, student loans,
major weapons systems.

Although there has been significant progress, some Members
believe that changes are needed in the budget process to reduce the
deficit further. Legislative proposals range from statutory entitiement
spending caps, to creating a so-called "deficit lock-box," to convening
a special House session to consider spending cuts on an ad hoc basis,
the so-called A to Z plan.

These Subcommittee hearings should help Members separate
budgetary fact from fiction. Here is where we ask the tough

questions:

Is there a procedural substitute for political will?

Or, do these proposals offer meaningful reform and a real
opportunity to control spending?

For the last several months, the House leadership has been
discussing many of these options with the various proponents. The
time has now come to give them the proper scrutiny envisioned by the
legislative process.

Besides the distinguished list of Member witnesses for today's
hearing, in July we will receive testimony from the Congressional
Budget Office, the General Accounting Office, academia and former
budget officials from across the political spectrum.

I intend these hearings to provide a thorough review of the full

range of issues. I also hope these hearings can address the concerns
and frustrations Members have expressed through the discharge
process.

Mr. Conyers. I will now yield to Mr. McCandless of California
for an opening comment.

Mr. McCandless. Thank you, Mr. Chairman. I would like to
thank you for granting us this opportunity to initiate a serious, bi-
partisan and badly needed discussion of our Federal spending hab-
its, and the overwhelming importance of responsible fiscal control.
Similarly, I would like to thank Congressmen Andrews and Zeliff,
as well as Representatives Stenholm, Deal, and Orton, for forcing
this issue out into the open, and for compelling this Congress to
confront our national spending priorities.

On the day I arrived in Washington, our national debt stood at
$1.37 trillion. Today, just 12 years later, it has tripled to $4.6 tril-
lion, and I might add without serious budget process and spending
reforms, that debt will stand at more than $7 trillion in just 10
years.

Interest on the debt alone will consume $345 billion, or 16 per-
cent of our Federal tax dollars in the year 2004. That is nearly
$350 billion which will be spent without funding one single pro-
gram or providing one single service to the American taxpayers.

Clearly, we are failing to meet our responsibilities in dealing
with the undeniable and overwhelming need for serious fiscal re-
straint and true budget reforms. Both the A-to-Z spending cuts
plan and the budget process reforms we are considering today will
allow us to change that. A to Z will force Members to critically re-
assess our national spending priorities to determine what is and
what is not a vital and unassignable role of our Federal Govern-
ment.

Similarly, in adopting strong and meaningful budget process re-
forms, such as a true line-item veto, emergency supplemental
spending restraints and the elimination of baseline budgeting, we
can cultivate a process designed to impose order and restraint
where weak rules have failed.

Mr. Chairman, I will be leaving Congress at the end this year,
and I would prefer to go knowing that I have done all I can to re-
verse our downward spiral. I look to the proposals before us as the
best and perhaps the only way of bringing our Federal spending
habits under control.

And I look forward to working with our witnesses in enacting
strong and meaningful fiscal reforms. Thank you, Mr. Chairman.

Mr. Conyers. Thank you, Mr. McCandless. We have enjoyed
your tenure and service and contributions to this committee, and
you may be called into your highest service in processing these last
five bills that are in front of us. If you can help us through this
very complex maze, we will be in your debt. And thank you again.

The Chair recognizes the gentleman from California, Mr. Wax-
man.

Mr. Waxman. Thank you very much, Mr. Chairman. I find it
ironic that we have before us today a whole set of proposals to fur-
ther reform the budget process, including proposals for deep and
automatic cuts in entitlement programs.

Less than 1 year ago, we enacted a budget reconciliation bill that
made major reductions in the Federal deficit. As a result of OBRA
93, the deficit is now lower than anyone anticipated, the economy
has responded to the reduction in the Federal deficit, and many

economists feel that further drastic reductions in Federal spending
at this point would be unwise. In short, we have a budget process
that is working reasonably well to achieve our economic objectives.

What I am worried about in these new, supposed reform propos-
als, especially the proposals for automatic caps on entitlement pro-
grams, is that we would end up with a different agenda than sim-
ply dealing with the budget. I fear that they are designed not to
reform the budget, but to reduce the Federal Government's commit-
ment to the income security, health security and other needs of our
citizens.

I wouldn't want the slogan "budget process reform" to really
mean the withdrawal of the Federal Government's commitment to
meeting the basic needs of some of the most vulnerable in our soci-
ety.

The budget process we now have is structured so that if we need
to make changes in Medicare or Medicaid, or veterans' or other
programs to achieve our economic goals, we can do so in a way that
makes some sense from a policy standpoint, and does not impose
questionable burdens on program beneficiaries.

Under some of these so-called reforms, we wouldn't look, we
would just cut; and I hope that we reject some of these draconian
ideas that are now being floated again under the mantle of reform.
Some of the ideas that we have before us, I think we ought to look
at seriously. But I want us to recognize that we are already under
very severe restraints with the caps on our appropriated programs,
ana I wouldn't want us to do a lot of damage as we look at some
of these proposals on the entitlement side.

Mr. Conyers. Thank you for a very reasoned statement, Mr.
Waxman.

The gentleman from Pennsylvania, Mr. Clinger.

Mr. Clinger. Thank you very much, Mr. Chairman. I really ap-

Ereciate your holding the hearing. I want to thank all of the Mem-
ers who are going to be participating, and there are many of them
this morning, so I am not going to take a long time.

But it is clear the need for both budget process and Federal
spending reform is real, it is urgent, it is very pressing, the most
pressing thing we have to deal with.

In 1992, we spent about $290 billion more than the Federal Gov-
ernment raised in taxes, and our debt is now $4.4 trillion; it is
equal to 74 percent of the U.S.'s entire gross national product. It
poses basically a debt of $17,413 on every single one of our citizens,
and these numbers are growing.

For a number of years, it has been fashionable to talk about
eliminating waste, fraud, and abuse — it has been sort of the
mantra around here — as the way of easing our debt. As the rank-
ing Republican on your committee, Mr. Chairman, where we over-
see and correct — hopefully, correct wasteful Federal practices, I
know you would agree with me that reducing paperwork and
reusing paper clips alone is not going to reduce the deficit.

Last year, all discretionary spending combined equaled less than
40 percent of the entire budget. We could eliminate every dollar for
every discretionary program, including Head Start, environmental
cleanup, jobs retraining, even zero out the entire Department of
Defense, and still not even come close to eliminating our national

debt. So we are coming to a time when this country is going to be
forced to reconsider our spending priorities and exactly what we
want from the Federal Government.

Clearly, we have to expect it to ensure our domestic and inter-
national security; we must expect it to provide our poor citizens
with a minimal safety net. We have to expect it to provide the in-
frastructure necessary to provide job security, and we must expect
it to do so as cheaply as possible. But, you know, given these basic
goals, what do we cut, how do we cut it, and what processes should
we adopt to better enable us to answer these questions?

I support a balanced budget amendment, I think out of frustra-
tion as much as anything else. I think we must eliminate baseline
budgeting. I finally, I am the sponsor of legislation to adopt a uni-
fied capital budget, which I think would encourage responsible
budgeting while safeguarding our vital infrastructure.

I think any or all of these reforms would help our country to ad-
dress the hard questions we are being forced to face, so I really
look forward to tnis very vitally important hearing, Mr. Chairman.
I commend you for holding it and look forward to the testimony.

[The prepared statement of Mr. dinger follows:]

Opening Statement of

the Hon. William F. dinger, Jr.

Subcommittee on Legislation and National Security

Hearing on Budget Process Reform

June 29, 1994

Thank you, Mr. Chairman. I appreciate you holding this hearing,
and I'd like to start by thanking each of the Members who will be
testifying today. The time, thought and effort they have put into
addressing one of the most pressing problems confronting our nation
will help this committee as it considers future budget legislation, and
will help the House as a whole in preparing to tackle the serious task
of major spending reform.

Mr. Chairman, the need for both budget process and federal
spending reform is real.

In 1992, our government spent $290 billion more than it raised in
taxes. At $4.4 trillion dollars, our national debt is equal to 74 percent
of the United States' entire Gross Domestic Product (GDP) and
imposes a debt of $17,413 on every single one of our citizens. What
is more, these numbers are growing.

According to the Bipartisan Commission on Entitlement and Tax
Reform, in 1990, the net national debt was about $10,000 for every
man, woman and child in America. The Commission estimates that if
tax and spending policies don't change, that debt will amount to
$64,000 per American by the year 2030. And there are no easy fixes.

For a number of years, it has been fashionable to talk about
eliminating "waste, fraud and abuse" as the way of easing our debt.
As the Ranking Republican on this committee, which oversees and
corrects wasteful federal practices, I can assure you reducing
paperwork and reusing paperclips alone won't eliminate the deficit.

Last year, all discretionary spending combined equaled less than
40% of the entire federal budget. We could eliminate every dollar for
every discretionary program including Head Start, environmental
clean-up, jobs retraining, and even zero out the entire Department of
Defense, and still not eliminate our national debt.

We are reaching a time when this country will be forced to re-
think our national spending priorities and consider what exactly we
want from our federal government. Clearly, we must expect it to
ensure our domestic and international security. We must expect it to
provide our poorest citizens with a minimal safety net. We must

expect it to provide the infrastructure necessary to promote job
security and ensure an effective marketplace for our goods and
services. And, we must expect it to do so as cheaply as possible.

But given those very basic goals, what do we cut, and how do
we cut it? What processes should we adopt to better enable us to
address those questions? I am a supporter of the balanced budget
constitutional amendment. I support the presidential line-item veto. I
believe we must eliminate baseline budgeting. I favor the adoption of
a deficit lock box. And finally, I am the sponsor of legislation to adopt
a unified capital budget, which would encourage responsible
budgeting while safeguarding our vital infrastructure.

I believe that each of these reforms would help our country
to address the hard questions we are being forced to face, and I look
forward to today's hearing as a rare opportunity to begin addressing
them.

Thank you, Mr. Chairman.

Mr. Conyers. Well, I thank you, Mr. dinger.

You have worked as a great partner on this committee, and I
think your approach to perhaps the heaviest assignment we have
had this year will be very important to the outcome.

I am pleased now to recognize the gentleman from South Caro-
lina, a member of the Budget Committee and a subcommittee
chairman on Government Operations, Mr. Spratt.

Mr. Spratt. Mr. Chairman, let me thank you very much for hold-
ing this hearing and say that I think it is wise for our committee
to turn its focus to this subject matter. In the interest of time and
in light of the numerous witnesses we have today, I will forgo any
further statement, but I look forward to their testimony.

Mr. Conyers. That is the briefest you have been this year, Mr.
Spratt. Thank you very much.

We are delighted — we have Mr. ZelifF, the Z in the A-to-Z budget
cutting bill. We are delighted to have you here on the committee.
You have worked on this committee with great enthusiasm, and I
know you are concerned about this subject matter. I recognize you
at this time.

Mr. Zeliff. Mr. Chairman, thank you very much. Thank you for
letting me be involved with tnis very important subject.

I support most of the ideas that are going to be presented today,
and I strongly believe that this Congress must enact serious budget
process reforms before the year is out. There are press reports, in-
cluding the Washington Post, that claim the leadership has agreed
to allow votes on proposals for reforming the budgetary process in
a desperate attempt to block passage of the A-to-Z spending cuts
plan. I hope we are here today to seriously consider ways to reform
our failed budget process, not simply to provide political cover for
people who do not want to be held accountable.

There is a real — there is no real connection between budget proc-
ess reform for the future and A-to-Z spending cuts now. The only
real way to cut the deficit is to cut spending now. Our Nation has
a $4.7 trillion national debt. Budget process reforms, by them-
selves, cannot cure this ill.

You can see from the charts that we have passed out that the
debt rises to nearly $6.5 trillion by 1999, and we have got two
charts here, in addition to the two that you passed out, with inter-
est payments of more than a quarter of a trillion dollars in that
same period of time.

Budget process reforms are an important part of the prescription
for future change, but we must make sure that it does more than
provide political cover. We should not consider votes on the budget
process as a substitute for real votes on real spending cuts.

The purpose of the A-to-Z spending cuts plan is to permit every
Member of this House to suggest some way of cutting spending.
Every proposal would have a iree and fair debate. Every proposal
would receive an up or down vote. Perhaps we should also have —
and I think it would be a good idea to have — an A-to-Z budget proc-
ess reform plan, but we can deal with that at another time. Then
every Member of the House could propose meaningful changes in
the budget process.

While we must never lose sight of the fact that the only real way
to cause real deficit reduction is through real votes on real spend.-

ing cuts, the best budget reform this House could get is a free and
open process that allows every Member of the U.S. House of Rep-
resentatives to propose spending cuts uncensored by the leader-
ship. Let the proposals be debated. Follow the debate with a roll
call vote. It is called representative democracy, and it gives us an
accountability and responsibility from A to Z.

Mr. Chairman, I heard Mr. Waxman talk about damage, and cer-
tainly the way I look at the two charts that you all passed out, you
look at these charts and look at the trends and certainly the na-
tional debt chart here, and then look at the trend with a downward
trend in terms of discretionary moneys and the increased trend of
entitlements. It doesn't take too long in the process to realize there
is a lot of damage being done as we sit by. And I think that as a
businessman, I look at damage, you can control that damage and
make sure that it doesn't afflict anything more serious that is being
done by the kind of plan that A to Z would present.

I look at another idea from a business point of view, if we took
our proposal to the bank with the idea that our interest rates are
going up in a line like this and our debt is going up like this, we
certainly would not be able to continue to borrow money.

I think it is time that we get ourselves in a position that we can
be strong in the future, and I hope that by the end of the day, we
will have some good, concrete ideas on how to accomplish that.

Thank you, Mr. Chairman.

Mr. Conyers. Bill Zeliff, we know about your commitment to this
subject matter, and I know that you will keep an open mind in
terms of the discussion that will follow.

Mr. Zeleff. I sure will. Thank you.

Mr. Conyers. We are pleased now to call our two chairmen — the
distinguished chairman of the Budget Committee, Marty Sabo from
Minnesota; the distinguished chairman of the Appropriations Com-
mittee, Dave Obey of Wisconsin — to join us at this time, if you
would.

Good morning, Chairmen. We are honored by your presence. We
know that this is an incredibly complex set of hearings, putting all
of these bills together, but we woula like you to open up the discus-
sion for us. We are delighted to have you this morning.

Mr. Sabo. I am not sure which order you want us to go in, Mr.
Chairman.

Mr. Obey. Go ahead.

STATEMENT OF HON. MARTIN OLAV SABO, A REPRESENTA-
TIVE IN CONGRESS FROM THE STATE OF MINNESOTA

Mr. Sabo. OK. Thank you.

Mr. Chairman and members of the committee, I have a prepared
statement, and if I might insert that in total in the record

Mr. Conyers. Without objection, so ordered. All of the state-
ments of all of the witnesses will be included in their entirety in
the record.

Mr. Sabo. Thank you, Mr. Chairman.

Let me say what I say in the prepared statement and then add
some comments to it.

It is a pleasure to be here again in front of your committee to
visit about process. I have always believed that if we dealt with the

substance of a problem, we would talk less about process, but I
think I am being proven wrong this year. The fact is that this Con-
gress has dealt in a more substantial way with the deficit problem
than any other Congress in the last dozen years.

We did pass a significant deficit reduction package last year. We
estimated it at close to $500 billion at that point. The reality is
that the deficit reduction will be substantially more over the period
from 1994 through 1998 than we predicted when we passed that
package a year ago. That is in contrast to what happened in 1981,
when we had rosy scenarios in the initial Reagan budget which
made substantial changes in the Federal budget and projected that
within a couple of years, the Federal budget would be in balance.
The opposite happened.

The opposite also happened when we passed the big Budget Act
of 1990, although some very important reforms ana changes oc-
curred in the 1990 act.

I also have to say I am struck by the degree that changes in
process are led most often by people who voted no in 1990, or no
in 1993 when we dealt with the reality of changes in both spending
and revenue that led to significant deficit reduction.

The hypothetical is easy to talk about. Each of us can strike our
own hypotheticals. What is difficult in this process is to get agree-
ment that can muster a majority in the House, muster a majority
in the Senate, and be of such substance that it can be passed and
be signed by the President.

The fact is that what we did a year ago is having a significant
impact on the economy. The economy is clearly in recovery. We are
producing substantial numbers of new jobs again as Alan Green-
span noted in front of the Budget Committee last week in testi-
mony. He stated the outlook for the U.S. economy is as bright as
it has been in decades; and really, that is ultimately what we are
about.

Let me speak a little bit about history and how the budget proc-
ess works and proposals for change.

Some would move us backwards and not forward. The budget
process in Congress is relatively new. It started shortly before I
came to Congress with the passage of the Budget Act in 1974,
which was in response to some real differences between the Con-
gress and the President as related to how to deal with important
budget issues. So the bill passed the House and Senate by an over-
whelming majority in 1974.

Basically, the way we deal with the budget is divided into two
parts — one, discretionary spending which, as Mr. Clinger indicated,
is about 35 percent of the budget, the balance being entitlements
or interest costs. We deal with them in different fashions; and I
think the budget process as we have it today frankly deals with
something in a better way than it is given credit for.

We each year set the discretionary spending totals which now
are around $540 to $550 billion. And since 1990 we have set those
as hard targets projected into the future, frankly this works much
better than the alternatives we had before that under Gramm-Rud-
man and a variety of other proposals.

These caps are working as they should. They set overall spending
limits on discretionary spending. Within those caps, the budget res-

olution makes certain assumptions by function, but ultimately, we
forward to the Appropriations Committee a spending ceiling, and
the detail are then reallocated in an appropriation process amongst
the various subcommittees.

Since 1990, those caps have basically been followed. They are
now in law through 1998.

On the entitlement side, we use a different process; it is called
the "reconciliation process." It provides an opportunity for the Con-
gress to deal in a systematic way with the question of entitlement
spending.

Within the budget resolution, we can make assumptions of dollar
amount changes in various entitlement programs. We then for-
ward, as we did a year ago to the various committees of the House,
dollar totals which they have to meet. Generally, we use assump-
tions about policy changes, to get to our numbers, but those indi-
vidual committees then have the discretion to meet those savings
in whatever fashion they want to enact, with the saving targets set
for a 5-year period of time, or in the case of revenues, to increase
revenues by a given amount.

It worked a year ago. Basically, the targets we set for our com-
mittees were met, and that was part of the deficit reduction pack-
age.

Since 1990, we have also had another very important modifica-
tion on entitlement programs, and that was the adoption of the
pay-as-you-go provision, which said that for new entitlement pro-
grams, you had to meet the amount of spending it included over
a 5-year period of time with either reductions in other entitlement
programs or new revenues; so they had to be deficit-neutral over
that 5-year period of time. I think that was a very important
change, and again, it has worked.

Frankly, when you look at entitlement spending, most of it is in
areas that have not been enacted in recent years. Most of the big
entitlement spending goes back to programs that predate most of
us — Medicare, Medicaid, old programs from the 1960's and Social
Security, also the decision to index those for COLAs, again — I for-
get— I think it was in the early 1970's at some point.

Again, the reconciliation process gives one the option of dealing
with that in a structured and organized fashion within the budget
resolution.

What about some of the proposed changes? Let me speak to some
of them and some problems I see.

Baseline changes: We really use three different methods for deal-
ing with and describing budgets, and I think they all play a role.
There are those who argue that we do baseline budgeting here.
That, frankly, is not the case. If one reads the report of every ap-
propriation bill that comes before the Congress; it shows last yearns
number, what the President recommended, and what the commit-
tee is recommending this year. I haven't seen baseline charts in
any of the committee reports on any of the appropriation bills.

On the other hand, to project what has happened over a period
of time on discretionary programs, to know what a base was, what
it would be, adjusted by inflation, and to see how it is changed, I
think is a legitimate measurement of what is happening with budg-
et policy.

I find that people use this in varying fashions. I find the most
avid defenders are those most concerned by the level of defense
spending, talking about how much we have cut defense. The reality
is, we have cut defense since 1985 in fairly substantial numbers,
if you use a baseline in projecting what defense spending would
have been from 1985 on. If you simply use the basics of the pre-
vious year, it would be roughly flat.

The same theory computes for domestic programs. You can meas-
ure them up, down, in various ways, showing the changes in rela-
tionship to baseline. That is one legitimate way of measuring what
has happened with Federal budget policy. Actual dollar changes
from x years is also a legitimate method of looking at changes in
where Federal dollars go.

Another method that we use is various functions of government
measured as a percentage of the gross domestic product. Again,
that is a legitimate method of describing what is happening with
Federal policy. I don't know that we should use any of them exclu-
sively or say that one of them is illegitimate when it relates to
baseline and entitlement programs.

I would not expect one would argue that we should not project
future costs based on current law, because current law projects in-
creased caseload and automatic adjustments for COLAs. If we said
we were going to project the future of entitlements simply on this
year's spending and ignore current law, we could show much small-
er deficits projected in the future. But it would be inaccurate.

If we simply want to look in total at this year in comparison to
next year, those Members should suggest that we repeal all growth
based automatically on COLAs in all programs and let the various
committees make the judgment on that, and eliminate automatic
growth from change in caseload. Again, then, you would be back to
this year's baseline.

But the reality we have to deal with is what is current law. If
we make changes in those, those are, in effect, changes that do im-
pact future spending, future deficits. So I think they are all three
legitimate measurements of budget policy; they all three have a use
in understanding what we are doing.

Entitlement review, I frankly think what the Congress did last
year, or the House did in terms of changing our rules and the ac-
cepted order by the President, in establishing a process to each
year review entitlements if their costs exceed our estimates, was a
very positive step forward; and Mr. Spratt was very key in nego-
tiating between many of us who had differing views in achieving
that. In my judgment, that was a very positive step forward.

I would like to see what we did last year put into law so that
it applies to both House and Senate and goes beyond simply the
Executive order. The lockbox, in my judgment, creates for both the
House and the Senate, a new Byrd rule, I have real problems with
that.

The fact is that when we adopt a budget resolution we arrive at
something that can pass the House and Senate. The lockbox pro-
posal would suggest then that the House could unilaterally change
that budget resolution, and the Senate could unilaterally change it.
To me, that makes no sense, because as I understand it. what
lockbox is suggesting is that after we have gone through the budget

process and decided on a given amount of dollars for discretionary
spending, if an amendment passed on the House floor that lowered
some appropriation bill, that would automatically change the budg-
et resolution.

If there were a series of amendments, they again would unilater-
ally change the budget resolution in the House. The Senate might
then adopt a whole series of different amendments making reduc-
tions in the appropriation bills. Again, those would unilaterally
change the budget resolution in the Senate. That makes no sense
to me.

You know, you get your agreement on the macro numbers at one
point and then you have your arguments on the relative priorities
with them. To do it unilaterally by House or Senate action makes
no sense.

And that, frankly brings me to the Byrd rule, which I think is
one of the real problems we have within the budget process.

The Byrd rule basically prevents us within the reconciliation
process from dealing with substantive change in law, unless they
are very directly related to entitlement spending without a 60-vote
waiver in the Senate. And my position on the Byrd rule, frankly,
simply is that if the Senate wishes to have the Byrd rule for their
initial consideration of reconciliation, that is fine with me, but it
should not apply to conference committees.

We have, I think, distributed to the committee an analysis of the
Byrd rule for you, along with a pamphlet on the budget process for
your information. In a variety of cases — when you are trying to
make substantial changes in authorizing legislation, the Byrd rule
simply knocks it out.

An example of that would be, last year when we were trying to
improve the income verification for public housing. Clearly, it
would save us money. That provision of law could have survived
the Byrd rule. But people thought along with it should go a hearing
procedure for due process for individuals who left — there was a
mistake made. The Byrd rule knocked out the due process.

And we went through a whole series of proposals in that same
fashion. We had problems with the spectrum because there were
specific provisions we needed to make that workable and they were
not acceptable under the Byrd rule.

So, again, I would argue that in terms of budget process on rules
like the Byrd rule or lockbox, we should not have a system where
the House or the Senate can unilaterally skew what is in the budg-
et resolution.

Let me suggest another problem that I think is going to be of
growing concern, and that is our ability to lock beyond 5 years in
budget resolutions; and I don't know how one deals with tnat sub-
stantively. The heart of reconciliation is that we can recommend
savings for 5 years and committees have to meet it.

I regularly find that committees meet it in such a fashion that
they meet the 5-year total, but then costs explode and the policy
may not carry on forward for the long term, contrary to the intent
of the budget.

Or we are increasingly finding, as Members draft amendments,
they are now drafting amendments which go into effect 6 years

from now, which means that they get by the 5-year pay-as-you-go
rule simply by making the amendment effective 6 years out.

I think some of the real significant long-term funding problems
of the Federal Government are the large ongoing entitlement pro-
grams where the real problem is not so much immediate as long
term. And again, in many cases, there are ones that are going to
deal with changes that may not be changes that have real budg-
etary impacts in the next 5-year period, but they start in the fu-
ture.

Like dealing with the long-term problem of Social Security fund-
ing, that would be very difficult to deal with in the reconciliation
process, because the initial savings might well be beyond the 5-year
window of the reconciliation rules. So I think that long-term prob-
lem is a real problem for us to deal with; it has real technical dif-
ficulties.

CBO will make estimates for 5 years; they will only make projec-
tions beyond that, and that clearly is a problem that we have to
think about.

Mr. Chairman, I thank you, and I know the bells have rung. I
have talked longer than I planned; I should have maybe simply
read the statement. But I would be happy to respond to questions
under whatever your schedule is.

[The prepared statement of Mr. Sabo follows:]

STATEMENT OF MARTIN OLAV SABO

CHAIRMAN OF THE HOUSE BUDGET COMMITTEE

BEFORE THE GOVERNMENT OPERATIONS COMMITTEE,

SUBCOMMITTEE ON LEGISLATION AND NATIONAL SECURITY

ON
BUDGET PROCESS REFORM

June 29, 1994

Mr. Chairman, Members of the Committee:

Thank you for giving me the opportunity to testify before you today. It is
always enjoyable to appear before your committee to visit about the concerns we
all share about the budget process.

I've always believed that if we dealt with the substance of a problem we
wouldn't need to talk about process -- in fact, I have often maintained that we
talked about process when we couldn't deal with substance.

But this year, I am being proved wrong in that view. Clearly, we have dealt
with the substance of. our deficit problem. We passed a significant economic
package last year that dealt with a real problem in a real way and we have had
significant success. In fact, the deficit this year will be down more that $50
billion below last year -- a 20% reduction -- and, more than $90 billion below
that of two years ago. That is not to say we shouldn't do more in the future,
but there are real macroeconomic effects with any significant change in the

federal budget. The work we did last year went about as far as we should go in
a two-year period.

In fact, just last week Alan Greenspan, the Chairman of the Federal Reserve
Board, commented extensively on our success in his testimony before the Budget
Committee. He stated, "... the outlook for the U.S. economy is as bright as it
has been in decades." Further, he noted, "Last year's budget agreement,
especially the spending caps, was a significant step in putting fiscal policy on
a more sustainable long-run path."

In spite of this success, we are still being asked to make dramatic changes
in our budget process. Mr. Chairman and my colleagues on the committee, I FEAR
THAT SOME OF THE PROCESS REFORM PROPOSALS NOW BEFORE YOU WILL DRIVE US BACK INTO
THE CHAOTIC, DESTRUCTIVE, UNDISCIPLINED, AND EXPENSIVE BUDGET PROCESSES OF THE
PAST.

BUDGET PROCESS HISTORY

Why do I say that? First, it might be helpful to review a little history
of the budget process.

As most of the members of this committee know, the budget process is very
young in this institution. In fact, it was initiated just 20 years ago by the
Congressional Budget and Impoundment Control Act of 1974. It was enacted
because of growing concern in Congress on the part of members of both political

parties about the growing shift in budgetary control away from the Congress
toward the President. The extensive use of impoundment by President Nixon
triggered a crisis that was the immediate catalyst for the 1974 Budget Act, but
pressures toward this type of legislation had been building for several years.

The 1974 Act stated its purpose as follows:

"To establish a new congressional budget process; to establish Committees on the
Budget in each House; to establish a Congressional Budget Office; to establish
a procedure providing congressional control over the impoundment of funds by the
executive branch; and for other purposes."

The law passed the House 401 to 6 and the Senate 75 to 0. Clearly, Congress
felt the need to reassert its constitutional authority over the "power of the
purse".

In the twenty years since the 1974 Budget Act was enacted budget procedures
in both Houses have evolved and changed. A variety of procedures and devices
have been tried to make the process more disciplined and effective. Although
many of the earlier mechanisms proved to have serious flaws, the current system
of budget controls is working reasonably well as is evidenced by the success of
last year's budget agreement in reducing the deficit.

Basically the budget is divided into two different types of spending --
discretionary and entitlement. The budget sets an overall number for

discretionary spending and the appropriations process governs the details within
that total pot. Since the 1990 Budget Agreement, the total amount of
discretionary spending has been limited by caps set in the budget. In the last
five budgets we have not appropriated more than the caps allowed. (There have
been two minor disputes over scoring that resulted in sequestrations when 0MB
interpreted an appropriation to be over the caps, but Congress has not
deliberately "busted the caps".)

On the entitlement side of the budget we have a slightly different situation
and we deal with this side of the budget through the reconciliation process. The
original purpose of reconciliation was to force committees to respect spending
ceilings adopted by the budget resolution. In other words, the individual
committees must "reconcile" their spending desires within the overall goals of
the whole Congress as expressed in the budget resolution. And the taxing
committees must raise any revenues required by the reconciliation process. This
process is now the primary means of controlling spending in non-discretionary
programs.

While entitlement benefit liberalizations have been rare since the 1974
Budget Act, the 1990 Budget Agreement established the Pay-As-You-Go (PAY-GO)
system to further clamp down on new entitlement spending. This system requires
authorizing committees to find either revenues or other spending cuts to pay for
new entitlement spending. Since this requirement went into effect, we have seen
few problems with new entitlement programs.

The remaining problem 1s "old" entitlement programs and the most significant
problem we have 1n that arena comes from the costs of health care. Clearly,
Medicare and Medicaid are two of our most dramatically growing programs in the
federal government. Further, as in the private sector, the cost of health care
is a significant problem in the defense budget and the personnel budgets of every
agency. This is why the President has rightly identified health care reform as
the second step in getting the federal budget under control.

This is not to say that we shouldn't be reviewing all entitlement programs
-- and for that measure tax expenditures -- while we wait to see what happens
with health care reform. Rather, my point is that control of the federal budget
requires substantive action. All the procedures and process changes in the world
won't solve our problems if we don't take substantive action.

So what do we do next? The most important question we need to ask about any
process or procedural change is, will it produce a better product or will it
produce a worse product than the existing system? In this case, will we have a
more manageable, more reasonable federal budget, or will it be more gimmicky and
difficult to control? Mr. Chairman, Members of the Committee -- I know that you
are trying to evaluate the proposals before you in light of that concern.

PROPOSED BUDGET PROCESS CHANGES

I would like to share with you my concerns and views on the proposals before
us and I would like to recommend another idea for your consideration.

BASELINE CHANGES

We hear lots of discussion about how we could Improve the budget process by
changing the baseline. I have to admit I don't know what people are talking
about when they say that.

In my view, It Is Impossible to develop good budgets without looking at both
past and current experience as well as future estimates and projections including
Inflation. I would object to any proposal which said we should not use either
current numbers or estimates of the future including inflation. To me, it is not
particularly meaningful to look at projections of future spending or revenues
without some understanding of the effect of inflation on the buying power of
those numbers. At the same time, I think any budgeting must be illuminated by
the reality of past and current experience.

I would oppose any proposal that would deprive us of the ability to review
all these factors when making budgets or responding to the President's budget
request.

ENTITLENENT REVIEW

I think the policies the House passed last year on entitlement review were
very positive and I would support efforts to get those provisions passed into
law. As you may recall, we passed a proposal that established a target level for
total entitlement spending that reflected our budget agreement. If entitlements
go over the target, the President is required to send to Congress, along with his
budget message, a proposal for dealing with the amount of entitlement spending
that is over the target. He can do this by cutting spending, increasing taxes,
Increasing the deficit or any combination of the three. We, then, are required
to act on his recommendation. If we decide to increase the deficit, a separate
vote is required on that recommendation alone before we can proceed with any
other budget action.

Unfortunately, the Senate Byrd Rule prevented us from keeping the
legislative language on entitlement review 1n the reconciliation conference.
Therefore, we had to confine this mechanism to an executive order from the
President and changes in the rules of the House. I will discuss the Byrd Rule
and why I would like it repealed in more detail later.

I should also point out that this year total entitlement spending came in
below the target so there was no separate presidential message on entitlements
and no action required by the House.

LOCKBOX

85-810 - 95 - 2

Now let me talk about the lockbox. I oppose the lockbox Idea because, In
my judgment, 1t destroys our ability to run a rational, controllable budget and
appropriations process.

The lockbox Idea might work If we had a unicameral legislature in a
parliamentary system of government, but we don't!

As it is proposed, the lockbox is a roving, unilateral decision to change
the budget. Under the lockbox proposal, every time an amendment passes to cut
a discretionary program the overall budget caps would be reduced and the total
discretionary spending allowed by the budget would be reduced. This means that
every single cutting amendment passed by either the House or the Senate changes
the budget resolution, even after the budget has been negotiated through the
legislative process and accepted by a majority of both Houses.

I am sure the Appropriations Committee chairman will tell you more about the
technical problems this idea poses for the appropriations process. There are,
however, unique budget problems with the lockbox beyond any technical issues with
appropriations. This idea violates the fundamental operating principal of all
politics that says "a deal is a deal"!

The ultimate effect of this type of process is to undermine any ability to
use the budget resolution as an overall roadmap for the federal budget. It
destroys our ability to make budget decisions in light of their impact on the
economy and it reduces our credibility when making budgets. If we indulge

ourselves in this type of process, we will ultimately be back in the position we
were In before the 1974 Budget Act with the "power of the purse" residing in the
executive branch because our process is so chaotic.

BYRO RULE

There is one additional area where I believe real reform is needed. That
involves the Senate Byrd Rule. This rule prevents many significant budget
reforms because of its limiting nature on the changes allowed in a reconciliation
package. Let me explain the problem in further detail.

The Byrd Rule sets up a 60-vote point of order in the Senate against any
provision in a reconciliation resolution that is considered "extraneous". It
defines as extraneous any provision that is not directly linked to a change in
outlays or revenues that is "scoreable" under congressional budget rules. Now
this does not particularly trouble me because the way I see it, the Senate can
have any kind of rules it wants. The problem arises because they have made this
rule apply to conference committee reports as well.

Because of the impact of this rule, we were not able to accomplish many
significant reforms the House passed last year and the House was in a very
weakened position when negotiating a conference agreement with the Senate on
reconciliation. The problems this created were manifold.

First, the Byrd Rule made It Impossible to Include provisions necessary to
achieve savings In appropriated programs. The House-passed reconciliation bill
included a number of provisions designed to reduce the cost of appropriated
programs. However, since changes in rules governing appropriated programs are
scored as not directly reducing outlays (because they all come under the caps),
these reforms were considered extraneous under the Byrd Rule and had to be
dropped from the bill. Examples include reform of the subsidy for postal rates
for nonprofit organizations which would have reduced costs $192 million,
restructuring of rural electric and telephone loan programs which would have
lowered costs $276 million, and several other changes such as changes in federal
employee pay structure.

The Byrd Rule also prevented inclusion of measures closely related to key
budgetary provisions, thereby forcing bad legislation. My favorite example of
the folly of this rule occurred when House conferees had to take out a due
process provision of a housing provision. The House-passed bill tightened
enforcement of eligibility rules for housing subsidies and included language
which allowed people who thought they were treated unjustly to contest the
results at a hearing. The Byrd Rule barred inclusion of the fair hearing
provisions in the conference report. In effect, the Senate said we could tighten
up enforcement of housing subsidy rules but if we made any mistakes, individuals
who had been hurt by our action could not have a hearing.

Further the Byrd Rule barred provisions that could have reduced government
costs because CBO was unable to assign particular savings to those provisions.

For instance, several provisions that dealt with Medicaid fraud and abuse had to
be dropped because CBO couldn't score them.

The Byrd Rule was incorporated into the 1990 Budget Act. I will be
introducing legislation after the recess to amend the Budget Act to end
application of the Byrd Rule to conference committees. I believe this change
would make a great improvement in our current budget process and I invite you to
join me in this effort.

CONCLUSION

In conclusion, I believe the current congressional budget process works much
better than it is given credit for. It produces sound budgets when there is a
majority in the Congress willing to vote for them. In the past, we have had
budget processes which encouraged and almost forced institutional lying. I urge
you, as you review the proposals before you, to be wary of this problem.

On the other hand, there is room for some genuine reform of the current
process. In my view, that means simplifying the process rather than complicating
it.

House Budget (^

OMMITTEE

Honorable Martin Olav Sabo, Chairman - 214 O'Neill House Office Building - Washington. DC 20515 - (202) 226-7200

June 29, 1994

Impact of the Byrd Rule
On the 1993 Reconciliation Conference Report

The basic principle of the Byrd Rule as applied to reconciliation conference reports
is that a provision will be considered extraneous - and hence subject to a 60-vote point
of order -- if it is not directly connected to a change in outlays or revenues that is
"scoreable" under congressional budget rules.

Last year, Senate Republicans served notice that they intended to strictly enforce
the Byrd Rule against the reconciliation conference report, and they had sufficient votes
to block Byrd Rule waivers. As a result, numerous provisions passed by one or both
chambers had to be excluded from the conference report while others had to be rewritten.

Some of the provisions dropped — such as the reduction in federal pay raises or the
cut in the subsidy for rural electrification loans — clearly have a budget effect in
commonsense terms. Other casualties were part of overall legislative packages achieving
savings in major entitlement programs, while still others may have had budgetary effects
that were insufficiently defmite to pass Byrd Rule muster. The net result of applying the
Byrd Rule to the 1993 reconciliation conference was a final bill less effective in dealing
with the deficit than the version that passed the House.

1. The Byrd Rule made it impossible to include provisions necessary to achieve
savings in appropriated programs.

The House-passed reconciliation bill included a number of provisions designed to
reduce the cost of appropriated programs. However, changes in rules governing
appropriated programs are scored as not directly reducing outlays (because the level of
outlays for any given program is ultimately controlled through the appropriations process),
and are therefore considered extraneous under the Byrd Rule. Examples of provisions that
had to be dropped for this reason include the following:

■ Elimination of the 1994 cost-of-living raise for federal employees and delay
and reduction in the pay raises for 1995-97; delay in implementation of
locality pay raises and limitation of the amount of such raises.

■ Restructuring of rural electric and telephone loan programs, basically to
reduce the depth of the federal subsidy provided and thereby lower 5-year
program costs by $220 million (House version) or $276 million (Senate
version).

■ Reform of the subsidy for postal rates for nonprofit organizations, designed
to reduce program costs by $192 million over 5 years.

■ Requirement that the Secretary of Agriculture consolidate USDA personnel
and offices so as to reduce personnel and overhead costs by $500 million
over 4 years.

These provisions would have reduced the "per-unit" cost of federal programs, and
would thereby have allowed appropriations to be reduced without a corresponding
reduction in services. Such savings become increasingly important as the caps on annual
appropriations become increasingly tight. The Byrd Rule, however, absolutely prohibits
this kind of cost-saving legislation as part of reconciliation.

2. The Byrd Rule prevented inclusion of measures closely related to key budgetary
provisions, thereby forcing piecemeal legislation.

When committees report legislation on a particular subject to meet reconciliation
instructions, they often wish to address that subject in a comprehensive manner. The Byrd
Rule, however, requires dismemberment of comprehensive legislation unless each and
every piece can be tied to particular budget savings. For example -

■ The House bill made cost-saving changes in various farm commodity
programs through fiscal year 1998 and also extended the legislative
authority for all commodity programs through that same year. The Senate
Parliamentarian ruled, however, that provisions could be extended only if
cost savings were made in that specific provision. Because the Byrd Rule
required deletion of some extensions, farm programs now have widely
varying expiration dates, and the Agriculture Committee is concerned about
litigation growing out of inconsistencies between sections of law that were
extended and sections that weren't.

House provisions expanding income verification for housing program
beneficiaries also required that beneficiaries be permitted to contest the
results at a hearing. The Senate Parliamentarian considered the "fair
hearing" requirement extraneous to the income verification savings,
however, and it had to be dropped.

As part of a comprehensive restructuring of student loan programs, the
Senate provided for consolidation and refinancing of loans under various
existing programs, thus allowing borrowers to reduce their payments
without cost to the government; this provision was deemed extraneous to
the other student loan changes.

Both versions of the bill included numerous changes to the rules for
Medicare reimbursement for hospitals, doctors, and other providers of
services -- in the aggregate cutting outlays by more than $50 billion over
5 years. Numerous specific provisions had to be excised from the overall
package, however, because CBO did not attribute savings to those particular
items.

House provisions modifying the tax credit for businesses operating in the
U.S. possessions required recipients of the credit to certify that
establishment of new operations in the possessions would not cause a loss
of employment at their U.S. facilities; the Byrd Rule required this
certification requirement to be dropped.

3. The Byrd Rule led to use of counterproductive drafting techniques in an effort to
mitigate its effects. For example -

■ As part of its legislation authorizing the FCC to auction rights to use
currently unused portions of the broadcast spectrum, the House included
provisions requiring 200 megahertz of spectrum to be reallocated from
federal to private use and preempting state regulatory authority over certain
communications services in order to ensure regulatory parity. Although the
House committee apparently deemed both of these provisions essential to
the overall spectrum auction package, the Senate Parliamentarian considered
them extraneous. The conferees' solution was to condition the FCC's
authority to auction unused spectrum on completion of the reallocation and
various "regulatory parity" rulemakings. While this technique kept the
package together, it may have the undesirable effect of encumbering the
auctions and delaying or jeopardizing the budgetary savings.

The House bill extended the formula for calculating the government
contribution to federal employee health benefits. Although the only effect
of this provision is budgetary (i.e., to determine the federal government's
cost for health benefits), CBO scored no change in outlays for the technical
reason that it already assumed the extension in its baseline. The conferees
preserved the extension by modifying the formula so that CBO scored it as
a small savings.

4. The Byrd Rule barred provisions that could have reduced government costs or
made programs more effective because CBO was unable to assign particular dollar
savings to those provisions. For example ~

■ Several provisions related to preventing fraud and abuse in the Medicaid
program had to be dropped because CBO did not score them as reducing
outlays. Examples include creating a new sanction for kickbacks, requiring
states to maintain expenditures for fraud control at no less than the fiscal
year 1992 level, and establishing safeguards against fraud under Medicaid
managed care contracts.

■ Provisions exempting various state health care laws from preemption under
ERISA were considered Byrd Rule violations, even though one basic
purpose of these laws is to control health care costs - a goal of great
importance to the federal budget.

■ Waivers permitting continuation of Medicaid contracts with three specific
prepaid health plans could not be extended because CBO scored no savings,
even though CBO scored a similar waiver for another plan as reducing
outlays.

■ Provisions establishing new standards for suppliers of durable medical
equipment to Medicare beneficiaries and making reforms to reduce
payments for unnecessary equipment and protect beneficiaries from charges
in certain cases all had to be dropped because CBO assigned no specific
cost savings.

-4-

38
[COMMITTEE PRINT]

THE CONGRESSIONAL BUDGET PROCESS:

1974-1993

PREPARED BY

NICHOLAS A. MASTERS, Special Assistant to the

Chairman

FOR THE

COMMITTEE ON THE BUDGET
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS
FIRST SESSION

JANUARY 1994

THIS REPORT HAS NOT BEEN OFFICIALLY ADOPTED BY THE COM-
MITTEE ON THE BUDGET AND MAY NOT THEREFORE NEC-
ESSARILY REFLECT THE VIEWS OF ITS MEMBERS

Serial No. CP-3

Printed for the use of the Committee on the Budget
MARTIN OLAV SABO, Chairman

U.S. GOVERNMENT PRINTING OFFICE
76-476 CC WASHINGTON : 1994

For sale by the U.S. Government Printing Office
Superintendent of Documems. Congressional Sales Office, Washington, DC 20402
ISBN 0-16-043438-6

COMMITTEE ON THE BUDGET
MARTIN OLAV SABO, Minnesota, Chairman

RICHARD A. GEPHARDT, Missouri
DALE E. KILDEE, Michigan
ANTHONY C. BEILENSON, California
HOWARD L. BERMAN, California
ROBERT E. WISE, Jr., West Virginia
JOHN BRYANT, Texas
CHARLES W. STENHOLM, Texas
BARNEY FRANK, Massachusetts
JIM COOPER, Tennessee
LOUISE McINTOSH SLAUGHTER, New

York
MIKE PARKER, Mississippi
WILLIAM J. COYNE, Pennsylvania
BARBARA B. KENNELLY, Connecticut
MICHAEL A. ANDREWS, Texas
ALAN B. MOLLOHAN, West Virginia
BART GORDON, Tennessee
DAVID E. PRICE, North Carolina
JERRY F. COSTELLO, Illinois
HARRY JOHNSTON, Florida
PATSY T. MINK, Hawaii
BILL ORTON, Utah

LUCIEN E. BLACKWELL, Pennsylvania
EARL POMEROY, North Dakota
GLEN BROWDER, Alabama
LYNN C. WOOLSEY, California

Eileen M. Baumgartner, Chief of Staff
Richard E. May, Republican Staff Director

JOHN R. KASICH, Ohio
J. ALEX McMILLAN, North Carolina
JIM KOLBE, Arizona
CHRISTOPHER SHAYS, Connecticut
OLYMPIA J. SNOWE, Maine
WALLY HERGER, California
JIM BUNNING, Kentucky
LAMAR S. SMITH, Texas
CHRISTOPHER COX, California
WAYNE ALLARD, Colorado
DAVID L. HOBSON, Ohio
DAN MILLER, Florida
RICK LAZIO, New York
BOB FRANKS, New Jersey
NICK SMITH, Michigan
BOB INGLIS, South Carolina
MARTIN R. HOKE, Ohio

(ID

FOREWORD

The article that follows is a revised overview of the congressional
budget process since the passage of the Congressional Budget and
Impoundment Control Act of 1974. The revision highlights the de-
velopment of the budget process, documents the significant changes
that have occurred in the budget process since its inception and
emphasizes particularly the recent changes made by the Omnibus
Budget Reconciliation Act of 1993. I am grateful to Nicholas A.
Masters, my Special Assistant, who prepared the original and re-
vised drafts of this article.

Martin Olav Sabo,
Chairman, House Budget Committee

(III)

THE CONGRESSIONAL BUDGET PROCESS:

1974-1993

The Congressional Budget and Impoundment Control Act of 1974
is the single most significant piece of legislation affecting the Fed-
eral budget process since enactment of the Budget and Accounting
Act of 1921. Like its predecessor of 1921, the 1974 act is part of
a process in which the legislative branch seeks to maintain its his-
toric role in determining the Nation's taxing and spending policies,
while allowing coordination, led by the President, within an execu-
tive establishment whose size reflects the activities of a huge coun-
try.

Article I, Section 9 of the U.S. Constitution states, "No money
shall be drawn from the Treasury except in consequence of appro-
priations made by law." Though the authors of the Constitution
clearly intended that Congress have the decisive power of the
purse, it has not always turned out that way. Throughout much of
the 20th century the President has gained power for a variety of
reasons. Two of the most obvious ones are the growth of the execu-
tive bureaucracy, taxing Congress's ability to supervise; and the
President's increased assertiveness in using his executive power
coupled with congressional reliance to challenge that power, par-
ticularly in times of war.

Wars everywhere disrupt established modes of financing and op-
erating government, and major budget process reforms, including
the creation of the Appropriations Committees after the Civil War
and later the 1921 and 1974 Acts, tend to respond to those disrup-
tions. World War I generated massive (for the time) spending in-
creases and deficits. The 1921 Act centralized under control of the
President (with rare exceptions) preparation of the Budget Esti-
mates with which agencies request funds from Congress. To bal-
ance this grant of power, Congress moved control of the audit of
spending to the legislative branch from the Treasury, creating the
General Accounting Office. Congress also centralized its own activi-
ties, reconcentrating authority over appropriations, which had been
dispersed towards the end of the 19th century, in the House and
Senate Appropriations Committees.

Budget Process Changes, 1921 to 1973

The Budget and Accounting Act of 1921 placed the Bureau of the
Budget in the Treasury Department although it officially was
under the direct supervision of the President. The Reorganization
Act of 1939 recognized the Bureau of the Budget's reporting rela-
tionship by moving it to the newly-created Executive Office of the
President. The Bureau of the Budget was renamed the Office of
Management and Budget as a result of government reorganization

(l)

in 1970 and an Executive order from President Richard M. Nixon
which implemented the change.

There had always been spending, such as interest on the public
debt, that received "permanent" appropriations. These funds did
not have to be voted upon annually by Congress. Beginning in
1932, Congress instituted a new form of "backdoor" spending in the
form of loan authority. The Social Security Act of 1935 created
major new "entitlements," programs with permanent appropria-
tions, such as old age pensions. These would grow steadily as the
eligible population-grew over the coming years. Congress also ex-
panded contract authority (enabling agencies to enter into con-
tracts in advance of an appropriation) over the following years.

After World War II President Harry Truman appointed former
President Herbert Hoover as chairman of a special commission on
improving government efficiency. The Hoover Commission, as it
was called, came up with a series of measures in its 1949 report
that improved the way the budget was organized and presented.

These measures were effectively implemented by the National
Security Act Amendment of 1949 and by the Budget and Account-
ing Procedures Act of 1950.

However other reforms — attempts to create a joint House/Senate
"legislative budget," in 1946, and an experiment with intentional
omnibus appropriations (rolling all appropriations into one large
bill), in 1950 — were rejected in practice.

The second Hoover Commission in 1955 made further refine-
ments to the way the budget was organized and presented. Al-
though many of these ideas were not adopted formally, they did
eventually find their way into budget management. In fact, the
way the budget is organized today by function and category is di-
rectly attributable to the Hoover Commission. Important as these
changes were, none was as significant as what was accomplished
by the 1921 Budget and Accounting Act.

Though the 1921 act and subsequent changes made in the budget
process were designed to bring greater control to Federal spending,
they also created a system that worked to increase the President's
power to shape spending policies. The Bureau of the Budget's supe-
rior resources for budget preparation, and the establishment of the
Council of Economic Advisers to monitor and predict the economy,
gave the President a staff with unmatched ability to develop and
analyze budget and economic information. And it was the only
agent able to package its spending priorities as a coherent whole
to deal with such macro-economic issues as inflation, unemploy-
ment and investment. As a result, the Congress continued to play
a secondary role to the executive branch when it came to the budg-
et.

Impoundment Crisis

By 1970, control over establishing spending priorities had shifted
dramatically away from the Congress and toward the President.
Members of both parties in the Congress were disturbed by Presi-
dent Richard M. Nixon's assertion of budgetary powers. Most sig-
nificantly, he was impounding funds; that is, refusing to spend
money that had been constitutionally appropriated.

President Nixon implemented his impoundments primarily by
using the authority of the Office of Management and Budget to ap-
portion funding to agencies. That is, OMB has the authority to reg-
ulate the rate (typically, so much per calendar quarter) at which
agencies may use funds during a fiscal year. This authority was
given to the OMB by the Anti-Deficiency Act of 1954 which was in-
tended to prevent agencies from using all their appropriations early
in a fiscal year. With insufficient funds to operate during the re-
mainder of the fiscal year, agencies would threaten to shut down
if they did not receive supplemental funding. Rather than appor-
tioning all funds to agencies, President Nixon instructed OMB not
to apportion the funding he wished to impound, thereby preventing
an agency from using that money.

The impoundment crisis was the immediate catalyst of the 1974
Budget Act, but its long-term antecedents were firmly rooted in the
congressional reform movement that reasserted itself in the late
1960's. Striving to adapt itself to a changing world and govern-
ment, Congress revisited many of its procedures, seeking to com-
bine both greater democracy and greater coherence. The Senate
passed financial disclosure legislation and tightened the rules with
regard to registering lobbyists. The Legislative Reorganization Act
of 1971 was designed to improve the ability of Congress to deal
with increasingly complex and technologically oriented legislation,
and also required the President to update budget figures in reports
for the Congress. The House established a Committee on Standards
of Official Conduct (commonly called the Ethics Committee). The
Senate established its "Ethics Committee" a few years earlier. The
House also began, for the first time, to vote for its committee chair-
men at the start of each Congress. Before then, seniority alone de-
termined who served as chairman. The new procedure required a
vote of confidence by the Democratic Caucus. Chairmen who failed
to win confidence could be challenged by other members.

Seeking to justify his impoundments, the President adapted the
reformers' own rhetoric, in essence asserting that he had to usurp
power because Congress had failed to fix itself. In the President's
budget message to Congress, submitted on January 29, 1973, Rich-
ard M. Nixon wrote that "[t]he fragmented nature of congressional
action [on the budget] results in a . . . serious problem. Rarely does
the Congress concern itself with the budget totals or the effect of

its individual actions on those totals The Congress must accept

responsibility for budget totals and must develop a systematic pro-
cedure for maintaining fiscal discipline."

It was easy to find Members of Congress who agreed with that
assessment. Although the Federal budget had changed considerably
in the 20th century, congressional procedures for dealing with it
had not changed much since enactment of the 1921 Budget and Ac-
counting Act. Before 1917, there was only 1 year in which the Fed-
eral Government spent more than $1 billion and that was during
the last year of the Civil War. By the 1920's, Federal spending in-
creased to about $3 billion annually. In the 1930's it was in the $6-
$8 billion range. In the last year of World War II it rose to more
than $98 billion. By the end of the 1950's spending was $80-$90
billion a year. In the early 1970's it had reached $250 billion.

In the 13 year period from 1960 until the Congressional Budget
Act was first introduced in early 1973, Federal spending tripled;
the inflation rate tripled; and the dollar outflow abroad quad-
rupled. The 1921 Budget and Accounting Act remained the last
major reform of congressional budget procedures. Yet in the more
than half a century that had passed since then, the Federal Gov-
ernment was spending yearly 100 times what it was spending year-
ly in the 1920's.

Such standard problems of providing for the national defense,
health and education remained. Other problems emerged and de-
manded attention. International trade and competitiveness, the
consequences of regulation and later deregulation, a more active
Federal Reserve, major overhauls in the tax system — they all put
additional pressures on the way the Federal Government budgeted
its resources. Congress's existing form of control, the appropria-
tions process, became less adequate as old entitlements grew to be
a larger part of the budget, new entitlements were created, and
other "back-doors," such as contract and loan authority, were ex-
panded. There was a proposal to index Social Security benefits, so
that they would rise automatically. This proposal was adopted in
1975. Increases in other programs were tied to the inflation rate
which, as it happened, was about to enter the double digit range.

In this climate the legislative branch needed to change if it in-
tended to participate as an equal party with the executive branch.
Congress was at a distinct disadvantage because it had a limited
capacity to analyze the President's budget or to develop a fiscal pol-
icy of its own. In particular, it needed reliable estimates of the cost
of Social Security and other forms of entitlement spending. It found
itself unable to pass, before the beginning of the fiscal year that
then began on July 1, the 13 regular appropriations bills that to-
gether made up the discretionary part of the President's budget.
When Congress did pass spending bills they were not coordinated
with the revenue bills.

The Congressional Budget and Impoundment Control Act of

1974

Budget Committees and the Congressional Budget Office

The fragmented nature of congressional action on the budget vir-
tually forced Congress in 1972 to establish the Joint Study Com-
mittee on Budget Control. In the words of the Joint Committee:

We must have an effective, permanent mechanism for budget control which will as-
sure a more comprehensive and coordinated review of budget totals and determina-
tion of spending priorities and spending goals, together with a determination of the
appropriate associated revenue and debt levels.

There were many individual legislative proposals introduced in the
early part of 1973 aimed at regaining legislative control over the
power of the purse. But the Joint Study Committee's proposals
proved to be the most important since they directly led to the intro-
duction of S. 1541 in the Senate and H.R. 7130 in the House of
Representatives. It was these two bills that were enacted into Pub-
lic Law 93-344, the Congressional Budget and Impoundment Con-
trol Act of 1974.

The opening words of the legislation stated the purpose as fol-
lows:

To establish a new congressional budget process; to establish Committees on the
Budget in each House; to establish a Congressional Budget Office; to establish a
procedure providing congressional control over the impoundment of funds by the ex-
ecutive branch; and for other purposes.

It passed the Senate 75 to 0 and the House 401 to 6.

The Congressional Budget Office (CBO) was created to give Con-
gress the capacity for analyzing and developing economic and budg-
etary information independent of the President. The authors of the
Budget Act assumed that if Members all had the same macro-eco-
nomic information then they would be able to deal rationally with
policy choices as to the division of budgetary resources, as well as
develop a coherent fiscal policy. In other words, if Congress had the
capacity to provide its own information, then Congress would be
able to "do the right thing" in determining the amount of revenues
it should raise and the amount of expenditures it needed to spend.
While CBO's estimates were less subject than OMB's to suspicion
of political manipulation, so they came to be relied upon heavily,
the uncertainties of the world and of estimation ensured that
CBO's estimates also were often off the mark, creating embarrass-
ments which could not be erased by reports of "technical correc-
tions." Unforeseen at the time, CBO's estimates and technical cor-
rections would vary widely and would be just as controversial and
subject to change as anything OMB ever did.

The Budget Committees were created with the responsibility for
drafting a concurrent resolution on the budget and directing the
congressional budget process. As with any other committee, mem-
bership on the Budget Committees is determined by the rules of
each House. In the 103d Congress, which began in January 1993,
the House Budget Committee has 43 members and the Senate
Budget Committee has 21 members. The ratios of majority and mi-
nority members are determined at the beginning of each Congress
based upon each party's strength.

The Budget Committees were superimposed on the existing com-
mittee structure. The House Budget Committee has no legislative
jurisdiction of its own other than reporting a concurrent resolution,
but the Senate Budget Committee does have jurisdiction over the
1974 Budget Act, the Balanced Budget and Emergency Deficit Con-
trol Act of 1985 (Gramm-Rudman-Hollings), and their amend-
ments.

Unlike the Senate, the House Budget Committee has a rotating
membership, with one exception. The one exception is that mem-
bers of the House leadership who serve on the Budget Committee,
one from the majority and one from the minority, have no term
limits. No member of the House Budget Committee can serve more
than 6 years out of every 10-year period. Nor can any chairman
serve more than 6 consecutive years as chairman. Four of the
seven House Budget Committee chairmen, including the present
chairman, had contested elections for the chairmanship. The Sen-
ate has changed chairmen only because of retirement, resignation
or a change of party control. Any Senator can serve on the Senate's
Budget Committee. The House, however, requires that the total
membership of its Budget Committee include five members (three

majority and two minority) each from the Ways and Means and Ap-
propriations Committees and at least one from the majority of the
Rules Committee.

It should be noted that the appointments of both parties leader-
ship members have had significant consequences in the develop-
ment and implementation of the budget process. All four Demo-
cratic appointees to the House Budget Committee have held the of-
fice of Majority Leader — with the first three being later elected to
the office of Speaker. Republican appointees have not generally
been members of the formal leadership but they have had consider-
able backing of the Republican Conference in presenting their
views.

Perhaps one of the most important provisions in the Budget Act
from the standpoint of gaining early acceptance of the new process
by the entire membership was the Budget Committees' power to re-
view legislation in order to prevent utilization of "backdoor" spend-
ing (as defined on page 2) by House and Senate authorizing com-
mittees. The Budget Act prohibits most types of "backdoor" spend-
ing but it is a complicated subject that requires interpretation. The
House and Senate Appropriations Committees work closely with
their respective Budget Committees in enforcing the act's provi-
sions through careful review of authorization legislation that has a
budget impact. The authorizing committees also use the Budget
Committee's staff for advice as to how to prevent Budget Act viola-
tions that would raise points of order against their bills.

Concurrent Resolution

The concurrent resolution on the budget is intended to provide
the Congress with a legislative measure that relates the disparate
parts of the budget to the whole and provides a means of enforcing
budget targets on itself. It is used to coordinate the budgetary ac-
tions of the other committees, something that the Congress had
never done before although the executive branch had been coordi-
nating its budget actions among the various departments and agen-
cies since 1921. The concurrent resolution is drafted by the Budget
Committee in each House of Congress. A concurrent resolution is
approved by Congress in the same manner as a statute, but it does
not have the force of law because it is not presented to the Presi-
dent and therefore cannot be vetoed and does not require the Presi-
dent's signature.

The Budget Act requires that Congress pass its concurrent reso-
lution on the budget by April 15 of each year. This resolution sets
targets in five areas: (1) total new budget authority, (new legal ob-
ligations that will result in the immediate year or future year out-
lays of government spending); (2) total budget outlays, (actual
spending in that particular year); (3) total budget revenues; (4)
total budget surplus (or deficit); and (5) total public debt. The con-
gressional budget resolution for 1975 marked the first time that
Members of Congress had an opportunity to vote on budget totals.

The concurrent resolution is structured as Congress's response to
the President's budget, which itself is divided, following Hoover
Commission recommendations, into functional categories. Debate
about relative priorities therefore is reflected in figures for 21 cat-
egories at all, covering such areas as national defense, veterans af-

fairs, income security, education, energy, health, transportation,
and interest on the public debt. But the appropriations process is
organized in terms of agencies with legal authority to spend money,
which crisscross the functional categories, so the relevance of the
functional priorities in the resolution as standards for appropria-
tions action has never been established.

In allocating spending whether as totals or priorities, the concur-
rent resolution also must distinguish categories of spending. One is
outlays: the amount spent each year. Outlays create the deficit for
that year, but are different from the amount of money that agen-
cies are allowed to obligate each year. An agency may obligate
funds to buy a piece of equipment, for example, yet not disburse
most of the money until that equipment is completed, often years
later. So the concurrent resolution provides targets for both outlays
and budget authority (the authority to spend).

There is a further difference in terms of how budget authority is
allocated. The resolutions provide targets for each committee in
terms of the amount of new budget authority and outlays it can
create that year (or the amount by which it must reduce them by
changing existing law) After the 1990 amendments, these are the
"602a" allocations (formerly "302a"). The basic division is between
entitlements, which are funded in authorizing legislation, and an-
nual appropriations, which are within the allocation to the Appro-
priations Committee. But there is a further complication.

A number of programs, such as food stamps, are entitlements in
the sense that Congress and the President have created an enforce-
able obligation of the government to individuals, but do not have
permanent appropriations. Since they must be annually appro-
priated, the Appropriations Committees need an allocation for
these funds. But, since their totals are essentially automatic with-
out legislative changes, the Appropriations Committees cannot
really be held responsible for them. During the 1980's Congress
was forced to confront this anomaly, and the 1985 revisions of the
Budget Act formalized the understanding still followed today. This
distinguishes between "mandatory" and "discretionary" appropria-
tions, and the key aspects of the 602a allocation to the Appropria-
tions Committees are therefore the Budget Authority and outlay
figures for those discretionary accounts.

Under the budget process, the previous procedures of authoriza-
tion and appropriation continue but with two important changes.
The first change is that the House Appropriations Committee is re-
quired to report all regular appropriations bills by June 10, regard-
less of other actions on authorizations or the budget resolution. By
custom, the Senate waits for appropriations bills to originate in the
House, so it has no formal deadline other than the start of the fis-
cal year on October 1.

The second and far more significant change is that, because of
the reconciliation process and various points of order related to the
602a process described above, committees are distinctly constrained
in their legislation. At a minimum, they cannot take action that ex-
ceeds their 602a targets; at a maximum, they are strongly pres-
sured to report legislation that changes law to meet those targets,
if such changes of law are required.

The Appropriations Committees are especially constrained, since
they do not have the option of refusing to act. This constraint was
not so meaningful in the early years of the Budget Act, because
each individual bill could not exceed a limit on the total. Only the
last bill was likely to "bust" the target, and it could not be expected
to take all the blame. But reforms in 1985 required the Appropria-
tions Committees not only to publish sub-allocations among their
subcommittees (the 602b, or 302b, allocation), but made that allo-
cation binding, so points of order inhibit either the committees or
floor amendments raising each bill's totals above the targets.

Budget resolution controls and instructions apply to revenues as
well as spending: the revenue-raising committees of the House and
Senate also receive targets to increase (or even decrease) taxes. But
aside from the Appropriations Committees, no committee, under
the usual legislative process, has to report legislation about its part
of the budget each year. Reconciliation was created to force com-
mittees to respond to the spending and revenue targets in the con-
current resolution targets that, since the 1980 fiscal year, have cov-
ered at least 2 fiscal years beyond the one for which appropriations
were being made.

In 1978 Congress passed the Full Employment and Balanced
Growth Act, known as "Humphrey-Hawkins," that amended the
rules of both Houses in providing for 4 hours general debate when
a first budget resolution is under consideration. The debate each
year is to be focused on "full employment and the economy" based
on economic goals and policies set forth by the Joint Economic
Committee.

The Budget Act originally provided for two budget resolutions.
The first resolution, adopted in the spring, served as a target. The
second resolution, adopted in the fall, provided binding numbers.
The second resolution would be passed by September 15 and be fol-
lowed if necessary by a reconciliation resolution (September 25)
that would force committees to respect spending ceilings if they
had been exceeded or not been met. But the second resolution
turned out to be difficult to pass and was eventually dropped.

Reconciliation

The original purpose of reconciliation was to force committees to
respect spending ceilings adopted by the budget resolution. In other
words, the total amount of money the committees want to spend
cannot exceed the amount set by the Congress for the whole Fed-
eral budget. That is why it is called reconciliation. The individual
committees must reconcile their spending desires within the overall
goals of the whole Congress as expressed in its budget resolution.
The taxing committees must adopt the revenue target contained in
the resolution. The reconciliation process has evolved into the pri-
mary means of controlling spending in entitlement and mandatory
programs as well as establishing a revenue floor.

Reconciliation is a two-stage process that seeks to bring manda-
tory spending and revenues in line with Congress's budget resolu-
tion. In the first stage, the concurrent resolution sends instructions
to committees about how much they should decrease (or increase)
budget authority, and outlays in the mandatory spending area as
well as revenues. At the second stage, legislation to meet these tar-

gets is drafted by the authorizing committees with spending and
revenue jurisdiction. The Budget Committees in the House and
Senate then combine the recommendations of the authorizing com-
mittees into an omnibus reconciliation bill, which after passage of
the bill in both chambers and conference changes is sent to the
President for his approval. Conferences between the House and
Senate on reconciliation measures have their own procedures. Suf-
fice it to say that the most recent conference (1993) included 13
standing committees in the Senate and 16 in the House. To resolve
the differences 31 mini-conferences were established. The Presi-
dents have signed all ten bills between 1980 (the first time rec-
onciliation was used) and 1993.

The Congressional Budget Office plays a critical role in the rec-
onciliation process. CBO provides the cost estimates of specific pro-
visions to ensure that the savings claimed in the reconciliation bill
are legitimate and that the bill is scored accurately.

No discussion of the budget process — specifically the reconcili-
ation process — would be complete without mention of the Byrd
Rule. Named after its originator, Senator Robert C. Byrd of West
Virginia, the Rule was originally adopted in 1985, as a Senate
Floor amendment to that year's reconciliation bill, in response to
concern over abuse of the reconciliation process. Unlike most legis-
lation considered in the Senate, reconciliation bills are not subject
to unlimited debate and and are not subject to non-germane
amendments. As a result, Senate committees had begun to use rec-
onciliation as a vehicle for legislative language unrelated to the
specific intention of reconciliation.

The Byrd Rule — codified in 1990 as section 313 of the Congres-
sional Budget Act — authorizes a point of order against any provi-
sion in a reconciliation bill, an amendment thereto, or a conference
report thereon, that contains "extraneous" material. Provisions that
are extraneous in a reconciliation bill are those that: 1) violate Sen-
ate committee jurisdictions, 2) increase the deficit if the Senate
committee failed to meet its reconciliation instruction, 3) produce
no change in the deficit, 4) produce budgetary changes incidental
to its non-budgetary aspects, 5) increase the net deficit in future
years, or 6) affect the Social Security old-age, survivors, and dis-
ability insurance program. Provisions that are extraneous in a rec-
onciliation conference report are those that violate 3 through 6
above. The specific language of the Byrd Rule makes application of
the Rule difficult to know with any certainty and a strict interpre-
tation could yield unreasonable results. However, with consider-
ation of each reconciliation Act the volume of precedent grows and
with that comes clarification and greater certainty.

A motion to waive the Bvrd Rule is in order and requires an af-
firmative vote of three-fifths of the Senators duly chosen and
sworn — 60 — to succeed. Similarly, a ruling of the Chair is over-
turned on appeal only by an affirmative vote of 60 Senators. If a
motion to waive is unsuccessful and the point of order is sustained,
the provision is stricken from the bill or conference report. If strick-
en from a conference report, the report is defeated and the question
before the Senate is an amendment consisting of the language of
the conference report minus the provisions stricken on the point of
order. The latter procedure has never occurred. In some years as

a result of bipartisan compromises and most recently, in 1993, as
a result of extensive efforts by the conferees to conform the con-
ference report to the Byrd Rule, points of order were avoided on the
Senate floor.

The Appropriations Committees in the House and Senate are
generally not subject to reconciliation instructions. Instead, they
are governed by the binding spending limits on all discretionary
spending set forth in the budget resolution. The overall limit on
discretionary spending is now enforced by a cap, as explained
below.

The frequency with which reconciliation has been used indicates
that this procedure has become a regular part of the budget proc-
ess.

Selected Provisions of the Budget Act: Fiscal Year and Impound-
ments

The Budget Act changed the beginning of the fiscal year from
July 1 to October 1. The extra 3 months gave Congress more time
to act on the 13 appropriations bills before the new fiscal year
began. Initially, this change helped. The 1977 fiscal year was the
first time in a decade that all the regular appropriations bills were
enacted before the start of the fiscal year. The only other time this
occurred was in 1989. There has been improvement in meeting the
timetable but strict compliance is still lacking.

The budget process and the impoundment control procedures cor-
rected two main deficiencies that had weakened congressional con-
trol of the purse. The budget process part of the act set procedures
and timetables for Congress to establish its own comprehensive
program for the Nation's taxing and spending priorities. The im-
poundment procedures prevented the President from unilaterally
abrogating legislative decisions on appropriations. By joining budg-
et and impoundment control into a single act, Congress sought to
ensure that the power of appropriations assigned to it by the Con-
stitution was exercised more responsibly and effectively.

The impoundment provisions of the 1974 act authorized Presi-
dents to delay or withhold previously enacted spending, but only
with notification or approval of the Congress. This provision was
key to getting the President to sign the bill into law.

Specifically, the impoundment provision gave the President a
congressionally-approved procedure to defer or rescind spending.
Spending deferrals mean the money is withheld from being spent
for a specific period of time. That period may not extend beyond the
end of the fiscal year in which the deferral is proposed. Spending
that is rescinded, however, is money that is permanently cancelled.

The President can defer or propose to rescind spending by send-
ing a message to Congress to that effect. In case of deferrals, action
by either House of Congress to disapprove the deferral means the
deferral must cease at once. In the case of rescissions, both houses
of Congress must approve the rescission within 45 days. If both
houses do not approve, the rescission is denied and the funds must
be released for use. The logic behind this procedure is that since
a rescission represents the undoing of what Congress previously
enacted, no rescission should take place unless approved by an af-
firmative vote in both houses.

Deferrals do not require congressional approval, but are per-
mitted only to provide for contingencies, to achieve savings made
possible by changes in requirements or operational efficiencies, or
as otherwise specifically provided by law. The original 1974 act also
permitted deferrals for policy reasons (e.g., because the President
disapproved of a particular program or wished to restrain overall
expenditures) and made all deferrals subject to disapproval by vote
of either House of Congress. In 1987, however, a Federal appellate
court ruled that the President's authority to make policy deferrals
was inseverable from the one-House legislative veto, which had
been invalidated in INS v. Chadha (1983). Thus, the President's
deferral authority fell with the legislative veto. The Budget Act was
amended later that year to prohibit deferrals except for the non-
policy reasons mentioned earlier. The use of both recission and de-
ferral remains as controversial today as when they were first en-
acted.

The Baseline Budget

The baseline budget has been developed principally to provide a
means of accurately measuring reductions or increases in spending
and revenues received. The Federal budget is affected by a variety
of actions independent of what the President or Congress may do.
There are unpredictable forces that affect Federal spending and tax
receipts. Take the example of entitlement programs. Entitlement
programs such as Social Security, Medicare, food stamps, and farm
price supplements and interest on the public debt account for 62
percent of all Federal spending. Existing Federal laws mandate
that the government must provide specified levels of benefits to all
eligible applicants of entitlement programs.

The baseline shows how much spending is needed in future years
to maintain current government programs and the revenues antici-
pated if the tax system were not changed. Deficit reductions are
measured according to the policy changes they would make to the
baseline budget. Increases in spending to provide an investment
strategy (for example, additional highways) would be measured in
terms of additional funding above the baseline.

Stated differently, the budget baseline is a means of determining
how the budget in some future year — if certain changes are made —
would compare with the same budget in the future year if no
changes were made. The principal agencies that formulate baseline
budgets are the CBO and OMB. The two baselines are similar, but
OMB's baseline (called Current Services) is based on different ob-
jectives, technical adjustments and economic assumptions than
CBO's. The formulation of economic assumptions is a critical exer-
cise in developing a baseline budget, a Presidential budget or con-
gressional budget resolution. Predictions in growth in GDP, the
level of unemployment, the rate of inflation and interest rates im-
pact on both the revenue and spending levels.

A tax reduction or increase is measured against the anticipated
revenues in the baseline. This would be a policy change.

Entitlement programs can be cut, of course, by restricting benefit
levels. When such action takes place, they represent what is called
a reduction from budget baseline or a budget savings.

Federal revenue receipts can, however, change even if tax policy
does not change. In a recession, revenues would be less. In a grow-
ing economy, revenues would be greater than anticipated. In both
cases tax policy need not have changed.

The same is true for Federal spending programs. If more people
retire in a given year than anticipated, Social Security spending
would increase. In the same manner, fewer retirements than antici-
pated would mean reduced Social Security spending in that year.
Yet no one could properly argue that Federal spending was "cut"
because fewer people than anticipated retired in a particular year.

Implementation of the Budget Act

Almost immediately after passage of the act in 1974, liberals of
both parties in the House and Senate — those who favor government
spending as an economic tool as well as a means for social justice —
thought they could use the budget process to direct spending for
various programs they supported. Conservatives — those who advo-
cated restraint for spending in domestic programs — thought the
new process could be used to control spending for these very same
programs. The budget process has been used to increase as well as
control spending, depending on the economic circumstances of the
time. It has been used to call for tax increases and tax cuts. It has
been used as a deficit reduction process as well as a means of pro-
viding for a public investment spending strategy. Sometimes it has
been used to do several different things at once. The budget resolu-
tion in 1981, for example, called for reductions in both taxes and
domestic spending, an increase in military spending, and required
that the reconciliation targets be met for each of 3 fiscal years to
insure multiyear savings.

The first test of the act was during the 1975 recession. The coun-
try faced double-digit unemployment. House Speaker Carl Albert
asked all 13 House Appropriations Subcommittee chairmen to draft
job stimulus proposals. The next step was to incorporate in the
budget resolution reported by the House Budget Committee spend-
ing allocations for the job stimulus proposals. The success of the
budget process, led by the House Budget Committee, in responding
to this macro-economic crisis firmly established the new budget
process in Congress as something significantly more than just rhet-
oric.

Much of the credit for this success must be given to House Budg-
et Chairman Brock Adams (D-WA) and Senate Budget Chairman
Edmund Muskie (D-ME) for shepherding the first budget resolution
through a skeptical and reluctant Congress. They were instrumen-
tal in establishing clearly the original intent of the Budget Act,
which was to give Congress the capacity to develop fiscal policy. If
anything, the Budget Committees carried their role even further
than the original intent by assuming detailed line-item decisions
about increasing or decreasing spending in specific programs.

During the first 4 years of the existence of the budget process the
role of the House and Senate Budget Committee was to fashion a
concurrent resolution that upon adoption would serve as a guide-
line to the Congress as whole on the appropriate fiscal policy. Al-
though existing enforcement procedures were seldom used, the poli-
tics of gaining acceptance of a majority vote in both houses was dif-

ficult. In the Senate a consensus emerged between a large number
of Republican and Democrats on budget issues, but there were also
policy differences among the Senators. The House support of budg-
et resolutions in the period divided mostly along party lines.

It should be noted that the original intent of the Budget Act was
to enforce budgetary decisions in the following manner: 1) a point
of order would lie against any spending bill that breached the
spending ceilings as set forth in the Budget Resolution and applied
to either budget authority or outlays or both (Sec. 311a), and 2) a
point of order would lie against any revenue bill that breached the
revenue floor set forth in the Budget resolution (Sec. 311a).

These early enforcement measures were soon regarded as unnec-
essary, ineffective, and unfair — because, as noted above, controls on
the total of appropriations bills, but not individual bills, did not
work. The Sec. 311 process would be stricken from the Act when
the Sec. 302b process was strengthened. In the meantime, self-dis-
cipline was the only meaningful enforcement tool.

In 1980, reconciliation was adapted from a provision to be ap-
plied to the second concurrent resolution to become a part of the
first resolution. That step transformed the budget process, chang-
ing reconciliation from a measure that could not be produced in the
time allowed (ten days), so was not used, to arguably the most im-
portant vehicle within Congress. In essence moving reconciliation
to the first resolution also eliminated the point of the second reso-
lution: if the reconciliation passed, the second resolution would be
unnecessary. The latter swiftly fell into disuse, and was abolished
in 1985.

From Macro Policy to Specific Controls

But reconciliation, and the capacity to contest the President
about macroeconomic totals, did not between them serve to reduce
the deficit to politically acceptable levels. Having the capacity for
analyzing macro-economic information proved to be not enough. By
the mid-1980's Congress decided that it also needed more stringent
control mechanisms to force itself to take certain actions. These
mechanisms would automatically trigger across-the-board spending
cuts if Congress failed to adhere to deficit targets. The sequestra-
tion order, as it is called, to implement the spending cuts is issued
by the President based upon a formula set by statute.

The seeds of sequestration were planted in 1980 with a renewed
emphasis placed upon controlling budget deficits. This change in
focus altered the congressional budget process from one of solely
developing macro-policy analysis to one of also imposing control.
The preoccupation with the deficit from 1980 onward has become
the tyranny of budget politics.

The congressional budget process was not born in a time when
the deficit was at the forefront of national attention. Rather, the
economy of the 1970's was a time of high inflation coupled with
high unemployment. This stagflation, as it was called, lea to a dif-
ferent emphasis in the House and Senate as well as different ap-
proaches by liberals and conservatives in both parties in how they
dealt with the Federal budget.

During the 1970's, the Senate was concerned primarily with
broad, sweeping economic issues. The House's emphasis was on in-

dividual programs. The Senate budgeted from the top down; the
House from the bottom up. The primary issue in the House was
how much to add or subtract in any given year from the CBO base-
line, which is the previous year's spending adjusted for inflation
and growth in entitlement program caseloads.

The Senate's approach was what the House called formula budg-
eting, such as across the board cuts in spending or freezing spend-
ing at last year's level. House Members generally were more con-
cerned with individual programs and believed they could best pro-
tect them by dealing with them as line items. As a result, the
House found itself voting on many amendments in relatively small
amounts to ensure funding for particular programs. Across the
board amendments to the budget resolution were also attempted in
the House in the early years, but were invariably defeated. The
Senate also had an amending process for budget resolutions, but all
Senate Budget Committee chairmen have opposed specific line-item
amendments, arguing that such decisions were the prerogative of
either the Senate authorizing committees or the Senate Appropria-
tions Committee.

As the deficit rose, and repeated deficit-reduction measures
failed, both chambers came to emphasize formula budgeting. Speci-
fying cuts within budget resolutions looked less attractive in the
House, especially as the Appropriations Committees were not
bound by those specific assumptions. There was near unanimous
agreement, at least publicly, on the need to find the "right" balance
of spending cuts ana revenue increases to move toward a balanced
budget. But specifying how was less attractive.

After all, leaders in both parties argue against the deficit. No one
defends it. Everyone wants to reduce it. How to go about doing
this, however, does have partisan political implications.

Riverboat Gamble

Congress hoped its budget resolutions would enable it to get a
better grip on the budget. The 1980 Presidential election ana the
election of Ronald Reagan soon changed the emphasis to getting a
grip on the deficit. The massive tax reductions under President
Reagan, coupled with increased defense expenditures, poured con-
siderable public and private money into the economy, which was
expected. Unexpected was that the added discretionary income cre-
ated by the tax cuts in the Economic Recovery Tax Act of 1981
(ERTA) went into unproductive endeavors rather than improving
the infrastructure or productivity of the country. The "Riverboat
Gamble," as the tax cut program was called by Senator Howard
Baker (R-TN) at the time, failed.

The deficit reached previously unimagined heights in the 1980's.
Under President Reagan the national debt went from under $1 tril-
lion when he took office to over $3 trillion by the time he completed
his second term 8 years later. Another $1 trillion of debt was added
by President George Bush in less than a 4-year period. The widen-
ing gap between the Federal Government's income and its expendi-
tures led President Reagan to propose and sign into law what be-
came the largest tax increase in American history (The Tax Equity
and Fiscal Responsibility Act of 1982 (TEFRA)). A few years later
President Bush proposed and signed the Nation's second largest (at

that time) tax increase less than 2 years after pledging he would
oppose any tax increase at all. Bush later said that he had made
a mistake in proposing a tax increase.

The deficit problem did more than anything to institutionalize
the role of the Budget Committees in Congress. They were the only
committees able to deal comprehensively with this issue. Other
macro-economic issues — unemployment, investment strategies, in-
flation— all had to fall behind the deficit in emphasis.

It was in this period that Congress began imposing procedural
control mechanisms which were designed as a means of achieving
a balanced budget or at least lowering the deficit. Control mecha-
nisms soon replaced the primary thrust of the budget process, re-
placing the self-discipline that had been hoped for as a result of in-
creased capacity on the part of Congress.

Budget Control Mechanisms
Gramm-Rudman-Hollings I and II

Republican Senator Phil Gramm, who as a Democratic House
member had sponsored the "Gramm-Latta" budget resolution that
promised to avoid such troubles, joined with Warren Rudman (R-
NH) and Ernest Hollings (D-SC) to write the first version of what
would become a series of attempts to create budget rules that
forced Congress and the President to agree to large deficit reduc-
tions. Senator Phil Gramm, who had been elected to the Senate as
a Republican, joined with Warren Rudman (R-NH) and Ernest Hol-
lings (D-SC) to write the Balanced Budget and Emergency Deficit
Control Act of 1985 (commonly known as the Gramm-Rudman-Hol-
lings law or GRH, after its three principal authors). This act set
specific deficit reduction targets and mandated relative across-the-
board sequestration of Federal spending if the targets were not
met. Many Members had hoped that the control procedures, at the
very least, would give them political cover in reducing spending or
raising taxes by claiming that sequestration — if they had failed to
act — would be a worse alternative. In the few instances where se-
questration was invoked however, it caused grave concern among
the Members of both Houses.

Part of the first version (GRH I) was declared unconstitutional
because it provided that the President's sequestration order be con-
trolled by estimates determined by the Comptroller General, an
agency of the Congress. The Supreme Court ruled that this was an
unconstitutional exercise of executive authority by a legislative
agent and therefore in violation of the separation of powers doc-
trine. As a fallback mechanism, the contents of the sequestration
order were placed in a bill and enacted into law. The second ver-
sion (GRH II), enacted in 1987, gave OMB the power to determine
the estimates for the President's sequestration order.

Both versions of Gramm-Rudman-Hollings signaled clearly that
the budget process had changed from a capacity mechanism to in-
clude one of control. Capacity provided a procedure for Congress to
respond to a variety of macro-economic issues, including the deficit.
The focus on control has severely restricted congressional action by
forcing it to deal primarily with one issue, the deficit.

The most sweeping legislation prior to 1993 ever imposed upon
the Congress in terms of attempting to control the budgetary out-
come came in late 1990. Gramm-Rudman-Hollings had failed to
produce the desired results. The sequestration required to comply
with GRH II was politically unacceptable. President Bush and the
Congress agreed on a budget accord that would reduce the deficit
by half a trillion dollars over 5 years, $135 billion of which came
in the form of new taxes. This agreement is referred to as the
Budget Enforcement Act of 1990 (BEA).

This act revised the Gramm-Rudman-Hollings deficit targets by
making them adjustable rather than fixed; extended the sequestra-
tion process through fiscal year 1995; and created a "pay-as-you-go"
process requiring any increase in entitlement or mandatory spend-
ing or decrease in revenues to be offset so there is no net increase
in the deficit. It also placed separate spending caps on the three
major categories of discretionary spending: defense; domestic; and
international. "Firewalls" prevented Congress from shifting funds
from one category to another. After 3 years, these caps were com-
bined into a single discretionary cap.

The BEA represented a rejection of the theory that Congress
could somehow be threatened or forced to agree within itself and
with the President to achieve some specific target. The BEA was
based on taking concrete steps and forcing the President and Con-
gress not to change them.

The Congress used a unique procedure to craft the budget agree-
ment in 1990. The agreement was a product of negotiations at the
highest levels of the Federal Government. The participants in-
cluded the President, the Secretary of the Treasury and the Direc-
tor of OMB, the leadership of both parties in both Houses of Con-
gress, and both the House and Senate Budget Committee chairmen
and ranking minority members, along with the Senate Finance
Committee Chairman and ranking member and the House Ways
and Means Committee Chairman and ranking member. The BEA
is often referred to as the "summit agreement."

Despite these control provisions the deficit in the ensuing years
continued to increase. It was not however, a result of non-compli-
ance with the caps or the failure of the pay-as-you-go requirement,
but rather in a large part resulted from the incredible growth in
Medicare and Medicaid costs. Also, the price of paying off deposit
insurance for failed savings and loans and banks, along with a
sluggish economy caused the deficits to burgeon. Control mecha-
nisms, then, helped only to limit the growth of deficit spending.

Balancing the Budget and the Line Item Veto

The BEA was regarded as only a first step. Many Members of
Congress still wanted a constitutional requirement for a balanced
budget. In the House, for example, strong support existed for a con-
stitutional amendment requiring a balanced budget. Leon E. Pa-
netta (D-CA), Chairman of the House Budget Committee at the
time, successfully opposed this proposal by marshalling 153 votes
(all but two of which were cast by Democrats) — a number barely
more than the one-third required to block passage of a constitu-
tional amendment when the measure came up in 1991.

As a substitute for the constitutional amendment Panetta intro-
duced the Balanced Budget Enforcement Act of 1992, a statutory
approach designed to provide for a balanced budget within a 6-year
period. The bill included stringent control procedures that require
the President to submit a balanced budget; required both the Presi-
dent and the congressional budget committees to use the same eco-
nomic assumptions in the formulation of their budget; and included
a sequestration order if the Congress fails to meet its revenue and
spending targets. This bill also incorporated spending caps and
"pay-as-you-go" provisions. The Panetta bill was not adopted, but
a similar version has been introduced in the 103d Congress.

Recent Presidents, including President Clinton, have favored a
line item veto to allow the President to veto selected items in a bill
without being required to disapprove the entire bill. The President
has no constitutional authority to disapprove selected items in a
particular bill. Since a constitutional amendment is not likely, a
new procedure has been suggested in its place entitled "enhanced
rescission." Under this procedure the President may rescind the
budget authority for an item or items and a statute of disapproval
would be required to overturn the recission. (Existing procedures
require Congress to approve rescissions before they take affect.)
The procedure is under review at this time and has not been en-
acted but it is safe to say that major budget savings would not re-
sult from such a measure.

Another approach is "expedited rescission." Under this procedure
the President would have to obtain congressional approval, but
Congress would be forced to vote on Presidential proposals. The
House of Representatives passed this version in 1993.

The new forms of proposed recissions are available as policy in-
struments, but neither of the new proposals has the potential of
major deficit reduction.

Though process is important, the use of control mechanisms dem-
onstrates that process is still no substitute for making policy deci-
sions. Reducing the deficit, let alone balancing the budget, is first
and foremost a matter of policy choices, although those choices may
be limited by economic conditions.

The Omnibus Budget Reconciliation Act of 1993

The election of Bill Clinton as President and his emphasis on def-
icit reduction has put the national spotlight once again on the Con-
gressional budget process. For the first time in 12 years it would
no longer be possible to explain budget gridlock as the result of
partisan politics between Congress and the President.

Newly-elected House Budget Committee Chairman Martin Olav
Sabo (D-MN) along with Senate Budget Committee Chairman Jim
Sasser (D-TN) seized the opportunity to usher in an era of coopera-
tion and mutual support between the House and Senate and espe-
cially between the President and the Congress. No one believed,
however, that the task would be easy. In fact the razor-thin mar-
gins by which the 1993 Budget Resolution and the 1993 Reconcili-
ation Act passed the Congress suggest how difficult it is, even with
an administration of the same party that controls Congress, to con-
struct a budget plan that can gain widespread support.

The Democrats in the House and Senate, acting with no Repub-
lican support, enacted a $496 billion deficit reduction package. The
reconciliation conference agreement passed by only two votes in the
House of Representatives (218-216) and a 50 to 50 tie in the Sen-
ate had to be broken by Vice President Albert Gore's "aye" vote. Of
significance here, however, is that control mechanisms were essen-
tial to the agreement.

The control mechanisms already in place before the 1992 Presi-
dential election continue in place. In 1993 the appropriation caps
were extended through 1998 on all discretionary spending. Also
continued was the provision allowing the Congress to avoid the
caps if the President declares an emergency such as he did for the
midwestern flood victims in the summer of 1993. And every in-
crease in entitlement spending or any tax reduction must be paid
for by increasing revenue or by reducing entitlement spending or
by some combination of the two. This is a carryover of the "pay-
as-you-go" provision of the 1990 Reconciliation Act.

As part of the rule for consideration of the conference agreement
of the 1993 Reconciliation Act in the House, and in combination
with an executive order from the President, the House and the ad-
ministration initiated a new procedure called "entitlement review."
The Senate did not consider or include this procedure in the con-
ference agreement because doing so would have violated both the
Byrd Rule and a rule barring inclusion of provisions under the ju-
risdiction of the Senate Budget Committee in a measure not re-
ported by that committee. (Violation of the latter rule would have
made the entire conference report subject to a point of order.) Both
rules would have required a 60-vote majority to waive — a vote mar-
gin impossible to achieve at the time.

Under the new procedure, when the overall entitlement target is
breached the President is required to propose in his January budg-
et measures that will cover the overage or explain why it is not
necessary or advisable to offset the overage. The House Budget
Committee is required to act on this proposal in its first budget
resolution. The committee can address the overage in any manner
it decides, provided that it proposes as least as much deficit reduc-
tion as the President. Further, if the Budget Committee proposes
raising the target instead of offsetting all or part of the overage,
the House must vote in favor of the target increase before the
budget resolution can be taken up. The objective is that this proce-
dure, along with the extension of "caps" and "pay-as-you-go" provi-
sions, will continue the basic budgetary policy objectives and fiscal
outcomes set forth in the 1993 Budget Resolution and the 1993
Reconciliation Act.

The many recent revisions to the congressional budget process
that have occurred, and the almost total preoccupation with the
deficit, suggest that additional changes are likely to occur. Some
version of biennial budgeting is one already being reviewed. What-
ever these future changes may be, one thing is certain: Congress
no longer is an idle bystander to the President or a rubber stamp
in formulating fiscal policy. Congress definitely has succeeded
through the budget process in giving itself at least a meaningful
voice in formulating and controlling budget decisions.

Budget Glossary

Appropriations: The thirteen bills reported by the Committee on
Appropriations, which determine the level of funding (budget
authority) for discretionary spending programs.

Authorization: A substantive law that sets up or continues a Fed-
eral program or agency. Authorizing legislation is normally a
prerequisite for appropriations. For some programs, the au-
thorizing legislation itself provides the authority to incur obli-
gations and make payments, see "direct spending."

Backdoor spending: Spending that avoids the normal appropria-
tions process such as granting contractual obligation authority
to a Federal agency prior to any appropriation.

Baseline: A benchmark for measuring the budgetary effects of pro-
posed changes in Federal revenues or spending with the as-
sumption that current budgetary policies are continued with-
out change. As specified in the Budget Enforcement Act of
1990, the baseline for revenues and entitlement spending gen-
erally assumes that laws now on the statute books will con-
tinue. For discretionary spending, the projections for a fiscal
year are generally based on the appropriations for the prior fis-
cal year, adjusted for inflation.

Budget authority: Authority provided by law to incur financial obli-
gations that will result in spending of Federal Government
funds. Budget authority (BA) is a synonym for "funding." BA
is provided for both discretionary and direct spending pro-
grams. Offsetting collections, including offsetting receipts, con-
stitute negative budget authority.

Budget deficit: Amount by which budget outlays exceed budget rev-
enues during a given period.

Budget resolution: A concurrent resolution, passed by both Houses
of Congress but not requiring the President's signature, that
sets forth a congressional budget plan for the next 5 years. The
plan must be carried out through subsequent legislation, in-
cluding appropriations and changes in tax and entitlement
laws. The Congressional Budget Act of 1974 established a
number of mechanisms that are designed to hold spending and
revenues to the targets established in the budget resolution.

Direct spending: Spending that is not controlled by discretionary
appropriations. The Budget Enforcement Act of 1990 defines
this term as (a) budget authority provided by law other than
appropriation acts; (b) entitlement authority (including manda-
tory appropriations); and (c) the food stamp program.

Discretionary spending: Spending appropriated and controlled by
the 13 annual appropriation bills. Discretionary spending is di-
vided among three categories: defense, international, and do-
mestic.

Defense discretionary spending consists primarily of the mili-
tary activities of the Department of Defense, which are funded
in the defense and military construction appropriation bills. It
also includes the defense-related functions of other agencies,

such as the Department of Energy's nuclear weapons pro-
grams.

International discretionary spending encompasses spending for
foreign economic and military aid, the activities of the Depart-
ment of State and the U.S. Information Agency, and inter-
national financial programs, such as the Export-Import Bank
of the United States.

Domestic discretionary spending includes most government ac-
tivities in science and space, transportation, medical research,
environment protection, and law enforcement, among other
spending programs. Funding for these programs is provided in
10 of the annual appropriations bills.

Discretionary spending caps: Ceilings on budget authority and out-
lays for discretionary programs as defined by the Budget En-
forcement Act of 1990. For fiscal years 1991 through 1993, the
caps are divided among the three categories of discretionary
spending — defense, international, and domestic. For fiscal
years 1994 and 1995, there is one cap for all discretionary
spending. Discretionary spending caps are enforced through
congressional rules and through sequestration procedures.

Entitlements: Programs that make payments to any person, busi-
ness, or unit of government that seeks the payments and meets
the criteria set in law. The Congress controls these programs
indirectly by defining eligibility and setting the benefit or pay-
ment rules, rather than directly through the annual appropria-
tion process. The best-known entitlements are the major bene-
fit programs, such as Social Security and Medicare; other enti-
tlements include farm price supports and interest on the Fed-
eral debt.

Fiscal policy: The Government's choice of tax and spending pro-
grams, which influences the level, composition, and distribu-
tion of national output and income. An "easy" fiscal policy
stimulates the growth of output and income, whereas a "tight"
fiscal policy restrains their growth. Movements in the stand-
ardized-employment budget deficit constitute one overall indi-
cator of the tightness or ease of Federal fiscal policy — an in-
crease relative to potential GDP suggests fiscal ease, whereas
a decrease suggests fiscal restriction.

Fiscal year: A yearly accounting period. The Federal Government's
fiscal year begins October 1 and ends September 30. Fiscal
years are designated by the calendar years in which they
end — for example, fiscal year 1991 began October 1, 1990, and
ended September 30, 1991.

Gross domestic product (GDP): The total market value of all goods
and services produced domestically during a given period. The
components of GDP are consumption, gross domestic invest-
ment, government purchases of goods and services, and net ex-
ports.

Off-budget: Spending or revenues excluded from the budget totals
by law. The Budget Enforcement Act of 1990 requires that the
revenues and outlays of the two Social Security trust funds be

shown as off-budget. The Omnibus Budget Reconciliation Act
of 1989 took the Postal Service fund off-budget.

Outlays: The liquidation of a Federal obligation, generally by issu-
ing a check, cash or a promissory note. Outlays may be for pay-
ment of obligations incurred in previous fiscal years or in the
same year. Outlays, therefore, flow in part from unexpended
balances of prior-year budget authority and, in part, from
budget authority provided for the current year.

Reconciliation: A process the Congress uses to make its tax and di-
rect spending legislation conform with the targets established
in the budget resolution. The budget resolution may contain
reconciliation instructions directing certain congressional com-
mittees to achieve savings in tax or spending programs under
their jurisdiction. Legislation to implement the reconciliation
instructions is usually combined in one comprehensive bill. As
a general rule, decisions on defense and nondefense discre-
tionary programs are determined separately through the ap-
propriations process, which is governed by allocations in the
budget resolution.

Sequestration: The cancellation of budget authority, if needed, to
enforce the Budget Enforcement Act of 1990. Sequestration is
triggered if the Office of Management and Budget determines
that discretionary appropriations breach the discretionary
spending caps, that direct spending and receipt legislation in-
crease the deficit, or that the deficit exceeds, by more than a
specified margin, the maximum deficit amount set by law. Fail-
ure to meet the maximum deficit amount would trigger spend-
ing reductions from non-exempt programs. Changes in direct
spending and receipt legislation that increase the deficit would
result in reductions in funding from entitlements not otherwise
exempted by law. Discretionary spending in excess of the caps
would cause the cancellation of budget authority within the ap-
propriate discretionary spending category.

Trust fund: A fund, designated as a trust fund by statute, that is
credited with income from earmarked collections and charged
with outlays. Collections may come from the public (for exam-
ple, taxes or user charges) or from intrabudgetary transfers.
More than 150 Federal Government trust funds exist, of which
the largest and best known finance major benefit programs (in-
cluding Social Security and Medicare) and certain infra-struc-
ture spending (the Highway and the Airport and Airways trust
funds). The term "Federal funds" refers to all programs that
are not trust funds.

85-810 - 95 - 3

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Mr. Spratt [presiding]. Chairman Sabo, we have had one bell
ring; and I take it Mr. Obey left, so he is coming back.

Mr. Sabo. I can easily come back.

Mr. Spratt. OK, fine. Let me just ask one question, and I will
turn to the other Members and give them an opportunity.

With respect to entitlements review, would you give us a quick
perspective on what happened to the first year in which that law
was in operation? We have had one fiscal year arrive, and I believe
we had an underage rather than an overage with respect to the
last fiscal year.

Mr. Sabo. The total spending was less than the targets, so it did
not kick in the process, and that was for a variety of reasons.

I think some of the health care programs are coming in, particu-
larly, below the totals, so that the review process did not kick in,
because in total we were under the target, which is good news. On
the other hand, if it had kicked in, it would mean that the Presi-
dent and the Congress would have to deal with the issue imme-
diately.

I think historically the opposite of what happened this year has
been the case, and that is that entitlements have come in above es-
timates, and the Congress sort of and administrations avoided it
until every several years. You then have a major look at entitle-
ments and then the problem would have gotten so much bigger,
that it is more difficult to deal with.

I might say I think it does have relationship to the second issue
that your committee isn't currently looking at, and that is the ques-
tion of biennial budgeting. Clearly, the entitlement review process
is one that is geared toward annual budgeting. I think if the judg-
ment of the Congress is to move to biennial budgeting, it makes the
entitlement review process more difficult.

Mr. Spratt. Because we only get a bite of the apple every 2
years, so if there is an overage, you are 2 years late in finally ad-
dressing the overage.

Mr. Sabo. That is right.

Mr. Spratt. In the interest of letting other Members ask ques-
tions, let me turn next to Mr. McCandless.

Mr. Sabo. Do you want us to go vote and come back?

Mr. McCandless. Mr. Chairman, may I offer a suggestion for
the committee? We are probably somewhere around 8 minutes into
the vote.

Mr. Sabo, as a key element of what it is we are holding this
hearing on, I would like an opportunity to discuss some very aca-
demic types of things with him; and if it would be possible, maybe
we could recess to go vote now.

Mr. Spratt. Sure. Let's go ahead and briefly recess, if everyone
would try to get back as quickly as possible, we have a long agenda
today. We will pick up as soon as we return from the vote.

[Recess taken.]

Mr. Conyers [presiding]. The subcommittee will come to order.

We were called to a series of votes on the floor and interrupted
the presentation of our first witness, Chairman Marty Sabo of the
Budget Committee. Please proceed, sir.

Mr. Sabo. I am through. I am ready for whatever questions peo-
ple might have.

Mr. Conyers. We have about a half dozen very important no-
tions that would drastically revise the budget reform process. Could
you give us, Chairman Sabo, your views on some bills that have
been put before us today, which recommendations are least accept-
able? I want to get some idea of a ranking, if you are able to put
them in some kind of order, in terms of how your committee would
view these matters.

Mr. Sabo. I would not presume to speak for our committee be-
cause I expect there are a variety of opinions there. My own judg-
ment is the most difficult problem we have working within our cur-
rent 5-year limitation on how we project bifdgets is the impact of
the Byrd rule on the reconciliation process. To me that is a major
problem.

How we solve it clearly is difficult because it involved a change
in the Senate process. I intend to introduce a bill after recess say-
ing that the Byrd rule does not apply to conference committees.
That is my fundamental problem. Whatever rules the Senate has
for their own operation that is their choice. But I have real prob-
lems when that Senate rule gets in the way of us dealing with the
real change in the substance in conference reports. That was a
major problem that we had in terms of our conference report a year
ago.

Second, thinking through how we deal with issues that go beyond
the 5-year window of budget resolutions deal is a significant ques-
tion and somehow we have to think it through. I have no particular
suggestions for you on how to deal with it at this point. But I think
it is a real problem.

I think we should take the entitlement review we passed last
year, making that law so it applies in the Senate also as it does
in the House. I thought that was a significant reform and a posi-
tive movement forward. As it relates to the baseline, some of the
proposals I have seen simply say that we also have to look at what
actual spending was last year compared to this year.

I have no problem with that. But some people suggest that cur-
rent baseline projections are totally irrelevant, and I think they are
wrong because I think that is part of measuring what the impact
of Federal budget policy is.

The proposal on lockbox I think is a very poor proposal, to put
it mildly. It does what the Senate did with the Byrd rule to the
budget resolution by letting each of the Houses unilaterally amend
the budget resolution, this makes no sense.

Mr. Obey will speak of the problems that it creates for the appro-
priations process and those are endless, the problems that it cre-
ates there. I am not sure what some of the other proposals are. The
enhanced recision really deals more with the appropriations proc-
ess than it does with the budget process.

I would, however, also suggest that the fundamentals of our sys-
tem of government are different — I often in describing our system
of government say you first must start with the understanding that
we are not a parliamentary system. We are one with three
branches of government, executive, legislative, and judicial, and
within the legislative we are a bicameral system, not a unicameral
system.

I would suggest vour committee at some point hold hearings on
whether we should go to a unicameral parliamentary system be-
cause there are so many of those proposals to deal with problems
with the efficiency of a unicameral parliamentary system, many of
these folks want to diminish the legislative branch versus the exec-
utive. Well, I have problems with that in the context of the type
of system of government we have.

Historically, I suppose this may be a conservative approach in
terms of preserving the legislative versus the executive. But for
folks who want to totally simplify the system, make it easily under-
standable and lessen the role of the legislative branch, the simplest
way to do that would be to go to unicameral parliamentary system
where there is simply one house, where the executive comes from
the legislative, the legislative body deems much of its power to the
executive that it has chosen, and has a much smaller and much
less involved legislative branch. That is how I understand most
parliamentary systems work.

I am not advocating that, but many of the proposals I see for
change today, try to make this complicated and intricate relation-
ship of government we have in this country more simple. I really
think the real proposal some of those advocates should look at is
the unicameral parliamentary system, and abolish the cabinet and
the President and the Vice President, and have House elections
and select a prime minister and the executive from whomever con-
trols that one body in a parliamentary system. That would be real
reform — change in our system. Not necessarily the word "reform"
but it would be real change. So you might view some of these
changes in that perspective.

Mr. CONYERS. Well, that is the only one we don't have in the list.

Mr. Sabo. I really think that would be the way to get at some
of these ideas, because we are not a simple system.

Mr. Conyers. We may have jurisdictional problems on taking
that one up.

Mr. Sabo. I think that would come in your jurisdiction, wouldn't
it?

Mr. Conyers. I am not sure, but I hope not.

Let me ask about the entitlement review mechanism. You had
one in the House bill that was deleted in conference. It was then
put forward as an Executive order. How do you think this process
is working? How it has affected the level of entitlement spending.

Mr. Sabo. Well, this year the way it was established last year
we adopted a ceiling. The estimates that were contained in the
President's budget is modified by the congressional actions in the
budget reduction bill last year; and entitlement spending currently
is coming in under those caps. And if the opposite were happening,
that process would have been kicked in, but it is working. We have
had success.

The actual expenditures are coming in lower than estimates. And
that, frankly, is good news. I think some people view it as bad
news, but I think it is good news so we have had not to use the
mechanism.

Mr. Conyers. The entitlements that are creating the deficit prob-
lems are really in the health care area such as Medicare and Med-
icaid. What happens to entitlement spending for these programs is

really going to be a function of what kind of health care reform we
finally enact. Do you have an observation about the assessment of
these health care entitlements?

Mr. Sabo. You are absolutely right. When you look at what is
projected to grow over the next 10 years, now I will switch to one
of trie other measurements we use, measuring expenditures in rela-
tionship to GDP, discretionary spending will continue to go down
as a percentage of gross domestic product. The retirement pro-
grams will stay rougnly level. Social Security and the Federal re-
tirement programs are not growing as a percentage of the total
economy over the next 10 years.

On the other hand, don't hold me to these exact percentages, but
I think health care expenditures in the Federal Government today
are 3.6 or 3.7 percent of gross domestic product. That is where the
real growth is occurring over the next 10 years. And that is key to
the debate on health care.

How we do it and what its long-term impact is on expenditures.
I suppose it is also a classic example of the problem we have on
short term versus long term. Clearly, the theory behind the Presi-
dent's program is that you make some reductions in existing pro-
grams, ana do a variety of other things, sharing employer/employee
responsibility to get the universal coverage, which is relatively —
has to be relatively deficit neutral over the first 5 years with the
expectation it lowers long-term costs. That is the approach that you
need to do it.

Frankly, another alternative would be not to deal with the total-
ity of the problem but simply reduce reimbursements under Medi-
care and Medicaid. You would have more savings in the 5-year pe-
riod, but it might complicate and increase your long-term expendi-
tures.

Mr. Conyers. Would the members of the committee indulge me?

I had intended to have both chairmen make their presentations
and then we question them. Now that Chairman Obey is here,
what I would propose to do, Dave, is have you make your presen-
tation and then we will take all the questions at the same time.
Would that be more feasible way to operate?

STATEMENT OF HON. DAVID R. OBEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN

Mr. Obey. That is fine with me, Mr. Chairman. I don't have any
voice left anyway.

I thank you for the opportunity to testify. Unlike Mr. Sabo, I am
not here to discuss the process. My favorite philosopher is Archie,
the cockroach, and Archie said a long time ago, he said what mat-
ters is not so much what system men have, what matters is what
they do with whatever system they happen to have.

I think that is simply another way of saying within the budg-
etary context that what defects we have in budgeting are traceable
much more to the lack of political will than to the lack of pristinely
pure processes. And I would simply say that if you have been
around here as long as you and I have, you have seen an awful lot
of proposals that have evaporated in smoke as human motivation
and ingenuity has managed to get around every single one of those
processes that have been put in place of.

I simply want to make the point that I understand why we have
the pressures for all of these procedural changes. Because people
are unhappy with the run-up of Federal debt that we have had
over the last decade and more.

But to put this in perspective, one must understand that in 1946
our debt as a percentage of GDP was over 100 percent of annual
GDP. That declined on a consistent basis until 1981 when it got
down to 25 percent of annual GDP. We then had some rather sig-
nificant fiscal choices made in the 1981 through 1985 period. And
as a result today, we are running at 52 percent of GDP in terms
of our national indebtedness.

It took a long time for us to be able to get the attention of the
public, that this was in fact happening. And the ironic thing is that
about the time we got the attention of the public that was nappen-
ing, things have significantly turned around. If you take a look at
the numbers, you will see that, as Mr. Sabo indicated, our debt to
GDP ratio which in 1982 was over 6.5 percent, that is now down
to — in 1992 it was down 4.9 percent. In 1995, it is 2.4 percent, and
it will be down to 2.2 percent in 1996.

That is a considerable change in the right direction, and most of
the members of this committee voted for those changes. I think you
have every right to take credit for it.

But I think you have to recognize that with all of that progress,
we are going to see that again start to dip upward at the end of
this coming decade. That is what everybody is concerned about. It
is not going to dip upward very fast, but it is going to dip margin-
ally upward.

And that is why I think you have a lot of pressure on us here
today. If vou take a look at the chart attached to my testimony,
whicn is from CBO's document on the budget outlook, page 29, you
will see that we have for the next 4 or 5-year period virtually a
freeze on domestic — I mean on all discretionary spending. In fact,
in real dollar terms over that 5-year period, you will have a reduc-
tion in purchasing power of every dollar that is appropriated for
discretionary funding of over $50 billion.

Now, none of us knows where those savings are going to come
from. I talked to Mr. Perry 2 days ago. He was describing to me
the force level reductions which ne felt would have to take place
unless one of the few remaining — one or two of the few remaining
new weapons systems which we are now contemplating in the mod-
ernization budget is in turn eliminated.

I happen to favor that. There are an awful lot of people in this
Congress who don't. But I think it is necessary to understand that
discretionary spending is not part of the problem.

In fact, if you take a look at what has happened to discretionary
spending in the sixties, it was roughly 13 percent of GDP; 1980,
1985, both years, that was riding at about 10.5 percent of GDP. For
1995, that will be down to 7.7 percent of GDP and by 1998 it will
be down to 6.7 percent of GDP. That is approximately half what
it was in the sixties.

If you take a look at my testimony on page 4, I try to point out
that the caps will hold discretionary spending; by 1998, they will
be holding discretionary spending to a figure $65 billion below the
level that would be allowed for inflation, for instance, but Medicare

and Medicaid will be above that number by $96 billion. That is a
13 percent growth above the inflation adjustment for the two enti-
tlement programs that are causing the budget problems.

As Mr. Sabo has indicated, when you disaggregate even the enti-
tlement problem and take a look at the specific programs, the two
problems that — the two problems that are the problem are Medic-
aid and Medicare. And if that is not addressed in health care, it
doesn't mean diddley what you do in everything else because all of
the squeeze that we have been able to put on discretionary spend-
ing amounts to only about two-thirds of the increase that you are
going to have in Medicare and Medicaid over that same time pe-
riod.

So I would urge people to look — to fix the problem where it ex-
ists.

Second, I would like to turn to the issue of lockbox. Now, the idea
behind lockbox appears to be that there is somehow this huge pot
of money which is cut out of spending by the House each year in
action on the floor which needs to be locked away and used for defi-
cit reduction. But which, instead, it is thought, escapes to new
spending.

I would like to disabuse people of that view. The fact is that ap-
propriations have lived within the caps that have been assigned to
them every year that we have had those caps. In fact, we have
been below those caps in virtually every year.

What appears to be behind lockbox is that supporters seem to
feel that even after a deal is struck on the budget process, on the
budget resolution, between those forces who want additional spend-
ing and those who want less, even after that deal is struck, the
supporters of lockbox seem to feel that they ought to have the abil-
ity on each and every action that then occurs in the House on ap-
propriations to again further adjust the agreed-amount for the dis-
cretionary cap that you have in the budget resolution. I do not
think that is a fair process.

You get a deal in the first place because people with competing
views, competing pressures, competing kinds of districts reach a
common conclusion about wnat the macroeconomic choices ought to
be for the coming year. And it seems to me that once we reach that
decision, it is unfair to allow one group to walk away from that de-
cision time and time again while tne other group is stuck with that
decision. That is not trie way you gain consensus in a legislative
body.

Tne second point I would make is that if you do adopt the
lockbox in the appropriations process, by definition, you make it
impossible to go to conference because you cannot reach agreement
unless you can unilaterally dispense with the Senate, which I
would greatly love to do on many occasions, but unless you can do
that, the fact is that you cannot go to conference because as Mr.
Sabo-says, you unilaterally in one House lock in a specific number.

And if you apply it to Congress, it is like the Byrd rule. It means
that you become dysfunctional in conference.

The essence of a conference is that the two Houses each have to
give up a bid of their position, and if one House unilaterally defines
away the possibility of compromise, you have a prescription for put-
ting the entire budget on a continuing resolution and you have a

69 i

process which creates perverse incentives in the appropriations
process because what it means is that committee chairs right now,
for instance, because we look at outlays, as well as B.A., we now
have the perverse result that choices are often made to fund
money— or to put money into program that spends out at a slow
rate rather than a fast rate which results in people looking at the
outlay rates rather than the program quality.

And I think you get judgments which are of less quality than you
got 15 years ago when we were not looking at outlay ceilings. But
that subjective judgment aside, if you have the lockbox process, you
give an appropriations chair the incentive to put your money in
safe, popular programs rather than the best programs.

Example, space station. I don't happen to believe in the space
station. I don't intend to support the space station, but the fact is
that if you have the lockbox principle and there is a high risk that
you are going to adjust the cap downward if any amendments are
adopted to the floor, tactically what subcommittee chairs will be
forced to do is to take in the HUD bill, for instance, to take the
money which is at risk and put it in safer items, VA hospitals,
places where I would like to put that money.

But you would create a perverse incentive in which the House
would probably not even have an opportunity to make the choice
that it is going to make today or tomorrow on the space station be-
cause they would be looking for safe ways to tuck the money away
so that you can then do the real business in conference. AJnd you
would in the end force people back to the good old days when a few
good old boys sat in conference adjusting the bill to reflect what
they really wanted to do and you would make floor action even less
meaningfiil than it is today. And I don't think that is what you
want to do.

The other point I would simply make is that you are attacking
a problem that does not exist. There were 27 cutting amendments
adopted on the House floor to appropriations bills in the last ses-
sion. The Senate-House conference accepted 21 of them; 21 out of
27. That is a 70 percent win rate.

Now, the supporters of lockbox seem to feel that because the
exact dollar amount of those reductions was not reflected in the ap-
propriations process, that means the money was stolen and used
for some other purpose. I would point out that is simply not the
case.

We cut $615 million by the acceptance of those 21 amendments
in conference. But you had items like the supercollider and
ASRAM, which had termination costs of $500 million. And so be-
cause you had to pay the termination costs in order to effectuate
the elimination of those programs, you could not wind up producing
the dollar savings which the amendment authors pretended they
were making by their amendment, and therein lies the apparent
numerical discrepancy between the amount people thought they
were cutting and the amount they actually wound up cutting.

Now you do have another suggestion. People say, well, maybe
you can move this issue to the budget process, and maybe you can
have 50 or 100 amendments to the budget process on specific pro-
grams and you can adjust the caps downward every time one of

I 70

those is adopted. I think that is exactly the worst way to proceed
for two reasons.

First of all, because you then inflate the apparent importance of
a vote, which after all, takes place on a product which is not signed
by the President. And second, you, in fact, force a whole range of
appropriations decisions into the budget process so they are made
beforehand before you have hearings, before you have public in-
volvement and before you have public testimony, before you have
negotiation between forces around here on those individual pro-
grams, and you also duplicate in the budget process what you are
supposed to do in the appropriations process. That makes no sense
at all in my view.

I would make one other point. And I mean no disrespect when
I say it. But I am looking at Mr. Zeliff s testimony. And among
other things, his testimony says as follows: Programs are harder to
kill than cockroaches. They are always kept alive in conference
with another billion dollar tax break for someone. I see nothing in
the A-to-Z process that goes after tax expenditures and I think if
you are going to go after abuse around here, you ought to.

Examples: you do have early writeoff for exploration and develop-
ment costs in energy. That costs $8 million in increased deficits in
fiscal years 1993 to 1999. The depletion allowance, a billion dollars
give-away every year. There is nothing in A to Z that gets to that.
Forestry, $4 billion in tax giveaways between 1993 and 1999; noth-
ing gets at that. Tyson and Purdue, two of the largest chicken proc-
essors in the country are considered, "family farms," under the tax
code. That means they benefit from special rules to the tune of $1.2
billion. I see nothing in A to Z that gets at tax preferences.

Second, Mr. Zeliff says people are tired of hearing that pork bar-
rel proiects are buried in larger bills and can't do anything about
it. Lets give them a forum where each spending issue can be
brought up for a roll call vote.

I would ask Mr. Zeliff where have you been during the appro-
priations process? Where have your amendments been? You have
never sought to offer an amendment to an appropriations bill. You
have never gone up to the Rules Committee to ask to have one
made in order. Every single appropriations bill but two, Foreign
Operations and legislative branch bills, have been open to amend-
ment at any point. You can offer any amendment you want. Where
have your amendments been?

It seems to me that you have a process now which provides an
opportunity to amend the living devil out of appropriations. You
can go after any project you want. You can offer a dollar amount
designated for that project and you can say that if that amendment
passes, that is the project you are aiming at.

The Congress is not about to walk away from the House's judg-
ment on that. But if you want a process under which you would
have take out spending in an appropriation process, offer the
amendments. Why do we need a special process to do what you
have the right to do now, but have not sought to do? Why beat up
on a process which you have never tried to address? It just seems
to me that before we blow up the ability of the House to do its busi-
ness in an orderly way, I would urge that you consider that.

I would also urge, Mr. Chairman, that you consider legislation
similar to A to Z that I have introduced. We would provide for the
system 56 hours of amendments on discretionary spending that is
provided for in A to Z with one caveat: Members would be asked
to offer amendments that would either reduce or eliminate projects
in their own districts. I call it the antihypocrisy deficit effect. I will
be happy to start with a project in my district. I guarantee you.
Project Elf. I put it on the table right now.

But it seems to me that before trie institution is asked to disrupt
orderly processes which are here for a reason, before they are
asked to totally ignore the ability of committees to allow probable
comment on choices before they are made. It seems to me that peo-
ple ought to try to use the processes which are now before them.
So, I have a couple of other points I would like to make, but in in-
terest of time I think I will simply stop and open for whatever com-
ments or questions you might have.

[The prepared statement of Mr. Obey follows:]

TESTIMONY OF HON. DAVID R. OBEY, CHAIRMAN

HOUSE COMMITTEE ON APPROPRIATIONS

BEFORE THE

HOUSE GOVERNMENT OPERATIONS COMMITTEE

SUBCOMMITTEE ON LEGISLATION AND NATIONAL SERVICE ON

BUDGET PROCESS REFORM

June 29, 1994

Mr. Chairman, I appreciate the opportunity to testify before these important hearings.
Despite the very substantial progress made during the past year in turning around the
fiscal condition of the U.S. government, there has been a host of new proposals for
changing the process by which budgetary decisions are made. It is up to this committee
to weigh these proposals carefully, to stimulate debate and encourage a broader
understanding of what these changes might mean to the quality of decision making in this
institution.

Experience has shown us that no where is the law of unintended consequences more
applicable than when it comes to changes in the legislative process-particularly in
matters of budgeting. So this is a very tricky business and the care with which the
responsibilities of this committee are discharged may very well have a lasting impact on
how well the House conducts the people's business.

Ultimately, this committee must determine whether shortcomings in budget policy are
rooted in failures in process or in failures of political will. If you determine that procedure
is substantially to blame (and I don't believe that for a moment), you must determine
whether the proposed changes will improve or diminish the quality of the process.

The burden of proof always lies with those advocating change. The committee
would do the institution and the general public a great disservice if it were to allow itself
to be a party to efforts that would change our procedures merely for the sake of change--
or worse, for the sake of changing process as a cover for those who seek the rhetoric of
deficit reduction but are unwilling to take programmatic action to achieve it. Change for
either of those reasons would contribute to the already high degree of public confusion
about the nature of our fiscal problems and reduce rather than enhance the
accountability of this institution to the American public.

First I want to make it very clear that I think the American people have endured a
fiscal nightmare over the course of the past decade an a half. Our affairs have not
always been arranged poorly. The United States made very good progress in reducing
public debt relative to its total income and output during most of period following World
War II. Between 1946 and 1981, public debt dropped as a percentage of GDP from
more than 100% to only slightly above 25%. But in 1981 we engaged in a massive
redirection of the nation's fiscal policy. Large tax cuts were adopted at the same time
that a major military buildup was undertaken. As a result of that decision, public debt
as a share of GDP doubled in the space of about a dozen years. At the beginning of
fiscal 1994, it totaled $3,240,000,000 or nearly 52% of GDP.

These policies not only ran up the national debt and diverted a major share of future
federal budgets from public investments to debt service but they had profound effects on
the overall health of the nation's economy. They generated record high real interest
rates which made it impossible to create or expand businesses with average or even
above average return on capital. They played a large role in creating an extraordinarily
strong dollar which clobbered the ability of even our most efficient industries to compete
in world markets.

The public has now finally awakened to the terribly misguided course which we
followed in this country for more than a decade. The concern and outrage which
resulted from that belated awakening is responsible for the proposals before us today.
The fact is, however, that the misguided economic policy that produced the outrage has
been substantially changed. Public debt as a percentage of GDP is now declining. The
annual deficit has dropped from 4.9% of GDP in fiscal 1992 to 2.4% in fiscal 1995 and
is expected to drop to 2.2% by fiscal 1996. Most of you voted for the changes that
produced that turn around.

This change in fiscal policy allowed the Federal Reserve to follow a more
accommodative monetary policy and sparked the very substantial recovery which we are
now enjoying.

But there is reason to be concerned about where we are headed long term and it
is that concern, rather than the effectiveness of recent policies which should be the object
of our attention. While the public debt will decline as a percentage of GDP over the next
several years, it will not drop rapidly and by the end of the decade it will begin to rise
again. The deficit will stay below 2.5% for several years, but it will begin to rise slightly
by the end of the decade.

I would encourage you to study the chart on page 29 of the Economic and Budget
Outlook: Fiscal Years 1995 to 1999 by the Congressional Budget Office. I think if more
people understood the information on this one page, the direction of proposed process
reform might be quite different. Under the caps imposed by last years budget resolution
discretionary spending does not increase markedly even in nominal terms. That means
no adjustment for inflation. That means any time we permit a military or civilian pay
increase-the cost is absorbed out of program. In real dollar terms, discretionary spending
will decline by $50 billion or by nearly 10%. The new targets contained in Exon Grassley
have raised that figure by an additional billion

We don't know where that $50 billion in savings will come from. I spoke with
Secretary Perry earlier this week and he believes that defense will either force cut backs
in force structure or eliminate several of the limited number of new systems still under
way. Chairman Murtha will give you a clearer picture of those choices later in these
hearings.

Domestic discretionary spending is being cut back almost government wide. We are
cutting back efforts to develop new sources of energy, we are cutting back our highway
programs, we are cutting in the area of education and health research. We have imposed
very deep cuts in soil conservation, meat and poultry inspection, nuclear waste cleanup
and IRS computer modernization.

As a consequence the domestic side of our government will not be keeping pace. As
our country's population grows and as our economy expands the government activities
and services which ultimately support the economy will be shrinking.

We will see the effects in terms of a less adequate transportation system, a slower
pace of scientific discovery, fewer new products and industrial processes, a less pleasant
and healthful environment and a slower pace of medical discovery.

But how is it possible that all of these things could be declining and the federal deficit
could continue to be a problem. The answer is simple. The discretionary programs
represent only a third of the budget. Defense and domestic combined equal just $540
some billion in outlays in a budget that today totals $1 .5 trillion and will grow to $1 .75
trillion by Fiscal 98. You can hit discretionary spending very hard and not have much
impact. That is what we have in effect been doing.

In fiscal 1985, discretionary spending represented 10.5% of GDP--the same level as
in 1980 and substantially below the 13% of GDP which discretionary spending
represented in the 1 960s. In the coming year discretionary spending will account for less
than 7.7% of GDP. Outlays from discretionary spending in the coming year will be 1 .5%
below current services, nearly $3 billion below prior year levels. By 1998 discretionary
spending will drop to less than 6.7% of GDP, one-half the level of the sixties.

It is almost a cliche but it is also the truth. The growth is in one area of the budget
and one area alone-entitlements. Further, a closer examination of the CBO 'Outlook
Chart' shows that jt is really in one area of entitlements.

Lets take the fiscal 1994 outlays for discretionary spending, for Medicaid and
Medicare and for all other mandatory spending and give each area enough to deal with
inflation, but no more. CBO projects on page xvii that prices will rise by 12.66% between
now and fiscal 1998. Providing only an inflation adjustment would shave about $80
billion off the projected 1998 deficit. As a result we could expect a deficit of about $100
billion or perhaps a little less. At that level we would be substantially reducing the public
debt as a share of the overall economy on a yearly basis.

But federal spending will grow faster than the rate of inflation because of explosive
growth in one area. The caps hold discretionary spending at $65 billion below the level
allowed for by the inflation, Medicare and Medicaid will increase by $96 billion. That is
39% growth above the inflation adjustment. The other mandatories will grow as well but
not by nearly as much. They will be $25 billion or about 5% beyond the adjustment. So
all the squeezing in the domestic programs is offsetting only about two-thirds the growth
in Medicaid and Medicare. The most disturbing aspect of this trend is that these health
cost increases are not just affecting government. The same increases are killing private
businesses and squeezing individual households.

But the main thing I wish to impress upon you as the Chairman of the Appropriations
Committee is that we already have a plan that squeezes discretionary spending very very
hard. The reason that we are not making more progress is the lack of cost controls in
other areas.

Now let me talk about the specifics of the so-called "lock-box" proposal. The
principal purpose of the "lock-box" appears to create additional downward pressure on
the overall level of discretionary spending. As I have already pointed out, the current
level of downward pressure is already quite intense. I would also point out that it is highly
effective. In every single year since we began having caps the appropriations bills have
provided less in both budget authority and outlays than was permitted by the caps. Prior
to that time the appropriations bills consistently remained below the legally non binding
targets contained in the budget resolutions. There is simply no case to be made that the
caps on the budget resolution are not effective. They have been— 100% of the time.

While I believe that there is a strong case that the constraints on discretionary
spending are already too severe, there is a simple, effective option under existing rules
for members who disagree with that assessment. All they need to do is work for a
budget resolution containing lower caps or failing that, offer a substitute or an amendment
to the budget resolution lowering the caps.

What members appear to be seeking with the "lock box" is to vote for one level of
discretionary spending in the budget resolution and then to revise that level every time
Appropriations bills. are considered. There are several reasons that such a procedure
would be bad process.

First, any budget resolution wins adoption because members of different view points
on the appropriate level of taxes, entitlements and discretionary spending get together on
a compromise which represents more spending than some would wish and less than
supported by others. Chairman Sabo would be better able to address this issue than I,
but it would seem remarkable to me if members who were concerned about the adequacy
of the amounts contained in a proposed resolution would agree to support it if those
wishing lower amounts could walk out on the deal the first time an appropriation bill
came to the floor.

Second, while there are a number of "lock box" proposals, none deals satisfactorily
with the unhappy fact that we are members of a bi-cameral legislature. One proposal
places all reductions in a deficit reduction trust fund contained in each bill. That portion
of the bill is not amendable by the Senate. That is a precedent which I would strongly
support but I am afraid that it tells us more about how well these proposals are thought
out than what is actually possible in terms of our ability to dictate the prerogatives of the
other body.

Another approach would be to simply reduce the allocation of the subcommittee which
lost a floor amendment in which ever body the amendment was lost. The problem with
that approach, is that it essentially sets up a one house veto on major spending items.
If the F-22 is supported by the House but defeated in the Senate, the Senate Defense
Subcommittee allocation would be reduced by the amount amendment cut. That would
literally make conferences impossible because the latitude for working out a compromise
would be eliminated. It would increase the portion of the government funded through a
continuing resolution. Ultimately, the only way in which the difference between the two
bodies on such appropriation matters could be resolved, would be if the body supporting
the higher amount yielded completely to the body that had accepted the cut. What ever
you think of that outcome from a policy standpoint, it abrogates the electoral
responsibilities of one body or the other.

Thirdly, It distorts the decision making process by creating a distinction between cuts
that are made in committee and those that are made on the floor. A subcommittee chair
would have an incentive to take controversial proposals out of the appropriation bills in
committee and use the savings to fund an alternate item that members would not wish
to vote to cut. One example of this is a vote that we will have later this week on the
Space Station. I do not support it and I hope we don't fund it. Quite frankly, I would
rather see the money go back to the Treasury. But I do believe that the House should
have the opportunity to vote on it--one way or the other. With "lock box" there is a strong
chance that issues such as Space Station would never come to the floor. The Sub-
Committee would have the option of using the money in other places including VA
hospitals rather than risk the possibility that the allocation would be lost all together.

Fourth, loss of the allocation would make it impossible for the committee to respond
to real world budget facts of life. If a program is eliminated by virtue of a floor
amendment, it can only on rare occasions provide us with 100% savings. But quite often
there are legal obligations resulting from contracts which have been signed by executive
agencies and for which this government stands liable. Whether we accept that
responsibility and appropriate the close down costs in a timely manner or force the
contractors and agencies to go to court and get a judgment against the Treasury we will
eventually have to pay. If 100% of the project funding is taken from the Committee
allocation if removes our flexibility to resolve these issues before they get out of hand.

My final point, Mr. Chairman, is that the implied argument of the supporters of "lock-
box"--that the will of the House to cut spending is not being protected in appropriation
conferences, simply does not hold water. The theory that large reductions are adopted
on the House floor that need to be "locked in" simply does not square with the facts.

Last year, the House adopted 27 amendments which cut appropriated amounts in
the 13 bills by more than $865 million. House-Senate conferences agreed to accept all
or a portion of the House passed floor cuts in 21 of those 27 instances. Resulting cuts
totaled $615 million or more than 70% of the House passed amounts.

The net impact of the House passed floor cuts on total appropriation levels was much
less than the total amount of the cuts for one very simple reason: termination costs.
Termination costs are an unpleasant but unavoidable fact of life in government finance-
one that the Appropriations Committee did not create and the "lock-box" proposal cannot
dispel. Two amendments that permanently eliminated large ongoing federal projects (the
super conducting super collider and the advanced solid rocket motor) reduced
appropriated amounts by $437 million. Termination costs on those two projects amounted
to $500 million. But the will of the House was honored-the projects were shut down--and
the long term budget implications are substantial. Everything that could have been
"locked up" was.

I would also like to comment on the idea now emerging from some quarters that these
problems with "lock-box" can be solved by simply moving it into the budget process. It
appears that this approach would be to allow members to suggest programmatic cuts
within the context of the budget debate. That is precisely what should not happen.

The central purpose of the budget process is to match income with outgo-to try to
establish an overall fiscal policy in which spending is related in a rational way to revenue.
Inviting a hundred non binding amendments on a program by program basis as a means
of arriving at a total cap on discretionary expenditures is not only duplicative of the real
work of the authorizing and appropriating committees but will lead to almost certain
mischief. Nothing is more corrosive to the responsible functioning of a legislature than
a process which allows individuals to posture themselves on votes that appear to have
much more meaning than they in fact have. Such processes not only confuse our
constituents and the outside organizations who follow our activities, but they often result
in a great deal of internal confusion and disappointment.

Under Chairman Sabo, the decision making in the House Budget Resolution has
become much more real. No longer is the allowance function used as a storehouse of
'negative spending' to offset billions of increases added to the functional categories which
cannot be funded if the discretionary caps are to be complied with. Unfortunately, the
same can not be said of the process in the Senate.

But a budget resolution "lock-box" would be a major step backward. Members could
pretend to defy the laws of mathematics and engage in wonderful initiatives which we
would all love to see but which our commitment to control spending in the real world
would preclude. By the same token we could have equal confusion created by a non
binding vote on cutting a program which has been described in a pejorative manner
based on no hearings, budget submission or serious review.

Mr. Chairman, let me review the major points I hope your committee will remember
when thinking about the "lock-box" proposal:

1 . It is aimed at increasing downward pressure on a portion of the budget
which has already shrunk dramatically and is scheduled to shrink further over the
next several years.

2. That portion of the budget contains defense programs and domestic
investments which can have an important impact on future economic growth.

3. While there may be reason to question the certain aspects of the current
budget process, that process has proven itself 100% effective in controlling
discretionary spending. For those who wish even greater restraint on that area of
spending, the mechanism for imposing that restraint is already in place.

4. The "lock-box" proposal is simply a means by which those who have
agreed to a compromise on the budget resolution discretionary spending cap, can
walk away from the compromise before the ink is dry. That cap could be revised
by a new coalition of members every time an amendment is offered to an
appropriation bill. Ultimately, that would destroy the prospects for getting 218
Members to reach an agreement on a discretionary cap. That would mean no
budget resolution and end the very effective control which the budget process has
exercised over discretionary spending.

5. The "lock-box" would create numerous procedural impediments to the
resolution of differences between the two bodies. It would significantly increase
the prospects that a major portion of the government would be funded each year
under a continuing resolution rather than as a result of the deliberate decisions of
elected representatives in the two bodies of Congress.

6. Despite arguments of "lock box" advocates, the will of the House in
cutting appropriated items is being protected in House-Senate conferences under
the current process.

I hope this perspective is helpful to the committee and I would be glad to answer
whatever questions you and the committee might wish to ask.

CHAPTER TWO

THE BUDGET OUTLOOK 29

The

Budget Outlook Through 2004 (By fiscal year)

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

In Billion* of Dollars

Revenues

1.251

1.338

1.411

1.479

1.556

1,630

1.706

1,783

1.868

1.958

2.054

Outlays

Discretionary

543

541

547

564

582

600

619

638

658

Mandatory

Social Security

318

335

352

370

388

408

429

450

473

497

523

Medicare

160

177

195

215

238

264

290

320

354

392

435

Medicaid

108

121

135

151

168

186

206

227

250

Civil Service and Military Retirement

Other

Subtotal

177
803

171
844

168
890

184
960

191
1.026

199
1.099

205
1,173

211
1,253

218
1.339

225
1,433

232
1.536

Deposit insurance

-5

-11

-14

-6

-4

-3

-2

Net interest

201

212

228

239

249

261

270

283

298

315

334

Offsetting receipts

-69

-77

-74

-78

-83

-86

-90

-94

-98

-102

-106

Total

1,474

1.509

1.577

1.661

1.736

1,834

1,931

2.039

2.156

2.282

2.419

Deficit

223

171

166

182

180

204

226

256

288

324

365

Deficit Excluding Deposit Insurance

228

182

180

189

164

208

229

258

290

326

367

Debt Held by the Public

3.462

3.642

3.822

4.021

4.218

4.441

4.686

4.961

5.268

5.611

5.995

M a Percentage of GDP

Revenues

18.8

19.1

19.0

18.9

18.8

Outlays

Discretionary

8-2

7.7

7.4

7.0

6.7

6.6

6.5

6.3

6.1

6.0

Mandatory

Social Security

4.8

4.7

4.8

Medicare

2.4

2.5

2.6

2.8

2.9

3.1

3.4

3.6

3.8

4.0

Medicaid

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2.3

Civil Service and Military Retirement

0.9

Other

Subtotal

2.7
12.1

2.4

12.0

2.3
12.1 .

2.4
12.3

2.3
12.5

23
128

2.3
130

13.3

2.2
13.5

2.2

138

2.1
14.1

Deposit insurance

-0.1

•0.2

■0.1

Net interest

3.0

3.1

3.0

3.1

Offsetting receipts

-1.0

-1.1

-1.0

Total

22.2

21.5

21.3

21.4

21.2

21.3

21.4

21.6

21.7

21.9

22.1

Deficit

3.4

2.4

2.2

2.3

2.4

2.5

2.7

2.9

3.1

3.3

Deficit Excluding Deposit Insurance

2.4

2.2

2.4

2.5

2.7

2.9

3.1

3.4

Debt Held by the Public

52.2

52.0

51.7

51.5

51.7

52.0

52.5

53 1

53.9

54.9

SOURCE: Congressional Budget Office

a Less than 0 05 percent of GDP.

Mr. Conyers. Well, I thank you very much, Chairman Obey and
Chairman Sabo. This has been a very helpful way to begin our ex-
amination of the proposals that are before us.

Let me ask about the recommendations to eliminate baseline ad-
justments for programs in the budget process, and develop spend-
ing levels from a freeze. Given the tight spending caps, isn't it cor-
rect that we are already doing that? Shouldn't inflation be a cost
that should be acknowledged? Isn't the current cost of continuing
the level of services enacted into law in the prior year useful infor-
mation that validates keeping baseline in our set of tools that we
use for budget evaluation?

Mr. Sabo. I think baseline serves a purpose in measuring the im-
pact of budget policies just as the previous year is an appropriate
measurement and as the GDP an appropriate measurement. Every
appropriation bill normally shows three things: the prior year's ap-
propriations, the President's recommendation, and the committee's
recommendations. The budget resolution, we put together from a
variety of sources we used last year. I suppose we use partially
baseline. It is partially the President's recommendations.

We then have CBO reestimates of it and the chair's mark to the
full committee comes out of all of that mixture. We don't start with
a baseline and then reduce it in the mark, at least the ones that
I have put together. Frankly, all of the discretionary spending is
going to have to stay within the caps we have already adopted.
That clearly is significantly below the traditional baseline.

Mr. Conyers. How did baseline start getting such a bad rap?

Mr. Sabo. I don't know, because it is one of three or four legiti-
mate measurements of budget policy over a period of time. You
know, the rhetoric is that a cut is not a cut because it is actually
something other than measured by the prior year's number.

Well, in some respects that is right, but the opposite is also in
some respects right. If you look at the impact of budget policy over
a period of time, what has happened on CPI is relevant to the
broad scale of what is happening with discretionary spending. The
impact within programs can vary with the change in cir-
cumstances. And so it is less appropriate, I think to each specific
program in comparison to being a measurement of broad budget
policy.

I am not sure — I suppose in Gramm-Rudman days there were
years that we did not have hard targets like we have now, but cer-
tain deficit reduction targets instead, and we had all kind of games
played with that. I think baseline was the worst of them. We used
to nave all kinds of rosy scenarios. For a period of time, we had
asset sales we could count, which we cannot count anymore. I think
a lot of this is a response to the gamesmanship that existed under
the Gramm-Rudman rules which we do not have anymore.

Mr. Obey. I would like to observe that when I mark up my ap-
propriation bill, I don't pay any attention to my baseline except
what we provided last year. I think the existing budget baseline is
a useful tool of analysis because it enables you to determine how
much the dollars you are appropriating buys in comparison to last
year. But when you put appropriation bills together, most chairs
that I know simply say, well, we are assigned this dollar amount,

they got this amount last year, we can afford this amount this
year, and so we don't hear any real discussion of baselines.

I think that is a controversy which is left over from a different
era. And it certainly doesn't have any application to the appropria-
tions process because while I think budget baselining is a very use-
ful tool to determine what is happening to the real purchasing
power of any program, that doesn't mean we appropriate at the
baseline. We are appropriating every year on the basis of a hard
freeze.

Mr. Sabo. To put it in context, I suppose last year when we
passed the large deficit reduction bill, and we said it was $500 bil-
lion, part of that reflected cuts from baseline. Which I think that
is an appropriate way, for broad guideline and outline, of saying
what we did to be accurate.

The fact that we in that bill kept discretionary spending at or
below what were then our 1993 estimates over a 5-year period of
time, some would say was no cut. Well, the reality is over a period
of 5 years, those are real cuts, policy choices that have to be made
by the Congress. And so I think it is an apt description of what
happened.

But when it comes to the specifics of appropriating, you look at
last year's numbers and the President's, and those committees
make their recommendations. When you come to entitlement pro-
grams, those inflation adjustments, in most cases, are built into the
basic fabric of law; and if you make changes in that basic fabric
of law, you have made policy choices, and reduced expenditures. To
pretend that that law didnt exist, I think would not make much
sense, unless you change the base law.

I suppose the other impact is that if you were going to consider
base laws as it applies to entitlements, with those adjustments oc-
curring regularly, and never look at the impact of discretionary
spending on inflation that skews things more, again away from dis-
cretionary to entitlement programs.

Mr. Conyers. My last comment or question is with reference to
lockbox, because in conference, it really becomes an enemy against
the House. In conference, you could be locked in in a way that only
the lowest figure in the conference would prevail, so that you could
end up reducing your own priorities because of lockbox.

Is that an accurate view of the kind of conundrum you could get
into?

Mr. Obey. Mr. Chairman, let me explain how the process actu-
ally works.

The House has the right under the Constitution to originate tax
bills. We also feel that the House has the right to priority judgment
on spending bills. So we determine what the 602 limitations are
going to be for each of the subcommittees. We consult with the Sen-
ate, but we don't always reach an identical agreement, because the
Senate has a different dynamic than we do. So we reach our 13
subcommittee 602 ceilings.

We then move the bills to the floor. The House works its will on
each of those bills.

We then go to conference. The Senate has done the same thing
on their bills.

We then try to come out of conference, first on the bills for which
we have the same allocation in both Houses, so that we get rid of
the easier ones first. Then we wind up dealing with the bills that
have different allocations, and we have to adjust between the two
of them to take into account the actions of the House, the actions
of the Senate. We can't exceed the overall number, but we have —
in fact, that is where the actions of the two Houses are reflected
in the conference process; and if we did not have the ability to do
that, we would have a winner-take-all or an all-or-nothing position
in conference.

I don't know of any human endeavor where that is a good idea.
It just seems to me that you always have to have the ability to
compromise between Houses, between the parties; and if you lock
yourself into a specific dollar number, you might as well not try to
go to conference, because in one House or the other that conference
is going to fail.

Mr. CONYERS. Thank you both.

Mr. McCandless.

Mr. McCandless. Thank you, Mr. Chairman. I would like to talk
in terms of the system, and I am not a person that wants to get
involved in personality. I think we are here to talk about the sys-
tem rather than a party on this side or a party on that side; or
what you said, he said, or I said.

So, naving set that stage, I would like to go back in history a lit-
tle bit and talk about my experiences with the Federal budget, hav-
ing come from another level of government and having been very
much involved in the process, which is the same, except you reduce
the numbers by quite a few dollars and zero signs.

Since my coming to Congress, we have enacted a number of
changes to the budget process steps. The 1986 tax law. That was
a big boondoggle. It helped to create the recession. And when
1990— or in 1987, I think it was, we came up with Gramm-Rud-
man. That was passed. The word "sequester" became a part of our
vocabulary.

Then, in 1990, we came up with the budget agreement. And in
each of these cases, the person paying our bills out here with his
or her taxes was saying, OK, we will go along with you on this pro-
gram, this policy, this procedure, because you are telling us it is
going to ultimately solve the problem.

And then we come up in 1992 with the budget and tax increase —
1993, I am sorry. And in 1992. if I have my year right, we waived
the budget rules on the floor of the House 52 times. So I am saying
to myself, wherein do we have the problem here with respect to
whatever system we decide to adopt? We don't seem to be satisfied
with it as a legislative body and we try to find ways around it if
it doesn't suit us; or we simply waive the budget rules and go
ahead and pass the rule and go on with the program at hand.

We have — in the last 40 years for every $1 of new revenue that
we have received, we have spent $1.59 in expenditures. In the pro-
gram that we passed last year, the tax bill and budget — depending
upon how this plays out, for every $1 that we promise to cut in
spending, we will add $4 to $8 in additional expenditures.

Now, what I have attempted to do here is to put together in a
collage a number of things that leave the people out there who pay

our bills at a loss. They keep asking well, aren't you fellows going
to ever come up with anything in the way of a system that you can
agree on and keep in place so that you can address this deficit?

For example, here is a question that comes up more times than
I would like to say, if I can find the right notes here. We voted to
cut spending. We tell the voters, we have cut spending, but we rou-
tinely redirect this money to other programs instead of applying it
to the deficit. Then the voters look at this and they say, when Con-
gress votes to cut funds from a program, that is fine, but all that
happens is that they vote money and spend it for another Federal
program.

Now, I have given you a little bit to chew on; however you wish
to respond, if you do, nave at it.

Mr. Obey. Well, I guess I would just like to take your last point
and say, it ain't so.

Mr. McCandless. Which last point, Mr. Obey? You mean, to
keep raising our expenditures?

Mr. Obey. No. The last point you made about Congress keeps
cutting spending and then shifts it to other programs.

As I said in the last part of my testimony, the fact is, the num-
bers just don't bear that out. I will repeat the numbers. On appro-
priation bills last year, 27 times the House voted to cut appropria-
tion bills, 27 times. We accepted — the Senate accepted those reduc-
tions in 2 1 of the 27 occasions.

Mr. McCandless. I heard that.

Mr. Obey. And that meant that we had a reduction total of $615
million capped all right. That was at the budget.

Mr. Obey. Which was offset by over — by about $500 million in
termination costs. So you did not nave a shifting of money

Mr. McCandless. Did you take into consideration the supple-
mental appropriations and all of the individual appropriations on
various waivers of the rules of the House?

Mr. Obey. Yes, sir. Waivers don't have anything to do with it. I
am talking about — you said that when the House voted to cut
spending, it was then shifted to other programs. I am saying that
is not a fact. That is a myth; that is not a fact.

Waivers have nothing whatsoever to do with whether the House
has voted to pass an amendment cutting spending or not. Most
waivers that are granted are simple waivers because of lack of au-
thorization. That is a totally different question; it has nothing
whatsoever to do with the assertion that somehow you need
lockbox, because we cut programs and then shifted to other pro-
grams.

The fact is, there were only six times when the conference didn't
accept the cuts that were successful on the House floor, and the
major reason that we didn't reach the same dollar savings is be-
cause you had termination costs.

Mr. McCandless. Well, you have gone over that a couple of
times now. When we talk about waivers, we talk about, well, we
are doing this because we don't have an authorization. Shouldn't
there be an authorization? Shouldn't the authorization committee
have an opportunity to review the subject in question before the
money is appropriated?

Mr. Obey. Well, of course they should. What do you do if an ad-
ministration stiffs an authorization committee?

Mr. McCANDLESS. I am sorry?

Mr. Obey. I say, what do you do if an administration stiffs an
authorization committee?

Example: I chair Foreign Operations. We have to provide the for-
eign assistance budget. We went over 5 years in a row, not having
an authorization pass. Now, Members are free — if they decide that
they don't want to provide any funding, they are free to vote
against the appropriations process.

We have never had a dispute with the authorizing committee
that was not resolved in the Foreign Operations bill, because I
won't bring a bill to the floor unless it is. But we — when we bring
a bill to the floor that is there without authorization in the Foreign
Operations area, it is because the authorization process has broken
down and we are, therefore, left with a choice. We can provide no
funding whatsoever for those programs, or we can reach an accom-
modation on an appropriation process.

And I would point out, since the bill that we passed was passed
by a margin of almost 4 to 1, it just seems to me an indication that
on a bipartisan basis, we reached a reasonable accommodation,
given the fact that the authorization process had broken down.

Nothing in any of the proposals before us will do one blessed
thing to fix the authorization process. The authorization process
does not produce a bill if you don't have the political will on the
part of an administration and both committees to reach the same
conclusion.

Mr. Sabo. Let me give you another example.

Tomorrow we will vote on the defense appropriation bill. And the
defense authorization bill has passed the House. It has not passed
the Senate; they authorize on an annual basis. So clearly, that bill
will require a waiver from the Budget Act to be able to proceed.
Otherwise, one would — you know, last year, I don't think the au-
thorizing bill was passed until virtually at the same time that we
had the conference report on the defense appropriation bills.

Those budget waivers are not waiving our discretionary spending
caps. They rarely have fiscal implications. Most of the bills that
may have a little bit of fiscal implications, violation of some rule —
if it is a minor number, you are more likely to find that suspension,
which involves no waivers. So the budget waivers are not spending
questions; they are procedural questions.

When you go back to the specific years you mentioned, you did
not go to 1981, where I think we made some judgments that clearly
created the deficit problems of the 1980's, started the problem. You
spoke to the 1986-1987 tax simplification bill. That was not a pro-
posal— you know, people can vote yes or no on it. It was not a bill
that was decided to either lessen or increase the deficit. It was ne-
gotiated between the Congress and then President Reagan in an at-
tempt to simplify the Tax Code.

The 1990 budget agreement with President Bush, I think, in set-
ting new spending caps, discretionary spending, established a very
effective procedure to deal with discretionary spending; and many
of its provisions clearly have been helpful in bringing the current

deficit down. But it also came in a period of recession. Any time
you have a declining economy, the deficit is going to go up.

The best strategy — the best deficit reduction strategy we have
going is a healthy, functioning economy. The 1993 act significantly
reduced spending. It extended the discretionary spending caps
through 1998 — and let me remind you that through the 1980's, dis-
cretionary outlays were growing at $20 billion to $25 billion a
year — made real cuts in entitlement programs which are having
their impact; increased revenues, and revenues are going up; and
actually, the deficit reduction is substantially more than what we
projected a year ago, because the economy is functioning and the
impact of the changes in laws that we made.

But the waivers today are not there from those discretionary
caps. The pay-as-you-go requirement which was part of the 1990
act, which was a very important 5-year requirement, those are in
place and, frankly, they are working.

Mr. Conyers. Let me ask Mr. Spratt to get two questions in be-
fore he leaves, and we will come back to Mr. McCandless.

The gentleman from South Carolina.

Mr. Spratt. Two questions.

First of all, as I understand your explanation of baselining, and
also the explanation of baselining that is being requested, we are
basically doing it right now. As I understand the baselining re-
quests, those who are proposing it are not seeking to have a budget
authorized or appropriated every year from last year's baseline;
they are only asking for a presentation of the budget so that you
can measure the increase from one fiscal year over and above the
prior fiscal year against that constant baseline.

As I understand it, in one form or another, both of you are still
presenting it.

Do you nave any problem with the presentation of the budget in
this form so long as it is just presentational?

Mr. Sabo. No. I think you should reflect last year and this year.
I have no problem with that.

I do have a problem when people say that when you project what
is happening with general budget policy, you should ignore base-
line. I think that is a legitimate measure, just as the change from
last year to this year is also a legitimate measurement of what is
happening. They are both legitimate.

Mr. Spratt. Mr. Obey.

Mr. Obey. People in the appropriations process, people right now
get the presentation that shows what you spent last year versus
what you spent this year.

Mr. Spratt. We do the same in the authorization process.

Mr. Obey. Yes.

Mr. Spratt. So as long as there is a present — as long as it is
presentational, there is a presentation of the budget so that you
can compare last year's spending with this year's spending, you
have no problem with it.

Mr. Obey. I don't have any — I mean, that is what we do now. I
mean, I would be happy if we had the resources so that we could
get — so that we could appropriate at the baseline level, but we
don't.

Mr. Sabo. I have heard people say that if we visit about what
has happened with defense since 1985, if we say there have been
some significant cuts in defense spending since 1985, that we are
wrong. We may disagree as to where we should go in the future,
but the reality is — you know, the dollar amount is relatively level,
but the reality of inflation over a 9-year period is that real spend-
ing on defense has dropped, I don't know, 35 percent, something
like that.

That is also an accurate description, just as looking at actual dol-
lars is an accurate description.

Mr. Obey. I mean, if we really want to fool ourselves, then con-
fine ourselves only to nominal dollar descriptions of programs, the
next time you get into a war and you get the hell beat out of you,
just say, well, gee whiz, we — you know, we provided the same
amount of money we were providing 10 years ago. Yeah, but over
10 year's time that is buying about 30 to 40 percent less in real
punching power than it would have a decade earlier.

So if you want to walk down a blind alley and leave this country
on a straight route to national insecurity, budget only on the basis
of nominal dollars with no attention whatsoever to the baseline
concept.

Mr. Spratt. One other question, and it relates to the lockbox.

Mr. Obey, I am fully aware of the unintended consequences of
laws that you both warned us against. I think maybe you state the
case against lockbox a little too harshly, though, because as I un-
derstand at least one version of it, it wouldn't be' binding upon you,
upon the Appropriations Committee, until the conference report it-
self had actually been adopted and the proposal to cut and the
spending cap had been enacted into law. Until that time, it would
seem to me the proposal for both the specific item and the spending
cap reduction would still be in play in conference and not binding
upon you until it was finally resolved with the Senate and enacted.

Mr. Obey. I would have two observations. First of all, it is fairly
difficult to comment on any of these propositions, because while, for
instance, they propose a process — well, I won't get into that. But
the fact is that these targets have moved so fast and the proposals
have changed so often that it is very difficult to keep up with them.

There may be a different permutation, which is a bit different.
Fine.

The problem is, however, that even if you did that, you would not
be able to respond to any — I mean, life is not — no matter what poli-
ticians promise, life changes, conditions change. We would not — we
would not have been able to fund assistance to the Soviet Union
last year if we had not been able to take the remaining budget au-
thority and outlay authority, which we had chosen not to spend for
other purposes, at that time and use it for a high-priority national
emergency.

I don't — we have the peacekeeping issue this year. I don't— I do
not buy the idea that once we had made a macroeconomic decision
in terms of what that overall spending level ought to be, that one
side of the argument ought to be able to adjust that and the other
side shouldn't. I don't think we ought to be able at the end of con-
ference to say, well, conference decided to spend an extra billion
dollars more, so we ought to raise it. I don't want to do that.

By the same token, I don't want to have to artificially lower it
either, when you can have hurricanes, national disasters, wars,
international problems that require you to try to

Mr. Spratt. I understand fully what you are talking about. What
I am trying to clarify is, under these bills that have been proposed,
at what point are your hands tied? Schumer's bill says, "It shall
not be in order in the House or the Senate to consider a conference
report that modifies any deficit reduction lockbox provision that is
beyond the scope of that provision and so committed to the con-
ference committee."

Mr. Obey. That means, in essence, that you are locked into the
House number, as you go to conference. You — in other words, you
can go to conference only if you agree not to compromise with the
Senate.

I think that is ludicrous.

Mr. Spratt. You read that language to mean that your hands
are tied as soon as the House has adopted it?

Mr. Obey. Yes, I do.

Mr. Spratt. So that is the provision that you are specifically
complaining about?

Mr. Obey. Yes.

Mr. Spratt. I think the point is well taken. Thank you both for
your testimony.

Mr. Conyers. Chairmen, Mr. Zeliff is very anxious to discuss
these matters with you. Could we stop now for the vote and come
back to accommodate him, please?

Mr. Obey. Sure.

Mr. Conyers. All right. Thank you very much.

We have a vote on the previous question and then a 5-minute
vote on the rule for DC Appropriations. The committee will stand
in recess.

[Recess taken.]

Mr. Synar [presiding]. The subcommittee will come back to
order. If Mr. Sabo will come down, we will continue the questioning
here.

The Chair recognizes Mr. McCandless for questions at this time.

Mr. McCandless. Thank you, Mr. Chairman.

Is Mr. Obey coming back?

Mr. Sabo. I think so.

Mr. McCandless. We have talked here through a number of is-
sues. Many of your answers are interesting. They are sincere, I am
sure.

My concern is that the two Members of this panel are key ele-
ments in the budgetary process and how the money is spent in
Congress, whether it happens to be you as a personality or some-
body else, the chairman of the Budget Committee or the chairman
of Appropriations.

If I understood Mr. Obey's comment correctly, if we don't author-
ize it, we need to appropriate it, so we waive the budget rules on
the floor of the House and go ahead and appropriate without au-
thorization. Was that your understanding?

Mr. Sabo. It varies. We do in some cases; in some cases, we
don't. There are all kinds of ongoing programs that have not been
reauthorized for a variety of reasons. Sometimes that stops appro-

priations, sometimes it doesn't. But whatever we do, we have to
stay within the spending caps that are set and that we have been
operating under since 1990.

But, you know, the waivers we talked about, those are basically
nonnumber waivers; they are — procedural waivers.

Mr. McCandless. Well, then we shouldn't have to have proce-
dures then.

Mr. Sabo. Well, the nature of a legislative process is

Mr. McCandless. I am familiar with the legislative process.

Mr. Sabo. Some flexibility is what makes it work. I have ob-
served this process for many, many years. You know, the Presi-
dent's program is whatever they say it is.

The legislature has many virtues. Part one of its negatives is it
can never be as simple and as precise as the executive. However,
but it has time and it has some flexibility in working out solutions
to problems. That is apparently what the legislative process is all
about.

As it relates to budget, the budget process puts some restriction
on total dollars we can spend in discretionary spending but we
have some flexibility in how we get there.

Mr. McCandless. I don't know

Mr. Sabo. If you are concerned over the dollars, watch suspen-
sion bills more than the bills that have waivers.

Mr. McCandless. Well, let me try to conclude by reading some
sentences out of the bipartisan commission on entitlement and tax
reforms report dated June 21, 1994. And I have some real concerns;
I mean, I am sincere.

And you say, well, if it isn't broken, don't fix it, it doesn't need
fixing or however that goes. If it isn't broke, don't play with it. In
my opinion — you may disagree — we have a real problem, and we
are going to have to make some major changes, and that is our
spending process, whatever that requires.

This is the summary of the June 13, commission meeting. I am
just going to read a couple of pieces out of it, a draft commission
finding, tor discussion. Under finding 3, the second section of that
simply says this: "Entitlement spending and interest on national
debt consume more than 60 percent of the Federal outlays today
and double the percentage of just 25 years ago."

This is the key element here. Entitlement spending and interest
are projected to exceed 70 percent of outlays by the year 2003.

And finding 4, and this is just a couple of the sections of finding
4: "By the year 2030, Medicare, Medicaid, Social Security and Fed-
eral employees retirement programs will consume all Federal reve-
nues." Total Federal outlays would exceed by 37 percent the econ-
omy, compared with outlays of 22 percent and revenues of 19 per-
cent today.

And then that particular section concludes "If action is not taken
soon, America will be forced to choose between doubling every Fed-
eral tax and cutting more than half of every Federal program and
entitlement to balance the total Federal outlays and revenues."

This is not some think tank downtown; this is our bipartisan
commission on entitlement and tax reform. Those are serious state-
ments with respect to the future.

I serve on the Banking Committee, and I have had interest in
the financial aspects of our development banks and so on and so
forth. And this is not meant to be a scare tactic, but if we continue
in the direction that we are, with the type of budgetary process
that is currently in place, I am sorry to say by the year 2000 we
will probably have devalued our currency, which presents a tre-
mendous problem with respect to everything we are trying to hold
together.

If you have ever been in a country where devaluation has taken
place, it tends to be catastrophic, particularly on the old people.

These are my concerns. I am sitting here, I am part of this com-
mittee, I am talking to you folks because it is broken and it needs
to be fixed.

Mr. Sabo. Mr. Chairman, if I might respond — I am on that com-
mission— I think those are preliminary findings; but I don't quarrel
with the basic thrust that we have some real, fundamental, long-
term problems. All of these procedures we are talking about here
basically relate to discretionary spending, not to the entitlements
that is referring to.

Basically what you read to me is part of the reason I said ear-
lier— when Chairman Conyers asked me about long-term problems
we had to deal with in the process, one of the problems we had to
sort out is how we deal with in this process problems that have a
timeframe of more than 5 years. And you are simply reinforcing
that, because when you deal with these programs that have long,
long lags or whatever one wants to call it, one of the problems we
have is that the fundamental change may or may not have an im-
pact within the 5-year framework in which we operate on budget
resolutions.

I would hope one of the areas that the commission might come
up with some recommendations on is how we deal with some of the
real long-term problems of Social Security. Those changes may or
may not have impact within a 5-year window; and that is the area
that we deal with within the reconciliation process of a budget res-
olution and how we get at those long-term problems. Or we can,
in effect, use the process to force change on long-term problems
which may not change anything in the 5-year framework. We need
to think this through.

I, frankly, am not sure how we do it. So I would be interested
in your thoughts on how we deal with that kind of process ques-
tion.

I think you would be much better served looking at those kinds
of issues than some of these — trying to rework some of the old
questions on discretionary spending, which frankly are under sig-
nificant control through the budget caps that we set in 1990 and
extended in 1993. And many of the other procedures don't deal
with the big issues the commission is trying to deal with.

And one of our problems — you know, we spend hours over some
amendment on the floor that involves $2 or $3 million, like that is
going to solve the problem. And there is some importance and rel-
evance to those, but the larger, long-term questions that we have
to deal with on how we handle retirement policy in this country is
something that I don't find any of these proposals before you really
dealing with: And those are tough, long-term questions.

There are also very substantive changes going on in our society.
There is a decrease in basic retirement plans being offered to peo-
ple. My own judgment is that the basic importance of Social Secu-
rity as sort of a basic retirement benefit is probably growing in im-
portance with the changing nature of our economy. At the same
time, we have to deal with the real long-term funding problems
that exist there.

I hope the commission can come up with recommendations. If we
do, they may not easily fit into what we do or don't do in the budg-
et process currently. So your committee would be much better off
spending time trying to sort through that and hearing from some
folks on how we deal with that kind of long-term problem in the
process, rather than some of these things that just simply rehash
the campaign rhetoric of recent years.

Mr. McCandless. I understand where you are coming from, and
I understand your response. The problem here is that the person
in the street does not understand all of this. They feel that it is
all attached to the budget; that if you were to address the budget
correctly over a period of time, these problems would be addressed.

Now

Mr. Sabo. Well, you know, I think some real debate and discus-
sion of real long-term problems would be helpful for the public; and
hopefully, we can find the framework for doing that. Clearly, we
have an aging population with retirement benefits being a very im-
portant part of it. How we fairly make modifications that, both for
existing retirees, for future retirees 40 years from now is a very im-
portant question.

But those are the kinds of issues that really go to the heart of
our long-term budget problems in this country. We have made sig-
nificant change for the short term and there are still short-term
problems we have to work on.

But these long-term ones are some very important basic govern-
mental decisions that we are going to have to make. And the struc-
ture doesn't lend itself to easily dealing with that. And I don't find
any of these, "process changes" really dealing with that kind of
problem.

Mr. McCandless. Let me just briefly touch on one more issue.
We have talked on occasion in this discussion about Social Secu-
rity. Other than the Federal Government's direct responsibility as
an employer, the Social Security trust fund is a self- supporting
agency, and it is self-supporting because of the withholding from
the individual employee and the payments by the employer. It was
finally taken off budget, I think, if I have my facts right, but we
keep referring to it, well, if we cut Social Security, that will help.
And the only thing that would help is that we would have more
money in the Social Security fund to borrow from under the 1935
act to apply to the deficit.

Am I out of sync here?

Mr. Sabo. No, not in the short term. But going back to what you
just quoted me earlier about the long-term problem, part of the
problem there is that— I forget the exact year, 2020 or maybe
2015 — that balance switches in the opposite direction. On a yearly
basis, expenditures will be higher than the yearly receipts, and we

will start the process of using up the surplus that has been accu-
mulated these years in the trust fund.

The reality is that the trust fund today has, both from employer/
employee contributions and interest earnings, more revenue than
outlays. But in the next century, that changes; and that is part of
that larger problem that you described to me earlier.

Mr. McCandless. In the 1983 adjustment we had — we finished
up that program with two amendments. The one amendment was
from Congressman Pickle and the other one was from our former
Congressman who is famous for his senior citizens from Florida,
Congressman Pepper.

The Pickle amendment said, let's increase the time, the date, or
the age at which recipients may take advantage of Social Security.
The Pepper amendment said, no, at 2017, let's increase the payroll
tax. And the 1983 bill was left there; and the increase in tne age
by month-on-month-on-month basis after whatever the year was,
2017, was the amendment adopted by Congress as a means of ad-
justing and taking care of what it is we have just been the short-
fall. We would move from 65 — from the 62 date to 65 over a period
of time, and the 65 date to 67 over a period of time, and that would
take care of what we had in the obligation.

This is a little bit off of what we are here to talk about, but when
we talk about cutting Social Security, it baffles people, including
me, because it has nothing to do with the budget; it is self-support-
ing. The only thing there is we are not able to borrow as much.

Mr. Sabo. The long-term viability of the Social Security trust
fund — I am one of those folks, I call myself one of the new notch
people because I am eligible for full benefits at over age 65. In my
case, I think it is 65 and 2 months or something. I am part of the
phasein of raising the retirement age.

But that was partially a problem to deal with current cash-flows,
but also partially to deal with long-term obligations of that fund.
And the current projections are that at some point we again have
to deal with the long-term viability of the fund, because outlays
will exceed the revenues and the surplus that has been accumu-
lated over these number of years.

What one should do with that surplus, I suppose is a debatable
question. Currently, it is put in government securities. You know,
you might want to look at the option of not doing that and having
it go out in the private stock market or someplace. I am not sure
folks would want that.

Mr. McCandless. I am not suggesting anything like that.

Mr. Sabo. No, but those funds currently do get interest. The in-
terest is credited to the surplus of that account.

Mr. McCandless. There is a separate account under the Social
Security system by which the Treasury handles these

Mr. Sabo. That is right. An option would be to invest those funds
separately in the private stock market or bond market.

Mr. McCandless. One final quick question, Mr. Chairman.

You have listened to our questions, comments and so forth. We
are here talking about a system currently in place and a number
of proposals for modifying it in some form, shape or another. Does
either one of you have specific suggestions on what you would see
would be beneficial in terms of modifying the current system?

Mr. Sabo. As I suggested earlier, I think the entitlement review
process that passed the House last year is positive. I would like to
see that permanent.

I again think the Byrd rule should be modified. I would place a
great deal of importance on doing that. I don't know how you easily
change that, but I just think it is fundamentally wrong that that
rule should apply to conference committees as well as the initial
Senate action.

Then, thinking through how we deal in the budget process with
those long-term entitlement problems that you were talking about,
rather than always sort of just simply those things that fall within
a 5-year window. I think those are very important issues that
should be dealt with.

Mr. McCandless. Mr. Obey.

Mr. Obey. I would simply say that I agree with Mr. Sabo with
respect to the Byrd rule. But what I would urge you to do above
all else is simply talk to Lou Fisher at CRS. I think that he has
laid out the best evaluation of the budget process which we have
right now.

I don't believe our problems are a lion process. I think if you —
I mean, if you want to control the budget — I find it ironic, for in-
stance, that on one of the amendments that was voted on last night
to the Labor-HHS bill, that that amendment took the Labor-HEW
bill over the outlay limit under the 602 subdivision for that sub-
committee. Yet an awful lot of people who sponsored A to Z voted
for it. I find that disconnect interesting.

What I think Mr. Fisher suggests is this: I really believe that the
main problem with the existing budget process is that Congress
knows how to authorize, it knows how to appropriate, but beyond
that, I think you get into all kinds of smoke and mirrors. I really
believe we were better off when the President submitted his budget
with no magic procedural crutches for us to lean on, and then we
were simply held accountable through the political process for the
end result each year.

I think that before we had all of the niceties of the Budget Act
which might be more elegant, but I think less realistic — we had a
better track record on controlling the deficit.

I think the basic thing you have to do if you are going to reduce
the deficit is to take substantive actions to clean up some of the
tax loopholes which leak away key money. I think you also need
to take a hard look at what is happening on the entitlement side
of the ledger, and I think that you should consider the possibility
of doing what Mr. Fisher recommends, which is to keep the Budget
Committee certainly, but to eliminate the budget resolution. Be-
cause I think the budget resolution gives everybody an opportunity
not to be real, including Presidents.

I think what happens now is that because we appear to have a
budget process whicn is separate from the President s budget proc-
ess, the President's budget is judged only on the basis of whether
it hits a specific target for the budget resolution. But in fact, they
can make numerous recommendations in their budget which are
wildly unrealistic.

The press really doesn't report that very much; it simply reports,
does it hit the target or not. So if all the President has to do is to

ft^-mn - a*; _ a

hit the target in the budget he submits, even if it is based on wildly
unrealistic budgetary assumptions, and then Congress is sort of left
to fend for itself, I think we would be better off without the budget
resolution. But I don't have the faintest belief that the Congress is
going to do that.

Short of doing that, I would simply — I would simply focus on the
necessity for people to vote the way they talk; and if you can figure
out how to get them to do that, you are a whole lot smarter than
I am.

Mr. McCandless. Thank you both.

Thank you, Mr. Chairman.

Mr. Conyers. Thank you very much. No discussion of budget re-
form would be complete without allowing Bill Zeliff to ask a few
questions.

Mr. Zeliff. Thank you, Mr. Chairman.

Thank you both, Chairman Obey and Chairman Sabo, for being
here and going through this, I hope, very constructive discussion.
I don't think there is any issue that is more important.

I would be happy to have you, Chairman Obey, join me maybe
in cosponsoring an A-to-Z process next year or even earlier to get
rid of some of those tax breaks; and I think I heard you say, like
the Tyson chicken farm. I think that would be very productive, and
I would love to join in that effort with you.

Mr. Obey. Why do we need A to Z to do that?

Mr. Zeliff. Well, then let's start the process. You both individ-
ually said that you are kind of happy with the process that we
have, that if we sit forward and just be patient and hang tight,
that the Federal debt that is going up like this is going to correct
itself at some point. The interest payments are going to correct
themselves and the entitlements over here that are admittedly out
of control will eventually, you know, with the commission and other
things, will take care of themselves.

I guess what I would just like to say is that all I did with A to
Z — and I don't want to do this on a personal basis, and I am not
going to respond to my vote on the Porter amendment and other
things

Mr. Obey. I wasn't talking about the Porter amendment.

Mr. Zeliff. OK What I would like to talk about is A to Z is a
process that resulted from Senator Kerrey in the Senate last Au-
gust asking for a special session to cut spending to make the eco-
nomic plan numbers work even far better than you have taken
credit for them working now.

I think the tax increases — and I, frankly, voted against that
plan — were wrong for our country, and I think time will bear that
out. Adding $1 trillion to our debt over the next 5 years in my judg-
ment is not the way to go. But what I have tried to do is pick up
on Senator Kerrey's request for a special session.

And Tim Penny, I believe, is in the room here, or was. He also
asked for that special session. And I believe that both of these gen-
tlemen were promised some kind of a special time when we would
review spending and waste in government and do a better job on
the spending side.

We do a great — better job on cutting the spending. We do a great
job on spending money; we do a lousy job in doing it in an account-
able process.

What I have tried to do here is work within the system, your sys-
tem, the system that we all respect and we are trying to make it
better, but I tried to put in a bill, along with Rob Andrews, and
we have been waiting about a year. It nasnV- nothing has hap-
pened from either the Government Operations Committee or the
Appropriations Committee. We then went through the discharge
petition where we have 203 people who have signed that.

I have no idea where we are going at this point. But what I
would like to do is just kind of look at the process itself. And as
we have worked a year on this thing, and what we are saying is
cutting spending 56 hours, everything on the table, including enti-
tlements— which I think both of you gentlemen would agree are
clearly out of control — that we need to have that discussion.

Why do you think that this is such a bad idea? Why do you think
we 203 or 230 that cosponsored the bill, certainly the will of the
majority in this House, are so badly wrong in our ideas in trying
to say, along with many, many people in America — I think the
beauty of A to Z is people can understand it.

Cab drivers and people who work for a living, work hard, can un-
derstand. They have to set priorities in their spending. Why do you
look at this as a threat, and why wouldn't you consider this as a
positive idea to explore, at least?

Mr. Obey. I don't look at this as a threat; I look at it as a way
to turn the Congress into a circus.

With all due respect, I do not believe you have worked the exist-
ing process. The only communication my committee ever had from
you was a request that we add 418 percent to the Emergency Food
Assistance program. We haven't had requests from you to cut budg-
ets. You haven't tried to cut budgets on the floor. You can go to the
Rules Committee and try to cut budgets.

Mr. Zeliff. Well, to save a lot of time and energy, rather than
individually getting in a contest between you ancl I, I think we
would be better served if we can try to stay on track with the proc-
ess of A to Z if it would work relative to reviewing entitlements,
for example.

And Chairman Sabo, in your report, the pages aren't numbered,
but on the first page on entitlement review, you marked, I should
also point out that this year total entitlement spending came in
below the target, so there was no special message sent by the
President on entitlements and no action taken by the House. And
yet we look at this, and by admission, entitlements are out of con-
trol.

Shouldn't we be dealing with that, and what is wrong with deal-
ing with it within the process of A to Z?

Mr. Sabo. First, the entitlement review process worked and we
came in under the targets, which is good, not bad.

But the most fundamental issue we have before us in reforming
entitlements is the question of health care reform. It goes to the
core of the problem. I have my own judgments on how we should
do it, and my view may or may not be in the majority.

But the most fundamental issue that we face in dealing with
lone-term entitlement policy in this country is the question of
health care reform. The Congress is dealing with it. We have com-
mittees working night and day on that issue, both in the House
and Senate. We will be having votes, I assume, in July or August
on that issue where we have to come to some judgment. And that —
you know is the largest, most complex issue this Congress has ever
dealt with.

So to say that the Congress is not dealing with entitlements in
1994 when, in a massive way, we are struggling with the question
of how we reform health care that is totally erroneous. It is true
that when you look at what is growing most rapidly in the entitle-
ment area, it is health care.

We have some very fundamental questions. Do we do some
things which simply have short-term savings? Do we do more com-
prehensive reform in the system? To what degree do we deal with
equity within that system/ Those are large issues that are being
struggled with by this session of Congress.

There were folks who wanted to take quick action that would
make it more difficult for us to deal with the long-term problems.
Those efforts have not succeeded. I hope we succeed in our ability
to deal with it on a long-term basis. I am not sure we can. We will
find out in the next several months. But the Congress, to its core,
is struggling with that most difficult of all issues this year.

Mr. Zeliff. I, for example, if I was given the opportunity under
an A-to-Z process, would propose that we have means testing for
something like Medicare.

Mr. Sabo. Well, there are proposals

Mr. Zeliff. And anybody that is making $75,000 or more would
be treated differently on a premium. I think that this is the kind
of discussion that we now need to start talking about.

Mr. Sabo. But that is part of the President s proposal for paying
for fundamental health care reform.

Mr. Zeliff. So the reason that you guys are not interested in
dealing with A to Z is you feel it will conflict with the President's
health care proposal?

Mr. Sabo. I don't know what A to Z is. It is very different than
our normal reconciliation process where we make recommendations
of dollar totals for entitlement savings, which is then worked
through the committees, and they come up with their recommenda-
tions.

There is potential for the public to be heard; there is potential
for committees who have the most expertise in that subject matter
to work their way. And when it relates to discretionary spending,
we have that portion of the budget before us every year, open to
amendments as we have been going through on all of these appro-
priation bills in recent days, where you and other Members have
the opportunity to make amendments. The reconciliation bill proc-
ess does that in entitlements.

We can also go beyond that in working on entitlements like we
are this year on health care. That is by far the largest and most
comprehensive reform and change in entitlement policy that this
Congress has considered. I hope we are successful. I don't know
that any of us can guarantee it at this point.

Mr. Obey. I would invite the gentleman to look at page 29 which
I — of the CBO presentation which I attached to my statement. If
you see there, Medicare goes from $160 billion in 1994 to $238 bil-
lion, a $80 billion increase; Medicaid from $86 to $135, a $50 bil-
lion increase — by far — by far the largest percentage increases in
any accounts in the budget. But, in contrast, discretionary for 1994
to 1998 goes from $543 to $547.

It is apparent that the problems are on the entitlement side, and
within the entitlement side focused on health care.

I respect the gentleman's desire, and I respect his honesty in
being willing to tackle a problem that he thinks is important. If
you think that it is right to means test Medicare, I don't quarrel
with your right to express that view through a vote. But what I ob-
ject to on A to Z is that it ignores the fact that the existing proc-
esses can achieve those same opportunities. And I don't understand
why the discretionary part of the budget, which has always met the
targets, is included in anyone's A-to-Z process, which to me simply
results in having one side of a deal on discretionary spending have
a right to get 14 kicks at the cat during the year while the other
side of the argument gets one.

Mr. Sabo. Mr. Chairman, if I might, let me speak to the specific
varying premium for Part B recipients. That is not means testing.
Means testing is something else.

Conceptually I agree with you. My hope is that that is one of the
funding requirements of health care reform. I fundamentally agree
with that. On the other hand, the issue is not so simple. The fact
is that there is incredible variation in Medicare reimbursement
around this country.

We had proposals earlier this year that for the bulk of the coun-
try would have hit most seniors, paying more than their actual cost
because the reimbursement of Medicare to the various States var-
ies immensely. We have a problem in the State of Minnesota where
I think we have a high quality of care and a 15 to 20 percent below
the national average.

Every time that we make a better improvement than the rest the
country, HCFA drops our Medicare reimbursement to the States.
Our premiums are the same as in the high cost areas but the reim-
bursement keeps going down. And then we have a proposal to vary
the premium ana having the more affluent seniors paying pre-
miums, that would be substantially more than 100 percent of cost
to the people in our State. That is not particularly fair either. And
those were the proposals. Those are the types of things I think the
committee needs to try and work out if they are going to do it.

As a matter of fact, I took a look at the proposals we had before
the Congress earlier this year because I was interested in the sub-
ject. I found that the residents of 96 percent of the counties in this
country had Medicare reimbursements below the national average.

We got to the national average because a few parts of this coun-
try are very, very expensive. And we would have had seniors in
most parts of the country paying more than 100 percent of the cost.
I don't think that is fair.

Mr. Zeliff. I see your point.

Both of you I think have mentioned the three-ring circus and let
me address that quick. I don't want to get off track, but you know

I can remember a three-ring circus at 4:30 a.m., 1991 where we,
on voice vote, passed $55 billion for RTC and FTC. I think that is
something that we all ought to be ashamed of. There was not a
piece of paper or a bill. There was nothing. We had nothing in our
hands to know what we were voting on and yet on a voice vote at
4:30 a.m., $55 million. That is a big chunk of change.

All I try to do in A to Z is in a businesslike judgment, and I
apologize if I tell you that I have been in the business world for
34 years and I bring that kind of point of view to this place — in
a businesslike judgment, what is wrong having a session where we
talk about trying to find together where everybody has a chance to
participate, not just a small group of people, in some of the ideas
and maybe add to the wisdom that you all have so that maybe we
can come up with solutions?

We have a discipline here that if we set a little target and we
reach the target and we are below entitlements for the last 2 years,
therefore we don't have to worry, we can close the door.

Let me just finish my comment. I tried to be pretty patient.

And on the other hand, if we find some savings out there just
because we are under the budget cap, why can't we have a process
that reduces the caps because, guess what, for whatever reason,
maybe less money on savings and loan, less money on interest, and
other things, there is good prudent judgment. I can't picture a busi-
ness, that if they were in trouble, and we are in trouble, would go
through a process and say, we hit our goals, we don't have to cut
our spending anymore but we are still in debt. It doesn't make any
sense.

Mr. Obey. The gentleman has said that he saw instances of bad
process. I agree with that. My question is, why do you want to
compound it? A to Z would allow for a chaotic discussion on the
floor. Show me at what point — the purpose of committee hearings
is so that somebody other than a Member of Congress gets a
chance to get in its 2 cents' worth before you make decisions which
affect a large number of people in this country. When you exclude
the committee process from budget consideration

Mr. Zeliff. But we never did. After a year, this is the first
chance we discussed A to Z in this hearing today. If you want to
call it a full-blown hearing — and we waited a year and basically
neither committee was going to do anything on this thing. This
thing was going to end up in some third drawer and we worked
hard on a discharge petition and we worked hard in grassroots and
this is something that everybody wants to see us to do.

You ought to be part of the leadership on this and the Speaker
ought to be part of the leadership, and it doesn't have to be a three-
ring circus. And believe it or not, the people who are involved in
it are responsible people just like you and we have the same com-
mitment that you all have.

Mr. Obey. With all due respect, I think your proposal is tremen-
dously flawed. I don't see any purpose in extending the time that
we are taking before you to repeat the reasons that we gave vou.

But I want to repeat the facts as opposed to the mvth. The facts
are that the House passed 27 cutting amendments last year. We
excepted 21 of them in conference — 70 percent. That resulted in
$615 million in spending reductions, and the only reason that you

did not get $615 million in savings is because we had $500 million
in termination costs associated with some of the programs that
were cut. So with respect to the lockbox portion of this proposal,
it fixes a problem that doesn't exist.

Mr. Zeliff. OK Let me just— and I won't belabor this, but last
year restricted appropriations bills of the 103d Congress, there
were 5, and 104 amendments that were rejected, 78 on the Repub-
lican side, 26 on the Democratic side.

Let me just ask you one question, chairman, on your idea. What

?rou were requesting as an alternative to A to Z was that you would
ike to have 56 hours of debate and you wanted it centered in each
Member's individual district; is that correct?

Mr. Obey. Yes, I believe in starting by posing for holy pictures
at home rather than in somebody else's backyard.

Mr. Zeliff. And you feel that would address the entitlements
and the way it needs to be addressed?

Mr. Obey. I am the chairman of the Appropriations Committee.
I am not commenting on the process with respect to entitlements.
I am saying that if you are going to deal with appropriations — you
mentioned 56 hours. I am willing to see 56 hours on the entire ap-
propriations process. We have a hell of a lot more than that right
now. And, frankly, as I said earlier, the gentleman has yet to offer
a single amendment on the floor to cut a single appropriations bill.

Mr. Zeliff. As chairman of the Appropriations Committee, you
indicated earlier that you would cut a particular program in your
district.

Mr. Obey. I would eliminate it.

Mr. Zeliff. Why don't you?

Mr. Obey. Project Elf. I have supported elimination of that for
years. I have not had Presidents agree with me or the committees
in the Congress agree with me.

I don't believe that every time an individual loses an individual
argument you ought to blow up the entire process because he has
not had his way.

Mr. Zeltff. I agree. The bottom line that we are dealing with
here, I think both of you are a lot more satisfied than I think we
are, is that we have a trend line that the interest on the debt is
going in the same direction as the debt itself. And we can talk
about the economic plan being so great for our country that was
passed in August 1993, but it adds $1 trillion to our debt over the
next 5 years. I just think we need to do something dramatically dif-
ferent.

Mr. Obey. I told you I thought the process was not the problem.
I indicate that I understood the substantive problems. The biggest
problem we have, very frankly, is that up until 1981, we never had
a deficit larger than $74 billion. Then we passed the Reagan budg-
ets. They took the deficits to $400 billion.

So we had a procedural fix with Gramm-Rudman II that prom-
ised to get us out of the hole in 4 years. I called it a public proce-
dural process lie. It was. It only missed by $290 billion. Then we
have a second Gramm-Rudman process. Another magic process fix.
Said we would get to zero deficit in 5 or 7 years. I have forgotten
which. Didn't quite make it.

100

The only time we ever began to see sustained significant deficit
reduction was from January of last year. The deficits for the fiscal
year which ended of October of last year was $70 billion lower than
the deficit that was predicted by President Bush when he walked
out of office, and we are now having 2 additional years of deficit
reduction.

Because we had the political will to take on the issue. Which was
not present during the era of gridlock.

Mr. Zeliff. Isn t a lot of the savings in the present deficit — what
did you say it was, $70 billion?

Mr. Obey. Seventy billion.

Mr. Zeliff. Isn't it due to budgeting more money originally rel-
ative to the savings and loan?

Mr. Obey. There was a portion related to that. Primarily the
major reason was because of increased economic growth which
meant that you had fewer people on food stamps, fewer people on
welfare and unemployment compensation, you had more people
working and paying taxes.

Mr. Zeliff. Do you support Mr. Gephardt's proposal for 2 days
of entitlement votes?

Mr. Obey. It is irrelevant to me. You can have all the votes in
the world, but if you don't have the determination to attack the
real problem you are not going to get a hell of a lot done.

And in my view, what ought to come first is action on health care
to deal with the major bleed in this budget, which is Medicare and
Medicaid.

Mr. Zeliff. I couldn't agree more on that.

Mr. Sabo. I find it ironic. I have no problem with a couple of
days voting on entitlement cuts. Two years ago at this time I recall
the Congress was voting on a bill to increase expenditures on enti-
tlements waiving the budget rules. I was one of the very small mi-
nority that voted against it. That was the proposal that increased
the earnings for people over the age 65, which excluded before they
started to nave reduction of the benefits. It cost several billions of
dollars. And fortunately, it did not become law, although it did pass
the House.

Mr. Zeliff. As much as we all think we are probably doing a

treat job and stuff, the emergency aid on the earthquake aid at
8.6 billion — and I would like to introduce this, if I can, as a piece
in the record — but here are 26 items of nonemergency aid that
went into that process.

And I will read four of them: $20 million for 500 new employees
in an FBI fingerprint facility in West Virginia; $10 million for a
post office project in New York City that specifically was precluded
from getting Federal funds in an earlier law; $1.5 million to con-
vert a commercial ship in South Carolina to a maritime museum;
$1.3 million to redesignate a HUD special purpose grant to Ha-
waii's sugarcane communities.

And I just take those four items as part of a list of 26 and add
to the fact that if we take a look at where our interest payments
are going, where our debt is going, what we have added in the
last — in the economic plan to our debt, I just feel that we need to
start looking at very dramatic ways of change. It is trend lines, and
I think A to Z is one of those ways to do that.

101

Mr. Obey. Each of the items that you mentioned was not part
of the added expenditures. They were offset. They came because of
actions in the Senate.

I would also make the point that we must not have had any of
those items in any of the appropriations bills that you are express-
ing concern about this year or else I would think the people like
you would have been on the floor offering amendments to take
them out.

Mr. Zeliff. I thank you, Mr. Chairman.

I don't want to wear out my welcome, but I do want to thank
both of the chairmen for coming before the committee. I think that
if we somehow kind of really thought about the process of what we
are trying to accomplish here, we would recognize that we are both
on the same team and we both want the best for our country. We
may come at it from a different point of view.

I hope that you will give us an open mind in what we are trying
to accomplish. We will certainly have an open mind in what you
are. We would like to get better results and quicker if we can.

[The information referred to follows:]

v"*

102

PORK IN THE EARTHQUAKE SUPPLEMENTAL

THE CALIFORNIA EARTHQUAKE APPARENTLY WAS
STRONGER THAN WE THOUGHT!

Supplemental Appropriations Bill Hits
West Virginia, New York, South Carolina, and Hawaii!

$20 million for 500 new employees at an FBI fingerprint facility in
West Virginia.

^ * $10 million for a post office project in New York City that was
specifically precluded from getting federal funds in an earlier law.
$1.5 million to convert a commercial ship in South Carolina into a
maritime museum.

$1.3 million to redesignate a HUD special purpose grant to go to
Hawaiian sugar cane communities.

$250 million for post Desert Storm operations in Kuwait.
$47.3 million for Air Force and Army procurement.
$44.4 million for military personnel costs.
$1.1 billion for military operations and maintenance.
Money to repair the Ochoco Dam in Oregon.
$300 million for LIHEAP.
$337,000 in transportation planning for Hawaii.
$1.4 million to fight the Late Blight potato fungus in Maine.
$2.3 million for pay increases for FDA.
$2.0 million for USIA "security and construction projects."
$2.1 million for more timber harvesting on non-federal land in the
Northwest.

$10.1 million to continue testing a new method to measure
unemployment.

$1.0 million for the Senate Office of Employee-Management relations.
$133,600 for the widow of Congressman Paul Henry.
$4.5 million from the Highway Trust Fund for high-speed rail
development.

$550,000 for the US Trade Rep. for travel expenses.
$300,000 for additional employees at the Council for Environmental
Quality.

$800 million for higher veterans' benefits payments.
Raises the loan guarantee limit for FHA by $22 billion.
$40 million for the NASA space shuttle "spacehab" module.
Removes the spending ceiling on the space station's redevelopment.
Creates the office of Undersecretary of Enforcement at Treasury.

103

'.Pr/r

^ifirru

Restricted Appropriations Bills of the 103rd Congress

rfR 1335 Emergency Supplemental

HR 2348 Legislative Branch Appropriations

HR 2295 Foreign Operations Appropriations

HR 2667 Disaster Assistance Supplemental

HR 3759 Emergency Supplemental in

^ A

>vA^.

^cJvS

CLOSED 11 amendments rejected (10 R/l D)

CLOSED 44 amendments rejected (41 R/3 D)

CLOSED 28 amendments rejected (18 R/10 D)

CLOSED 12 amendments rejected (6 R/6 D)

CLOSED 9 amendments rejected (3 R/6 D)

104 amendments rejected (78 R/26 D)

Co.w

104

Mr. Conyers. That is the purpose of these hearings on budget
process reform. Chairman Sabo, Chairman Obey, you have begun
the process in a very fine way.

We have two dozen more of our colleagues as witnesses and I
think you have laid a good foundation. I thank you very much, and
I accept your recommendation of some of the witnesses that we
should have when we get into the n on congressional part of the
hearing.

Mr. Obey. Mr. Chairman, I thank you.

I would just like to leave with one request. I would ask that peo-
ple not continually try to paint a worse picture for this country
than in fact exists. When we are told all the time that we are near
bankruptcy because every man, woman, and child in this country
in terms of public obligations owes $17,000, as was said earlier
today by one committee member, in fact, if you look at the debit
side of Federal assets and liabilities, it amounts to about $18,000
in liabilities for every man, woman, and child in the country.

But I find it interesting that people always ignore the asset side
of the ledger. In fact, if you take a look at assets, also commonly
owned by the taxpayers of this country, we have approximately
$17,000 of assets for every man, woman and child in the country.
So that means that we are short about $1,000 per capita.

That figure got much worse in the 1980's because of the 1981
budget essentially and the decisions that flowed from that. But we
are a whole lot healthier as a country than we sometimes like to
say in our moments of self-flagellation.

Mr. Conyers. We thank you very much.

Mr. Sabo. I thank the Chair and look forward to continuing to
work with you, and if we can be helpful we are available.

Mr. Conyers. Well, you are a regular visitor to Government Op-
erations and I don't think it is going to change any time soon.
Thank you both very much.

I would like now to call the ranking minority member of the
Budget Committee, the gentleman from Ohio, John Kasich to the
witness table. We are delighted to have you here.

I would like also to call the gentleman from Minnesota, Mr. Tim
Penny, as well as the gentleman from Texas, Mr. Charles W. Sten-
holm.

Welcome, gentlemen. All of you have been here before so you
know the ground rules. We will take all your testimony that you
have written and agree to put it into the record in its entirety.

Let's start with Mr. Kasich. Good afternoon.

STATEMENT OF HON. JOHN R. KASICH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO

Mr. Kasich. Thank you, Mr. Chairman.

Mr. Chairman, I do have a complete statement that I would like
to enter into the record.

I found the discussion to be very interesting and I hope that we
can cover perhaps some of the points that were covered by the pre-
vious panel. But what we have agreed to do is to divide this up to
save all of you repetition. Is that unbelievable? Is that a first?

Mr. Conyers. Well, for you it is. And we are grateful.

Mr. Kasich. I come here trying to be under control.

105

Mr. Conyers. I bring you praise and commendation from the
Chair. That is an excellent idea and we are delighted that you
thought of it.

Mr. Kasich. We have four sections to our bill. One has to do with
baselines which Representative Stenholm is going to cover today.
Enhanced recision, which I don't know if we nave decided who is
going to cover that. And then Mr. Penny is going to cover the
lockbox. And I am here to talk about the other part of the proposal
that has to do with the emergency spending.

We tried to put together a common sense proposal that makes
some fundamental changes in the way in which we do business as
it applies to the budget process.

Our proposal brings in two separate provisions. One is to require
that if we are going to have an emergency appropriation bills, that
those bills be limited to just one single emergency and that we
don't stick four or five emergencies under the roof of one emer-
gency. We think that each of tnese emergencies ought to be consid-
ered by themselves. They ought to be given the scrutiny that they
deserve by themselves. This would prevent too many things from
being considered emergencies because if everything becomes an
emergency, then you could really make an argument that therefore
nothing is an emergency, and if it is a critical item, and many of
these items are, they ought to be considered separately.

Second, the proposal mat we have has to do with the nature of
creating Christmas trees in emergency bills. Not only do we some-
times put more than one emergency in each emergency bill, but we
also add a significant amount of nonemergency spending to these
bills.

Mr. Chairman, there have been a lot of efforts here in this Con-
gress recently to try to restore some credibility to the way in which
we do business. And I think we can all agree that it does not serve
this Congress very well, not Republicans nor Democrats — nor does
it enhance confidence in the American people when they hear about
an emergency bill for an earthquake in California only to pick up
the paper the day after the bill passes and read about a whole host
of items that clearly are not emergencies.

I want to tell you a little bit about the history of the recent emer-
gency spending bill for the Los Angeles earthquake.

Mr. Nussle, Mr. Penny, myself and Mr. Condit felt as though
even though this was an emergency and should not be included
under the caps, we felt we should go ahead and try to pay for it.
This January 27th date I think is probably a Thursday. At that
point the funding for the earthquake was at about $6 billion. So
we scampered around down at the Budget Committee and came up
with $6 billion worth of offsets. On Monday, the bill had grown
from $6 billion to nearly $10 billion.

And you can see, I actually have a chart that shows everything
that happens. It is a flow chart but I think this kind of describes
it. As you can see, the longer we waited in terms of passing the
earthquake funding, the more nonearthquake funding was added to
the bill.

Now, some people might want to blame the administration, but
I think what typically can happen is a Member of the other body
can call down to the White House and say, hey, I got something

106

here I would like to have included in the emergency. It is a nice
way to get my project through, plus, it won't count against the
caps. How about putting it in there? And a White House of either
party, which would always be looking for votes when tough things
come up like the health care plan or something that could happen
in a Republican administration, really doesn't nave a lot of incen-
tive to say no, frankly. So, a lot of these projects get added. There
you see the growth in the nonearthquake funding.

Now, I must tell you that the definition of an emergency is based
on everybody agreeing that something is an emergency. These are
items that we pulled out of the bill that we considered to be non-
emergency. And, Mr. Chairman, for the sake of bipartisan partici-
pation we have in here $20 million for a fingerprint lab, but for the
first time that this has ever been presented, you notice it didn't
have the State in which it is being built. I specifically requested
that that be deleted in the spirit of bipartisanship.

Anyway can you see $1.4 million to fight potato fungus and $10
million for new Amtrak station, $40 million for the space shuttle,
$5.2 million for public debt modernization, $100 million for DC, $55
million for the U.S. Trade Rep. And you might also remember, Mr.
Chairman, that we had a significant chunk of money related to the
Defense Department included in the bill. And, in fact, Mr. Frank
and I believe Mr. Shays moved to try to strip that out and not have
it included as that part of the emergency.

Our bill, the Budget Reform Act, basically says, let's have one
bill for one emergency. Let's not put more than one emergency in
each bill. And let s keep the nonemergency funding out of the emer-
gency bills.

I think that this is a proposal that we clearly ought to adopt.
And I think it can receive strong bipartisan support. I think it can
be supported strongly in both the House and the Senate. And
frankly, I think that members of the media would look at a pro-
posal like this favorably and would go a long way toward eliminat-
ing those stories that we read after we try to do something to help
people in a particular part of the country.

Mr. Conyers. But tne nonearthquake funding part could not be
subject to any point of order that you know of, could it?

Mr. Kasich. No, because they lop it all in the emergency bill.

Mr. Conyers. Could the Rules Committee exercise greater scru-
tiny in that area before it comes to the floor? Might that offer an-
other outlet for scrutiny?

Mr. Kasich. First of all, if the administration wants to send a
passage up here, that becomes a problem. But second, we have es-
sentially operated under the assumption that the Rules Committee
can knock certain things out. But it doesn't seem to work very well
because people are not trying to be unreasonable here. And I think
what this proposal would do would be to create a clean way to do
it where noboay has to be accommodated to anybody else.

The rules should be clear. And the purpose of the emergency def-
inition in the 1990 Budget Act was essentially to just say, if you
have a legitimate emergency, one that both the Congress and the
President agrees is an emergency, then it won't count against the
caps. We could have that argument but we decided to not nave that
one.

107

But what we thought we should say is, let's keep it consistent
with the 1990 Budget Act, and in fact, Mr. Chairman, in the House
we ultimately ended up paying for a portion of the nonearthquake
funding because of the debate that began on the House floor in
terms of paying for the whole package. I just think this is the easi-
est way to do it and really accomplishes what the spirit of the law
was in regard to the way in which we do emergencies.

And why don't I stop there and let my colleagues explain their
part of the package and then we can go to questions.

Mr. CoNYERS. Very good. Tim.

STATEMENT OF HON. TIM PENNY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MINNESOTA

Mr. PENNY. My assignment is to talk about the second provision
in the Common Cents Budget Reform Act. That is the provision ti-
tled "a cut is a cut," otherwise known as a deficit reduction lockbox.

Before I do that, I want to make a few observations. I was in-
trigued by Chairman Obey's analysis of the national debt. He la-
mented tnat we only concentrate on how much we owe, which is
about $17,000 per man, woman and child in America. And, in fact,
he acknowledged that by taking into account other factors, that
number really becomes about $18,000 per capita. He then sug-
gested that a more honest analysis would be to include the assets
of the Nation. When factored in the assets fall about $1,000 short
of the liabilities. That is like borrowing against the house and then
some.

For an individual — that is like selling off the house and then still
having debt, so I don't find the Obey approach a terribly encourag-
ing way of looking at that debt problem that we have in America.
That is exactly why Republicans and Democrats continue to raise
these deficit reduction issues, even though it antagonizes some of
the top leaders in this institution.

The fact is that business as usual leads to deficit spending. We
have demonstrated that over the years. And, frankly, if you look
back in the past dozen years, the only time that we made any
headway in terms of cutting the deficit is when we set aside busi-
ness as usual.

We had a blue ribbon commission led by Alan Greenspan back
in 1982 and 1983 that provided Congress a package of reforms that
salvaged the Social Security system. We didn't develop that legisla-
tion within the Congress. We had to pass that responsibility to an
outside group. We went outside the normal procedures because it
was such a touchy issue that we couldn't handle it without a little
bit of cover. So we had to go around or outside of business as usual
to get that done.

I heard earlier in the testimony today a disparagement of the
Gramm-Rudman-Hollings process being disparaged. You know, it
was not perfect and we had to make some changes on a couple of
occasions in that process. But G-R-H forced us to make some deci-
sions about the deficit that otherwise we would not have con-
fronted.

And frankly, during the first few years of the implementation of
the Gramm-Rudman-Hollings process, we did see declining deficits.
It was only when the requirements of Gramm-Rudman-Hollings

108

came to a point where they bit a little harder that we backed off
and modified it and readjusted the deficit reduction schedule. So it
wasn't Gramm-Rudman-Hollings that failed, it was us.

We were afraid to take the deeper cuts in those years. We backed
away and reworked G-R-H and eased the political pain a little bit.
The political pain, but we didn't do a better job of reducing the def-
icit by suspending the original Gramm-Rudman-Hollings require-
ments.

We created the base closing commission in 1987, the first time
that we ever seriously closed any military bases in this country.
Now with the end of the cold war era, we can continue to close
more bases. But, again, that went outside the normal procedures.
It was an insult, I am sure, to the authorizing committee, but when
the authorizing committee hadn't closed a base in 20 years, I think
it was reasonable to suggest that maybe the normal process was
not getting the job done. Now the base closing commission is get-
ting the job done.

In 1990, the budget deal produced a change in our budget philos-
ophy on Capitol Hill by instituting a pay-as-you-go principle. Under
that pay-as-you-go requirement in the 1990 budget, we now cannot
add new entitlement programs without finding some offsetting rev-
enues. One of the reasons we are going to face an agonizing process
in the next few weeks is because we nave to find a way to pay for
the lost tariff revenue under the new GATT agreement. It is not
fun, but it is honest.

If you lose revenue, you make it up somewhere. If you propose
a new entitlement spending program, you make it up somewhere.
It is honest budgeting and that pay-go process was not part of the
normal procedures around here for many, many years.

Now it is, and it is beginning to have a bite. We also put spend-
ing caps in that 1990 budget deal and we retained those spending
caps in the 1993 budget. As we have witnessed on the House floor
the last couple of weeks, these appropriations bills, in order to ac-
commodate some high priority items, have been making cuts in an-
other parts of the budget. Here again, making room for the new by
cutting the old.

And that is what honest budgeting is all about. The pay-as-you-
go principle is something new to the process. It was not normal
procedure around here to budget in that way until the last couple
of years, but changing the budget process has begun to make a dif-
ference.

So normal procedures have not worked. And they make no sense
because there is no bottom line under normal procedures. The only
way we get to the bottom line and force a debate over priorities is
to change those normal procedures and that is what our common
sense budget reforms are all about, is bringing some sense to this
budget process.

In our common cents budget proposals, we have talked about
changing the baselines so that we no longer automatically inflation
adjust for every program in the budget, then making it appear that
a reduction in the increase is actually a cut when the program is
still getting more than the program received the year before. We
are talking about entitlement reforms and an entitlement cap so

109

at we have to honestly address the growth in the entitlement
ograms from year to year.

We are talking about emergency spending revisions and my col-
igue, Mr. Kasich, has just discussed that item and how we want

clean up the emergency spending bills so that these unrelated
sms are no longer allowed. Finally, we have proposed that cuts
ght to be cuts. If you bring an amendment to the House floor in
ly of these appropriations bills, you ought to be able to designate
at it go for deficit reduction so that we don't have a process
lere the money is cut out of one program and spent somewhere
se.

We allow flexibility for the author of the amendment to transfer
at money to another program on a pay-as-you-go program basis,
it if a legislator determined to save that money and apply it to
e deficit, they ought to have that option and that is what the "cut

a cut" provision in this budget reform package is all about. We

mt to make a cut, a real cut and that is what common sense

idgeting entails.

With that, Mr. Chairman, I would have no further remarks at

is time and would defer to my colleague from Texas.

Mr. CoNYERS. The gentleman from Texas, Mr. Stenholm, wel-

me again.

STATEMENT OF HON. CHARLES W. STENHOLM, A
EPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. Stenholm. Thank you, Mr. Chairman. The first point would
ake is the Common Cents Budget Act was never intended to be
substitute for the A-to-Z process, it was meant to complement it.
)u have heard the first two explanations of two of our four pro-
isals today. I would like to talk just briefly about the concept of
iseline budgeting.

With all due respect to my chairmen and others who spoke before
garding the fact that we already do this, my experience has been
at if we already do it, it is very difficult to understand it. And
at is what we are talking about here is trying to take what we
e already doing and put it in plain English so the people in the
rth district of Texas or Michigan or New Hampshire or anywhere
n understand what we are doing.

They do not understand, nor do we understand what we are
»ing when it comes to budgeting. And anybody that is halfway
>nest will have to admit that. Just todav, for example, we had the
ibor-HHS-Education Appropriation bill on the floor. I voted for
irious cuts.

But I had every intention of supporting the bill on final passage
scause it was below what we spent last year; one of the criteria
at I used. When I was on the floor I had a colleague that showed
e the Democratic Whip Organization's information that showed
at was not below, it was above by $2.5 billion. The committee
id it was below and the Whip Organization said it was above.
Which was it? My staff is working on this to find out. So far no-
>dy has been able to answer our question.
Mr. Conyers. Stay tuned and we will find out after the vote.
Mr. Stenholm. Yes, you better believe it. But that is part of my
)int.

110

Last year, too, in another frustrating thing, and again the spirit
in which we come here today is saying could we not do some things
to make the process of the legislative process of the House of Rep-
resentatives work better so people felt a little better about us? I
have felt that if we are going to talk about spending cuts we should
start at home.

We should reduce the legislative budget. I have been told every
year for the last 3 years that we are doing that and when I was
told we were doing that, I assumed that we are doing that and I
do not bring any characterization of the character of any of my col-
leagues because I believe they believe when they told me that we
were doing that that they believed it.

We come to the floor this year and we see instead of the legisla-
tive budget going down, it is going up. Now when you go home and
you tell your people that we are cutting and you believe that we
are cutting and we haven't cut, something is a problem.

Now, that is what we suggest. You have heard already that what
we are suggesting is heresy. Something is not working. If not this,
then what? And the little part that I am here to talk about, it
seems to me that it would not be too difficult for us to agree on
what we spent last year. And whatever process of the budget we
go through, we use that figure.

This is how much we spent last year and is this how much we
are spending. We fully acknowledge that those programs that are
protected by law that nave COLAs, you should designate that. You
should say here is what we spent. The COLAs say this much and
put that in the budget. People understand that.

The final point I would make, whatever our colleagues say about
what we are doing, pardon the grammar, but it ain't working with
the folks down on Main Street. Folks that have to meet a payroll,
they understand when you talk about cuts.

If you have got $100 this year and you get $99 next year, that
is a cut and $101 is an increase. And no amount of explaining in
our "budgetese" language is going to change that and what we are
suggesting is make it absolutely critically clear to every Member of
the House of Representatives, everyone that deals with budget
matters will have that one number so that when we go to the floor
we will have available on every document before us what we spent
last year and what is proposed to be spent this year.

Also, I would mention that you will hear from Chris Cox on a

Eroposal that I am happy to cosponsor with him and other Mem-
ers about some of the individual proposals. I think Chris goes into
quite a bit of detail of additional budget process. I think it is very
worthy of consideration.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Stenholm follows:]

Ill

Statement of Rep. Charles Stenholm

Before Government Operations Committee

Subcommittee on Legislation and National Security Affairs

Budget Process Reforms

June 29, 1994

Mr. Chairman and members of the Government Operations
Committee, I appreciate this opportunity to testify on the Common
Cents Budget Reform Act

that I have introduced along with Tim Penny and John Kasich. I
welcome this opportunity to explain our proposals and listen to any
concerns and suggestions that the members of this committee have
about our legislation.

I would like to underscore the point in our prepared joint
testimony that our budget reform proposal is completely separate
from the A to Z process. Our proposals compliment the A to Z
process by making long-term changes in the budget process to
make it easier to cut spending and reduce the deficit, but they are
not a substitute to the open and thorough examination of the
federal budget proposed by the A to Z Spending Cut Plan.
Although there have been many reports that Common Cents was an
alternative to A to Z, this has never been the case. I began
working on these proposals in the beginning of the year when the
Budget Committee began its consideration of the budget resolution,

112

well before the A to Z discharge petition was filed.

Earlier this year I had hoped that the Budget Committee would
recommend a reconciliation bill which would make additional
reductions in entitlement spending and allow us to make reforms to
the budget process and was disappointed when the decision was
made to avoid this course of action. I was pleased, however, that
we were able to attach Sense of the Congress language to the
resolution which called for enactment of several budget process
reforms. I also was pleased that there was an agreement for the
consideration of further budget process votes within the House of
Representatives. As a result of the commitment to allow the House
to debate and vote on budget process reform legislation, Tim
Penny, John Kasich, and I sat down and developed the Common
Sense proposal.

The defenders of budgetary status quo argue that the process
is not the problem. They argue that if we simply make the tough
choices, we don't need to change the process in order to deal with
the budget deficit. As members who have made many of those
tough votes, the three of us disagree with this view. The process
by which we make decisions and the way that we talk about the
choices we face have a tremendous impact on the outcome of
policy.

113

The folks down at the Sweetwater coffee shop can't make
heads-or-tails out of the federal budget process because it is so full
of things called baselines and 602(b)s and spending "cuts" which
always manage to increase the deficit. It's time for us to take
some of the confusion out of our budget process, to say what we
mean and mean what we say.

We think levelling with taxpayers is the least Congress should
do. The current budget process is enormously confusing and
strongly biased in favor of the status quo and deficit spending.
Thafs why we've proposed this legislation - to make the budget
process more honest and understandable.

We start by bringing greater honesty in the practice by which
we measure our budgets and budgetary decisions. Baseline
budgeting, the process in which spending is automatically assumed
to increase for inflation and other factors, has thrown budget
debates into "Alice's Wonderland" by making it appear that
programs were incurring a spending cut when in fact they simply
were receiving a smaller increase than expected.

Our legislation would require that budget proposals compare
their budgets to the amount actually spent the prior year rather
than against some prognostication of future spending. We should
recognize increases in spending for what they are and not talk

114

about cutting spending when we really are increasing spending.

The folks I represent in the Seventeenth District of Texas
understand that if you received 100 dollars last year and receive 99
this year, that is a spending cut. If you receive 101 dollars this
year, that is an increase, even if you expected to receive 102
dollars this year.

Right now we find ourselves in the appropriations season. I
have bragged about the discretionary spending "hard freeze" we
enacted last year. Therefore, one of the most important
considerations I make in trying to decide whether or not to support
final passage on a given appropriation bill is how this year's
spending compares with last year's. I have to tell you that I have
been extremely frustrated in trying to determine whether some of
the appropriations bill have increased or decreased. It is easy to
find comparisons with the amount requested or with the "current
services" amount. But it can be extremely difficult to find
comparisons with last year's appropriations.

In fact, when the House voted on the Legislative Branch
appropriations bill last year, I asked my staff what I thought was a
simple question: Has spending on the legislative branch gone up or
down from last year. I did not realize that my staff would spend
the rest of the morning looking for an answer to that question. It

115

was remarkable the number of people who were surprised that
anyone would even want this information.

I completely concur that there are programs that need and
deserve increases in spending from last year's level for any number
of good and valid reasons. Our legislation does not prevent us
from increasing spending on programs. What it does is force us to
debate these increases for what they are and require that
supporters of programs justify why they should be increased
instead of relying on current services budgeting to be a de facto
justification itself.

Our legislation does allow the baseline to reflect increases in
spending that are required by law such as COLAs and other
entitlement programs. We seek to bring greater accountability to
these programs, howlver, by requiring the Congressional Budget
Office to report on the specific reasons for growth in these "blank
check" items. By bringing greater attention to all of the sources of
growth in entitlement spending, we hope to further the educational
process about these programs.

I also wanted to mention that the legislation that Chris Cox
will describe later in this hearing preceded and expands our
proposals. My colleague's legislation will bring greater attention to
these open-ended programs by requiring that Congress budget for

116

all programs, including entitlements, each year and enforce the
spending limits set out in the budget resolution. I will let Chris
explain his legislation in greater detail, but I want to add my strong
support for his proposals.

I also wanted to make a brief comment on the issue of
emergency spending. In addition to the restriction on emergency
appropriations in the Common Cents plan which John will describe,
there are other proposals which deal with the issue of paying for
emergency spending. I have cosponsored legislation with
Representative Sam Johnson which requires that the discretionary
spending caps be reduced in the subsequent fiscal year by the
amount of emergency spending in a fiscal year. Representative
Mike Castle has introduced legislation providing for the creation of
a disaster reserve fund. I look forward to hearing the suggestions
of Dick Durbin's task force on emergencies. I strongly encourage
this Committee to work with these Members and others interested
in this issue to develop a consensus that will put an end to the
practice of routinely adding spending for disaster relief to the
national credit card, which now is $4.7 trillion in debt.

I look forward to working with this committee in moving
forward on budget process reforms.

117

Tuesday, May 24, 1994

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EDITORIALS

Budget Diet

Stenholm plan would reduce the federal girth

The primary function conservative House
Democrats like Rep. Charles Stenholm, D-
Stamford, and Tim Penny, D-Minn,. play is to
keep their leadership fiscally honest. Such
deficit-minded legislators may not always be
successful in bringing along their party's
leaders. But the Stenhalms and Pennys keep
pressure on spend-happy House Democrats
to remember that while the $180 billion defi-
cit is declining, it will only increase unless
further fiscal restraint is exercised.

That awareness is why Democratic Reps.
Stenholm and Penny, and Republican John
Kasich of Ohio, have introduced a plan to
reform the budget process. Their Common
Cents Budget Reform Act is aimed at revers-
ing what the authors term the bias toward
higher spending in the existing budget
process.*

That real bias could be countered by
enacting several reforms:

• Stop agencies from automatically
including inflation increases when project-
ing their budgets from year to year. If you
spend $100 million one year, that" s the fig-
ure you build your budget upon for the next
year. No automatic hikes can be included.

• When Congress kills a program, the
reductions should actually lower the deficit.
Currently, when programs like the Super-
conducting Super Collider are killed, the
funds often flow into other parts of an

appropriations bill.

The reform measure would change that
phenomenon this way: If Congress wiu a
billion-dollar program, the $540 billion cap
that now limits »tirm«i congressional spend-
ing on all discretionary programs (roads,
defense, the environment, etc) would like-
wise be reduced by $1 billion Congress
would thus have only $539' billion available
to spend the next year.

• Limit legislators from adding multiple
expenditures to so-called emergency spend-
ing bills. Ever since the 1990 budget act.
Congress has had to meet emergency needs,
such as arose from the California earth-
quake, with separate appropriations,

7et legislators have been known to tack
on to such bills requests for unrelated
spending projects. The Stenholm reform bill
would curtail the clever piling-on through
limiting emergency authorizations to only
one emergency. So if California quakes, New
York could not slip in funding for a train
station, as occurred recently.

The full House could vote. on the "Com-
mon Cents" package before the July Fourth
recess. If the Democrat-controlled House is
interested in the future generations that
will be stuck with the present deficit, they
will follow the advice of their responsible
Democratic colleagues and support this bud-
get reform measure.

118

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119

Testimony of

Representatives Charles W. Stenholm

Timothy J. Penny

and

John R. Kasich

before the

SUBCOMMITTEE ON LEGISLATION AND NATIONAL SECURITY

of the HOUSE COMMITTEE ON GOVERNMENT OPERATIONS

regarding

THE COMMON CENTS BUDGET REFORM ACT OF 1994

(H.R. 4434)

June 29, 1994

INTRODUCTION

Mr. Chairman, thank you for this opportunity to present to your subcommittee our proposal for
reforming the federal budget process — the Common Cents Budget Reform Act of 1994. We
know you share our interest in assuring that the methods by which we in Congress allocate the
public's money are sound, reasonable, and responsible. We are confident that by working together,
Members of Congress can reform budget procedures so they make more sense to us and — more
important — to the people we serve.

Let us make a few general points at the outset.

First, this budget reform proposal should be viewed as completely distinct from the "A-to-Z"
spending reduction process that is currently being developed. Our plan is not — and never was
— intended as either a complement to, or replacement for, the A-to-Z approach. Indeed, all three
of us are cosponsors of the A-to-Z plan and the discharge petition that calls for bringing it to the
floor. We began developing this Common Sense process reform bill on March 17, the day the
House failed to pass a proposed balanced budget constitutional amendment.

Second, we recognize that process reform alone is not a panacea for the chronic deficit spending
problem that faces this Congress. Control of federal spending depends, above all, on the consistent
will of the Congress. No refinement of procedures, no manipulation of budget rules, can substitute
for Congressional resolve.

Representatives Stenr olm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 1

120

The process can, however, provide incentives or disincentives for making budgetary decisions in
a way that best serves the public. The current process is not a complete failure in this regard. But
in the 20 years since the Congressional Budget and Impoundment Control Act was developed, we
have witnessed a pattern of runaway spending and chronic federal deficits. To the extent that
reforming the Budget Act can nudge Congress toward greater control, accountability, and
simplicity, such reforms should be pursued.

Furthermore, language has consequences. In so far as the current budget process contains
rhetorical biases that favor higher spending, it promotes higher spending. Eliminating these biases
in language would help control spending impulses in reality.

Our bipartisan proposals for reforming the budget process are straightforward and non-
controversial. They are rooted in common sense. The Act contains four basic reforms: 1) It
reforms the budget baseline process to change the underlying psychology that assumes automatic
spending growth in virtually every federal program. Under CCBRA, budget proposals will be
compared to the amount actually spent in the prior year, rather than to an inflated "baseline." 2)
It ensures that savings from cuts in appropriations bills may be directed to deficit reduction instead
of new spending. 3) It compels Congress to vote on rescissions proposed by the president, rather
than letting rescissions die if Congress fails to act on them. 4) It halts the use of "emergency"
spending bills as magnets for non-emergency or other controversial spending by limiting each
emergency bill to one specific emergency and excluding all extraneous provisions.

We also wish to note that we intend to offer one of our specific reforms — the expedited,
enhanced rescission procedure in Title HI of our bill — as an alternative to the Expedited
Rescissions Act (H.R. 4600) being sponsored by Representative Spratt.

TITLE I: ELIMINATING INFLATED BASELINE BUDGETING

FOR DISCRETIONARY PROGRAMS

Comparing Cuts to Real Spending Levels

Our proposal begins with a fundamental reform of the baseline budgeting process: It requires that
proposed spending for discretionary programs be compared to actual current-year levels, rather
than solely to inflated projections of those levels for the forthcoming fiscal years.

Current law requires budget proposals to be measured against a "baseline" — which includes an
automatic adjustment for inflation plus all legislated changes scheduled to take effect1 — rather
than against actual spending levels. Against this "baseline," any effort to simply slow down
spending growth is shown as a cut, even if spending for the program would actually be higher
than in the previous year. Professor Allen Schick of the University of Maryland, an expert on
Congressional budgeting, explains the process as follows:

The baseline assumes that existing programs will continue without policy change. It adjusts
projected expenditures for estimated inflation and mandated workload changes. A simple example
will show how a baseline is constructed and used. A program spending $100 million a year and
projected to have an annual 5-percent increase in participants and a 5-percent inflation rate would

Representatives Stenholm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 2

121

have approximately a $1 10 million baseline for the next year, a $121 million baseline for the second
year, and a $133 million baseline for the third year. These hypothetical extrapolations are highly
sensitive to the assumptions underlying them. Any action projected to reduce spending below these
hypothetical levels would be scored as a cutback, even if spending would still be above the previous

year's.

Table 1 below shows an illustrative set of proposals to "cut" spending in particular program areas.
The total amount of these supposed cuts ranges from zero to $6.65 billion in Fiscal Year 1995.
But this does not represent a reduction from total actual 1994 spending levels for these items; it
only reflects an aggregate reduction from the 1995 "baseline." That baseline already is higher than
1994 actual spending, because the baseline incorporates increases for inflation and other changes
in law that will increase program obligations. When compared to actual 1994 spending levels, the
total of these ostensible "cuts" is shown to be what it truly is: an aggregate spending increase. As
a result, the $11,020 billion in spending cuts recommended in this group of proposals actually
represents $17,698 billion in spending increases.

TABLE 1

Dolars in Milbona

PROGRAM

CHANGE FROM

FV9S FV»4

BASELINE ACTUAL

5 YEAR CHANGE FROM
FYS5-99 FY»4

BASELINE ACTUAL

Limit Rate of Growth (of tfte National Science Foundation

Restructure the State Department - Freeze'

Freeze International Security Assistance**

Freeze the Peace Corps

20% Coinsurance tor Home Hearth Care***

20% Coinsurance tor Clinical Lab Services***

Reform Marshals Service

Reduce Funds for BATF

Limit the Growth of Foster Care Administration to 10% Per Year

Freeze Medrcare's HI Payment Rates and Limits for One Year***

Freeze COLAs for One Year in Non-Means- Tested Benefit Programs"

TOTALS

114

-476

1.765

-77

-965

174

-142

-1202

-8

-92

■2 012

-112

-15.418

10.382

-798

-198

-6.352

4.048

-5

■25

188

-2

-10

236

43B

-150

5.463

■1.300

5.600

-8.450

104.650

-6.650

11.801

-54.850

250.755

•11.020

17.698

* Added $62 million to '1995 Proposed* for termination of U.S. Institute of Peso* r$t 1 msTkm), Asia Foundation (tie milton). East-
West Center ($27 million) and North-South Center ($9 trillion) Acquisition end maintenance of buildings, salaries and expenses,
and diplomatic and consular programs are included In this option.

** Economic Support Fund and Foreign Military Financing Grants are induced tn tha oooon

— February 1994 basetne

This outcome is magnified in the five-year calculations. By this reckoning, these proposals call
for $88.99 billion in spending reductions. But again, these are cuts only from the baseline. When
calculated against actual 1994 spending, these proposals actually increase spending by $378.2
billion over five years. Yet if these proposals were adopted, we in Congress would call them
spending cuts — because that's how the current budget law describes them. The approach invites
growing cynicism on the part of the taxpayers, who are left on their own to understand how
Congress can cut so much spending and still produce larger budgets every year.

Representatives Stenholm,
Penny, and Kasich

The Common Sense Budget
Reform Act - Page 3

122

The baseline's bias toward higher spending is not only rhetorical. The practice gives an actual
impetus toward higher spending as well. Professor Schick explains in the following passage how
this effect develops:

The current services budge! . . . complicates doing that which is difficult to do under even the most
favorable circumstances — cutting into the base This is a significant bias because the difference
between "current expenditures'* and "current services" often is the effective margin of choice for
congressional decision makers. That is. when they cut programs, they frequently do so by holding
the dollar increase below the rate of inflation.3

The baseline assumptions also create a higher-spending bias among claimants — the agencies and
individuals receiving federal funds. Professor Aaron Wildavsky has described this pattern, from
the point of view of recipients, as follows:

This [the current services budget] is misconceived. The idea is that everybody who has a claim on
the federal Treasury, for whatever reason, deserves not only to get what they had last year in
outlays, but to make up for whatever inflation there has been, and therefore. Congress and its
Budget Committees have to chase after them to claw money back if that is necessary. It should be
the other way around, that the collective comes first. You speak for the common interests. No
individual interest has the right to say '1 come first." which is to say. everybody gets the outlays
that they had and if they want the inflation, then they have to come back to you to get it and you
in your political wisdom should decide how much of that they should get.

Our budget reform proposal addresses this issue in the following ways:

► It amends the legal definition of the baseline so that it no longer assumes automatic

growth in discretionary spending due to inflation.

► It requires both the president and Congress to compare their budgets to the amount
actually spent the prior year, rather than solely against the inflated baseline.

► It stipulates that Congressional Budget Office (CBO) cost estimates of pending legislation
must include a comparison to the change in spending from the prior year's level.

► It instructs CBO to enumerate all the programs funded on an automatic, open-ended basis
rather than subject to annual Congressional review (entitlement programs) and identify the
reasons behind their projected growth.

TITLE II: CHANGES IN DISCRETIONARY SPENDING LIMITS
Capturing Spending Cuts for Deficit Reduction

One reason Congress's efforts at deficit reduction always seem to fall short is that they don't go
far enough to begin with. Consider, for example, floor amendments to cut spending from
appropriations bills. When these bills reach the House floor. Members often attack specific
programs by offering amendments that reduce or eliminate funding for those programs. These
amendments, which often are well-intentioned, may affect everything from the space station to a

Representatives Stenholm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 4

123

federal agency's overhead costs, and the proponents can use the need for deficit-reduction as one
of the arguments in support of their recommendations. The problem is, the "savings," if adopted,
rarely reduce the deficit. This is because there is currently no way to dedicate the funds to the
deficit; the money saved can still be spent elsewhere.

To correct this problem, the Common Cents Budget Reform Act would do the following:

► It would allow Members of Congress to designate that all or some of the savings from
any floor amendment to an appropriations bill be directed to deficit reduction.

► It would ensure that the proceeds from spending cuts actually go to deficit-reduction by
automatically adjusting the discretionary caps by the amount of the savings. (Our proposal
differs from that of Representatives Schumer and Crapo, H.R. 4057, in that ours would
lower the spending caps for the first year and the out years, whereas theirs would affect
the cap only in the first year.)

► It would enable the Congress to reassert direct control over discretionary spending by
reducing the cap on discretionary spending if the budget resolution establishes a lower
limit on appropriations than allowed under the discretionary cap.

To preserve the prerogative of the Appropriations Committees, our bill still would allow
appropriators to maintain reserve funds for future needs. Nevertheless, the cause of deficit
reduction would be enhanced simply by empowering Members to direct their spending cut efforts
toward the deficit — through procedures that do not exist now. This would contribute to greater
truth in budgeting, because amendments offered as spending cuts would actually cut spending,
rather than simply causing it to shift from one account to another.

TITLE III. EXPEDITED, ENHANCED RESCISSIONS

AND TARGETED TAX BENEFITS

Compelling Action on Spending Cuts and Targeted Tax Breaks

Before the mid-1970s, it was typical for Congress to reduce the amounts of spending that
presidents requested throughout government agencies. The sums approved in appropriations bills
were considered ceilings, not floors. Congress tended to provide less than presidents asked for.
Since 1974, however, appropriations bills have required presidents to spend at least as much as
appropriated. If a president doesn't want to spend all the money given to him, he must ask
Congress for permission not to spend it — through a measure called a "rescission" bill. Congress
can force a president to spend every nickel anyway by simply ignoring the rescission request.

Nor can a president force Congress to reconsider specific tax breaks that benefit only particular
special interests.

The current rescission process resulted mainly from Congress's frustrations with the Nixon
Administration's use of "impoundments." For 170 years presidents had, with little controversy,

Representatives Stenholm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 5

124

used impoundments to save budgeted money that no longer needed to be spent. The first recorded
impoundment came from Thomas Jefferson, who — after the Louisiana Purchase in 1803 —
refused to spend $50,000 for Mississippi River gunboats that, until then, were needed to protect
the nation's borders. From Jefferson's time on, most impoundments reflected an administration's
ability to carry out CongTessionally mandated programs with less money than anticipated.

This changed with the Nixon Administration, according to the following account by Joel
Havemann, a former reporter at the National Journal:

After 1970, Nixon's impoundments took on a wholly new character. Sometimes the president used
impoundments to save money when circumstances no longer required its expenditure, but more often
he simply refused to spend funds that Congress provided for programs that he did not like. During
his campaign for reelection in 1972 Nixon repeatedly condemned the Democratic Congress for
failing to bring federal spending under control. After his reelection he put a large number of federal
programs under the guillotine. Among the victims: half of the $18 billion program for sewer
construction; four of the biggest federal housing programs; seven community development programs,
including urban renewal and model cities; five Agriculture Department programs; and a variety of
education and health programs. Altogether, the Nixon Administration withheld at one time as much
as $18 billion in funds voted by Congress for specific purposes.

Congress's desire to disable Nixon's aggressive impoundments was a main reason for the 1974
budget reform, and the result was the rescission process as it currently stands. (Impoundment
Control became Title X of the 1974 budget reform.)

Under the current process, if a president wants to reduce or eliminate specific funding amounts
in the current fiscal year, he must ask Congress for permission through a rescission proposal. The
problem is that nothing requires Congress to vote on the rescission. If Congress fails to act within
45 days, the rescission proposal dies and the administration must spend the money appropriated.
Data from the General Accounting Office show that since 1974, presidents have proposed 1,019
rescissions totalling $69.6 billion. Of these. Congress accepted 354 rescissions as requested,
totalling $21.6 billion. The remaining $48 billion of presidential rescissions were not accepted.

The point is not that Congress necessarily should have accepted all the rescissions presidents
proposed. That is a matter of Congressional discretion. But Congress should have been required
to exercise that discretion in a publicly accountable way — by voting on them. As the law
currently stands, nothing requires Congress to declare its position on the president's recommenda-
tions; Congress can reject them by simply ignoring them. Thus, Congress never was required to
vote up or down on the $48 billion of presidential rescissions that were not accepted.

The Common Cents Budget Reform Act recognizes these problems and tries to address them
without weakening Congress's role in spending decisions. It does not grant undue budgetary
power to the executive branch. It simply requires that Congress must vote on presidential
rescissions. Thus, Congress no longer could defeat a president's spending reductions simply by
ignoring them; the House and Senate would have to vote one way or the other. To improve the
rescission process, the Common Cents Budget Reform Act would do the following:

Representatives Stenholm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 6

125

► It would grant the president the option of earmarking savings from proposed rescissions
for deficit reduction.

► It would enable the president to force a vote on excessive or low-priority spending
amounts without vetoing an entire appropriations bill. The president also would be
enabled to strike targeted tax preferences in a similar fashion.

► It would require the Congress to vote on any package of cuts in spending or repeal of
targeted tax benefits submitted by the president.

► It would allow the Congress to vote on individual items within the president's package.

► It would preserve the Appropriations Committees' prerogative to move their own
rescission bills.

None of these reforms would force Congress to accept a president's rescissions. They would,
however, force Congress to be accountable: Congress no longer could dodge the question by
looking the other way; it would have to vote expressly to accept or reject rescission proposals
made by a president.

Two additional points regarding this expedited rescission proposal should be made.

First, a rescission bears a distinction from a line-item veto that often is ignored. A line-item veto
requires a president to strike an entire line in an appropriations bill. A rescission allows a
president or Congress to rescind only a portion of the funding for a program. Therefore, a
rescission may be considered more flexible than a line-item veto.

Second, as noted above, we intend to offer our rescission proposal on the House floor this week
as an alternative to the Expedited Rescissions Act (H.R. 4600) to be offered by Representative
Spratt. In that regard, we wish to note the key distinctions between our rescission proposal and
the underlying measure that will be considered by the House.

► H.R. 4600 is only temporary. It would strengthen the president's rescission authority only
through the end of the 103rd Congress (roughly another six months). Our proposal would
strengthen the authority permanently.

► H.R. 4600 applies only to appropriations bills. Our amendment would apply to
appropriations and targeted tax benefits.

► Third, H.R. 4600 offers no guarantee that savings from a rescission would go to deficit
reduction. Our proposal allows the president to designate a portion of the savings from
a rescission of spending or repeal of a targeted tax benefit to a Deficit Reduction Account
so the savings could not be spent elsewhere.

► H.R. 4600 provides the expanded rescission authority for a period of only three days after
enactment of an appropriations bill. Our amendment would allow the president to use the

Representatives Stenholm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 7

126

enhanced rescission authority at any time after enactment or during the fiscal year to
which the appropriations bill applies.

For these reasons, we believe our amendment would significantly improve the base rescission
measure to be considered by the House.

TITLE IV: CONTROLLING "EMERGENCIES":
Limiting Each Bill to Only One Emergency

A typical way to spend money on items that would have difficulty passing on their own merits
is to tie them to "emergency" appropriations bills, which have a virtual guarantee of passage. This
approach became more popular under the Budget Enforcement Act, which exempts emergencies
from the caps on discretionary spending.6

The recent earthquake relief bill demonstrates how an emergency spending measure can grow. In
February, the President's request for $6.2 billion in Budget Authority for the victims of the
California earthquake grew to more than $1 1 billion, as Congress added funds for everything from
the design of a new Amtrak station to copies of White House electronic-mail. (Please see the time
line of the earthquake bill at the end of this testimony.)

Equally significant is the question of the non-emergency items that are loaded onto emergency
spending bills. Frequently, these are items that would not survive the legislative process on their
own merits. They are therefore incorporated into emergency bills that have a strong potential of
passing. Thus, items that certainly are not emergencies become parasites on emergency spending
bills. Since 1990, approximately 14 percent of the gross spending in emergency appropriations
bills — $13 billion of the total $97 billion in these measures — has been for non-emergency
items. Below is a sampling of such items from recent emergency spending bills.

Earthquake Emergency Supplemental, 1994: H.R. 3759, P.L. 103-211 (selected non-
emergency items)

Hire 500 employees for a fingerprint laboratory $20 million

Fight potato fungus in Maine $1.4 million

Pay raises at Food and Drug Administration $2.3 million

Continuing study on measuring unemployment $10.1 million

Employee-Management Relations at the Office of the Senate Legal Counsel $1 million

New Amtrak station in New York City $10 million

Travel for the Office of the U.S. Trade Representative for trade negotiations $550,000

New employees at the Council on Environmental Quality $300,000

NASA payroll increases $56 million

"Spacehab" module $40 million

Representatives Stenholm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 8

127

Hurricanes Iniki and Andrew, Typhoon Omar, Desert Storm Emergency Supplemen-
tal, 1992: H.R. 5620, P.L. 102-368 (selected non-emergency items)

Veterans Health Administration - medical care $8.7 billion

Veterans Benefits Administration - compensation and pensions $500 million

Department of the Treasury, salaries and expenses $320,000

BATF salaries and expenses $2 million

U.S. Mint salaries and expenses $270,000

Bureau of the Public Debt systems modernization $5.2 million

Dire Emergency Supplemental - Desert Storm, Veterans' Benefits, Unemployment,
Student Financial Assistance: H.R. 1281, P.L. 102-27 (selected non-emergency
items)

D.C. financial crisis $100 million

Atomic energy defense activities $623 million

Delaware River Basin Commission salaries and expenses $39,000

Vaccine injury compensation $17 million

Supplemental security income program $232 million

Food Safety and Inspection Service $8 million

Food Stamp program $200 million

Coast Guard retired pay $14.5 million

Veterans Benefits Administration, compensation and pensions $712.6 million

Operation of low-income housing projects $75 million

Finally, Congress often combines a variety of emergencies into a single bill. For example, the
1994 earthquake supplemental actually contained funds for nine different emergencies: the Los
Angeles earthquake, the Loma Prieta earthquake, the California forest fires, the midwest floods,
and emergency aid to Somalia, Bosnia, Iraq, Haiti, and Southwest Asia. This practice swells
spending amounts in emergency bills but dilutes the significance of events that justify such special
appropriations measures. On average, the emergency supple mentals enacted since 1991 have
contained 4.4 emergencies each. (See listing on the next page.)

Clearly, the number of emergencies that may be included in a single emergency spending bill, as
well as the non-emergency items that get attached to such legislation, reduce the clarity and
accountability that should accompany such measures. To address these issues, the Common Cents
Budget Reform Act would:

► Expedite Congressional action on genuine emergencies by stripping out all non-emergency
items from "emergency" spending bills.

► Compel the Congress to consider each emergency on its own merits in a separate bill.

Representatives Stenholm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 9

128

Number of Emergencies in Each Emergency Supplemental

Los Angeles Earthquake Supplemental, 1994 9

Midwest Flood Relief, 1993 2

Hurricane and Typhoon Supplemental Appropriation, 1993 3

Hurricane, Typhoon Supplemental, 1992 11

Los Angeles Riots Supplemental, 1992 3

SBA Disaster Loans Supplemental, 1992 1

Desert Shield/Desert Storm and Kurd Assistance, 1992 6

Refugee Assistance Resulting from the Persian Gulf War, 1991 4

Desert Shield/Desert Storm, 1 991 1

Unemployment Compensation, 1991 4

Average Number of Emergencies in Each Supplemental 4.4

CONCLUSION

In conclusion, we reiterate a fundamental point made at the beginning of this testimony:
Reforming the budget process is not the entire answer for controlling federal spending and deficits.
Congressional resolve is an indispensable element. The budget process can, however, encourage
or discourage responsible budgeting and accountability. As it turns out, those procedures that meet
the test of common sense are likely also to provide the incentives that Congress needs. Further,
a more reasonable, common sense budget process could help alleviate some of the cynicism
among American taxpayers, who are growing increasingly frustrated with Congress's chronic
failure to handle the public's money properly.

For these reasons, we strongly urge the subcommittee and the full Government Operations
Committee to act quickly on our proposed budget process reform. We encourage you to allow the
full House an opportunity to bring "common sense" into the federal budget process.

Representatives Stenholm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 10

129

Endnotes

1. As defined in the Balanced Budget and Emergency Deficit Control Act of 1985. the baseline includes "a
projection of current-year levels . . . into the budget year and the outyears based on laws enacted through the
applicable date [emphasis added]. In other words, changes in law that call for higher spending in the
forthcoming budget year are assumed in the baseline. Legislated changes are more significant in the baselines
for mandatory programs, but they do apply to the baselines for discretionary programs.

2. Schick. Allen, The Capacity to Budget (Washington. D.C.: The Urban Institute. 1990), p. 96. This example
reflects a mandatory spending program, but the same principles would apply to discretionary programs.

3. Schick, Allen, Congress and Money: Budgeting, Spending and Taxing (Washington, DC The Urban Institute.
1980), pp. 217-218.

4. Wildavsky, Aaron, testimony to the House Committee on the Budget, May 11, 1992.

5. Havemann, Joel, Congress and the Budget (Bloomington, Indiana: Indiana University Press, 1978), pp. 176-
177.

6. As defined in Section 25 1 of the Deficit Control Act, adjustments to discretionary spending limits are to be
made for spending provisions "that the President designates as emergency requirements and that the Congress
so designates in statute."

Representatives Stenholm, The Common Sense Budget

Penny, and Kasich Reform Act - Page 1 1

130

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131

Mr. Conyers. Today we have a great number of budget reform
bills before us. Thank you all very much. We have got H.R. 3266,
A to Z. We have got your bill, 4434. We have 1138, the Comprehen-
sive Budget Process Reform Act, introduced by Representative
Orton. We have H.R. 4057, the Lockbox Act; we have H.R. 2929,
introduced the gentleman from California, Mr. Cox and we have
two proposals that treat emergency spending.

And actually, we started off with Mr. Kasich talking about emer-
gency spending. I suppose most of the features in tne two emer-
gency bills we will consider later would meet with your approval.

Mr. Kasich. I don't know anything about the other bills.

Mr. Conyers. I see. It seems you made a pretty good case for the
provisions in your bill.

Mr. Kasich. I am glad that you felt as though I made a pretty
good case, Mr. Chairman.

Mr. Conyers. I thought you made an excellent case.

Mr. Stenholm. Mr. Chairman, may I respond in part to that?

There was a fourth part to our package that we didn't talk to,
but it was the modified line item veto proposal. And I think if you
will read here carefully what the three of us is suggesting. If some-
one else has some other ideas that differ from us, we tnink they
ought to be voted on. We think if someone has a little different ver-
sion, if it is something that can be determined by a majority vote
of the House of Representatives of whose idea is better, then we
ought to construct a rule and we ought to construct a process that
would allow different ideas to be considered.

That is what we achieved, and I am very happy with the rule
that came out of the Rules Committee yesterday on the modified
line item veto because it managed to do something that I have not
seen happen many times in the last several years. We had one in
which Chairman Moakley and the ranking minority Member, Mr.
Solomon, both agreed.

And it also made those of us who had a little different version
from either one of the two ranking Members, we were happy, too,
because the process allows the will of the House to work and if we
don't have a majority for the proposal that we have submitted, then
the ones that have the majority will win. And I hope, Mr. Chair-
man, that that is the way you will look at all of the ideas before
the committee and make the recommendations accordingly.

Mr. Conyers. Well, as I remember, we worked pretty closely on
recision legislation and came up with some modified package that
met the general mood of the Congress. So the Common Cents Re-
form Act includes baseline budget reform, expedited recision, dis-
cretionary cap adjustments, limitation of emergency designation,
and modified line item veto as its essential ingredients. What I
want to do is continue with other witnesses, not only our col-
leagues, and I invite you to keep involved in this process. We would
be nappy to notice you of the hearings as we proceed. Because we
will be having witnesses examining all of these, and we would look
forward and be happy to know of witnesses that you would like to
include so that there is a fully balanced view of these issues.

These are all important issues I think critical that we have a
hearing constructed so it is not just a rambling discourse by person
after person on a whole range of budget reform matters but that

132

we specifically are talking about these issues in terms of a bill con-
text; what it would look like coming out of one measure.

So, I think that this gives us a pretty clear picture of where you
are coming from. I have got a couple of more questions but I want
to recognize Al McCandless at this time.

Thank you very much for your very orderly presentation.

Mr. McCandless. Thank you, Mr. Chairman.

I liken this discussion as a preacher talking to the choir and I
am not sure who is the preacher and who is the choir here.

We touched on a situation, Mr. Penny did, relative to success
that we have had in the past and we were not able to experience
through the legislative process, and the two examples used were
the revision of the Social Security program in 1983, and the base
closing. Both very touchy and sensitive political issues. We have a
number of bills here that are admirable. We also have currently in
chairmanship people who do not seem to think that there is an
awful lot wrong with the system or if there is something wrong
with the system, that they will work it out or however you wish
to analyze and review their testimony.

With that in mind, then, is there a place for a similar type of
committee to that of a Social Security and the base closing as the
next step to try to put the budgetary process on track?

Is that fertile ground?

Mr. Kasich. Well, there have been a couple of other commission-
type proposals that have been offered. I am a cosponsor on two of
tnem. Helped write two of them. One is Connie Mack-Kasich pro-
posal that says that we should reach certain targets similar to the
Gramm-Rudman proposal.

The other one I have done with Byron Dorgan that would call for
a base closing- type commission, that would allow a commission to
review everything else in the Federal Government that is not de-
fense related for purposes of being able to close facilities that,
frankly, don't have any purpose anymore.

Mr. McCandless. Let me interrupt you, Mr. Kasich. What I am
talking about here is not an active committee in the sense as you
are explaining it to me, but a committee that would develop a
budget procedure separate from what actually makes up the budget
itself, in terms of nuts and bolts, a procedural activity that would
say — and again you would have people who would be respected in
the system develop this budget procedure.

And then it would come to Congress, and it would not deal with
specifics like base closings or something of that nature. I use those
as examples of how we nave been successful following this proce-
dure on two other occasions that have been mentioned today.

Or if this is not fertile ground, that is fine.

Mr. Penny. The chairman mentioned a number of bills and they
are very admirable. I have no problem with them, but there is a
certain — you are not going to be able to get all of this in this one,
so maybe we will have that amended out and that may have been
a very desirable characteristic of that bill and then we go to the
next Dill and this bill would happen here; so we don't come up with
a cohesive ultimate budget plan from beginning to end through x
number of steps that Congress would benefit and certainly the peo-
ple that look to Congress to spend their money.

133

Mr. Penny. Clearly, the preferred path would be for this commit-
tee to report a comprehensive budget process reform bill. Then we
could bring it to the floor under a rule that would allow various
amendments or substitutes to be debated. At end of the process I
trust that we would have reforms that would make a difference.

We are trying to change the budget environment. That is really
what this is all about. And frankly, any one of the bills you have
described would offer a positive change from the status quo. We
would like to see this committee take action on a bill that is as
farreaching as possible.

You know there was some suggestion about an outside group to
look at budget reform and somehow that got rolled into this con-
gressional reform panel. We decided to keep it all in-house rather
than allowing former Members of Congress or whoever to be a part
of a group that would make these recommendations.

Now we see that the reform commission's report has been sitting
at the Rules Committee for the last 8, 9 months. And they are not
anxious to bring it to the floor. Mostly because when it comes to
floor, they are afraid of amendments that might be offered and
might, in fact, pass. It is feared these amendments would go far-
ther in the area of budget reform or the elimination of committees
or the consolidation of jurisdictions within committees. And so, we
are being frustrated here by

Mr. McCandless. If I may, you are making my point.

Mr. Penny. The point I wanted to make is that initially, what
got this whole internal reform commission set in motion was a very
credible suggestion by some legislators that we create an outside
commission with retired Members of Congress, and this internal
process was instituted as a way of preempting that. So now we are
sort of back to square one, but we do have some good bills that
have been introduced. We have got a committee chairman here who
has taken some interest in these issues over the years.

He deserved a lot of credit for pushing the chief financial officer
through the Congress. It is going to save us a lot of money and that
is doing in the executive sector, the executive department, much of
what we want to do on Capitol Hill. That is to bring some common
sense to the way we do budgets.

Mr. Conyers. If the gentleman would yield, I would like to ob-
serve that all three of the gentlemen supported the Chief Financial
Officer Act, as well, and we appreciate your support for that.

Mr. Kasich. I would like to say to the gentleman from California,
listening to the testimony of the last panel, I got the sense that —
it is this one but let's do the next one and if we are doing the next
one, let's wait and do something else. I think the common sense
budget plan that you have before you right now will change the
language in the way we operate. Just the language on baseline is
so significant. I have got a list of about 10 items that add up to
$17 billion in spending increases that is actually labeled on $11 bil-
lion spending cut.

It is the inability to actually speak in a language that we can all
understand. I argue that the administration ought to support the
baseline changes because if, in fact, they are interested in control-
ling the deficit over the long term, then it makes their job easier

134

to say that a cut is a cut and an increase is an increase and a
freeze is a freeze.

I think if you cut an appropriation bill, the money should be able
to go to the deficit. It doesn't lock in appropriators on this side
from being able to go to a conference committee and work out the
differences between the lower level and the higher level. All it says
is if in the middle of doing a budget, we decide that we want to
cut spending more, we ought to be able to do it.

Every one of these appropriation bills that we are going to con-
sider over the rest of this year, not one dime in it will go for deficit
reduction, even if we eliminate the Interstate Commerce Commis-
sion and not a dime of it goes for deficit reduction. These emer-
gencies are ridiculous when you read in the paper about them.

Let's pass this now. It is June. It is almost July. This is a bill
that has a chance of passing this House. Our enhanced recision
proposal that came out of Rules Committee yesterday, we believe
will pass the House of Representatives. We think we can pass it
through the Senate.

And where I get concerned about Mr. McCandless is we are al-
ways waiting on another vehicle. This is a good down payment on
what I think can make a difference.

I know serving on that Budget Committee, defining an increase
as an increase and not an increase as a cut would be the most sig-
nificant sea change in the way in which we describe budgets that
we have had in the 10 years that I have been here.

Mr. McCandless. The problem I have, Mr. Kasich, is the road
of good intentions as far as the budget process is concerned is lit-
tered. And I am afraid that we are just going to continue to litter
it with another Gramm-Rudman or other this or another that. I am
not saying we shouldn't do what we can with the resources that we
have.

I was very impressed to use another example. I was impressed
with the Peter Grace Commission. I thought the 326 recommenda-
tions— not all of them I would have accepted, but there were a
goodly number that were excellent that seem to have fallen by the
wayside. I think we got 22 of them through today. I may be off one
or two.

But that is a failure, but the other two that I mentioned, base
closure and Social Security, were a success because we took the po-
litical climate and divorced it from the decisionmaking process and
the decisionmaking process had the necessary integrity and person-
alities of respect that, when it came back, nobody wanted to mess
with it. And that is why I mentioned it to you gentlemen as I did.

Thank you, Mr. Chairman. Thank you, gentlemen.

Mr. Conyers. Mr. Spratt

Mr. Spratt. John Kasich, let me take up the topic that you ad-
dressed at the outset, emergency spending. Is what you are propos-
ing; a stricter germaneness rule so that emergency relief bills, par-
ticularly disaster relief bills pertain only to disasters? Or do you
want some sort of procedure whereby every emergency bill denomi-
nated an emergency, exempted from the caps has to be subject to
an open rule so the House can delete these extraneous things when
and if it comes up? Do you have a legislative proposal?

135

Mr. Kasich. Yes, we do. See, one of the things that we have
hoped to do was define what an emergency was in the bill. But
what we have decided is that it is hard to define what you mean
strictly by an emergency except that when you see an emergency
and I see an emergency and the President sees an emergency and
someone in the Senate does and we all agree on it, it is then an
emergency.

But we can also agree on things that are clearly not an emer-
gency.

So whenever the package comes up it has had to be one single
emergency that has to apply to that. If it doesn't

Mr. Spratt. The rule mixes emergency and disaster relief to-
gether. You said to start with that the disaster relief bill on an
earthquake can't pertain to something that is not an emergency. It
could be an emergency. The financial insolvency of District of Co-
lumbia is an emergency. The potato fungus to a potato farmer is
an emergency, but it is not a disaster relief provision.

Mr. Stenholm.

Mr. Penny.

Mr. Stenholm. Yes. Basically what we are saying, call it what
it is. It is very embarrassing and difficult to explain after you have
passed an earthquake emergency disaster relief bill to find out the
next day or two that you have had other things added to it. It is
difficult to explain to the people why any of the things that were
on Mr. Kasich's chart were, in fact, related to that. So what we are
suggesting, whatever the procedure would be, keep it clean.

Mr. Kasich. Mr. Spratt, the specific answer to how you would
prevent it from happening is if anything that is included in that
bill was not directly related to that emergency, it would count
against the caps. So if you had an emergency earthquake bill

Mr. Spratt. Let me give you an example.

The Hugo relief bill was passed by one House, I think, and then
the earthquake occurred in California. And so the Appropriations
Committee then piggybacked onto it the Los Angeles relief earth-
quake. So could you package those two together?

Mr. Kasich. No. That is a perfect example, and I will tell you
why I say that.

When we passed the Los Angeles earthquake, we picked up
money from a whole variety of otner disasters that had happened
that up until that point we had not defined as being an emergency.
So the bill would have the impact of doing two things.

One, each emergency would be considered separately. If you got
Hugo, we do Hugo separately; if you got San Francisco, you do San
Francisco separately. Because when we had L.A., and we were tak-
ing a look at what the definition was, all of a sudden, San Fran-
cisco found itself in consideration of L.A.

Now, maybe it should have been in there, but perhaps some
things were rolled in under the guise of an earthquake in San
Francisco, because there was a convenient vehicle. And what I
would argue is, keep them separate and consider them separately
on their merits and don't let anything extraneous to it be consid-
ered.

Mr. Penny. We also had a second installment on flood aid as
part of the earthquake disaster bill, and under the definition that

136

we would place in the law would be that, from now on, each of
those would have to be brought up as a separate bill. If it was an
emergency bill, fine, but it would have to be a one-item or a one-
topic bill; and any additional items would count against the spend-
ing caps.

Mr. Kasich. I can remember, Mr. Spratt, a discussion at the time
of the Los Angeles earthquake bill about money that was going for
the flood emergency. People came to me and said, by the way, I am
from the section or the country where this is the case and if you
are going to offset it, please don't offset the flood, even though the
flood probably would never have come to the floor under a separate
emergency.

Maybe it would have, but it got to be a matter of let's just get
it all taken care of, and please don't ask me to be against that, be-
cause that applies to my district. I am not criticizing anybody for
that. I am saying you get a neater, cleaner process if you consider
them separately; and clearly we ought to take these extraneous
matters out.

Mr. Spratt. All right. So what you are saying in your legislation,
what is the number of the bill?

Mr. Kasich. 4434.

Mr. Spratt. It is common cents?

Mr. Kasich. Yes.

Mr. Spratt. OK What you are saying then is every disaster re-
lief bill shall have but one disaster?

Mr. Kasich. Correct.

Mr. Spratt. And no extraneous emergency money. If it is, it
counts against the cap. You can't waive the cap as to anything that
is extraneous or unrelated to that.

Mr. Kasich. Correct.

Mr. Spratt. OK. What happens if the Rules Committee — what
happens if you have a bill that has, I guess — then CBO is directed
to score it and that is a waivable, nonwaivable aspect of it?

Mr. Kasich. OMB.

Mr. Spratt. OMB is; OMB has to score it, OK. And that is — the
Rules Committee can't rule?

Mr. Kasich. Nonwaivable.

Mr. Spratt. OK. Nonwaivable.

Baselining. On baselining, you heard our colloquy before you
came in. I think Charlie Stenholm was here. What you have got in
here is the starting point for any deliberations in the Committee
on the Budget on the current resolution shall be the estimated
level of outlays for the current year and each function and
subfunction.

We are talking about functions now and not about programs, pro-
jection or activities, but just about the 13 functions and
subfunctions within them. Any increases or decreases in the budget
for the next fiscal year shall be from such estimated levels.

As I was saying to Marty Sabo, it seems to me that this is main-
ly presentation.

Mr. Kasich. I wouldn't agree with that, Mr. Spratt.

We are saying that we will not anymore describe an increase as
a cut. When you say it is just a presentation, it is really voluntary
as to whether they each list the previous year's spending level. We

137

want them to list last year's spending level and judge the increase,
decrease or freeze based on the previous year.

Mr. Sfratt. Yes, but what if they go on another step? They do
exactly what you want, but they have the current services budget
for the next fiscal year and they — we are underfunding current
services by this amount. So to that extent, we have

Mr. Kasich. Well, we define "baseline" though.

Mr. Spratt. And the others speak to the other presentation.

Mr. Kasich. No. Because we define what the baseline is in our
bill.

Mr. Spratt. I know you do, but that doesn't prohibit somebody
else from using a different point of reference.

Mr. Kasich. Well, but the problem would be, Mr. Spratt, when
they come to the Budget Committee, they would no longer be say-
ing that these are cuts, because when they say "cuts, they are
talking about cuts from the baseline. That gives them the authority
to do it. If we have now defined the baseline differently, they would
be inaccurate in terms of coming and talking about this being a
cut. It would not be a cut.

If we were to pass this, when Alice Rivlin would come before the
Budget Committee next year and there was an increase in spend-
ing under this proposal, she would have to define it as an increase
if it was one penny above the previous year's level.

Mr. Penny. CBO would have to apply this newly defined base-
line. So if someone wants to talk about current services or some
other baseline, they can do that. But the official baseline for Cap-
itol Hill and for CBO — and they are the God of budgets around
here — would have to be essentially a freeze baseline or something
that compares the coming year's spending levels with actual spend-
ing levels for the current year.

Mr. Spratt. Suppose CBO did just what you wanted, but they
also did a presentation of the budget comparing the current fiscal
year and the next fiscal year according to current services, and also
having a constant dollar budget, so that you have a constant dollar
baseline. You get three presentations out of that.

Mr. Penny. Who is going to instruct them to do that, the Budget
Committee?

Mr. Spratt. You don't prohibit them from doing that. You simply
call for one presentation using the nominal dollar current-year
baseline.

Mr. Kasich. But I would argue to the gentleman that the lan-
guage of budget stems from the statutory language of what a base-
line is. So when you change the statutory definition of a baseline,
you automatically change the language.

Now, they can come in and speak in Portuguese if they want to,
but we are demanding that they speak in English. So if you are
suggesting that what we are doing is changing the language, the
way in which we communicate, that is exactly right. We want the
language changed.

Mr. Spratt. No. What I am suggesting is that you can't change
the language because of the first amendment and the fact that peo-
ple will choose to argue the budget from their most advantageous
point of view. If current services cuts have been made, then they

138

will go out and talk about current services. If real spending cuts
have Deen made

Mr. Penny. Fine. But it shifts the burden of proof. They can talk
about a current services cut if they want, but at least they are ad-
mitting that the cut is below a higher level of spending than is cur-
rently existing. So the burden of proof has been shifted. And for
those that want to call a current services budget freeze, we now
have the upper hand in the debate; again, it just shifts the burden
of proof. You have hit on it exactly. We don't stop people from talk-
ing about some other baseline if they want to present their case in
those terms. But we at least start with an official baseline that
stays at a freeze level, a hard freeze level.

Mr. Spratt. On the lockbox, you heard maybe our colloquy about
whether or not this throws things into a state of confusion, that
you have numbers in play all the time. And it is not quite clear
until there is some final reconciliation at the end of the fiscal year
just how low the spending levels are going to be for next year, be-
cause there are 13 bills and there might oe amendments on each
one that not only delete items but also lower the cap; and until
that is finally resolved, you don't know exactly what the overall
spending cap is. So you have the thing in a significant state of flux.

No. 1, you may not have been here, but I asked Martin Sabo and
Dave Obey, as I read this, it doesn't say to me that the reduction
in the spending cap is final until it is actually enacted. The reduc-
tion is still in play; is that correct? I can't put my fingers on the
language from Schumer's bill, but is that your understanding?

Mr. Stenholm. Yes.

Mr. Spratt. So could the conferees from each of the subcommit-
tees go to conference if, let's say, they have a $1 billion cut in their
bill which is allocated to the baseline, is it still open to negotiation
with the Senate, whether it is $ 1 billion or $500 million?

Mr. Kasich. Mr. Spratt, the wav it would work is that they
would be free to negotiate between tne two levels.

Mr. Spratt. The level being the Senate

Mr. Kasich. The Senate and the House levels. I mean, the con-
ferees under the provision in the common cents budget; I know
that — the Schumer-Crapo language, I think may be somewhat dif-
ferent. Under our proposal, it would just be negotiating between
the two various levels.

Mr. Spratt. But theirs speaks to being out of scope. So if the
Senate is $500, and we are $1 billion, and if the subcommittee
comes back with a conference report at $100 million, then it is out
of scope and subject to a point of order?

Mr. Kasich. Tnat is correct.

Mr. Spratt. But as long as they are within the range of $500
million to $1 billion, it is within scope.

Mr. Kasich. That is correct. Now, serving on the Armed Services
Committee, I have got to tell you that when we got into a negotia-
tion on the F-14, where we passed 10 and they passed 3; we ended
up with 12. We would hope never to negotiate that way in the con-
ference committee. You might remember those days.

Mr. Spratt. Well, I think I have this straight. Those were the
three or four points I wanted to

Mr. Kasich. Can I offer one other point?

139

Mr. Spratt. You have the spending cap in a state of flux, you
have 13 bills in the mill at any given time. Granted, usually, let's
say — it is easy to conceive of a situation where you would have six
or seven different bills in conference at the same time — July, Au-
gust, September— and we might have $6 billion or $7 billion of
spending cap, plus or minus $6 billion or $7 billion that wouldn't
be allocated, I guess, until you have done a 602(b) reallocation
process on exactly where that $6 billion goes.

Would the Appropriations Committee — let's assume that you suc-
ceeded; at the end of the fiscal year, the net reduction is $5 billion?

Mr. Penny. Yes.

Mr. Spratt. Is that reallocated by the 602(b) allocation process
with the cardinals, or is that taken out of each function?

Mr. Penny. My understanding is that it would be reallocated,
but it would be achieved function by function. In other words, any-
thing below the cap would be negotiated within that committee
alone. As the conference is closed on that committee, any savings
there go into the lockbox. Then at the end of the process, the over-
all cap is lowered by the aggregate sum of the 13 bills.

And then the next year, the budget resolution is bound by the
new spending caps, the allocations are made to the Appropriations
Committee, tney in turn suballocate, and we start all over again.

Mr. Spratt. Yes. OK Thank you very much.

Mr. Conyers. You are welcome.

Mr. Stenholm, shouldn't we let our modified rescission work its
way, as opposed to starting off with a new proposal? You have an
expedited rescission section in 4434. But we worked out a modified
rescission bill that has been reintroduced as H.R. 4600. And I think
there is a considerable amount of support for that.

Would it be acceptable if the thrust of H.R. 4600 replaced the
particular expedited rescission feature that is in H.R. 4434?

Mr. Stenholm. No. You are correct, we have agreed on that, last
year's perspective. What we have asked this year and has been ap-
proved in the Rules Committee to allow those of us who had a
slightly different version to have an opportunity to vote upon it. If
we have 218 votes, then I submit that that will be what we send
on to the Senate; if we don't, then I would anticipate that 4600 or
the base bill that has been introduced will be passed again in its
current form.

We would like to improve on it because we believe that it can be
improved on, and that is what the three of us are suggesting in an
amendment that we will offer.

Mr. Conyers. Now, there is no section in H.R. 4434 specifically
on lockbox, between the approval of amendments to cut spending
and an adjustment of the caps, we sort of get the same effect.

Mr. Penny. Well, we have a section 2, which we call a cut is a
cut; and it is just a different term to describe a lockbox. It basically
has the same effect.

Mr. Conyers. OK. So section 2, a cut is a cut, is really your ver-
sion of the lockbox?

Mr. Penny. Of the lockbox, that is right.

Mr. Conyers. I thank you very much. You know, what I may do
is call you back. You are at the top of the list of our witnesses
today and some of these issues will be further developed as we go

140

along. It might be helpful if you come back, if you come back at
a later time to talk about some more of these things.

Mr. PENNY. I think all of us would be happy to do that, and we
wait on your call.

I think there is interest at this table in some of the other reforms
that you are looking at; some of them are supplemental to what we
have suggested in our legislation, and certainly nothing in our pro-
posal is a substitute for the A-to-Z approach, which one of your
committee members has championed. That can move forward as a
freestanding effort, and these reforms are really designed to change
our budget procedures and our budget definitions, and the two are
not in conflict at all.

Mr. Conyers. So if you saw A to Z and 4434, you would not

Mr. Penny. They would not be in conflict. You can do both.

Mr. Conyers. That's my question.

Mr. Penny. The two are not exclusive.

Mr. Conyers. Good enough. Thank you very much, Mr. Kasich,
Mr. Stenholm, Mr. Penny.

Mr. Durbin, why dont we wait until after the vote and come
back then, so we won't get interrupted.

We will go now and stand in recess for just a few minutes. Thank
you very much.

[Recess taken.]

Mr. Conyers. The subcommittee will come to order. We are
pleased to have as our next witness the Appropriations Subcommit-
tee Chair, the Honorable Richard Durbin of Illinois.

We are delighted to have you here. You have been in and out of
the committee room all day, and we invite you not only to make
your own statement, but add any observations or comments about
the discussions that have gone on in your presence. We would ap-
preciate any views you may have about them as well, Richard. Wel-
come to the Government Operations Subcommittee.

STATEMENT OF HON. RICHARD J. DURBIN, A REPRESENTA-
TIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. Durbin. Thanks, Mr. Chairman, and Mr. McCandless; I ap-
preciate the opportunity to testify.

As I sat and listened to the close of testimony of the previous
panel, I was reminded of how relieved I was when I finished my
sentence on the Budget Committee and was released for time
served, and thought I would never again have to deal with some
of the arcane — important, but arcane aspects of budget policy.

But I come to you today

Mr. Conyers. But you were wrong.

Mr. Durbin. I was wrong. I come to you today to address at least
a few aspects of the proposed reform, perhaps from a little different
perspective, though I understand Mr. Obey was here earlier, and
ne might have spoken to them, at least partially.

Let me say at the outset that we come here today because of a
real difference in outlook and philosophy. Many Members believe
that we can never cut enough spending. They reject the notion held
by many economists that if spending cuts are too deep, they can
contract the economy, kill jobs and dampen economic growth. They
either opposed or reiused to acknowledge the positive strides we

141

have made under the Clinton administration — reducing the deficit
by 40 percent, 3 successive years of deficit reduction, the first time
since Harry Truman.

And more important than this, in my estimation, from my per-
sonal point of view, is the fact that our economy is rebounding. We
are seeing growth, the creation of new jobs, more jobs created in
the last 18 months than in the previous 4 years.

Despite all of these good things, deficit reduction, economic
growth, the folks who come to you with an agenda for budget re-
form have an appetite to cut that is at least nominally insatiable,
and they continue to devise new ways to force spending cuts.

The bottom line is this: They don't trust government and they
certainly don't trust Congress, so they search for new ways to re-
strict congressional activity, to reduce flexibility, to put Congress
on automatic pilot. They can't bring themselves to concede that in
congressional spending, our record was consistently better under
the two previous Republican administrations than many people will
acknowledge.

I should say the Democrats of Congress did more to reduce the
deficit last year under President Clinton than any of our deficit
hawks and heroes of the balanced budget amendment have
achieved in the last 12 years, and most of them voted against it.

Now let me get down to a more practical level. When I first went
to Chairman Whitten of the Appropriations Committee and asked
him if I could be an Appropriations member assigned to the Budget
Committee, his reaction was something I still recall today. Why do
you want to do that, he said? He said, the Budget Committee deals
in hallucinations, and the Appropriations Committee deals in fact.

I kind of chuckled, asked for the appointment, got it anyway.

But the longer I am around here, the more his wisdom shines
through.

Let me give you a practical observation of deficit reduction from
the viewpoint of someone who is forced to bring 1 of the 13 appro-
priation bills to the floor. Many of our deficit zealots call for major
surgery on the deficit and faint at the sight of blood when they face
appropriation cuts.

Let me be specific. This year I had to cut $1.3 billion from discre-
tionary spending in my agriculture appropriation bill. A Member of
Congress who styles himself as a deficit hawk sent a letter out to
all of our colleagues and said, vote against the Durbin appropria-
tion, it cuts too much spending, it cuts too much spending.

When it was all said and done, it was interesting. I have here
a list of Member requests to my subcommittee for earmarks in in-
creases in spending in my bill, 1,119 letters from our colleagues.
We put them in alphabetically. The list runs from A to Z, if you
catch my drift; all of the Members who are deficit hawks when it
comes to the press conferences and budget reform, and who were
the first in line when it comes to earmarks and additional spend-
ing.

Now, let me tell you what happened when the bill came to the
floor. Despite the Dear Colleagues sent out by my friend, we passed
the bill. But 127 Members of our House voted against my appro-

Eriation bill, which cut — the net cut was $1.3 billion out of the $13
illion bill, real cuts, real deficit reduction. Of the 127 Members

142

who voted against final passage of the agriculture appropriations
bill, a real cut bill, 120 are cosponsors of the A-to-Z bill. Seventy-
eight voted to exempt the Veterans' Administration from cuts; 122
voted for the balanced budget amendment; 115 voted for Mr. Ka-
sich's budget, which would nave cut an additional $8.9 billion out
of agriculture programs over 5 years; and 119 voted for Mr. Ka-
sich's motion to instruct conferees to accept the Senate spending
caps, if you will recall the Exon-Grassley proposal, which cut us
even deeper.

So excuse me if I come to this hearing with some skepticism
about the fervor of some of the people who want to cut the deficit
and can't bring themselves to vote for appropriations bills which
really cut spending.

We come to the floor with only two exceptions this year, with vir-
tually open rules. We all know that. That is why we have been
bouncing back and forth between committee, office and the floor for
the last week and even longer. So to be faulted and to hear the
suggestion that this process isn't open for those who want to cut
spending, I think that is just dead wrong.

Let me tell you what I think is wrong with the lockbox. But be-
fore I do it, I hope you all have a copy of Jack Murtha's testimony
before this committee on this same subject.

Jack will not be able to join us todav. Chairman Murtha has sent
his testimony. It is in his style, very brief, very concise, very clear.

[The prepared statement of Mr. Murtha follows:]

143

TESTIMONY OF

HON. JOHN MURTHA

BEFORE

COMMITTEE ON GOVERNMENT OPERATIONS

JUNE 29, 1994

I WOULD LIKE TO SPEND A FEW MINUTES TODAY TO TALK ABOUT WHAT
I SEE AS THE REAL WORLD IMPACT OF THE PROPOSED "LOCKBOX'
PROCESS ON THE DEFENSE APPROPRIATIONS BILL

LOCKBOX WILL HAVE UNINTENDED CONSEQUENCES

THE LOCKBOX CONCEPT WILL HAVE UNINTENDED CONSEQUENCES
WHICH COULD END UP CREATING IMPOSSD3LE "GORDIAN KNOTS" IN
WHICH APPROPRIATIONS CONFEREES FIND IT NEXT TO IMPOSSIBLE TO
PRODUCE PASSABLE, SIGNABLE BILLS.

I'M AFRAID WE WOULD BE LOCKING AWAY THE KEYS TO PRODUCING
PASSABLE AND SIGNABLE APPROPRIATIONS BILLS IN THIS LOCKBOX.

144

THE PROBLEM IS THE "LOCKBOX* LOCKS AWAY SAVINGS PREMATURELY
- BEFORE THE FINAL PRIORITIES ARE HAMMERED OUT. IT TAKES AWAY
THE FLEXIBILITY FOR THE CONFEREES TO WORK OUT ACCEPTABLE
COMPROMISES THAT CAN PASS.

EXAMPLE OF POTENTIAL LOCKBOX SCENARIO

LET ME GIVE YOU A HYPOTHETICAL BUT VERY POSSIBLE SCENARIO
UNDER THE STENHOLM-PENNY-KASICH LOCKBOX PROPOSAL.

LET'S SAY THE HOUSE VOTES FOR A FLOOR AMENDMENT NEXT YEAR TO
CUT $2 BILLION FOR THE F-22 FIGHTER. THATS A REAL POSSIBILITY
GIVEN THE FACT THAT WE HAVE A $20 TO $40 BILLION SHORTFALL IN
THE PRESIDENT'S DEFENSE PLAN AND GIVEN THE SUPERIORITY OF THE
F-iyS THAT ARE CURRENTLY IN THE INVENTORY.

THIS $2 BILLION IS PUT IN THE LOCKBOX SO THAT IT CANT BE SPENT
IN A SENATE BILL OR BY THE CONFEREES.

LET US THEN SAY THAT THE SENATE REJECTS THE HOUSE CUT BUT
INSTEAD CUTS $2 BILLION FOR THE C-17 TRANSPORT AIRCRAFT. THIS
CUT WOULD BE VERY UNPOPULAR IN THE HOUSE.

145

ALL OF THIS $2 BILLION IS ALSO PLACED IN THE LOCKBOX.

THAT MEANS THE CONFEREES HAVE LOST A TOTAL OF $4 BILLION.
THERE IS NO MONEY TO RESTORE EITHER ONE OF THESE PROGRAMS OR
TO REACH A COMPROMISE ON REDUCED FUNDING.

I COULD NOT AND WOULD NOT BRING BACK A BILL THAT GUTS OUR
STRATEGIC MOBILITY AS ELIMINATING THE C-17 WOULD DO. STRATEGIC
MOBILITY IS ONE OF OUR NATION'S HIGHEST DEFENSE PRIORTITES.

THERE ARE SENATORS WHO FEEL JUST AS INTENSELY ABOUT THE F-22.

THE PRESIDENT ALSO FEELS STRONGLY ABOUT THESE PROGRAMS.

WHAT DO THE CONFEREES DO? ONE OPTION WOULD BE TO PRESERVE
THESE CRITICAL DEFENSE PROGRAMS BY CUTTING OTHER
WORTHWHILE PROGRAMS IN THE BILL THAT DO NOT CONTRIBUTE
DIRECTLY TO NATIONAL SECURITY. THIS MEANS:

ELIMINATING ALL DRUG INTERDICTION FOR A SAVINGS OF $875

MILLION.

ELIMINATING ALL ENVIRONMENTAL CLEAN-UP PROJECTS FOR A

146

SAVINGS OF $1.88 BILLION.

THAT WOULD GET US $2.7 BILLION.

IF WE THEN CUT THE DEFENSE CONVERSION PROGRAM BY NEARLY ONE-
HALF WE COULD COME UP WITH THE REMAINDER.

THE PROBLEM IS, OF COURSE, A CONFERENCE AGREEMENT
ELIMINATING DRUG INTERDICTION, ENVIRONMENTAL CLEAN-UP, AND
ONE-HALF OF DEFENSE CONVERSION WOULD NOT PASS AND PROBABLY
WOULD FACE A VETO.

OUR ONLY OTHER ALTERNATIVE WOULD BE SUCH DRASTIC STEPS AS
REFUSING A PAY RAISE FOR OUR TROOPS AND CUTTING READINESS.

THIS PROBLEM WOULD ONLY GET WORSE IN THE FOLLOWING YEARS
WITH THE END RESULT BEING THE VERY REAL POSSIBILITY OF FORCING
DEEPER AND POTENTIALLY DANGEROUS CUTS TO IMPORTANT NATIONAL
SECURITY PROGRAMS-

147

LOCKBOX WILL CAUSE LOSS OF CONSISTENCY BETWEEN DEFENSE
AUTHORIZATION AND APPROPRIATIONS BILLS
FURTHER COMPLICATING THIS SITUATION IS THE FACT THAT THE
AUTHORIZATION BILL.WOULD NOT BE SUBJECT TO THE LOCKBOX.

MR. CHAIRMAN, WHEN WE DEVELOP OUR DEFENSE APPROPRIATIONS
BILL WE CONSIDER ACTIONS TAKEN IN THE AUTHORIZATION BILL VERY
CLOSELY.

JUST AS IN THE APPROPRIATIONS PROCESS, EVERY YEAR THERE ARE
MAJOR AUTHORIZATION ISSUES THAT DON'T GET RESOLVED UNTIL
CONFERENCE IS CONCLUDED.

OUR SUBCOMMI1TEE MARK UP TYPICALLY OCCURS AFTER ARMED
SERVICES FULL COMMITTEE MARK UP.

OUR FULL COMMITTEE MARK UP USUALLY OCCURS AFTER ARMED
SERVICES ACTION.

AT ALL OF THESE POINTS WE MANYTIMES MODIFY OUR BILL TO
REFLECT CURRENT AUTHORIZATION ACTION. ITS AN ONGOING AND
CHANGING PROCESS THROUGHOUT.

148

THE PROBLEM IS, UNDER A LOCKBOX PROCESS, IF A PROGRAM IS CUT
OR TERMINATED IN THE APPROPRIATIONS BILL WE CANT GET THE
MONEY BACK IF WE HAVE TO COMPROMISE ON THAT PROGRAM IN
CONFERENCE.

THE AUTHORIZATION COMMITTEE WILL HAVE NO SUCH CONSTRAINT.

THE END RESULT IS MORE STRIFE AND CONFLICT BETWEEN OUR
COMMITTEES BECAUSE WE WOULD BE OPERATING UNDER DD7FERENT
RULES OF THE GAME AND HAVE WIDELY DIFFERENT. RESULTS.

149

CONCLUSION

MR, CHAIRMAN THE LOCKBOX IS A SOLUTION IN SEARCH OF A
PROBLEM THE CURRENT SYSTEM ALLOWS PLENTY OF OPPORTUNITY TO
MAKE CUTS STICK IF THATS WHAT A MAJORITY OF MEMBERS WANT.

THE LOCKBOX CREATES NEW PROBLEMS WHICH COULD RESULT IN
LEGISLATIVE STALEMATE AND UNINTENDED NEGATIVE CONSEQUENCES
FOR OUR NATIONAL DEFENSE.

IT IS UNWISE AND UNNECESSARY. IT SHOULD NOT BE ADOPTED.

THANK YOU FOR THIS OPPORTUNITY TO TESTIFY.

150

Mr. Durbin. He talks about the real world impact of the pro-
posed lockbox. Read it. Read it to try to get a perspective on what
it really means and what it would mean if we have, in fact, a mov-
ing target on deficit reduction, which I think is a serious mistake.

Let me tell you a few things it would do in the practical world
if we had the so-called lockbox. First, as a subcommittee chairman,
I would use my entire 602(b) allocation. I would never come in
lower, because honestly I am going to be penalized if I do. If I want
to hold back some 602(b) authority on the possibility that an au-
thorizing bill might be passed later on, I would be foolish.

Under the lockbox proposal, I am penalized, I lose it. Use it or
lose it. Not that government — perhaps for some of these folks, it
makes sense; it sure doesn't to me.

The thing that bothers me the most about lockbox and why I
think it is closer to a loony bin than a lockbox is the fact that they
have mixed up the concept of macroeconomics and microeconomics.
The purpose of the budget resolution is to try to arrive at some
general deficit reduction plan for the government, for the House
and for the Senate. But if we are going to build into this an appro-
priation process which changes the caps with every vote, I would
suggest to you this goes beyond a moving target. It becomes impos-
sible to calculate at any given time where you stand.

Jack Murtha uses an example of two defense projects, one worth
$2 billion which dies in the House and reduces the cap; another de-
fense project worth $2 billion, a different project, dies in the Sen-
ate, $2 billion, and reduces the cap. Now, how do they compromise
that out in conference?

They have just lost $4 billion from their cap. And yet they are
supposed to resolve that in conference. I don't think it makes sense.

One of the things that bothers me, too, about this is that we real-
ly should have a meaningful debate on the budget resolution, reach
an agreement on what that figure will be, and then go about our
business. Anyone who wants to comment at a later date — 1, 2, 10,
or 20 times — to change that budget resolution to basically say, the
will of the House is now changed, I think should come up with a
super majority vote.

I don't believe after the initial budget resolution you ought to
have a free shot at that cap any time you care to take it. And, un-
fortunately, that is part of the proposal on the various plans that
are before us.

I talked about this life. Before I was elected to Congress, I spent
14 years as the parliamentarian of the Illinois State Senate, and
so I usually think about these things in procedural terms, too. How
is this going to work in the real world? How can this work on the
floor in an orderly fashion? And I am at a loss, having spoken to
the House Parliamentarian and looked at it myself, as to how this
lockbox is going to work.

What if a Member came forward and said, I want to cut the
money for the space station, and I would like to put part of it back
into housing and the other part in the deficit reduction. Under the
current rules, without a rule, it is virtually impossible. You are
bouncing between titles of the bill and you are creating a lockbox
for some other part of it. And as far as I am concerned, that is a

151

real serious and genuine procedural concern which we are all fac-
ing.

Let me also suggest to you that the lockbox provision creates a
little different mindset for a chairman of an appropriations sub-
committee. Why would I put money in a risky program, even if it
is a good program? When I say "risky," I mean a program that
might not survive on the floor. It doesn't make a lot of sense. I
have to put money in popular programs.

So when Charlie Stenholm comes to me and wants money for boll
weevil eradication, there are some southerners who really care
about that, some folks in California, too. In fact, it is a very good
program. But if I had to ask you whether that or an increase in
WIC is likely to survive on the floor, well, the WIC program would.
I would put the money in WIC first, if I stand the chance of losing
it. Is that fair then to a program that may not have broad-based
popularity, but still might be important?

In the agriculture sector, those programs abound. We have all
sorts of programs. I understand that wnen it comes to rice produc-
tion, there are only six States that have an interest in it. It is an
important program, but if you are going to put it up for a vote on
a majority basis, it might not survive.

So do I want to fund those sorts of programs that may not enjoy
majority support on the floor, or go to those that are immensely
popular and stick with them? Because if I guess wrong, I lose my
cap. I can't take this to conference and bargain it up.

So let me conclude by saying this: I think there is need for hon-
esty in our budget deficit reduction. I think there is need for hon-
esty when it comes to dealing with appropriations. Having strug-
gled over literally weeks, months, if you will, listening to witnesses,
preparing a budget, coming to the floor; Mr. Spratt has the long-
suffering responsibility to preside over my bill each year, and he
knows what we go through.

It kind of bothers me to have folks come in and say, well, you
really don't have an open process; we really need to bring some dis-
cipline in here. Folks, when I come to the floor, anybody can take
a shot. It is an open rule. Anything you want to cut, come and get
it.

This year, when we cut the heck out of this bill, a lot of the folks
that are calling for deficit reduction were nowhere to be found on
final passage.

[The prepared statement of Mr. Durbin follows:]

152

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TESTIMONY OF

THE HONORABLE RICHARD J. DURBIN

BEFORE THE

SUBCOMMITTEE ON LEGISLATION AND NATIONAL SECURITY
COMMITTEE ON GOVERNMENT OPERATIONS

JUNE 29, 1994

Mr. Chairman, I thank you for the opportunity to testify today regarding
proposed budget process reforms. I would like to focus my remarks on two
issues: the proposed deficit reduction "lock box" concept and the proposal to
place limits on emergency spending bills.

DEFICIT REDUCTION "LOCK BOX" PROPOSALS

Mr. Stenholm and other Members have offered various deficit reduction
"lock box" proposals to encourage spending cuts. While I support responsible
reductions in the Federal budget deficit, I believe these proposals are
seriously flawed.

As I understand Mr. Stenholm' s proposal, each appropriations bill would
include a Deficit Reduction Account or "lock box". This account would start
out at the difference between the subcommittee's 602(b) allocation and the
amount of spending in the bill.

For any amendment to cut spending which is offered in the Appropriations
subcommittee or full committee or on the House floor, the sponsor of the
amendment could designate that some or all of the spending reduction be
transferred to the Deficit Reduction Account.

While Members could offer amendments to increase the Deficit Reduction
Account by cutting other spending, no amendment could be offered to decrease
the Deficit Reduction Account. This means that Members could be prohibited
from offering amendments later In a bill to spend savings gained by previous
cutting amendments, no matter how worthy the cause.

The Senate would be required to accept the amount in the House -passed
Deficit Reduction Account as its starting point for consideration of a
House-passed bill. The Senate could increase the amount in the "lock box" but
It could not decrease the amount, even If it disagreed with the spending
priorities expressed by the House in the House-passed bill.

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153

Page 2

Furthermore, a change in House rules regarding consideration of
conference reports would have the effect of prohibiting the House and Senate
conferees from reaching a final conference agreement that Includes a lower
level for the "lock box" than the lower of the House and Senate levels.

Finally, when each appropriations bill Is signed Into law, the
discretionary spending limit for new budget authority and outlays would be
reduced by the amount In the Deficit Reduction Account of each bill, based on
calculations made by the Director of the Office of Management and Budget.

What Is wrong with this approach to appropriations bills? Plenty. Let's
walk through the process and look at the implications of the "lock box"
approach at each step of the process.

First, the initial level of the Deficit Reduction Account is the
difference between the subcommittee's 602(b) allocation and the amount of
spending In the bill. In other words, "use It or lose it." Appropriations
subcommittees would be prevented from setting aside funds for potential use
later (for example, If new authorizations were anticipated), because any money
not spent in the initial version of the bill would go into the "lock box" and
be unavailable thereafter.

Second, full and free debate over spending priorities in the
Appropriations Committee would be Inhibited. Since any spending cut could be
put In the Deficit Reduction Account, committee chairs would be compelled to
try to work out any differences with their members behind closed doors before
marking up a bill, In order to reduce the risk of losing money to the "lock
box" that the committee might feel could be better spent elsewhere.

Third, the debate on cutting amendments in committee and on the floor
would be muddled by the mixing of two very different issues. Under today's
rules, each year we decide how much we are prepared to spend in broad areas of
the budget through the budget resolution. Once those broad decisions have
been made and translated into 602(b) allocations for the 13 appropriations
bills, we turn our attention to the question of priorities within each
allocation. This two step process allows us to make an orderly decision about
how much the Federal government should be spending in the coming year, and
then make another set of orderly decisions about what our spending priorities
should be within each of the budget allocations. These are two fundamentally
different issues. One focuses on whether we should spend $13 billion or $14
billion on discretionary agriculture programs. The other focuses on whether,
in spending only $13 billion on discretionary agriculture programs, we should
spend $2.6 billion or $2.8 billion on conservation programs.

The deficit reduction "lock box" concept would cause the debate to gyrate
back and forth between these two very different issues. The debate would
shift confusingly between how much deficit reduction should be achieved
overall and how we should subdivide the allocation for a broad area such as
agriculture so as to maximize the use of the limited Federal dollars available
for that area of spending. This wholesale destruction of the lines between
what are now distinct steps In the budget process would create confusion and
chaos .

154

Page 3

Fourth, this approach makes a mockery of the budget resolution. The
budget resolution would never be final. It would continually be revisited and
potentially opened to amendment every time an appropriations anendment was
offered to cut spending.

Under the Stenholm proposal, the budget resolution would be debated In
the House and Senate Budget Committees, on the House and Senate floors, and in
the House-Senate conference, as it is today. Then it would be debated again
in each of the 13 House Appropriations subcommittees, 13 times in the full
House Appropriations Committee, 13 times on the House floor, 13 times in the
Senate Appropriations subcommittees, 13 times in the full Senate
Appropriations Committee, 13 times on the Senate floor, 13 times in conference
committees, and possibly 13 more times on the House and Senate floors as the
conference reports are considered. At each of these points, any amendment
could reduce spending and increase the Deficit Reduction Amount with the
eventual effect of amending the discretionary spending limits which are
otherwise spelled out In the budget resolution and current budget laws.

This continual revisiting of the budget resolution is deficit reduction
overkill. It suggests that deficit reduction is the only important issue we
face. The premise behind this approach is that you can never cut spending
enough. No matter what level of spending cap has been agreed to, you should
be able to cut more at any time. But there comes a point where you need to
look at other issues, including the question of spending priorities within
accounts .

Amending a finalized budget resolution shouldn't be a simple matter
requiring only a majority vote as proposed by "lock box" proponents. I think
that, after a budget resolution conference agreement has been approved by both
houses, any attempt to amend the budget resolution through an appropriations
amendment should require a supermajority vote. In the absence of such a
supermajorlty vote, the Congress should not be compelled to continually
revisit the issue of discretionary spending caps to the detriment of other
important responsibilities we have.

Fifth, the "lock box" approach would create a parliamentary morass that
even the parliamentarians don't fully understand. Suppose you wanted to offer
an amendment to cut spending in a particular account, transfer part of the
savings to another account, and put the rest of the savings into the Deficit
Reduction Account. How would you accomplish that under the rules of the
House? The parliamentary tangle associated with potentially anending three
difference sections of a bill at once should not be taken lightly.

Sixth, the "lock box" provisions could make it more difficult to reduce
spending for some items by splitting opponents of a program into those who
want to use the savings for deficit reduction and those who want to use the
savings for other higher-priority programs. Major programs such as the
Superconducting Super Collider or the Space Station could easily fall into
this category and be unnecessarily sustained simply because ttenibers disagree
on where to put the savings.

155

Page 4

Seventh, the "lock box" approach would have a serious Impact on the
ability of House and Senate conferees to reach agreement on final spending
amounts for the year. Conferees need flexibility to reconcile what are often
substantial differences between House and Senate bills. In addition to
differences in spending for specific accounts, the conferees often have to
deal with the fact that the House and Senate may have established different
602(b) allocations. The conferees must juggle the spending levels in
different accounts and the overall allocation to reach an agreement. The
"lock box" approach would add another level of complexity to the difficult
task of negotiating a conference agreement by reducing flexibility to shift
between spending accounts. In trying to increase the ability of members to
cut spending, the "lock box" approach ties the hands of conferees.

Eighth, consider the psychology that the "lock box" provisions could
impel a committee chair to adopt. What will a chairman do if every amendment
he loses on the floor could reduce his allocation? "I could lose my
allocation if a guess wrong," he may say, "so I'll play it safe. I'll put my
funding in the most popular programs." Rather than allocating funds based on
the substance of the programs and their relative priority, the fear of the
"lock box" could encourage committee chairs to base their policy choices
primarily on whether each line item can survive on the floor. Funding would
flow to the safely popular programs, but not necessarily to the most
meritorious programs.

If committee chairs adopted this approach -- and who could say they
wouldn't at least consider it? --we would actually achieve little deficit
reduction. The programs that got funding would be the popular ones, but that
change in emphasis wouldn't necessarily be in the best interest of the
American people. The proposed change in process would have unintended
consequences that would thwart the goals of the proposal.

This highlights the final and fundamental flaw of the "lock box" approach
to legislating. It assumes that policy goals can be reached by tinkering with
the process rather than by addressing the substantive Issues head on.

If deficit reduction is needed, you don't need a new process to achieve
it. It can already be achieved under the current budget process. In fact,
that very thing happened this year. Discretionary spending caps were reduced.
How? Through the budget resolution. We don't need a new process to achieve
that goal. We don't need to drag the budget resolution into every spending
bill. We don't need to muddle and warp the entire appropriations process to
cut the deficit.

The "lock box" approach tries to use the guise of process reform to
achieve a substantive, policy goal. I say, let's cut through the muddle and
address the Issue head-on. Let's debate overall spending where that issue
belongs, In the budget resolution. Then let's let the appropriations process
subdivide the pie -- whatever size of pie is approved in the budget
resolution. But let's not confuse those two Important steps with the Illusion
that process changes can achieve the policy goals we seek.

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Page 5

BUDGETING FOR EMERGENCIES

The subcommittee is considering several proposals on budgeting for
disasters -- a proposal to limit emergency spending bills to one emergency, a
proposal to create a budget reserve account for natural disasters and national
security emergencies, and a proposal to reduce the following year's spending
limits by the amount of any emergency spending not paid for in the current
year .

Let me first comment on the proposal to limit emergency spending bills to
one emergency.

While I appreciate the intent of this proposal, I believe its effect
would be to unnecessarily and perhaps dangerously restrict the ability of the
Congress and the nation to respond in times of emergency -- the very time when
the ability to respond with flexibility is at a premium.

It is in the nature of emergencies that they often have unforeseen
consequences, and Congress must sometimes revisit funding for old disasters.

Several examples come to mind. In the Northridge earthquake supplemental
last January, provisions were added to cover requirements of the Midwest
floods, which had been overlooked when that supplemental was enacted.

The supplemental appropriation for the Midwest floods last year included
funding for several separate emergencies, including a drought in the Carol inas
and separate floods in Kentucky and Ohio.

The funding for Hurricane Andrew and Typhoon Omar was added to a pending
supplemental by the Senate. This supplemental was further expanded on the
Senate floor to cover Hurricane Iniki when it struck.

It could be argued, of course, that the unmet needs of a previous
emergency could still be funded under this proposal, but in a separate bill.
However, It would force the Congress to consider a multitude of emergency
spending bills, instead of Just a few. It would make the Congress spend even
more time on emergency bills, not less, and unnecessarily slow down the
appropriations process.

I think that at the heart of the proposal to limit emergency spending
bills to one emergency is a desire to make sure that non-emergency provisions
are kept out of emergency bills.

However, I fail to see the benefit, for budgetary purposes, of doing
that. For the purposes of the Balanced Budget Act of 1985, non-emergency
provisions are already kept separate form emergency provisions in emergency
spending bills. Under current law, discretionary spending limits are not
adjusted for non-emergency provisions, even if they are included in an
emergency spending bill.

Under current law, both the Congress and the President must agree that an
emergency requirement exists for the appropriation to be exempt from the
budget ceiling. If Congress initiates an emergency supplemental and the

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President does not designate the funds as an emergency requirement, then the
funds cannot be used. The same is true when the President requests an
emergency supplemental. This procedure was agreed to by Congress and the Bush
Administration as part of the Budget Summit Agreement in 1990.

In sum, the proposal to limit emergency spending bills to one emergency
would tie the hands of Congress in emergencies, add to the workload of the
Congress, and offer no benefits in return.

Let me next comment on the proposal to create a budget reserve account
for natural disasters and national security emergencies.

It is an interesting idea. However, as it is currently proposed, it is
fatally flawed. It ignores the possibility of a major disaster, which could
not possibly be paid for from a rainy day fund, or without adjusting
discretionary spending limits.

If Hurricane Andrew had hit downtown Miami, or if the Northridge
Earthquake had been centered In Los Angeles, the cost of each of those
emergencies could have reached $100 billion. There is no way the Congress or
the nation could respond to such an emergency if it had to rely on a rainy day
fund and could not adjust discretionary spending limits.

And yet that is what this proposal would force us to do. It would force
us to pay for emergencies from a budget reserve account, and it would
simultaneously repeal the adjustment for emergency appropriations currently
provided in the Balanced Budget Act of 1985. It is an interesting idea, but
as it is currently proposed, it could have disastrous effects.

The same problem exists with the proposal to reduce the following year's
spending limits by the amount of any emergency spending not paid for in the
current year. This might work if the amount not paid for in the current year
is a manageable amount, but it Ignores the possibility (and some say the
probability) that one day we may be struck by a major disaster costing $100
billion or more.

Last February the House Leadership created a bi-partisan Task Force to
look for ways to improve the way we prepare for, respond to, recover from, and
pay for emergencies. The Task Force, which I co-chair with Bill Emerson, has
met with the Congressional Budget Office, the General Accounting Office, the
Congressional Research Service, the Administration's working groups on
emergency issues, FEMA, and others. We are looking at every aspect of the way
we handle emergencies, including budgeting.

The Task Force will meet with several more Federal, State and local
agencies and organizations in the next few months, before reporting to the
Congress with recommendations.

The Senate also has formed a bi-partisan Task Force, co-chaired by
Senators Glenn and Bond, focusing on the question of how we pay for
emergencies.

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We need to address the question of how we pay for emergencies in a
comprehensive way, and not with piecemeal provisions. I would urge that the
bi-partisan Task Force on emergencies be given the opportunity to make its
report to the Congress, before the Congress considers emergency budgeting
proposals .

159

Mr. Conyers. Thank you for a unique and important insight into
the budget reform process, based not only on your career on the
Budget Committee, but even more importantly, the real life view
you have acquired as the appropriations subcommittee Chair; I am
sure that many of your comments will be very well taken by others
when they hear it.

Have you looked at any of the subjects of baseline budget reform?
There is a lot of fixation about the baseline being more than a tool
of analysis, but that it is actually distorting some of the budget pic-
ture by the way it is being used now.

Mr. Durbin. You know, Mr. Chairman, I guess my problem with
it is that since we have adopted the Clinton deficit reduction plan,
I am stuck for the next 3 years — I am going to be stuck with a
freeze; I will be cutting every single year — and to suggest that we
will be able to hide or conceal our efforts behind some sort of base-
line manipulation just doesn't work.

I mean, in the real world that I am dealing with, in terms of defi-
cit reduction, this is an interesting academic argument, but totally
irrelevant.

Mr. Conyers. Tell us the magnitude of the cuts ahead, and what
does it mean for the people in agriculture, the farmers and the
farm interests in the country?

Mr. Durbin. Let me give you three specific areas that we had to
cut this year where we should not have cut spending.

Agriculture research: We spend $1.1 billion in the Federal Gov-
ernment each year in agriculture research. It supports a sector of
our economy that accounts for 17 percent of our gross domestic
product. That is a very modest investment, and we are holding the
line on it this year when we should be increasing it, increasing in
areas like pink bollworm.

We have a group around here that calls themselves the "pork
busters." And they get together with these taxpayer watchdog
groups and like to giggle at the names of the projects. They hold
press conferences each year and have this collective giggle, like
pink bollworm research.

Little do they know that that is a cost-sharing plan with cotton
growers that pulls in a 70 percent reduction in agriculture chemi-
cals in California. And as we reduce the application of these chemi-
cals, we reduce the problems associated with clean water and pollu-
tion and infiltration plants, not only in the countryside, but in the
cities as well.

So they giggle their way through these. We are unfortunately un-
able to increase that spending as we should in agriculture research.

A second area which I will point to is the AHIS area, the Animal
Health Inspection Safety program, again, an area that Mr. Sten-
holm would have been very qualified to testify about. Same idea,
boll weevil eradication, fewer chemicals being applied. Soil and
water conservation, we cut this year. That doesn't make sense. We
are going to pay for that down the line.

But some people are of a mind that there just is no end to how
much you should cut; just keep going, and we will never have to
pay for it. It is a cynical and pessimistic view of government which
I don't share.

160

Now, having said that, let me add, I have blown the whistle on
a few things in the short time I have been chairman. Crop insur-
ance reform is something that our subcommittee took on, saving
$70 million this year. We also went after the section 515 Farmers
Home Administration housing program, which I think needs seri-
ous remodeling; and it is going to result in a savings for taxpayers.

There are areas where improvements can be made. But to start
with the premise that all Federal spending is somehow suspect is
just one I don't share.

Mr. Conyers. Why are you sure that your appropriation figures
are going to diminish in the years ahead? Is that built into the
long-term Clinton plan?

Mr. Durbin. It is. It is, because we will not see — we will be fac-
ing a freeze in spending, and yet, as you know, inflation will con-
tinue to chip away at the services that we are going to offer. If we
are unable this year, for example, to come up with user fees which
is now an escape clause when it comes to providing government
services in the Food and Drug Administration, in the meat inspec-
tion business, if those things don't occur, we will have to cut even
more this year. So I don't think it is going to get any better in the
near term.

It is because this deficit reduction package is a real one. Some
people won't concede that. I mean, if you listen to the previous
panel, you would think nothing had happened over the last 2 years,
that we are still in the old smoke-and-mirrors era where we made
our projections on where the economy was going to go; and we said,
we are going to cut, and we didn't want to cut, and the cut occurred
the day after the fiscal year began.

We played all kinds of games in the old days. This administra-
tion hasn't done that. In fairness to them, and I think we should
be fair, this is real deficit reduction.

Mr. Conyers. Thank you very much, Mr. Durbin. I would like
to recognize Al McCandless at this time.

Mr. McCandless. Thank you, Mr. Chairman.

Mr. Durbin, what I would like to do is talk about the system as
you experience it as a subcommittee chairman. The concern that I
and other members of this committee have as relates to that sys-
tem and the way it functions.

Now, I admired your work on the Agricultural Subcommittee this
year, because agriculture is an important part of my district.

But one of the things that was brought out by one of the panels
is well, the waiving of the budget rules on the floor of the House
really doesn't mean an awful lot, because you have to have an ap-
propriation and if you don't have an authorization, you waive the
budget rules, so you go ahead and appropriate and get all of the
business done for the country.

I was somewhat troubled by that, because the authorizing com-
mittee is supposedly, allegedly, through its process and its hear-
ings, the beginning point of how you arrive at programs and what
you want to authorize. That then becomes a basis upon which the
Appropriations Committee functions. Do you have any thoughts on
that?

161

Mr. Durbdst. Well, let me tell you, Mr. McCandless. You and I
have been here the same period of time and we have seen a lot of
things happen on the floor.

I have brought this appropriation bill to the floor with virtually
an open rule both times so that I am subjected to every point of
order when it comes to violation of budget rules and the like. This
time we made an exception because there were three or four pro-
grams in the bill, large-scale programs which were unauthorized.
But colleagues on both sides of the aisle agreed that they should
be protected.

I think the general rule of thumb is a good one, that you should
not authorize on an appropriation bill. I attempted to do that, inci-
dentally, by going to the Rules Committee this time and asking for
special treatment in a ghren area and I was turned down.

I abided by the decision of the Rules Committee and took it from
there. But as a general rule, we should have those clear lines
drawn between authorizing and appropriating.

Let me tell you one of the problems I run into, though. The au-
thorizing committees many times enjoy the luxury of promising ev-
erything to everybody. The farm bill historically includes wonderful
programs, far beyond our financial reach, great ideas, and we con-
tinue to hear on the Appropriations Committee, why didn't you
fund sustainable agriculture to the degree authorized?

We don't have the money. It is far easier to authorize to certain
levels than it is to find the money under our strict budget process.
That is why I am always mystified when I hear these deficit reduc-
tion plans coming around, they seem to think that we can manufac-
ture the money.

We are really the last stop in the Appropriations Committee.
There has to be real money, real 602(b) allocations, or we are out
of business. So the authorizing committees sometimes are not re-
stricted as we are when it comes to coming up with these ideas.

We have to pay for them.

Mr. McCandless. Let me read you a couple of quick quotes here
from the report to Congress by the bipartisan commission on enti-
tlement and tax reform. The report was released on June 21, and
with reference to page 29 of Mr. Obey's comments dealing with the
budget outlook through the year 2004: we all have constituents. We
all have people asking us from the media, why did you do this, why
didn't you do that, and the concern they have in all levels of exper-
tise, in all levels of income, is we just don't think that you "the
Congress," are getting a handle on this budget.

They use that general term budget to describe the whole appro-
priations, authorization, spending process, irrespective of whether
it happens to be the legislative Dranch, the executive branch, or
what. They think in terms of the budget and that is the hub upon
which the wheel revolves.

Entitlement spending and interest are projected to exceed 70 per-
cent of outlays by the year 2003. By 2030, Medicare, Medicaid, So-
cial Security and Federal employee retirement programs will
consume all Federal revenues.

Total Federal outlays would exceed 37 percent of the economy
compared with outlays of 22 percent and revenues of 19 percent
today, and then this is the big kicker.

162

If action is not taken, America will be forced to choose between
doubling every Federal tax and cutting more than half of every
Federal program and entitlement to balance the total Federal out-
lays and revenues.

Now, using that as kind of a beginning point, what would you
suggest that the process do, meaning the budget process, the ap-
propriation process, about going to the Budget Committee.

What should be done to address this issue to the maximum de-
gree possible?

Mr. Durbin. I think there are two levels we should address it
from. Let me say at the outset that the entitlement area is one that
I have to deal with, of a $67 billion appropriation bill that I bring
to the floor; $13 billion is discretionary. So we are dealing with
some $54 billion in mandatory spending, which goes for food
stamps, about $25 billion, the Commodity Credit Corporation,
which pays our farmers, and several other mandatory/entitlement
programs.

The jurisdiction over those programs is in the authorizing com-
mittees. If there are savings to be made, they have to be made
through reconciliation or some other action by trie authorizing com-
mittee. I think it is a mistake not to address that because in many
areas we can and should save in terms of entitlement spending.

A good example is food stamps. When the Food Stamp Adminis-
trator came before our subcommittee, my first question to him was,
is there a more cost efficient way to feed hungry people in America.
He was speechless.

No one had ever asked him that question, at least not in recent
times, but I think there are positive answers to that that would in-
volve electronic benefit transfer and a lot of different concepts
which would feed hungry people in a more cost efficient way and
take away some of the criticism of the program.

So in terms of getting to those entitlement programs, either
through reconciliation or some other part of the process, we should
be addressing them and addressing them more frequently.

I would concede that that is a reform that I would support.

The second thing, though, is to look at the underlying cause of
some of these problems. As the Federal Government is bankrupt
today, so too is my State government in Illinois; perhaps yours in
California.

The root cause of it is medical care. If you look at the two or
three areas where we are losing it, it is medical care and correc-
tions, where we are just spending money hand over fist to build
prisons and to keep people healthy, and frankly our States can't af-
ford to keep up with it.

So when you get down to the fundamentals, health care reform,
real health care reform is a critical part of addressing the very gen-
uine concern which you just raised. If in the outyears we are going
to be able to say we brought spending under control, we have to
get to the fundamentals of some of the spending, and I think
health care reform is one of those fundamentals.

Mr. McCandless. Thank you.

Thank you, Mr. Chairman.

Mr. Conyers. Mr. Bill Zeliff.

Mr. Zeliff. Thank you, Mr. Chairman.

163

I just would like to point out, I voted against the final passage,
but not because of the good things you did, but because of the
things that weren't done; frankly, that we didn't go far enough.
With all due respect, I applaud you for what you have done.

I have a great deal of respect for what you have done. But don't
just look at those of us that care just because we didn't, you know,
go ahead with your bill, don't feel that we are not on the same side.
I just look at agricultural offices that remain open; I look at the
overhead that we are spending in the Department of Agriculture;
I look at large agricultural subsidies to large farms and men just —
you know, I had; my reasons for voting against final passage, but
it certainly wasn't because I — I applauded the direction that you
took and the work that you did, but I just didn't think we went far
enough.

Mr. Durbin. Mr. Zeliff, there wasn't a single Member who stood
on the floor and said what you just said. There wasn't a single
Member that got up and said I should have cut more.

One of your colleagues circulated a Dear Colleague letter to the
rest of us and said it cut too much.

Let me tell you, this isn't an easy job. We are dealing with
130,000 employees in the U.S. Department of Agriculture. We have
been closing down offices, closing down laboratories; we have been
constricting programs, and we have tried to do it in a sensible way
that will not in any way endanger the food and fiber production
system in America.

A person like yourself who has an intense personal interest in re-
ducing spending and in reducing the deficit should have been an
aye vote on this bill. It should have been saying, we support what
you have done in reducing discretionary spending by 10 percent in
1 year.

To hold off and say I couldn't do it because we expected more,
I don't know if that is the real world.

Mr. Zeliff. OK

Well, your real world and mine may be, there may be an honest
disagreement. I think I know where I am.

Let me just again leave on a positive basis, that I applaud the
work that you are doing. I continue to hope that you will go fur-
ther, and you know, I will certainly look for the opportunities to
support that on a public basis as well.

I think my problem is that we have heard a lot of testimony this
afternoon that basically looks at four of these charts, and I am sure
you have seen them, but you know, we have got a situation where
the debt trend line is parallel to— the interest trend line is parallel
to the debt line, and frankly, if we took this to any banker, I don't
think we could borrow money on it.

That is just maybe my business approach to things, but I don't
like the trends and the directions. You, I think, are proud to say
that we do the deficit reduction plan back in August, and — but I
look at that and we are adding $1 trillion to our debt over the next
5 years.

I look at the $4.7 trillion debt that we have, with the increase
that is projected, the interest that continues to move forward, and
I just — I think we need some very serious changes in the system
that we have been going in, and I think there are people like you

164

that are exceptions, but generally across the board, we need a heck
of a lot more people that are willing to do the courageous cuts.

Mr. Zeuff. On the Medicare — not on Medicare, Dut on the food
stamp program, maybe you can elaborate a little bit on doing that
electronic transfer, or going to a card; and what do you think about
putting all of our entitlement programs under one kind of super-
vision in one department, one area where you have one card and
one accountability?

Mr. Durbin. I would be open to that suggestion. I am open to
any suggestion in terms of modernizing the system. What we are
trying to do with electronic benefits transfer is to get away from,
first, printing the food stamp coupons which is a massive expense
we shouldn't De able to afford.

Mr. Zeliff. Isn't there a lot of fraud and abuse in the way it is
distributed?

Mr. Durbin. Sure.

Mr. Zeliff. I am appalled by the question that you asked and
the fact that they had no answers to it. That is part of our problem,
isn't it?

Mr. Durbin. In fairness, I think they have come a long way.

Mr. Zeliff. But they have no idea how to streamline.

Mr. Durbin. In fairness, they are working on electronic transfer
now; what we want to get away from are folks that sell their food
stamp coupons for cash. We want to make this a program that pro-
vides food for hungry people, and I think the electronic benefits
transfer demonstration project in Maryland has been successful. It
has been expanded to other States. It is a move in the right direc-
tion. I think those things are good steps forward.

Welfare reform is clearly going to address the bigger picture, as
it should.

Can I go back to your earlier comment, though, talking about
what a banker would say if he looks at those charts? America's
banker just testified last week, Mr. Greenspan, before the Budget
Committee. I have been listening to him, and what he had to say
about the future of our economy was the most positive statement
I can recall in the 12 years that I have served. He really took a
look at the deficit reduction plan that we passed and said, the fun-
damentals are sound, we are headed in the right direction. I
haven't heard that in a long, long time.

I will concede to you, our debt is large; it should be reduced. But
going back to my statement, I think it is critically important for us
to make certain that we have a growing, expanding economy creat-
ing jobs. That is even more important to me than reducing the defi-
cit another billion dollars, and I think you can go too far. I think
you can close down programs, and in closing them down, frankly,
hurt the long-term growth of this country.

I will give you a practical example. If we are going to have real
welfare reform, if we want to have a commitment within govern-
ment to eliminate fraud in welfare, we will have to modernize com-
puter capacity of the Federal Government. It may start with the
U.S. Department of Agriculture, which is in the dark ages.

Mr. Zele?f. That would be an excellent place to start, and the
IRS is another one.

165

Mr. Durbin. And we don't have the money for it this year. Be-
cause of deficit reduction, we don't have the money for Infoshare
to put into modernizing computers. It is a perfect example of where
just cutting spending overlooks the long-term impact in providing
more cost-efficient programs for the taxpayer.

Mr. Zeliff. I still say that when the guy that is running the food
stamp program is completely shut out and has no answer to your
question, I don't think we are even making progress in the right
direction.

Mr. Durbin. He is gone, incidentally. We have a new person.

Mr. Zeliff. He should be gone, and probably a lot of people
working with him that don't get it either.

But you also alluded to entitlements as the key, and entitlements
driving the deficit. How do you feel about Mr. Gephardt's proposal
for 2 days of entitlement votes?

Mr. Durbin. I think it is a gimmick, just like A to Z with all due
respect.

Mr. Zeliff. You think our A to Z is a gimmick?

Mr. Durbin. I sure do. After going through 11 weeks of hearings,
340 witnesses, including 37 Members of Congress, 7,000 pages of
testimony to produce a bill, I don't think in 10 minutes to 60 min-
utes you can do justice to our program.

Mr. Zeljff. Let me get you on Gephardt's. Why do you think his
is a gimmick?

Mr. Durbin. Because, honestly, we have a process to deal with
it and, frankly, we are trying to come up with a trick shot now in
an effort to satisfy some Members' needs. I think we have a process
to deal with it, and I think the process should hold people account-
able.

Just like my appropriations bill on the floor held people account-
able, vote yes or no. Are you for deficit reduction or are you not?
Some people said no, they are not for it.

Mr. Zeliff. Let me just ask you. We had interesting testimony
from Chairman Sabo, and you probably have a copy of it, but on
his page, entitlement review, toward the end, he put down, "I
should also point out that this year total entitlement spending
came in below the target so there was no separate Presidential
message on entitlements, no action required by the House." And I
just found that kind of interesting.

Isn't that kind of where we are with entitlements and generally
in the budget process itself?

You and other chairmen come in and say, you know, everything
is going just fine. We have a process for that, you guys, you
shouldn't be radical. It is going to be a three-ring circus. A to Z
won't work. We don't want to do this. That is a gimmick; so is Gep-
hardt a gimmick. Two days versus our 56 hours. You know, why
don't you — I mean, why aren't you guys willing to try something
different?

Because if we give you credit for doing a great job at $4.7 trillion
of debt, continuing adding more in the next 5 years, and we give
you credit for keeping piling up the interest payments every year
with no end in sight in balancing our budget, then I guess we
should say — we should stand and applaud the process.

166

But you know, that is not working; and maybe you are an excep-
tion, and vour committee, and you are doing a good job, but I don't
think we have done a good job as Members of Congress, or you and
your committee or anybody else.

Mr. Durbin. Mr. Zeliff, you may have missed the earlier testi-
mony, but the 127 Members that voted against my 10 percent re-
duction in the

Mr. Zeliff. It didn't go far enough.

Mr. Durbin. 120 were cosponsors of your bill. You know, I just
don't buy it.

Mr. Zeliff. The guy you brought in for testimony, he was
shocked when you asked nim if he could deliver food stamps

Mr. Durbin. So you vote against deficit reduction?

Mr. Zeliff. How about closing some of the agricultural offices
that aren't needed in New Hampshire, as far as

Mr. Durbin. As a matter of fact, Secretary Espy and President
Clinton are doing just that.

Mr. Zeliff. Why isn't that part of your bill? Just because we
didn't vote exactly

Mr. Durbin. This is an appropriation bill, remember? We don't
authorize anything.

Mr. Zelwf. I know. But just because we didn't vote for your bill
doesn't mean we don't applaud part of what you are doing.

Mr. Durbin. I would like to hear your applause with a green
light.

Mr. Zeliff. I told you I think that could be very possible next
time.

Mr. Durbin. I am looking forward to it.

Mr. Zeliff. In the meantime, what is wrong with our effort to
cut spending?

Mr. Durbin. Let me just tell you this.

Mr. Zeliff. What is wrong with our 56 hours, including entitle-
ments, to put a special session that was promised back with Bob
Kerrey in the Senate, with Tim Penny back in the House in August
in order to get the economic plan passed? What is wrong with set-
ting a time to take and review the process and cut spending and
eliminate waste?

Mr. Durbin. I think I just told you, but I will repeat it.

Eleven weeks of hearings on our appropriation bill; you know, it
really does take time to sit down and go through these programs.

Mr. Zeliff. So the process is working?

Mr. Durbin. Well, I think it worked on my bill even though you
didn't vote for it.

Mr. Zeliff. So across the board, though, looking at the big pic-
ture, the process is working and all we have to do is be patient
here?

Mr. Durbin. Deficit reduction under the Clinton administration
has worked a lot better than it has in recent memory.

Mr. Zeliff. By raising taxes, we can solve the problem?

Mr. Durbin. You may have disagreed on that, but frankly, it was
interesting to me that the Kasich alternative would have cut even
more in agricultural spending; and one of our colleagues on the Re-
publican side said he couldn't vote for our bill because it cut too
much. That is the kind of duplicity that bothers me.

167

Mr. Zeliff. What I would like to do in proposing this is just ex-
plain to you what we are trying to do with A to Z, because you look
like a guy with an open mind, and I respect your testimony and
what you have done here, and I will close it out with this.

A to Z is a commitment to a process to have to cut spending, to
have a special session, to put everything on the table, including en-
titlements, to do 56 hours of debate, to try to come up — Penny/Ka-
sich was what, $90 to $95 million, we will try to do maybe $100
million, to have everybody involved in the process, to kind of talk
the talk and walk the walk and be held accountable.

We want to cut it in a responsible way. We think we can do it
in a responsible way. It is a new idea, but I don't think that the
old ideas are working that well and I think that all of us, you and
I together, need to look to what can we do better, what can we do
different to achieve the goals that really don't seem to be out there
for us. They seem to be eluding us, and that is ray point.

Mr. Durbin. I am open to new ideas, but I don t think a C-SPAN
telethon on deficit reduction is an answer to the deliberative proc-
ess.

Mr. Zeliff. Maybe — if you can't explain it in front of people,
maybe you shouldn't do it.

Mr. Durbin. If you can't explain a vote on your part that actually
cut spending by saying that it didn't cut enough, that is little
tough, too.

Mr. Zeliff. I think if you were really honest about it, and we
will leave it at this — the Agricultural Department is a huge area
where we can do massive cuts; it is an area where we should have
gone a lot further in almost every department.

I will leave it at this. When the guy that you asked the question
that is running the food stamp program can't answer you on how
to deliver the program on a much more efficient basis, then we are
in serious trouble and it proves my point that we haven't gone far
enough.

Thank you, Mr. Chairman.

Mr. Conyers. Thank you very much.

John Spratt.

Mr. Spratt. Dick, let me start first with a different topic, let you
relax a bit on agriculture a minute.

You are also chairing a task force on emergency spending, disas-
ter relief and how to pay for it on a current basis; and I think you
were here when we had the testimony earlier, Kasich's testimony
about legislation he is sponsoring that would confine emergency
spending bills to a single emergency or a single disaster.

Having spent some weeks with your task force studying this, do
you think that is a realistic, workable way to keep these bills rel-
atively clean and straight?

Mr. Durbin. I don't want to speak for the task force because we
haven't really reached our conclusion yet, but I think that we
should be very careful as to how we restrict our response to disas-
ters. They come to us fast and furious many times. We are anxious
to make sure that suffering people are taken care of in a hurry.

I would hate to see us build into the process rigidity, inflexibility.
I don't think it makes sense.

168

Mr. Kasich, I did miss the testimony, but I understand from staff
that Mr. Kasich made reference to the fiscal year 1994 emergency
supplemental appropriation, noted the fact that there were not only
several disasters included — L.A. earthquake, Somalia, Midwest
floods and Loma Prieta — but then he went on to point out that
there was some billion dollars in supplemental funds in that for the
Veterans Administration, NASA and other things. I don't know
that he made the point that there was also $3.2 billion in rescis-
sions in the same bill.

So although it was all characterized as emergency spending, the
natural disaster part of it was treated differently than these other
areas.

Now, I would agree that we or the Senate can go far afield in
the name of emergency or disaster, but I would hate to see us tie
our hands in terms of responding to real disasters. At the time
when the Midwest was inundated with floods, ironically your part
of the country was going through a terrible drought.

Mr. Spratt. I win give you another example because hurricanes
normally come in late August, early September to our part of the
country, the eastern seaboard and Florida.

When Hugo hit Charleston, it came in with $4 to $5 billion of
damage that was done; and it was right upon the close of the fiscal
year. We had not adopted the appropriation bills at that point.

We had a continuing resolution, and FEMA had $35 million in
unused budget authority to cover bills that were about to be thrust
upon it from the disaster in the wake of Hugo. And that has made
me, in light of the fact we came up with $4 billion quickly, sent
to Hollings' office, then the Senate; it was tacked on the CR, and
it went through and it was there. It made me feel morally obliged
to vote for these disaster relief bills for other sections of the coun-
try because they did as much by South Carolina.

On the other hand, I rather cringe when I have to vote for them.
There are extraneous things that have been tacked onto them.
What if we just kept them clean and limited it to natural disasters?

Mr. Durbin. I don't think that is unreasonable. I don't think that
is unreasonable, but I would like to give us some latitude because
I was troubled when the Midwest flood disaster program came
around. After spending 10 or 11 years here as you have, voting
time after time for disaster assistance all across the United States,
when it finally hit in my back yard, we got ourselves involved in
days of procedural debate over whether we were going to help these
people who were literally losing their homes and businesses and
farms. That is a little hard for me to take and a little hard to ex-
plain.

It was in my backyard. It could be in anybody's backyard tomor-
row. I don't want to see us tied up into some procedural situation
where it makes it more difficult to respond quickly.

I also think we ought to keep this in mind. We may be, unfortu-
nately, reaching a point where this isn't this magnanimous — there
isn't the magnanimity that we need among Members dealing with
others' disasters. I hope we haven't reached that level of cynicism
around here. But if you put natural disasters seriatim, bill by bill,
there could be a time when you are not going to pass every single
one of them for whatever given reason it might be.

169

I will use an example. We are arguing in our disaster task force
as to whether a fire is a natural disaster. The L.A. riots, some say,
should not have been treated as a natural disaster. If lightning had
started the fire instead of an arsonist, the end result for the person
who lost their home or business is the same. It is a disaster.

If we are going to get into some political argument as to what
is really a disaster, I think that is really unfortunate. I would like
to stick to natural disasters. I have no problem putting them to-
gether in a bill, perhaps taking other emergency spending out.

Mr. Spratt. But in the interest of expedition, you think they
should be lumped together?

Mr. Durbin. Absolutely. Absolutely. We have got to be able to
move and move quickly. You just can't sit and explain to people
who are homeless, worried about where their next meal is coming
forward, that Congress is involved in a very important procedural
debate.

Mr. Spratt. Let me ask you about baselining. I think you also
heard some of that colloquy testimony.

In marking your bill, the agriculture appropriations bill, is it
your custom to begin with the existing current fiscal year as your
baseline, and measure your increases against that existing dollar
baseline?

Mr. Durbin. Yes, it is our subcommittee.

Mr. Spratt. Do you also measure or have a current services
budget that you use as a frame of reference?

Mr. Durbin. Well, it is a frame of reference, but when we are
dealing with this deficit reduction plan that we are in now, it is
somewhat irrelevant. I mean, we really — we are cutting 90 dif-
ferent programs in my appropriation bill; 70 were cut from last
year, 10 remain the same and the remainder were increased. So we
naven't had the luxury of even considering a lot of increases in pro-
grams.

Mr. Spratt. When you report it, don't you have the current fiscal
year baseline?

Mr. Durbin. Yes.

Mr. Spratt. And the next fiscal year increase?

Mr. Durbin. Current fiscal year baseline and the administra-
tion's request. Those are two things we operate off of.

Mr. Spratt. So what we are talking about here is really

Mr. Durbin. Irrelevant.

Mr. Spratt. Irrelevant because it is already done?

Mr. Durbin. Absolutely.

Mr. Spratt. I mean, it is relevant, but it is already done in a
form that is sufficient for everybody.

Mr. Durbin. That is, going back to Mr. Whitten, we are dealing
with facts here. We have got a limited amount of money and a defi-
cit reduction plan that is fairly specific.

Mr. Spratt. As to entitlement cuts, I think I have presided over
your bill 3 years in a row now, and it is always interesting to me
what would be the consequence if someone wanted to cut that dol-
lar number in your bill, which is the appropriated lump sum money
for all the entitlement programs. Even though we don't actually re-
enact those entitlement programs as a formality, your bill contains

170

that sum of money to continue to fund all those underlying direct
spending programs.

Mr. Durbin. Well, I hope I am not misstating this, but I think,
because the authority over the entitlement programs is in the au-
thorizing committee, that even a cut at the mandatory level would
not generate any kind of savings.

Mr. Spratt. That is my understanding, too. It wouldn't have any
impact. You still have the underlying

Mr. Durbin. As an example, Commodity Credit Corporation,
which has moved from $25 billion in 1 year to $15 billion in an-
other year, really has wild fluctuations because we can't predict the
weather or prices. That is really the province of the farm bill and
the As Committee, and they have got to sit down, if they are going
to make — if we are going to have any savings in that, and make
that in the way they construct the farm bill or through reconcili-
ation.

Mr. Spratt. Let me ask you this. You are talking about your dis-
cretionary money gets squeezed every year. Partly that is because
defense and agriculture are the two programs that are losers in the
allocation process money; we have got a flat sum of money for dis-
cretionary spending, and beneath that cap there are certain func-
tions that will actually suffer losses over the next 3 to 4 fiscal
years.

Do you think in this context it is realistic for us to ignore entitle-
ments every year? I know there is a 5-year authorization bill for
the farm program, but what happens is we end up amply funding
deficiency payments, price supports, but squeezing the thing that
underlies it all, and that is agriculture research. Is that realistic?

Is that good budget policy, or should we be looking on a more
periodic basis at entitlements along with — you have got an $80 bil-
lion—$70 billion— $80 billion program bill, and $67 billion of it is
beyond the appropriation process every year. As a consequence, to
meet your totals, we are squeezing that $13 every year.

Mr. Durbin. Absolutely.

Mr. Spratt. Is that good budgeting?

Mr. Durbin. No. I think really we should be opening up these
entitlement programs. We nominally do that through the reconcili-
ation process, did it last year as part of this, but I think it is appro-
priate for us, as we have discussed earlier in food stamps or wnat-
ever the program might be, to take a look at it.

But how do you get to that, Mr. Spratt, when you are dealing
with a Congress which comes in with such an overwhelming vote
to exempt the Veterans Administration? I mean, many of the big-
gest deficit hawks couldn't get up there fast enough to vote yes to
exempt the Veterans Administration. Why? We love them. These
are men and women who served our country and sacrificed for us,
and we don't want to go home and explain to them how we might
be cutting the Veterans Administration and hospitals.

It is painful. It hurts. It is an entitlement. We are dealing with
entitlements here. But that is the dilemma we face.

I voted no on that. I guess I will have to explain that to my vets
group, but I didn't see how we could sit here and basically exclude
one section of spending and say that they were beyond the pale
when it came to deficit reduction. That, to me, I think reflects why

171

some of these things become difficult, whether it is Social Security,
Medicare, Medicaid, veterans programs or foreign programs.

Mr. Spratt. But getting to the point, though, do you not think
that in light of the squeeze on discretionary, we ought to have an
annual look at entitlements instead of a 5-year look at entitle-
ments?

Mr. Durbin. I don't know if you would want every program to
come up every year, but I think as you suggested, some sort of reg-
ular schedule where those programs would come up for review and
change would be appropriate.

Mr. Spratt. And better, that it come in some sort of orderly con-
text like the consideration of your bill than a special ad hoc proce-
dure like A to Z?

Mr. Durbin. I agree, and that is why I responded to Mr. Zeliff
about the so-called Gephardt or Orton suggestion.

I am not opposed to looking at entitlements, but doing this thing
in a breakneck fashion and let's get it done in 56 hours and move
on, that isn't an orderly process. That will only lead to embarrass-
ment as we get down the line and say we did something in haste.
We are now paying for it; we have to go back and try to repair the
damage.

If this truly is a deliberative body, let us take the time to delib-
erate and do it right.

Mr. Spratt. Thank you very much for excellent testimony.

Mr. Conyers. I concur, and. we are in your debt, Richard Durbin.
Thank you very much.

Mr. Conyers. I am delighted to call our colleague from Utah,
Representative Bill Orton; and from Georgia, Representative Na-
than Deal to give testimony at this time. They played a major role
in the discussion around budget reform.

We have your prepared testimony, and we will include it in the
record in its entirety. Bill, why don't you begin?

STATEMENT OF HON. BILL ORTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF UTAH

Mr. Orton. Thank you very much, Mr. Chairman. I really do ap-
preciate the efforts and patience and ability of the members of this
subcommittee to sit through this length of a hearing process on
this issue.

I think we may be biting off a little more than we can chew in
one hearing by looking at all of the process reform proposals — the
lockbox issue, the elimination of baseline budgeting, the emergency
spending. I mean, these are all very complex issues, which I recog-
nize we are asking the committee to look at a great deal in a very
short period of time.

You do have a copy of my prepared statement, which I will not
read to you. I will save you from that.

I alSo — and I hear bells ringing so let me, in a very short period
of time, try to give you a basic overview.

I have given to you also a copy of a proposed piece of legislation
filed today as a bill with an overview of it that is meant to be con-
sidered as an alternative lockbox concept.

Mr. Conyers. What is the number?

172

Mr. Orton. It hasn't received a number, because we just filed it
today and I don't know the number of the bill, but I have given you
a copy of it, so it is here. You can review it.

Let me just very, very briefly tell you that the problem from
where I see it is that we, as a deliberative body, tend to move from
year to year without really deliberating on those tough policy is-
sues, without really focusing on where we are setting priorities,
without really raising a public policy debate about the priorities of
the Nation and where we are going to get the revenue and where
we are going to spend it. And so we see a great deal of frustration
among the Members in this body, among the people in our country,
because every year we borrow more money than we bring in.

We borrow, we spend, we are never able to explain to the people
why we need more taxes, if we need more taxes. The people won't
support it. And so we say, OK, we are not going to charge you
taxes, we will give you something for nothing. We will continue all
the entitlement programs, we will continue all of this spending and
continue to deficit spend.

I think we all are realizing that will not work forever into the
future, so the real question is, when are we going to establish some
mechanism of debating public policy and establishing priorities?
We attempted to do that in the 1990 budget resolution by setting
spending caps. It was a very small step, only on discretionary
spending, but it is working on discretionary spending.

Look at what is happening. We are forced to actually look at pri-
orities. Now, there is a problem with this because still what we are
doing is we start out at the very beginning and we set a cap. That
is a fairly arbitrary cap based on some assumptions, assumptions
of what went on last year, assumptions of what we think is going
to happen in the next 5 years.

So we set those assumptions at the beginning of the Congress.
We then vote on a cap on total spending. We then go into the ap-
propriation process with 602(b) allocations and we tell the Appro-
priations Committee, now you decide how to divide up this pie.
This is the total pie, you divide it up.

And then we come in, if we don't like how that pie was divided,
and we say, no, let's not spend it here, let's spend it over there. We
have votes, we have policy debate, we vote to cut programs, but in
fact, it doesn't really reduce spending. It doesn't snrink the size of
the pie. And that is the frustration that gives rise to the A to Z
kind of approach saying, when you propose a cut, when you get a
majority of the people in the body to cut it, let's cut spending.

Now, what we are looking at, with the lockbox concept, is essen-
tially saying that when you cut spending in an appropriation bill,
that lowers the budget cap. That would be very effective in lower-
ing spending. I am a cosponsor of those proposals; I support them;
I think we can do it through the appropriations process.

But as we have looked at that, there has been a great deal of op-
position saying, wait, you are going to create a moving target. We
have got to establish what the level is and so forth.

Then why not do it in the budget process? If we can't do it in
the appropriation process, let's back up one step. Let's debate the
policies, debate where we are going to spend and where we are not
going to spend in the budget process itself.

173

So my proposal very simply says, in the budget that we debate,
in the budget resolution, we will start with the President's pro-
posal. The administration sends a budget. It is a line-item budget.
We start with that. We will then in the Budget Committee set a —
through the budget resolution, we will set caps, and we will send
that to the full House with specific specification where it differs
from the President's proposal. At that point, we will say to the
body, now you debate this.

If the body chooses, with a majority of the full House to say,
these assumptions that are the basis of our spending caps and our
budget are incorrect, we don't want to assume that we are going
to spend $14 billion on supercollider or $30 billion on the space sta-
tion or whatever, we think that we ought not to assume that
money will be spent. Therefore, we will lower the cap to begin with.

So if you focus the debate on priorities, focus the debate on func-
tions, true, the budget will not itself set the exact items to be ap-
propriated. We will set the caps, however, and in the discussion of
where the caps ought to be, by looking to begin with at the Presi-
dent's budget, moving then to the — the specifics that the floor says
ought to be the priorities, we will set a cap.

We will have to agree in the resolution with the Senate. That
process isn't changed.

We will come up with a budget resolution. The budget resolution
will set a cap. That cap will be given to the appropriators who will
then appropriate within that cap. If they believe that the whole
House made the wrong decision, if they believe that the whole
House didn't really know what they were talking about when they
voted to cut this particular provision out of the budget, they can
fund it anyway, and we can come back and vote again and say, no,
we don't think that money ought to be spent in this area, but it
doesn't change the cap at that point in time.

So very, very simply stated, what I am attempting to do is say,
look at the concept or the lockbox, which is proposeclin the appro-
priation process under the A-to-Z bill, under the Brewster/Schumer,
et al., bill, under the Stenholm bill; all of that deals with the appro-
priation process.

I am saying you can do essentially the same thing in the budget
process without doing great damage to our current budget and ap-
propriation process, but you can get the whole body involved in
helping to set policy and give recommendations to the appropri-
ators so they know tne mood of the whole Congress.

Now, the one last point, and then

Mr. Conyers. Well

Mr. Orton. I can do it in 10 seconds.

Mr. Conyers. Well, we want you to come back anyway, and we
know that Mr. Deal will rejoin us. So let's get the vote out of the
way and then come back, because there will be some questions for
you.

It is a very unique plan that you put in terms of going to the
budget process instead of the appropriation process.

We will stand in recess.

[Recess taken.]

Mr. Conyers. The subcommittee will come to order. We have our
colleague from Georgia with us, and we would like him to begin the

174

discussion on panel No. 5, and we will pick up with Representative
Orton when he gets here.

Welcome to the subcommittee. Thank you for your patience, and
we will be delighted to hear from you at this time.

STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA

Mr. Deal. Thank you, Mr. Chairman. I want to express my ap-
preciation to you and to your committee, first of all for holding
these hearings, and to tell you that I have been impressed with
your patience and with your generous attitude in undertaking this
particular hearing.

I have listened, as you have, with interest to Members who are
senior to me in this body, and I will depart from the prepared com-
ments I have given to tne committee to share with you a perspec-
tive that I bring with me; and I do that from who I am.

I am a freshman and I am a Democrat, and I would like to com-
ment from those two perspectives as it relates to process reform in
this body.

First of all, as a Democrat, I recognize that the 40 years or so
of control of this House that our party has maintained does not
allow us the luxury of being able to say that we are not in some
way responsible for the deficit situation that we are faced with. We
cannot avoid or evade a responsibility.

I listened with great interest to committee chairmen, especially
the last subcommittee chairman, Mr. Durbin, and I sympathize
with them. I understand the difficulty of their jobs, but I would say
that as a Democrat and as one who advocates in this instance the
consideration of the common cents proposals, that we should not
question each other's party loyalty, nor should we question the mo-
tives of anyone who simply believes, as I do, that to level off with
deficits of $200 billion annually is simply not sufficient, that we
can do better than that and that we should do better than that;
and that as Democrats in control of this body, it is our responsibil-
ity to take the lead in achieving that end.

Second, as I said, I come as a freshman. I do not come out of na-
ivete. I come from a background of years of service in the State leg-
islature, and I have wrestled with the same problems that I lis-
tened to these committee chairmen talk about. I wrestled with
them as the presiding officer of a State senate when our State con-
stitution mandated that we had to have a balanced budget. And
when we had a budgetary shortfall, time to come in and do the un-
thinkable; that is, to deappropriate sums that you had promised to
people that they were going to receive in their programs.

So I do that also from a background as a trial lawyer, and I un-
derstand, as a trial lawyer, difficult situations and I understand
difficult procedures; and I understand that in this body we have
difficult procedures.

But as a trial lawyer, I also know that when you come to the
jury, you do away with those complicated procedures because your
point is to convince them that your side is correct; and I think we
now have come to that place in this body where we need to take
away some of the mystique and some of the mystery and some of
the complicated rules that we follow, which the public does not un-

175

derstand, especially when those rules do not translate into what
they perceive we should be doing.

I realize, too, that the committee process shields us from difficult
decisions and many times we privately are perhaps thankful that
we have been shielded from having to make those difficult deci-
sions; but I am convinced that we have come to a point in time of
this body where we cannot be shielded from hard decisions any
longer.

It is not right for us to expect committees to do that. We should
not ask them to do that. We should be willing to come to grips with
them.

In the part of the process that you have talked about, I share the
concern that my colleague, Mr. Orton, shares. My primary concern
is not so much with the discretionary spending, because I think we
have done a much better job in that area than we have in the area
of entitlements. I believe that our primary focus in process reform
should not only be on those things that will address themselves to
discretionary spending, but in particular, to the very difficult and
troublesome area of how do we bring entitlement spending under
control and how do we bring it down to realistic levels. Those are
the difficult votes, that if we actually confront them, are going to
be hard for either party to actually make those hard decisions.

So I share with you my perspective, and I do say that I am one
who is committed to following through with the processes that we
have begun, because I think it is for the good of the country that
we do that. It is not a partisan issue. It is something that all of
us as Americans and especially as elected representatives have to
come to grips with; and I commend and applaud your committee
for undertaking these hearings, and look forward to, hopefully,
some progressive action coming forward from you as you consider
these bills.

Mr. Conyers. Well, thank you very much, Mr. Nathan Deal. It
is a pleasure to hear from you and to know your background. That
puts you in a unique position to help us thresh this out.

[The prepared statement of Mr. Deal follows:]

176

TESTIMONY OF CONGRESSMAN NATHAN DEAL

SUBCOMMITTEE ON LEGISLATION AND NATION SECURITY

HOUSE COMMITTEE ON GOVERNMENT OPERATIONS

HEARING ON BUDGET PROCESS REFORM
JUNE 29,1994

I want to thank you, Mr. Chairman and members of the
Committee for scheduling this hearing on budget process
reform and for providing me with this opportunity to join this
distinguished panel to testify on the important subject of
budget process reform.

As every member of this committee knows, federal
deficit spending has mushroomed over the past twenty years
creating what may very well be the most dangerous threat to
the citizens of this country: a national debt that we cannot
afford. Our national debt now stands at $4.4 trillion or
$17,413 for every man, woman and child in the United
States. Interest payments on our national debt consumes 14
cents of every dollar and saps us of our ability to invest in the
human and physical resources needed to compete in a global
economy. In 1993 we paid $292 billion in interest on the

177

national debt. That is more than we spent on defense and
almost as much as we paid for social security. Although it
appears that we have reduced deficit spending to some $200
Billion annually, the Congressional Budget Office predicted
that despite the 1S93 budget package, the annual federal
deficit will grow and reach some $365 billion in 2004.

Just as our national debt has increased every year, our
ability to control spending has diminished. We are currently
experiencing unprecedented growth in entitlement programs.
In 1970, mandatory spending constituted 36% of federal
spending. By 1980, that percentage had grown to 53% and
by 1 995 we will spend some 64% of all federal dollars on
entitlement and interest on the debt.

The long term effect of continued deficit spending is
catastrophe. University of Pennsylvania economist Alan
Auerbach, in an analysis released in April of 1 994, warns that
net lifetime tax for future generations of Americans would
reach 82% or higher unless substantial budget cuts are made

178

in the next ten years. From the great empires of ancient
Egypt and Rome to the birth of our Republic, history teaches
that government falters when excessive taxes are needed to
support its spending.

Mr. Chairman, that is why I believe that we must take
swift and certain action to reign in deficit spending. The
budget process reforms that you have under consideration
here today are necessary to wean a government addicted to
deficit spending from the yoke of dependency.

The so called "Lock Box" would permit Members of
Congress to dedicate all or some of the savings from floor
amendment, to an appropriations bill to deficit reduction. The
measure also provides flexibility by permitting the author of
the amendment to reserve the savings for future needs. I
prefer the Stenholm version of this mechanism over the one
proposed by Mr. Schumer because it will secure cuts in the
out years.

179

I also support reforming "Baseline Budgeting". Currently,
cuts in spending are measured against a baseline which
includes an automatic adjustment for inflation. Under the
current system, efforts to simply slow the rate of growth in
spending are shown as a cuts when, in reality, the effect is to
increase spending over prior years. By tying baseline levels to
the actual level of spending in prior years, we promote honest
and realistic assessments of spending proposals.

Finally, we must find a way to control what is called
"emergency" spending. Because spending which is
designated as "emergency" is exempt from the discretionary
spending caps. Congress has stretched the term beyond
recognition so that it can escape the caps and fund items
which are clearly non-emergency. The Common Cents Plan
would tighten the definition of "emergency" and strip out non-
emergency spending. There is perhaps no more important role
for the federal government than to respond to a national
emergency. We know that natural disasters will occur, yet

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we have no fund set aside from regular appropriations to pay
for these occurrences. I favor creation of such a fund.

Mr. Chairman, I believe this debate is about preserving
our Republic. The greatest inherent danger in allowing free
people to govern themselves is that the euphoria of liberty will
produce an addiction that denies the necessity of self-
discipline. Could we achieve fiscal responsibility by just
saying "no"? Of course! But telling an addict to just say no
will not work. Congress is addicted to deficit spending and it
needs the discipline imposed by these and other budget
process reforms. We have sold our own possessions and
mortgaged our children's inheritance to support the habit.
Anarchy is the twin brother of irresponsible democracy. The
mystery of the American drama on the stage of history is -
When will the twins swap places?

181

Mr. Conyers. Let me turn back to Mr. Orton for a concluding
comment that he was about to make.

Mr. Orton. Thank you, Mr. Chairman. It was very much along
the lines of what Mr. Deal has just indicated, that I recognize that
the problem in the Federal budget currently is not in discretionary
spending. We have, in fact, frozen it over the next 5 years. We have
processes where we can bring it down.

That doesn't mean that we have solved all of the problems. That
doesn't mean that we have cut all of the fat and everything out of
discretionary spending that we might want to do.

The broader problem is, in fact, in mandatory spending, which
we have very little opportunity to deal with. To suggest that, in
fact, we have a regular opportunity to deal with the policy issues
in entitlement spending through a reconciliation bill about once
every 5 years, I think does not reflect reality.

In that reconciliation bill, we don't discuss policy. We don't talk —
I looked at the CBO book on various options of cutting the deficit,
and you look at entitlement spending. If you are going to cut the
deficit, you are going to have to deal with entitlements.

If you deal with entitlements, there are essentially four or five
major issues that you are going to have to touch on. These are pub-
lic policy issues. We have to decide whether a retirement age of 65
years old is within the scope of reality in our current society. What
is the average life expectancy? How long are people productive?

We haven't had the public policy debate on retirement age. We
need to deal with cost-of-living adjustments. Are we going to con-
tinue providing cost-of-living adjustments? Should they be means
tested? Should you provide them to everyone? How do we calculate
the formula of cost-of-living adjustments? What about means test-
ing?

Does everyone in the country — are they entitled to every pro-
gram? Are the multimillionaires entitled to free health care by the
U.S. Government when we can't afford to pay for immunization for
children?

I mean, these issues we have not addressed. We don't address
them in any reconciliation bill. We don't address them in any form
in this body and I think, Mr. Chairman, that is part of the problem
that we have when we go out to the public and say to the public,
we are doing something about deficit spending, when we say to the
public, we are making real reform, when we say to the public, gee,
this is so tough, we are going to have to raise taxes in order to help
pay for deficit reduction. The public doesn't believe it because the
public doesn't even understand what the priorities of this Nation
are.

I believe if we open up the budget process to public debate on the
floor of the House, if we start talking about priority issues from
day one, where we are going to raise the money and where we are
going to spend it, that will force this body to consider alternatives.
It will force us to consider priorities. It will force us to consider
sources of revenue, and it will force the public to recognize where
we are spending our money; and if they are not willing to let go
of entitlement programs, they are going to have to pay more taxes.

182

Those are the points that I think can be positive, beneficial
points through this kind of a debate; and that is why I have pro-
posed through the leadership to do essentially three things.

To make sure that we have an open process on discretionary
spending through open rules on appropriation bills — and A to Z is
going on right now on the floor of the House; we are debating those
cuts — but also to expand that to an opportunity to deal with enti-
tlements, as well as changing the process so that this isn't a one-
time, 1-week event, but really a change of the process so we can
set these priorities, allocate the very scarce resources we have
among those priorities within a balanced budget every year.

That is my ultimate goal, and again, I thank the chairman very
much for your patience and participation in this and allowing us
to present our ideas before you.

[The prepared statement of Mr. Orton follows:]

183

STATEMENT OP REP. BILL ORTON

Legislation and National Security Subcommittee

[Government Operations Committee]

June 29, 1994

I would like to thank Chairman Conyers for holding this
important hearing today. I would also like to congratulate the
many other members testifying today on budget process reforms.

First, I would like to address the question of why we need
to reform our budget process I believe the issues raised in
this hearing are an important part of the answer to the basic
question asked by so many taxpayers: Why is it that actually
reducing the deficit is so difficult when so many members of
Congress seem dedicated to deficit reduction?

After careful review of the budget process and participation
on the Budget Committee, I have come to the conclusion that our
current budget procedures and rules are an impediment to
effective deficit reduction. Given the high level of member
participation in this hearing, I believe that many of my
colleagues agree with this assessment .

Almost two years ago, I introduced HR 1138, a comprehensive
bill to reform our budget process. This bill included provisions
to provide for a cooperative effort between Congress and the
President to reduce the deficit, expedited rescission, sunset
authority, performance -based budgeting, elimination of baseline
budgeting, biennial budgeting, and capital budgeting. In
drafting this legislation, I drew on the hard work of many before
me who have also cared about the budget process .

184

I am pleased to see that Congress has taken action on many
of these provisions. Last year, we passed performance -based
budgeting. Within the next month, we expect to bring legislation
to the floor of the House to provide for enhanced rescission and
to provide for entitlement controls.

Today, we are considering a number of important measures
dealing with lockbox, emergency spending, and baseline budgeting.
I would like to commend the hard work of the individuals
testifying today who have developed solid legislative proposals,
most of which I have co-sponsored.

In particular, I am a co-sponsor of HR 4434, the "Common
Cents Budget Reform Act," introduced by Rep. Stenholm. I believe
that Title 1 of this bill, which would eliminate baseline
budgeting, is an important step towards providing for greater
scrutiny of spending growth.

I am also supportive of a number of changes in the area of
emergency spending. I am an original co- sponsor of HR 4189,
introduced by Rep. Castle, which establishes an annual reserve
fund to pay for emergencies. I also support Title 4 of HR 4434,
which would limit each emergency spending bill to one item.

However, I believe that the most important change we can
make is to implement some form of lockbox provision. I commend
the efforts of Rep. Charles Schumer (D-NY) , Rep. Bill Brewster
(D-OK) , and many others who crafted HR 4057, the "Deficit
Reduction Lockbox Act of 1994." I also commend the work of
Charlie Stenholm in designing a slightly different lockbox

185

approach, through Title 2 of HR 4434. I believe it is important
that members have a meaningful opportunity on the floor of the
House to offer specific amendments to cut spending, and equally
important, to reduce the discretionary caps whenever such
amendments succeed.

At the same time, I understand the deep concerns held by
many on the Appropriations Committee about these approaches,
including the concern that we will have a continuously moving
target with respect to the discretionary caps.

Therefore, I have recently developed and introduced
legislation intended to achieve the goals of lockbox provisions,
but in a way that is less intrusive into the appropriations
process. I wanted to offer this bill as an alternative to the
other lockbox proposals, in an effort to stimulate debate on the
choices we have on this issue.

Let me explain how this bill would work. Under my "Budget
Responsibility Accountability Act, " the lockbox concept would be
implemented through the Concurrent Budget Resolution process,
instead of through the appropriations process. First, it is
envisioned that whenever the Concurrent Budget Resolution is
brought the floor of the House, it would be brought under more of
an open rule than is currently the case. Specifically, my bill
provides a sense of the Congress that amendments to cut or raise
spending in functional categories should be allowed.

This is in contrast to our current practice, where only a
few amendments are typically made in order to the budget

186

resolution -- and only in the nature of a substitute. Enactment
of the Budget Resolution has a critical practical effect under
our current budget process, through the establishment of a
binding target for total discretionary spending. By opening up
floor debate to greater consideration of amendments, including
narrower amendments to functional categories, we are providing
for a more meaningful debate and consideration of the
discretionary spending caps, as well as focusing priorities of
the whole House for the appropriators to consider.

The second critical feature of this bill is a requirement
that whenever such amendments are offered on the floor, the
author must identify where the specific cuts or increases are to
be made in programs, projects, or activities. These specifics
would not be part of an amendment; however, there is a
requirement that specific line- item recommendations be inserted
into the Congressional Record at least a day in advance.

Thus, with regard to specific programs or projects, the vote
on any amendment is non-binding. However, the point of this
provision is to force authors of amendments to cut spending to
itemize how they would achieve the total levels of deficit
reduction, or where they would shift priorities and increase
spending. In other words, we would end the practice of allowing
"unspecified cuts." This makes for a more rational debate and
consideration of the spending caps. It also sends an important
message to the appropriators about the level of support, or lack
of it, for specific programs.

187

Finally, my bill requires the Budget Committees, when
reporting the Budget Resolution out of committee, to show in the
committee report where the committee deviates from the
President's budget. This change is necessitated by my other
provision requiring authors of amendments to itemize specific
programmatic changes. However, it is also good policy to require
a presentation of how the broad functional categories in the
Budget Resolution correspond with the President's budget, which
is presented on an item by item basis.

Overall, the effect of my bill is to provide for a more
meaningful consideration of spending reductions (or increases) in
establishing the discretionary spending caps. I believe it
accomplishes the goals of lockbox, but in a different manner.

However, I would like to reiterate my very strong support
for prompt consideration and passage of a meaningful lockbox
bill, in whatever form. Discretionary caps have been one of the
most successful tools we have had to get spending under control.
Lockbox legislation would strengthen and improve their use.

Mr. Chairman, again, I appreciate the opportunity to testify
today, and would welcome questions from you and other members of
the committee.

188

Mr. Conyers. Well, I thank you, Mr. Orton. We have another bill
that will be out tomorrow with your number on it, which we will
add to the half-dozen measures tnat are being generally examined.
We will shortly begin to give them more focused attention, and we
would hope that you could follow along with this committee as we
begin to try to put in some priority the many provisions.

Some of the bills have many things in common. There was a
lockbox provision, which is similar to a cut is a cut in a version in
another bill. We have baseline reform in more than one bill. We
have adjustment of caps and expedited rescission going on in sev-
eral others; and we deal with the emergency spending concept, so
that there are several points of commonality between all these
bills.

Each one, of course, is different in that it is configured differently
but these discussions are going to be helpful in what is in perhaps,
the widest kind of examination of how to reform budget process
that has been held in the Congress in a considerable period of time.

So we appreciate both you and Nathan Deal joining us to make
clear your point of view. I invite you to follow our process along,
and maybe later on down the road when we have other
noncongressional witnesses, you may choose to weigh in again. If
you do, you are welcome to come back.

Mr. Orton. Thank you.

Mr. Conyers. I would like to now recognize Al McCandless.

Mr. McCandless. Thank you, Mr. Chairman. I can't help but go
along with what it is that you have presented us here with a Budg-
et Resolution Accountability Act. Certainly these are all laudable
goals, and I don't know of anyone who is thinking correctly who
wouldn't be in agreement with you. And to use the famous phrase
in Washington, now, having said that, the implementation of this
in the real political arena that you and I and Mr. Deal and the rest
of us live in becomes a Herculean task.

The Rules Committee would take a dim view of some of this, and
so be it, but I can't help but remember that the famous phrase —
I haven't heard it recently, but I think it is still out there, the
President's budget — ah, it is dead on arrival; and you have used
that pretty much as one of the cornerstones and building blocks of
your proposal.

Why the President's budget? Why not something else?

Mr. Orton. Well, the Budget Act starts with requiring the Presi-
dent to submit a budget request to the Congress within a specified
period of time at the ^beginning of Congress. We then are to act. I
think the executive branch spends the money. It is the executive
branch that executes the budget, and therefore — and we have re-
quired them to submit to us their request. I think that that is the
logical place that we then should start.

Now, if we believe that the President's budget is in error in cer-
tain areas, too low or too high, we can make adjustments, but I
think we then owe it to the executive branch and the public to say
where we differ with the request of the executive.

Also, in order to provide the specificity and the opportunity for
a Member to get involved on the floor of the House with a specific
reduction, you have to frame a point of reference. So if you don't
start with the President's budget, as changed by the Budget Com-

189

mittee resolution which comes to the floor, you have nothing of any
specificity in line items or functions from which to cut.

Mr. McCandless. This is my point. The budget document is
rather Herculean and thick in nature with line items on top of line
items and so forth; and so, going back to my former statement, how
do we implement that into a system on the floor of the House and
complete a budget process within a couple of years?

Mr. Orton. Well, it was done in the 1970's.

Mr. McCandless. This was prior to the Budget Act?

Mr. Orton. No, subsequent to the 1974 Budget Act.

There have been, at prior times, previous to the current accepted
procedure where we have a budget and then an alternative budg-
et— and those are the choices of the people on the floor of the
House — there actually was discussion and debate on line-item is-
sues that took a few weeks to get through the budget process, but
they have actually had that in process. Tney decided that that took
a lot of time and really had no effect, and it didn't have any effect
at the time because there were no budget caps; and therefore we
could spend a lot of time on the floor of the House debating this
issue or that issue, and it never made any difference because there
weren't any budget caps and the appropriators just appropriated
what they wanted to appropriate.

Mr. McCandless. You don't feel that the entre into the Budget
Committee during the budget deliberation process on the part of
that committee has any meaning then? You feel it should be done
on the floor of the House?

Mr. Orton. No, I think it does have meaning, and in fact, I think
we produce a very good document. I am very proud of the budgets
that we have put out of the Budget Committee over the last couple
of years.

I have been on the Budget Committee, and I think that it does
serve a process; but what I am saying is, if the President ignores
broad public opinion and policy issues, if the Budget Committee ig-
nores broad public concerns and policy issues and says, no, we are
going to set this as a priority, a priority which clearly is not sup-
ported by the public policy of this country, and says, we are going
to start in our budget with an assumption that we will fund this,
then I think the full House has a right to speak out on that issue
and say, no, we disagree with these basic assumptions, we disagree
with that program being put in this budget of the United States.

So, therefore, the typical example I would raise is the
superconducting supercollider. Broad public dismay at the pro-
gram. No one outside of Texas supported it for very long, and we
voted overwhelmingly to cut that out of the budget. Now, most peo-
ple thought that actually would reduce bottom-Tine Federal spend-
ing. It didn't reduce spending a dime because the money is simply
available under the allocations to reallocate somewhere else to
some other spending project.

My point is, if the President says I am going to assume funding
for the superconducting supercollider in my budget and the Budget
Committee says, we are going to assume funding for the
superconducting supercollider in our budget, and the full House
says, that is a bad idea, we don't want to do that, I think the full
House should have an opportunity to raise the issue and debate it

190

and say to the body, we don't want to assume funding for that in
this budget. Therefore, we want to take it out and we want to
lower the spending caps by that amount of money.

And by doing that, the effect within the budget is to lower the
spending cap. You have not eliminated the program because the
budget resolution is neither an authorizing bill nor is it an appro-
priation bill, but it does set the broad cap. It sets the level at which
we can spend overall.

Now, if the Appropriations Committee comes along later and
says, no, the House didn't know what they were doing, we are
going to fund money for the superconducting supercollider anyway,
and then they bring the appropriation bill back to the floor, we can
say again, no, you have ignored our priorities. We don't want to
fund that. We are going to take the money out of that. We took it
out of the budget already, and we have money in the budget for
funding other programs, but they chose to take it from those other
programs and put it into the superconducting supercollider; and so
we can cut it out of that in the appropriations bill without chang-
ing the budget caps.

And so this proposal works by taking it into the budget process,
where I believe it belongs, to allow us, when debating the budget,
to debate broad public policy issues, to set broad priorities.

We are doing it right now with no debate. We are doing it right
now with no focus on the assumptions. We are doing it right now
with no understanding, no public policy discussion, no debate, no
votes.

We just set a cap, and the cap is based upon, to start with, the
assumptions in the President's budget as changed by the Budget
Committee, but it is all done in macroeconomics without looking at
any real data and detail. I am saying, by looking at the real data
and detail, we are likely to get a better product than just by setting
the cap to begin with and then coming along later and saying, we
will debate all the policy issues within that cap and decide where
we are going to spend it, but we are still going to spend this
amount of money. The question is where we are going to spend it.

I think by backing up into the budget process itself, we can lower
the amount of money we spend by debating broad public policy is-
sues and specific programs and whether we want to set those as
priorities; and if we do, then we darn well better also recognize
that we have got to pay for those programs and we had better raise
revenues somewhere to do it. That, I think, is where we get the
real accountability to the public for what it is we are saying are
our priorities.

If we are not willing to raise the money to pay for it, then we
ought not to set it as a priority for spending; but we never get
around to that kind of debate because of the process we currently
have.

Mr. McCandless. Thank you.

Mr. Deal, I didn't catch ail of your testimony. I am sorry, but if
I were to capsulize what it is that you presented to the committee,
you feel that current cuts are not sufficient, that rules, the process
is too complicated and the public can't understand and reform is
necessary. Would that be a fair statement?

191

Mr. Deal. Yes, I think it would. The point I was making is that
even though for our own internal purposes we have complicated
rules that we follow, that they at some point in time had a purpose,
I believe that we have to reexamine those purposes to see if they
are actually accomplishing what we really wanted them to do, and
I think some of these process reforms go to the heart of those and
say, look, we need to simplify the process, we need to be able to
achieve the goals that we had in mind. And although this is the
first time I have heard Mr. Orton's proposition on his new bill, it
certainly has that same kind of common sense approach that I sup-
port.

Mr. McCandless. Thank you. Thank you both.

Thank you, Mr. Chairman.

Mr. Conyers. Mr. ZelifF.

Mr. Zeliff. Thank you, Mr. Chairman. Thank you both for excel-
lent testimony. I certainly support what you are trying to do and
I think you are right on the mark. As a matter of fact, Bill, when
you were talking there, I couldn't help but think you were describ-
ing A to Z; and would like to just ask you, you know, where are
you on A to Z?

You were a cosponsor. Where are you now, and aren't we really
both in support of both propositions, an A-to-Z process that looks
and reviews all programs from A to Z, including entitlements? It
sounds very much like we have the same kind of goal here.

Mr. Orton. I think we do share the same goal, Mr. Zeliff, a goal
of actually reducing overall Federal spending, but doing so through
inclusion of all of the Members of the body in allowing them to par-
ticipate in that debate and decisionmaking process.

I think the basic fundamental principle of A to Z is — and you
being the original sponsor can tell me if I am right or wrong, but
I believe the original purpose is to allow Members to participate
and propose specific cuts.

Mr. Zeliff. That is correct.

Mr. Orton. And if, in fact, the full body agrees with those cuts,
that they actually should reduce spending.

Mr. Zeliff. Right. So it is amazingly simple.

Mr. Orton. Amazingly simple. Now the question and the debate,
the question whether we do it through a discharge petition, wheth-
er we do it through the committee process, how we bring this
about, that is where the debate is.

I have not signed the discharge petition because I am not con-
vinced yet that doing this for 1 week in debating 1994 spending
cuts, when 1994 is almost over — we have 2 to 3 months, if it were
passed today, of spending cuts that we could actually make, and
that is a one-shot deal. I am not convinced that that is the best for-
mula for accomplishing our common goal.

What I am attempting to do is change the process so that, in
fact, we can accomplish the goal over a longer period of time. So
that by changing the budget process itself, by opening up not only
the appropriations process to open rules, but essentially opening up
the budget process to open rules and allowing us to fully partici-
pate, propose priorities, either spending increases or decreases.

I am not suggesting that the only thing you are going to get
through this process is a cut. You may get this body saying we

192

haven't devoted enough resources to this particular problem, and so
what I am simply trying to do is say, how is the best way to accom-
plish the common goal.

If we can get this body to move in taking up these issues on proc-
ess reform and having open debate on appropriations bills and in
opening up the entitlement process some way so that we can iden-
tify programmatic changes and specific reductions in entitlements,
then I believe we accomplish the common goal perhaps even more
successfully than through the discharge petition.

Mr. Zeliff. OK. My suggestion to you would be that we could do
both. We could do the cuts that are in A to Z and we could also
do the process reform as well. And I think they compliment each
other, they don't really compete with each other, and that is why
I say, we are both heading in the same direction.

I know you had indicated

Mr. Orton. Could I just respond to that one point very briefly?

Mr. Zeliff. Sure.

Mr. Orton. I am also a very practical, pragmatic politician, and
I have come to learn in this town over the last 4 years that you
only get what you take. And in all honesty, I don't believe I could
get the leadership to agree to the process reforms, to bring these
things up. In fact, we discharge A to Z. Therefore, I don't know
that we will get both. We might get one or the other, and the ques-
tion is, which will we get, which will be most effective to accom-
plish the common goal. And I am being just very blunt with you,
and I think that your process has, in fact, moved this body forward
toward that common goal, and I think whether we achieve the goal
through my proposal, through Charlie Stenholm's, through some-
thing that is yet to be developed by the committee or through the
discharge petition, if we achieve the goal, then we have all suc-
ceeded.

Mr. Zeliff. I agree, and America wins. I guess I was hoping to
hear you say that, you know, as we have talked before, that you
were hoping to work something out with the leadership that would
be very defining, that you would have a laid-out program in terms
of specifics, that you could agree with, and you were hoping to do
that rather than sign immediately on to the A-to-Z discharge peti-
tion, and if that didn't work you would be there as with your col-
league, Nathan Deal, who is sitting next to you who did join us.

I want to congratulate your leadership, what you have done in
terms of our negotiation with A to Z. You know, it has been tre-
mendous, and, you know, I think we really have a good, strong bi-
partisan effort and we are looking forward, Bill, to your involve-
ment as well.

Mr. ORTON. Well, I think this committee hearing is part of that
process, of getting specific detail of how we are going to reform the
budget process, of how we are going to actually open up the entitle-
ment spending to priority discussions and policy discussions, and
so I think we are accomplishing right now what we are setting out
to accomplish, and therefore at this point in time, I don't see a
need to sign the discharge petition.

If that breaks down and fails and we are unable to move forward
and the discharge petition is the only mechanism, then you have
to consider signing it at that point in time.

193

Mr. Zeliff. Do you have a schedule on your entitlement cuts?

Mr. Orton. What do you mean do I have a schedule?

Mr. Zeliff. That is going to take place

Mr. Orton. Has that been set for a specific date? To my knowl-
edge, it is not yet set on the calendar, but it is my understanding
that we have a commitment to set it on the calendar.

Mr. Zeliff. Well, we wish you luck. Again, Mr. Chairman, I just
want to say I think it is very encouraging to see a bipartisan effort
here with a Member of our class and a Member of the freshman
class on the other side. We are all working in the right direction,
and we will be very happy and pleased to accept you on board on
I think it is number 204. Thank you, Mr. Chairman.

Mr. Conyers. Well, I want to say that if you are trying to bring
order into the budget process, I think the way that you bring it in
is going to be very important. We are in the midst of a calendar
year. There are certain things that have gone by already and that
can't be reclaimed, no matter what one's position might be. So it
seems to me that the better course may be to see how far we can
go within the system in an orderly way, even if it results in work-
ing on the next fiscal year, which is, frankly, on us anyway. I
would also urge the Members to think about that parliamentary
process.

Let me now recognize John Spratt of South Carolina.

Mr. Spratt. I am sorry I missed your testimony, but I under-
stand the concept and I have read your bill. It is a provocative idea.

One of the objections to this approach allowing anybody to attack
specific functions and lower those functions is that usually the
budget resolution is a fairly delicate balance. There is a lot of give
and take and compromise in putting together the final resolution
that will muster a majority on the floor.

Suppose you instead have the alternative of, say, presenting your
own full-up resolution, where you could lower functions, lower the
spending cap, but do it as a complete budget proposal, and that we
had a rule of the House or not a rule of the House or a statutory
provision that any Member who could present a petition signed by
50 of the Members, let's say, show at least that amount of support
for his proposal, they would have to certify that they supposedly in-
tended to vote for it and wanted to see it go to the floor, would
have the right to have his resolution made in order.

Would that be an acceptable alternative to what you have got
here?

Mr. Orton. Well, Mr. Spratt, I think I recognize or understand
what it is you are suggesting. I mean I understand the political im-
petus behind it, which is you can go through a lot of debate and
discussion where people will vote tor an amendment, but are not
going to vote for final passage of a resolution, and if you can vote
for enough amendments and pull enough other people off of final
passage, then you can defeat the whole resolution. So rather than
in honesty trying to perfect the bill, there will be those people pro-
posing amendments trying to destroy the bill. And therefore, by re-
quiring an entire substitute to be submitted, you then pass a bill,
a resolution in total, which has made this specific change.

If it is opened up enough in the process so that you have any
Member being able to bring a substitute to the floor, then, in fact,

194

it might work, although it becomes more complex and more dif-
ficult, because we then are looking at 35 different substitute budg-
ets, and it is very difficult to analyze everything in that budget, be-
cause the budget is four or five volumes thick and you may
change

Mr. Spratt. That is why I was saying you would have to present
a petition to the Rules Committee, the leadership, the Clerk of the
House, somebody that

Mr. Orton. But my point is even the whole House, when consid-
ering that separate budget, is going to have to understand that you
are changing this and this and this and this, and the other func-
tion, and you have 15 different things, and you can't really set any
kind of public policy or priorities on a particular issue. And what
we are trying to get at is allowing the body to speak on particular
policy issues, like the superconducting supercollider, for example,
and saying that we simply ought to pull that out of funding in this
budget. And so I believe that we need to stay with the process I
have recommended, where a Member could propose a specific re-
duction, and that reduction would have to pass the whole body.

I do recognize and have sympathy for your concern that we then
may end up with a bill that you can't get 218 votes for. I think that
is a very real concern, and I recognize it, and we are trying to find
resolution to that that people are comfortable with as well.

Mr. Spratt. Thank you very much.

Mr. Conyers. Thank you, gentlemen, we are in your debt. We
hope you will follow us and feel free to visit as these hearings pro-
ceed.

Mr. Orton. Thank you very much, Mr. Chairman.

Mr. Deal. Thank you, Mr. Chairman.

Mr. Conyers. Thank you, Mr. Orton and Mr. Deal.

I am delighted now to call up the author of the A to Z, Rob An-
drews, and if Bill Zeliff chooses to join you at the witness table as
coauthor of H.R. 3266, we would be very pleased indeed. Thank you
for joining us at this time. There has oeen a great deal of discus-
sion about the idea that you bring in deficit-fixing proposals, and
we are anxious to get your view of how this measure would work
and improve the budget process. Who cares to begin?

Mr. Zeliff. Well, Mr. Chairman, I think what I would like to do
is just have my — ask for unanimous consent to have my entire
statement included in the record and then let my partner over
here, Rob Andrews from New Jersey do the testimony. I think I
have given a fair amount of contribution during the afternoon. So
rather than take your time up

[The prepared statement of Mr. Zeliff follows:]

195

OPENING STATEMENT OF CONGRESSMAN BILL ZELIFF

Government Operations Hearing on A-Z and the Budget Process

29 June 1994

Mr. Chairman,

This subcommittee is today considering several worthwhile budget process reforms.
I support most of the ideas that will be presented, and I strongly believe that this Congress
must enact serious budget process reforms before the year is out.

There are press reports, including the liberal Washington Post, that claim "the
leadership has agreed to allow votes on ... proposals for reforming the budgetary process in
a desperate attempt to block passage of the A to Z Spending Cuts Plan."

I hope we are here today to seriously consider ways to reform our failed budget
process not simply to provide political cover for people who do not want to be accountable.

There is no real connection between budget process reform for the future and A-Z
Spending Cuts now.

The only real way to cut the deficit is to cut spending now. Our nation has a $4.7
trillion national debt. Budget process reforms cannot cure this ill.

You can see from these charts that the debt rises to nearly $6.5 trillion by 1999 with
interest payments of more than a quarter of a trillion dollars.

Budget process reforms are an important part of the prescription for future change,
but we must make sure that they are more than a placebo. We are not here today simply
to provide political cover.

We should not consider votes on the budget process as a substitute for real votes on
real spending cuts.

The purpose of the A to Z Spending Cuts Plan is to permit every Member of this
House to suggest some way to cut spending. Every proposal would have a free and fair
debate. Every proposal would receive an up or down vote.

Perhaps we should also have an A to Z Budget Process Reform Plan. Then every
Member of the House could propose meaningful changes in the budget process.

But we must never lose sight of the fact that the only real way to cause real deficit
reduction is through real votes on real spending cuts.

The best budget reform this House could get is a free and open process that allows
every Member of the United States House of Representatives to propose spending cuts
uncensored by the Leadership.

Let the proposals be debated. Follow the debate with a roll call vote.

It's called representative democracy ... and it will give us accountability and
responsibility from A to Z.

196

Mr. Conyers. That is a great way to do it. We have agreed to
incorporate all of the statements. So yours will be in, Bill, and Rob,
welcome to our committee and we are delighted to hear from you.
Congratulations on a proposal that has gained such wide attention,
both on Capitol Hill and across the country.

STATEMENT OF HON. ROB ANDREWS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW JERSEY

Mr. Andrews. Thank you, Mr. Chairman. Thank you for the
chance to be here, and let me begin by thanking my friend and col-
league, Bill Zeliff, for his continuing friendship and cooperation in
this. I want to begin by saying that one of the things that im-
pressed me when I came to Congress in November 1990 was how
genuine and how committed virtually every person I have met here
is to the betterment of this country as he or she sees it. It is a rath-
er striking dichotomy when you look at the way the public gen-
erally perceives politicians and Congressmen specifically.

Mr. CONYERS. I think we are misunderstood.

Mr. Andrews. And the way that folks really are. I do think peo-
ple misunderstand us, and it is a privilege and honor to serve in
this body and it is a privilege and honor to work with people who
are doing in their heart what they feel is right for the country. And
I think virtually everyone I met here falls into that category.

Having said that about motive, general motive, I want to respond
to a couple of points made earlier about the motives of those of us
who are sponsoring the A-to-Z plan, by answering some questions
I know have been raised here today. I am sorry I was not here
when they were raised, by the way. That is not your responsibility,
but I would like to answer them for the record.

Why don't A-to-Z sponsors like me go to the floor and offer
amendments to open appropriations bills and cut spending that
way? Well, I have chosen, with my Washington staff of six people,
to devote my time to pushing the A-to-Z initiative, an initiative
which has drawn the active opposition of the Democratic Whip, the
majority leader, the committee chairmen throughout the Congress,
the Speaker of the House, and various other instruments of the
Democratic Caucus, which is their right, privilege and prerogative.

I have chosen to focus my time on pursuing this initiative
against that opposition, and chosen not to exercise my resources
and spend my time on individual amendments to this point. I cer-
tainly am prepared to do that when A to Z comes to the floor.

Why do A-to-Z sponsors like me write letters to appropriators
and sometimes vote for projects that would spend money in our dis-
trict, and then later accuse other people of pork barrel spending?
President Clinton, the other day, was asked about why the Demo-
cratic Party continues to raise soft money that he criticized during
the campaign, and he said he is not prepared to disarm unilater-
ally. Well, neither am I. And as long as we are operating under
rules where there are possibilities of exploring earmarked projects
for your district, as long as we are operating under a system wnere
individual projects that don't have a national scope can be funded
through the Federal budget, any Member who fails to avail himself
or herself of that process is neglecting his or her duties.

197

Why is A to Z necessary when we have open appropriation bills —
rules, rather, on the floor all the time? Well, it is necessary because
the term, "open appropriations rule," is awfully misleading. And I
do not suggest that the Rules Committee intends to mislead any-
one, nor do I suggest that those who use that phrase do either. But
let me offer you two examples of why so-called open appropriations
rules aren't very open at all, if you mean to imply by saying that
anyone can come to the floor and put his or her best idea forward.

Representative Zimmer, a minority member of this committee,
proposed earlier this year that the medical college that is run by
the Pentagon for special medical training for Armed Services medi-
cal personnel be phased out, because he felt that given the high
quality of medical education already available in this country, that
it was not necessary or desirable to have a separate medical school
program under the Department of Defense.

If representative Zimmer were to go to the floor during the open
rule, if there is one, on the defense appropriations bill next month
and offer that amendment, it would not be in order, because it
would be struck down on a point of order as legislating on an ap-
propriations bill, because Representative Zimmer did not simply
propose reducing the amount of funding for that program or cutting
it out altogether; he came up with what I think is an intelligent,
fair, rational, constructive approach to phaseout the school. Let the
present students continue their education and close it when they
are done.

He offered that amendment through the defense authorization
bill. He went to the Rules Committee, and the Rules Committee
ruled his proposal out of order for reasons that I am sure are legiti-
mate and within their purview, but a rule out of order.

Now, Representative Zimmer could go to the floor next month
and offer an amendment to cut 25 percent from the funding for
that school. And what would happen is that Members of Congress
would get up and say, this is an arbitrary and unfair and irrational
proposal, because the school is still operating and it still needs 100
percent of its money, and it creates uncertainty, and what is going
to happen to these students who started their medical education
and may not finish it? And that argument would be correct. It
would be governmentally irrational and irresponsible to offer such
an amendment, and it would lose, and the funding would stay
where it is, and the program would stay where it is, until the
chairman of the authorizing committee or a majority of members
of the authorizing committee felt differently. That is not an open
process.

Second example. Several years ago myself, Congressman Bill
Sarpalius from Texas, Congressman Curt Weldon from Pennsylva-
nia, Congressman Nancy Johnson from Connecticut, thought that
there was a better system for pursuing a system of foster child
block grants— foster child care block grants to the States. Very
similar, by the way, Mr. Chairman, to your innovative ideas about
eliminating State mandates, Federal mandates to States and let-
ting States and cities do more of their own ideas, a bill which I
have cosponsored that you have introduced.

Mr. Conyers. Thank you.

198

Mr. Andrews. That was a change in an entitlement program. If
we wanted to offer that during the relevant appropriations bill, of
course, we could not offer it, because there is no relevant appro-
priations bill, because it is an entitlement program. So an open ap-
propriations rule doesn't let us do that. Instead what we did was
offer a bipartisan substitute to what was called the Child Preserva-
tion Act, I think, of 1992, or 1993, and offered this substitute which
would have reduced the entitlement over 5 years, increased the
amount to be spent on children by reducing State administrative
allowances in this program.

The Rules Committee ruled the alternative out of order. We
fought the rule, we lost the rule vote by about 30 votes, and our
proposal never came to the floor. That is not an open process. That
is why the A-to-Z open process is necessary.

Why do A to Z? Why is it necessary? I would make this argument
to you. First of all, and this may surprise some of my A-to-Z co-
sponsors, I think the biggest losers under the A-to-Z process would
not necessarily be defenders of Government programs who believe
in the validity of those programs and have not signed the A-to-Z
bill or petition. I think the biggest losers might be some of the A-
to-Z cosponsors and petition signers who love to go home and make
speeches at the Rotary Club about the evils of the debt and deficit,
but never want to cast a real hard vote to take money away from
people, who are ready to vote against helium reserves and mohair
subsidies and those sorts of things, but are not ready to say you
must pay another dime to ride the bus in the morning because
transit subsidies are going to be cut. Your daughter has to pay an-
other quarter of a percentage point on her student loan, because
the education budget is going to be changed. Your town is going to
get 95 percent of the money under its community development
block grant to pave roads next year because that has to be done.

I think this is the greatest smoke-out device in the recent history
of American politics. And all of these people, including me, who
have gone home and made the antideficit speech to trie Rotary
Club are going to have to, pardon my French, put up or shut up,
and there is going to be a series of votes that sometimes hurt and
always effect real people with real dollars and real issues.

I think then we would begin to restore the credibility of this in-
stitution, of politics in general and of Government more generally,
and I think each one of us, the next time one of our political oppo-
nents, whether he or she is a Republican or a Democrat, stands up
in a debate and says Congressman, you incumbents have ruined
the country by running up the Federal debt and Federal spending,
can say to them, here are 750 specific budget cuts that I had to
cast a vote on. How would you have voted, yes or no?

Let me say to my Democratic friends, those who believe that this
process would hurt the Democratic Party, I think are listening to
a different set of constituents than I am listening to. I think it
would help the Democratic Party, because I think it would force
people, frankly, from the other side, not including my friend and
colleague, but some people from the other side who love to talk
about cutting spending, but are never willing to really do it.

A to Z is an abnormal, unusual, radical procedural change. It is
necessary. It is necessary because people no longer believe we can

199

handle their money carefully; they believe we are always looking
for a procedural dodge; they have been misled into believing that
we can solve this problem by getting rid of somebody else s pro-
gram in somebody else's State that will hurt somebody else. It isn't
true. And the A-to-Z plan is an opportunity to address that problem
in a real and meaningful way.

Finally, why should we report out the A-to-Z process and why
should it come to the floor? The most basic reason I can give you
is this: our Constitution is not a Constitution that sets up a democ-
racy. It sets up a republic. The one institution in the Federal Gov-
ernment that is a majoritarian institution is this one.

The U.S. Senate really needs 60 people to get something done.
Laws can be blocked by the stroke of a pen from one incumbent in
the oval office in the executive branch. The Supreme Court by five
can strike down a law that is passed by 500 in the Congress of the
United States. The one institution under our constitutional scheme
that is supposed to be the majority rules is this one. And we have
a majority on this bill. There are 230 Members of the House of
Representatives that have read this bill, listened to the arguments,
listened to the detractors and cosponsored the bill.

Mr. Chairman, you are a fair-minded person who has contributed
much to the discussion of these issues, and before I answer ques-
tions, I would just close by asking you one. And that is when can
we expect our bill reported out since it has a majority of people
supporting it?

Mr. Conyers. You want to know when your bill will be reported
out of this committee?

Mr. Andrews. Yes, sir.

Mr. Conyers. I am not able to answer that. You are about the
10th witness of 21 Members in the Congress who are going to tes-
tify, and we are going to have some hearings with a number of
other persons in and out of government. So I am unable to give you
a date. But even if I were, I wouldn't give it to you anyway, be-
cause it is not necessary, nor is it appropriate. If I did it for you,
I would have to start doing it for every other piece of legislation
that came before us.

Mr. Andrews. I appreciate that.

Mr. Conyers. I thank you very much for your testimony. I think
that the beginning of this process of hearing testimony is very criti-
cal because it forces us to listen to each other. It may be necessary
for me to invite you back again, because we are at the beginning
of a curve, and I know that there will be more information coming
to my attention as we go along.

Let me ask you and Mr. Zeliff whether or not you feel that it is
an accurate criticism that the A-to-Z proposal will hurt programs
for the poor and middle class disproportionately. By expanding re-
scission authority and moving that authority into entitlement pro-
grams, we are now placing these important programs, programs
that had been set aside by our own legislative directive, at risk and
we are now using this new process, perhaps, as an instrument to
go back in and raid and disassemble many valuable social pro-
grams. t

Mr. Andrews. I disagree with that criticism, and I think it is off
the mark. This is not fashionable to say: I have faith and con-

200

fidence in the judgment and conscience of the people with whom I
serve, and I think they cast in the overwhelming majority of cases
well-informed, intelligent votes that are meant to serve the people
of the country. If we are at a point where we believe that a major-
ity would maliciously or recklessly cut programs that would hurt
needy people in this country, then I think that says something aw-
fully ugly about our politics.

On the other hand, if we are saying that we are unwilling to sub-
ject programs to review by the majority, what else are we unwilling
to subject to review by the majority? Are we willing to say that
taxes should not be increased unless a super majority can do so,
or can a minority block a tax increase? Are we willing to say that
regulations whicn regulate the environment or education can be
blocked by a minority? Are we willing to say that changes in rules
governing employment or health care or social services can be
blocked by a minority?

I think implicit in that criticism, which I have heard, is a dis-
trust for majority rule. If majority rule impedes upon the legal
rights of people, they have redress in the courts. If majority rule
intrudes upon the political rights, our system basically says that
the check and balance is the Senate and the executive veto.

Mr. Zeliff. Mr. Chairman, can I just add one quick comment?
In my judgment, what we are doing here is we are arguing the
merits of the case, and when you come to, just to use an example
that effects my home State of New Hampshire, low-income fuel as-
sistance is vital, and you know the games that have been played
with that every year. Would I stand up and argue that based on
the merits of the case and hope to win that case? Whereas you
have come to something like we have heard a lot of testimony
today on health care and Medicare.

One proposal that I would put forth is means testing for Medi-
care. People who are making $75,000 a year or more should be
treated and pay a little bit more than someone that could hardly
put food on the table, and again, hopefully, we will win that based
on the merits of the case. So the question is, who is to decide? The
majority? Why can't we all, and I agree with my colleague, Rob An-
drews, why can't we all be trusted to argue the merits of the case
and make the decision up or down in full view of everybody in
America, including ourselves. So it is a fresh approach, it is a new
idea, but you know, it is not that big a deal, it is not that scientific.
It is simple, straightforward to understand, and I think we can be
trusted to do the job in a responsible way.

Mr. Conyers. Well, I want to examine that a little more care-
fully with you. For example, the wealthy Medicare recipients, you
may or may not know that historically, that provision was included
because those who were against Medicare, period insisted that it
include those of every rank and class. It was not something that
was thought of as an ideal way to proceed, but it was a condition
of getting a sufficient number of the votes. The same with Social
Security. That goes right up the ladder. As we know, those in the
upper ranks don't really need it.

Mr. Zeliff. Going back on the Medicare, Mr. Chairman, with
due respect, maybe it is time to review that decision, and that is
all we are saying with A to Z, is let's take another look.

201

Mr. Conyers. I quite agree.

Mr. Andrews. Mr. Chairman, if I may just chime in one thing.
One thing that surprises me as the way the Federal Government
does business as a former local official is that we have the opposite
of what most local county and State governments do with spending
money. In most local governments, you need a super majority to
spend, money. If you want a bond or incur debt, you need a super
majority of a legislature or city council very often, or a county
board of commissioners. Here you seem to need a super majority
to reduce spending, and I don't — I don't say that to be flip, but it
strikes me as a rather odd juxtaposition of trie way government has
usually been set up in this country, and I don't quite understand
it.

Mr. Conyers. Well, the same number operates on both sides of
the issue. If you get 218 votes, you can either cut or add to a meas-
ure. I didn't know there were two separate standards.

Mr. Andrews. Oh, I disagree. I think that if you get 218 votes
on a proposal that makes it to the floor, you can get it done, and
to get something to the floor, you need the authorizing committee
chairman to make it happen, through a majority of his or her com-
mittee. You need the Rules Committee to decide something is in
order, and then you need to make it happen. No question, 218 wins
on the floor, but the real issue is how does something get to the
floor?

Mr. Conyers. Well, that means that we have the same standard,
because those supporting or opposing increases would be those
same chairmen, those same committee members, and actually the
same process.

Let me ask you now about a comment that you made that you
didn't think tnat the Members would maliciously discriminate
against the poor middle class in using the A-to-Z proposal in terms
of revisiting some of the programs, particularly entitlements.

Mr. Andrews. Yes.

Mr. Conyers. Well, suppose a person without being malicious or
mean-spirited merely chooses as a matter of political preference,
the fact that they would support those who are not in the poor and
middle income class, without being bad fellows; that it is just a pol-
icy choice that they may happen to prefer. So that it wouldn't be
inferred that a person was malicious if they used the A-to-Z propos-
als in this manner, but that they were merely exercising the kinds
of preference that all of us do in the course of our responsibilities.

Mr. Andrews. Well, I, frankly, would call that legislating. And
I guess what I would say to you is this: that our system, as you
well know, because leaders like yourself have taught newer Mem-
bers like me this lesson through the work that you have done. Our
system draws a line between rights that are vested in the Constitu-
tion, more fundamentally and rights that are political rights, that
are determined by a majority of the legislature. And if you impede
upon someone's constitutional rights, their right to be free of dis-
crimination based on their race or agenda; their right to be given
due process, you can have 100 percent of the legislature vote for
it and it doesn't fly. The courts are there to guard us against that.
But rights that are given by a legislature or entitlements given by
a legislature can be taken away by a legislature.

202

And if the majority wants that to happen, it happens. If the re-
sult is unjust, if the result is unjust, what our system permits us
to do is to change those who sit in the legislature, or change he or
she who sits in the White House so he or she can use her or his
veto authority, or to ultimately change the Constitution to give a
protected constitutional right. But implicit in that question seems
to be the notion that if a legislative decision has a disproportionate
impact on a particular economic class, you need more than a major-
ity of people to approve it. And that is not my understanding of the
way our Constitution is or should be.

Mr. Conyers. Well, I think your response encourages those who
may think that this A-to-Z proposal may inadvertently or
nonmaliciously hurt programs that disproportionately affect the
poor and middle class. Let me try to approach this one other way.

Mr. Andrews. Yes.

Mr. Conyers. What about the notion that tax expenditures can-
not be cut in the A-to-Z process— only discretionary spending and
entitlement programs — not tax expenditures. Would tnere be any
merit in your considering, as the authors, in including a provision
permitting tax expenditures to be affected by the same process?

Mr. Andrews. Let me respond to that for myself and, obviously,
my friend will respond for himself. I believe that the American
public wants, and our bill provides, the following argument: we will
go through our bill line by line, dollar by dollar, program by pro-
gram, and have an open, honest debate on where we should spend
our money and where we should not, given the money we already
take in. If subsequent to that, people believe that more money
should be taken in or money should be taken in in a different way,
that that is a legitimate and necessary discussion.

Let me say further that I would support, if your question is get-
ting at this, I would support the same thing. If we want to have
a proposal where anyone could propose a modification of any provi-
sion of the Internal Revenue Code, by going to the floor and issuing
his or her best idea, whether it is to raise revenue by closing a tax
loophole, or simply by raising revenue by imposing an individual
tax, I would support that.

I think the chairman of the Ways and Means Committee would
be a little reluctant to do that. But I would support something like
that happening, sure.

Let me say this point finally, Mr. Chairman, about the issue of
poor people and economic decisions. A lot of the poor people that
I represent, people who make $11,000, $12,000 a year who work for
a living, sometimes 40 hours a week, much like your constituents
in your district who are in many cases ineligible for assistance pro-
grams and in all cases pay taxes when they do work, drive to work.
And last year as a result of the deficit reconciliation bill that was

f>assed, they paid an increase in gasoline tax of 4.3 cents per gal-
on. That had a disproportionately negative impact on poor people
as far as I can tell, but I didn't hear anybody saying then that
there should be something more than a majority vote required to
pass that.
What is the difference?

Mr. Conyers. Well, you are arguing against yourself now, be-
cause you are the one that thinks that there are different stand-

203

ards. I am the one that argues that it is 218 on either side of the
case.

Let me

Mr. Andrews. Well, may I just answer that? If I just could an-
swer what you said, no, I am not. I think it should be 218 no mat-
ter what, and I think it should be 218 on spending and 218 on
taxes, and I just find the contradiction here to be that if the prin-
ciple is that we should be careful to prohibit a simple majority from
making a decision which has a negative impact on a different in-
come group, why doesn't that apply to across-the-board aggressive
taxes as well as spending decisions:

Mr. CONYERS. Well, that is my question. I am the one that raised
the tax question, not you.

Mr. Zeliff. Let me just jump in, if I can.

Mr. Conyers. Well, let me just finish one other point, Bill, and
then we will move forward. Because I was intrigued by your sug-
gestion that, frankly, you wouldn't mind if there was a way to
make tax changes up or down in a mechanism similar to A to Z.
But would you be willing to have such a mechanism involved in A
toZ?

Mr. Andrews. No, I personally would not, because I think the job
that is first before us is to examine whether we have the right
spending priorities. And Congress has raised taxes lots of times in
the last 10 years. What it has not done, in my opinion, is this kind
of effort.

Mr. Conyers. Well, wouldn't A to Z give you the opportunity to
cut taxes much easier than the difficulties that have been experi-
enced before?

Mr. Andrews. No, because that is not in order under the A-to-
Z plan. What is in order under the A-to-Z plan is the ability to
identify a spending program that should be altered or reduced or
abolished, and after that is done — let me say this, Mr. Chairman,
about taxes. I am from New Jersey, and New Jersey is a place
where tax increases nearly upset a very able popular incumbent
Senator named Bill Bradley. It did upset my predecessor, a very
able, deserving Governor, deserving of reelection, and what I hear
people saying is not that they hate taxes, or they don't think that
they have to pay them.

Here is what I hear them saying: the burden of proof, Congress-
man, is on you to show me that the money I am already giving you
is being wisely spent and prudently shepherded. And until — I don't
believe that it is now. And until you demonstrate to me that it is,
that you have made a conscious, all-out effort to do so, don't take
any more from me.

After you have done that, if I am convinced that you have
made — you meaning the institution has made a good faith effort to
examine spending priorities and said to people, you know, it does
cost money, but by God, we ought to have more opportunities for
low-income children to have subsidized child care. That is impor-
tant to us as a society. Or we ought to have 100,000 police officers
on the street, that is important to us as a society. We will pay for
it. But we will not pay our hard-earned dollars unless we get value
for it. And I think the way you convince people they are getting

204

value is to systematically review their budget in a way we have not
done so to date.

Mr. ZELIFF. Mr. Chairman, just one quick comment. Chairman
Obey suggested earlier — I think we started at 11 a.m., on this — and
suggested we have A to Z on looking at tax loopholes, tax incen-
tives; he even then mentioned Tyson chicken, and I think this is
an example where we could take a look at A to Z on that subject
separately, but what we are concentrating on is on cutting spend-
ing. I think also we could do A to Z on government regulation, A
to Z on unfunded mandates. I think A to Z is just the process or
a concept, and I think certainly we would be willing to consider
that, at a different point, not this year with this particular A to Z.

Mr. Conyers. Well, this has been a most helpful discussion. I am
going to be examining particularly Mr. Andrews' novel approach
here, because we have agreed that perhaps tax changes through A
to Z might be OK, but not through this bill.

Mr. Zeliff. According to the way the rule is written.

Mr. Conyers. I understand. I would like to ask one last question,
and then Mr. Spratt will be recognized. Isn't it true that tax ex-
penditures benefit the wealthy more and they are, under your pro-
posal off the table while discretionary programs and entitlements
are used more heavily by working families and the middle class
and are more potentially A-to-Z targets?

Mr. Andrews. Well, let me respond this way: no, it is not true.
And specifically here is what I would say to you. If Members want
this institution to go through a process where any Member can
come to the floor and propose the closure of a tax loophole and get
a debate in an up or down vote, or an increase in any given tax
and get an up or down vote, tell me which bill it is and I will co-
sponsor it, and if the committee bottles it up, tell me which dis-
charge petition it is and I will sign it, because I think that that
would be a worthy exercise for us to engage in.

I think, however, having said that, that the concept that tax ex-
penditures are an expenditure of public money is based on the
rather bizarre notion that government owns our earnings, and is
beneficent in letting us keep some of them by giving us the ability
to deduct some of them from our tax return. It seems to suggest
that we start from the proposition that government has the right
to take everything that we earn and what it permits us to keep is
gracious and beneficent.

I think that the history of our country, the foundation of our
Constitution and the consensus of our people all point to the oppo-
site conclusion, which is to say that our earnings belong to us, and
it is only after a majority of the Congress and the President signs
a bill taking some of that away that it belongs to the government.
So — I mean that is a philosophical difference, but I wish that we
had a chance to debate that kind of philosophical difference in a
series of up-down votes on specific proposals on the floor like this
one, instead of having to vote on a massive reconciliation package
that a handful of people sitting on one committee have real input
into. And if those critics choose to introduce such a bill, I will be
an ally of theirs.

Mr. Conyers. Thank you very much. John Spratt.

205

Mr. Spratt. Thank you very much, Mr. Chairman. Thank you
both for your testimony.

I am reading H. Res. 407. Is that the resolution that you dis-
charged or filed a petition to discharge?

Mr. Andrews. Yes.

Mr. Spratt. As I understand this, if a particular item of discre-
tionary spending was rescinded under an A-to-Z process, the dollar
amount of that item would be deducted from the 601-A discre-
tionary spending limit for that fiscal year, the balance of that fiscal
year, but not beyond. Is that correct?

Mr. Andrews. No, that is incorrect. Let me also say to our friend
from South Carolina that we have agreed, the sponsors have
agreed with the group led by Mr. Deal and Mr. Stenholm to clarify
the issue, that this would be deducted from all caps covered by the
present reconciliation law, not simply from the 1 year.

Mr. Spratt. And how do you effect that change in this resolution
then? Are you going to file in the resolution?

Mr. Andrews. There would be an amended rule.

Mr. Spratt. There would be an amended rule.

Mr. Andrews. Yes, sir. Because our intention was to do what I
just said and, frankly, there were technical problems with it. To
Mr. Stenholm's credit he pointed that out and we corrected it, and
a number of people joined our cause after we did.

Mr. Spratt. Would you have to have a discharge petition for the
amended rule then?

Mr. Andrews. No, we would not. It is my understanding that the
way this works is that when we reach 218 signatures, a motion to
discharge is in order. If the motion is adopted by a majority of the
House, the rule is on the floor of the House. The rule is subject to
a limited power of amendment. We have agreed that we would
offer a substitute rule to make the amendment I just talked about.
If it were adopted by a majority vote, what would then be in order
would be the rule, as amended, and the rule would be, then, either
passed or rejected. If the rule passed, the session would take place,
if it didn't, it wouldn't.

Mr. Spratt. You would have the original page 407 then?

Mr. Andrews. Yes.

Mr. Spratt. OK This applies to both entitlements and to discre-
tionary spending?

Mr. Andrews. Correct.

Mr. Spratt. The title of the bill refers only to rescissions. Are we
talking about amendments — as I understand it here, we are only
talking about amendments in the nature of rescissions, actually
cutting something. A minute ago you used the word altered, re-
duced or abolished. So if you wanted to change an entitlement, so
as to reduce it, for example, if you wanted to change the inflation-
ary index for Social Security by which the COLA is determined
from the CPI to some other index, you couldn't do this with this
bill, could you?

Mr. Andrews. Oh, I disagree. I believe that this bill and the rule
that accompanies it are broad enough to make in order any change
in the underlying formula of any entitlement which would have the
net effect of reducing outlays for that entitlement.

206

Mr. Spratt. Well, that is more than a rescission. The title refers
to rescissions. You would not only rescind one thing, you would leg-
islate something else in its place, correct, which could be quite com-
plex?

Mr. Andrews. That is correct. And Mr. Spratt, the reason for
that, and your work on the Budget Committee, I think, has been
ample evidence of this, is that the real way to get a grip in reduc-
ing spending is, frankly, not by abolishing this program or cutting
that one. That is a good headline grabber, but it is not particularly
effective. The way to do this is to change the underlying formula
that funds certain programs, the building blocks of a program to
make it run more efficiently and make it run smarter, and we
think that that is the way to achieve — and I would again use — I
am not sure if you were nere when I talked about Mr. Zimmer's
proposal to eventually eliminate the medical college for the Defense
Department, but not do so in a way that is irrational or unfair. So
that is why we have that feature.

Mr. Spratt. We have had that amendment on the floor before
sponsored by Mr. Sabo.

Mr. Andrews. We didn't have it this year. It was ruled out of
order by the Rules Committee.

Mr. Spratt. On the authorization bill or on the appropriation
bill?

Mr. Andrews. Well, of course, it was ruled out of order on the
authorization bill and on the appropriations bill. I assume it would
not be protected against a point of order and would be struck down
as legislating on an appropriations bill.

Mr. Spratt. Well, all you could do then was cut the money to the
bone to the point where it was effectively terminated.

Mr. Andrews. Yeah, you could do that, and I think that would
be an irrational, an arbitrary and unfair way to do it. You know,
what happened here is that instead of Mr. Zimmer's proposal,
which I think is a very sensible, rational one, lots of folks would
say you know, I would love to get rid of this program because I
agree that it is extravagant, but it is not being done the right way,
so I am going to vote, no, on your amendment. That happens
around here all the time.

Mr. Spratt. Is it your interpretation, is it the Parliamentarian's
interpretation, then, that you not only have the authority to re-
scind this bill whose title says downward adjustments and rescis-
sions also gives you the authority to legislate?

Mr. Andrews. I am certainly not free to speak for the Par-
liamentarian, but it is absolutely our intention, and it is my inter-
pretation that the answer is, yes.

Mr. Zeliff. I think we clarified that with the Parliamentarian.
We went through the whole rule, everything, with him.

Mr. Spratt. And the Parliamentarian, as you understand him,
says that you can legislate COLAs, you can redefine disproportion-
ate share, rules for Medicaid, hospitals, all of that.

Mr. Zeliff. That is our understanding.

Mr. Andrews. Yes.

Mr. Spratt. OK Thank you very much.

Mr. Conyers. Gentlemen, you have acquitted yourself with great
distinction

207

Mr. Spratt. Mr. Chairman, could I ask one further question?
Once you get through, could I?

Mr. Conyers. And I want to congratulate you on presenting the
proposal, joining us here at the hearings. We should have begun
these hearings earlier, but now that we are here and are started,
we are going to move them along as rapidly as we can. Fortunately,
Bill Zeliff is a member of this committee, so he will help us expe-
dite this as quickly as possible, you can both be assured. Mr.
Spratt.

Mr. Spratt. Just to follow up the request that I was pursuing
with you, suppose that I had an amendment. Let's say I proposed
to eliminate the Comanche helicopter; $2.4 billion, let's say, is ap-
propriated for the Comanche helicopter. I want to eliminate the Co-
manche helicopter, but at the same time take $2 billion of the $2.4
billion and put it in Head Start and Pell grants, so that there is
still a downward reduction, $400 million; I am still saving money,
that is the net effect of it, that is what your bill says right here.
Can't do that?

Mr. Andrews. My answer is, no.

Mr. Zeliff. My answer is, no. Our understanding is that the
money you save from the helicopter would eventually go to the bot-
tom line. You can't direct to spend it in other programs.

Mr. Spratt. Any amendment in order which would have the ef-
fect either directly or indirectly of reducing budget authority and
that has that effect, it reduces it $400 million. That is the net effect
of it.

Mr. Andrews. Well, the clarifying rule I believe also speaks to
that issue that we worked on with Mr. Stenholm, and if it is not,
it is a clear intention, which could be made even more clear in the
substitute, if you sign our petition and get the rule to the floor, is
that nothing other than a reduction in spending is in order. There
could be no net effect on the amendment.

Mr. Spratt. Well, let me get back to my point then. If you then
decided that you wanted to change the COLA for a particular pro-
gram, you still provide for a substitute COLA, so that would be an
increase in spending. You would decrease spending by eliminating
one COLA, but turn around and increase it by adding back another
COLA?

Mr. Andrews. No, unlike — here is the difference. Your first ex-
ample is really three transactions. It decreases spending on the Co-
manche helicopter, and then it increases spending on Head Start
and the other program that you used. The COLA is one trans-
action. The COLA formula changes would be a transaction that
would change the underlying formula governing outlays for particu-
lar entitlement for this year and for the future. It is a unitary,
budgetary transaction that would have the effect of a downward
adjustment.

Mr. Spratt. Suppose I said let's stick with the Apache helicopter,
it costs a lot less money, so substitute 110 Apache helicopters for
110 Comanche helicopters. The net effect is a reduction in the
budget.

Mr. Andrews. No, no, because that is a different transaction.

Mr. Spratt. Pretty fine lines.

208

Mr. Andrews. Well, they are drawn around here all the time.
And, you know, what I would suggest to you — Mr. Spratt's points
are very well taken. They are very, very well taken, and I do not
for a minute assume that there are parliamentary questions on
each one of these proposals.

Mr. Spratt. I am reading to you your own rule which says, the
only two criteria, you have to print it 1 day ahead of time and it
has to have the effect, directly or indirectly of reducing budget au-
thority. None of this unitary, tertiary, whatever it may be is
even

Mr. Andrews. And, frankly, through the good work of Mr. Sten-
holm and Mr. Deal and others, many of their criticisms and con-
structive ones which were similar to yours, and we as a group met
and reconciled them. For instance, the 1-day requirement I believe
is now a 5-day requirement, and the unitary spending issue was
also dealt with.

Let me say one other thing, too. I think this is awfully important,
because I, too, am alarmed by the very complex difficult issues that
would be dealt with in a relatively short period of debate time on
the floor. I, by no means, mean to denigrate the efforts of Members
during floor debate, but I do mean to acknowledge a phenomenon
that I think we all would have to acknowledge, and that is that the
way Members tend to deliberate on floor votes is to direct their
staff to do an appropriate level of research, confer with their staff,
confer with their colleagues, take advantage of every opportunity
around the institution to learn about an issue, ask questions that
they want to ask, make up their minds, and on their way from a
committee markup, a hearing, a meeting with constituents, look at
their card, see whether they decide to vote aye or no and go vote
aye or no.

The thought that an insufficient period of floor debate is a criti-
cal flaw in this I think is inapposite. However, I can only offer this
as a personal opinion without the immediate consent of our other
229 cosponsors, and that is that if the leadership would wish that
the A-to-Z plan would go forward with a minimum of 4 hours of
floor debate on each amendment, I would certainly welcome that
change.

If the leadership feels there is a correct number for the fixed
time of floor debate, I would certainly be willing to support that.

Mr. Spratt. Thank you.

Mr. Conyers. Thank you very much. We appreciate, again, Mr.
Andrews and Mr. Zeliff, your important contribution in these ex-
tensive hearings.

Mr. ANDREWS. Thank you very much for your time and patience
at this late hour. Thank you.

Mr. Zeldtf. Thank you, Mr. Chairman.

Mr. Conyers. OK, Bill. Come on back up here on the roster. We
are going now to call Dennis Hastert, Bill Brewster, and Michael
Crapo and Chet Edwards to the witness table and invite you gen-
tlemen to add to our first day's discussion. We have been here all
day listening to Members, and it is very important, since the budg-
et reform process is going to involve the Members in the first in-
stance.

209

Mr. Hastert, you are a member of this committee and have
served with great distinction for a considerable period of time. Let
me invite you to begin. All of your statements will be reproduced
in their entirety in the record, as have all of the previous Members
that have been to the witness table.

STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTA-
TIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. Hastert. Thank you, Mr. Chairman. I certainly appreciate
your giving us this opportunity to present this piece of legislation
to you. I understand that you have been in this room all day long
and very diligently listening to a lot of different ideas. So witn that
in mind, what I will do is Keep my testimony as brief as possible
and open up to any questions.

Mr. Chairman, I am pleased to be here, as we have said, to tes-
tify on behalf of H.R. 4057. It is the Deficit Reduction Lockbox Act
of 1994. I was very pleased to be an original cosponsor of this legis-
lation. It is a bipartisan piece of legislation, and I am happy to see
that nearly 140 of my colleagues on both sides of the aisle have al-
ready joined us as cosponsors.

H.R. 4057 would go a long way toward real budget process re-
form. Last year, when my good friend, Mike Crapo, introduced a
bill he called, make our cuts count, I joined him as an original co-
sponsor in crafting this legislation. We identified a basic frustration
with our budget process.

After just a few months in office, Mr. Crapo came to me and said,
listen, I understand when we make these cuts, they are not really
cuts, they just go back into the budget function ana they are spent
someplace else, and it was a great frustration. Well, the issue was,
that is true, that our cuts don t count. The money supposedly saved
by cuts in the budget is simply rerouted to other programs.

In the current system, cuts don't go to deficit reduction, they just
go back to the coffers to finance someone else's wish lists or
projects. We have all been discouraged in our efforts to make legiti-
mate reductions in our budget deficit.

Congressman Crapo addressed this frustration by introducing
H.R. 3145, make our cuts count, and that bill, Members, could des-
ignate cuts in spending to go directly to deficit reduction. However,
shortly after we introduced H.R. 3145 last year, Congressman
Chuck Schumer, Congressman Brewster, Congresswoman Jane
Harman and Congressman Chet Edwards introduced their deficit
reduction lockbox bill.

This piece of legislation addressed the same issue as make our
cuts count. It lets Congress designate cuts in an appropriations bill
to go into a lockbox so to speak. The funds in the lockbox would
go directly toward deficit reduction. So we joined forces. Now, we
nave a bipartisan bill, H.R. 4057, the Deficit Reduction Lockbox
Act of 1994.

Because of our joint efforts and bipartisan cooperation, support
for H.R. 4057 is quickly gaining momentum, and as I mentioned
earlier, we already have 138 cosponsors. There is widespread
agreement among our colleagues that our legitimate efforts to de-
crease the budget deficit should result in real reductions.

210

Currently, there is no means of guaranteeing that when we have
agreed to a cut in a program which is deemed unnecessary by the
Congress, that money can be used to reduce the deficit. The deficit
reduction lockbox provides the option of designated spending cuts
to go directly to deficit reduction. When the Congress decides that
a particular program no longer warrants the level of Federal sup-
port it has received in the past, and that money previously spent
on that program could be better used to reduce the deficit, then
that is wnere the money should go.

Mr. Hastert. I think a good example before the House, as we
speak, is the move to cut the space station from the appropriations
bill. If that amendment is adopted, then that money still stays in
that budget function.

My view was that it was the intent of the sponsors if that bill
passes, we take that money to reduce the deficit. We have a tre-
mendous deficit out there. We are paying interest on some $4-plus
trillion. The appropriations that we spend that we have the ability
to deliberate on are only about one-third of the moneys we expend
already. Interest rates are almost one-third of all the dollars we
spend, and hopefully in the long term, we can reduce that deficit
out there. Then there is more real money for us to do good things
for people in this country.

I am of the conviction that we have to cut spending to reduce the
deficit, but when we do cut spending, that money should go to re-
duce the deficit so we can reduce the interest rates, so ultimately
when — I don't know if it is ever going to be in our lifetime, but
when our children's representatives and our grandchildren's rep-
resentatives are in this body, they can start to use the taxpayers'
money for what it was intended for and that is good things for this
country.

I am going to stop there and give my colleagues here time for tes-
timony.

Thank you for your indulgence, Mr. Chairman.

Mr. Conyers. Well, thank you very much. Chet Edwards of
Texas is with us and we are delighted to hear next from you, sir.

STATEMENT OF HON. CHET EDWARDS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS

Mr. Edwards. Thank you, Mr. Chairman. I also will be brief be-
cause you have been patient today on this very important issue.

If I could ask your permission. Representative Jane Harman,
original cosponsor of this bill, could not be here and I would like
to introduce her testimony into the record.

Mr. Conyers. We would be delighted to accept it at this time.

[The prepared statement of Ms. Harman follows:]

211

Testimony on Deficit Reduction Lock Box

July 29, 1994

Rep. Jane Harman

Mr. Chairman, the new Members came to Congress with
the bipartisan goal of changing the way our government does
business. The Deficit Reduction Lock Box is a simple, basic
reform that will have a profound effect on the way that this
Congress spends the people's money.

Our constituents elected us with the mission to make
responsible spending choices and to ensure that bloated
programs are cut to reduce the deficit. And the Freshman class
has led the way on several of the major cuts we have made
during the appropriations process.

Yet, my constituents are often flabbergasted to learn that
when we cut a major program, like the Superconducting Super
Collider, it has no impact on the budget of the relevant agency
or the deficit. The cost of the Super Collider was simply
reprogrammed in the Energy and Water Appropriations Bill, a
result that negated the act of budget discipline by the Congress.

Not only does this process encourage the skepticism that
Americans already have about the budget process, it also lets the
appropriators be far less vigilant than they would otherwise be.
Appropriators are often willing to fund projects that they know
have only marginal support because they know, if these projects
are cut on the Floor, the overall budget remains the same and
they can always restore money in conference committees.

By allowing the Congress to place savings cuts into a
Deficit Reduction Lock Box, we will not only produce greater
spending reductions — we will produce better appropriations bills

212

that have greater support in the Congress and the nation.

Mr. Chairman, the Deficit Reduction Lock Box is the kind
of real, common-sense reform that our constituents expected
when they voted for change. I urge this Committee to mark-up
theLock Box and send it to the Floor.

Thank you.

213

Mr. Edwards. Mr. Chairman, I want to thank you for holding
this hearing. This is a day and age of reform. We have proposals
for campaign finance reform, for perk reform, for parking reform,
and quite frankly, I don't think any of those amount to a hill of
beans when it comes to making the difference in the lives of citi-
zens around this country. I think far more important than whether
Members of Congress get parking spaces at National Airport is do
we spend the taxpayers' money carefully and responsibly.

I don't know anybody in this Congress, conservative, moderate,
liberal, from one part of our country to another who has worked
harder on furthering Congress' credibility when it comes to spend-
ing programs than yourself. To me, your work to point out defense
waste does more to protect the long-term integrity of our defense
programs than anything any budget defense hawk could do.

Mr. Conyers. Triank you very much.

Mr. Edwards. And those kind of efforts go a long way, more than
these other reform debates, in preserving our credibility as an in-
stitution of government.

I am not for the A-Z program. I won't go into that, but I do
strongly support the lock box bill, and just would briefly say for
three reasons. One, I do think it would help reduce the deficit, and
I see the deficit as essentially using future generation's credit card
and we ought to have the integrity to pay for those programs that
we believe in today, not use our children's and grandchildren's
credit card and pass the bill on to them for spending that we enjoy
today.

Second, the important point of credibility for Congress. I think
we do lose credibility when we go back home, we say we voted to
cut a program and tnen when the conference report comes back, lo
and behold, a lot of other projects, some worthwhile, some not,
have popped up in the conference reports.

I think that hurts the credibility of Congress and we just need
to simply say, when the will of Congress has been expressed on the
floor of the House or the Senate, then we will respect that, that
will.

Finally, third, I would say the lock box bill would cause commit-
tees to think very carefully before they would add pure pork barrel
projects or very, very narrow special interest projects, knowing that
if those projects are cut on the floor of the House, that could lower
the 602(b) allocations for that committee's jurisdiction.

For those reasons, I would ask for and would certainly appreciate
your respectful consideration of this measure.

Thank you, Mr. Chairman.

Mr. Conyers. Thanks, Chet Edwards, for a well-reasoned pres-
entation. I appreciate that.

The gentleman from Oklahoma, Mr. Bill Brewster, is recognized
and we welcome him to the Government Operations Committee
hearing.

STATEMENT OF HON. BILL BREWSTER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OKLAHOMA

Mr. Brewster. Thank you, Mr. Chairman, and as everybody has
noticed, the hour is late. I have been in committee all day, too. Our
committee just finished a moment ago. I think as Mo Udall once

214

said, I think everything has been said, just not everybody has said
it at this point. So let me point out just a couple of tnings and then
we will move on.

But I think all of us know there are many competing plans out
here right now on how this Nation needs to go about getting its
deficit spending under control. I feel like ours is simple. It is to the
point, it does very few things. Those few things are when an appro-
priation bill is brought up on the floor of the House, an amendment
is passed making a cut within that bill, the money goes into deficit
reduction lock box. It can only be used for deficit reduction.

One other exception would be if that amendment directed the
money taken from one program and put into another program
within that subcommittee, that is possible under our bill. But with-
out it being directed to a particular point, the cut actually goes into
the deficit reduction lock box. When the bill is passed, it locks it
up.

That is what happens with the money. Most of us, since we have
been here, have voted at numerous times for some kind of an
amendment that made a cut in an appropriation bill, only to see
that money reappear somewhere else at a later time, in conference
or elsewhere.

So as I said, our bill is very straightforward. It does very few
things, but it does them well, and I Delieve that it is a passable
bill. I believe it is a workable bill. I don't think all the competing
ones are and I would like to encourage the chairman and others
on the committee to look with favor on 4057 and we would be glad
to answer any questions when the time comes.

Mr. Conyers. Thank you very much, Mr. Brewster. I notice we
have been joined by my colleague, Chuck Schumer from the Judici-
ary Committee. Before we call on him, I would like to have the gen-
tleman from Idaho, Mr. Michael Crapo make his presentation. I
know you have worked on this measure for some time.

STATEMENT OF HON. MICHAEL D. CRAPO, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF IDAHO

Mr. Crapo. Thank you, Mr. Chairman. Before I make my re-
marks, I would like to ask the Honorable Connie Morella, who is
also one of the original cosponsors, could not be here and asked if
I would obtain permission for her remarks to be made a part of the
record.

Mr. Conyers. Absolutely.

[The prepared statement of Mrs. Morella follows:]

215

Honorable Constance Morella
Testimony on H.R. 4 0 57
Committee on Government Operations

Subcommittee on Legislation and National Security
June 29, 1994

Mr. Chairman, and members of the Subcommittee, thank you for giving me
the opportunity to speak on behalf of H.R. 4057, The Deficit Reduction Lock
Box Act .

Most of our constituents would be shocked to learn that, under our
current system, amendments to cut spending actually have little impact on
the budget deficit. Currently, funding cuts from a specific program are
put back into the government's general fund, and there is no guarantee that
these cuts will reduce our nation's deficit. This bill, which has strong
bipartisan support, will force Congress to make responsible spending
choices that reflect honest budgetary policy. H.R. 4057 is an important
and smart approach to budgeting.

Our legislation would establish a Lock Box Account in each
appropriations bill which would be dedicated to deficit reduction. When an
amendment which curbs funding for a specific program is approved, the
savings would automatically go into the bill's Lock Box Account unless the
funds were designated to another program. Our bill would also allow
Members to designate only a portion of the savings to another program while
placing the remaining amount in the Lock Box Account. My colleagues and I
-eek these reforms in an attempt to bring truth to our budgetary process.
t is time Congress reformed its spending procedures to make its cuts count
while strengthening our representative democracy.

This legislation is endorsed by several national groups, including the
U.S. Chamber of Commerce, Citizens against Government Waste, the National
Taxpayers Union, and Citizens for a Sound Economy.

Real budgetary reform is the only way to change how our government
does business. We must enforce new rules aimed at raising the
accountability of this institution, and we must create opportunities to use
our savings wisely. Our constituents expect us to make responsible
spending choices and demand that, when we vote to cut spending, we create
real rather than illusory results. I believe that the Deficit Reduction
Lock Box Act of 1994 will not only help to reduce the deficit, but that it
will create a more responsible and honest budgetary process.

216

Mr. Crapo. Thank you, Mr. Chairman. I also will make my re-
marks brief, given the length of time you have spent today and the
fact that my written remarks are going to be a part of the record,
but I just wanted to indicate that I believe that this is one of the
most significant budget reforms that Congress can enact.

When I came here this year, this term as a freshman, we debated
for months over many different proposals to cut different programs,

E rejects, or appropriations on appropriation bill after appropriation
ill, and I can still remember, after many weeks of those debates,
when it dawned on me as I was sitting on the floor that even when
we were successful, that the money did not go to deficit reduction,
it simply went back into the conference committee as a part of the
allocation for that committee's — that subcommittee's allocation and
was generally respent on other programs or projects.

In fact, to me the most clear example of this was I was watching
the C-SPAN coverage of the debate over the SSC last year and as
Members of Congress were debating the issue, they were debating
as though the money were going to be going into deficit reduction
if we voted against the SSC, and even the C-SPAN caption said
something to the effect of this debate is over whether to support
the SSC or whether to put the money into deficit reduction, yet the
money was not going to go into deficit reduction under our current
budgetary plans.

What we need to have and what this bill provides is an oppor-
tunity when both the House and the Senate both cut the same
proiect, program or appropriation measure, that that cut is real
and that the money that is reduced goes to deficit reduction rather
than just the program going away or the money being moved into
other spending projects.

I know that there are a number of competing approaches to this
idea, and one of the strengths of this bill is that it stands separate
and independent of other approaches. There are people on this
panel who support and who oppose the A-Z bill. There are people
on this panel who support and oppose other measures, but this one
should be viewed as distinct, not as a substitute for or as an alter-
native for anything else.

It should be viewed on its merits. This measure has been under
consideration in one of its forms for months, ever since last fall,
and I don't believe should be viewed as a competing measure to
other types of alternatives, rather as a separate and distinct pro-
posal tnat is one of the most important budget reforms we could
consider this year, and I thank you for your time.

[The prepared statement of Mr. Crapo follows:]

217

THE HONORABLE MICHAEL D. CRAPO
BUDGET PROCESS REFORM TESTIMONY

BEFORE THE HOUSE COMMITTEE ON GOVERNMENT OPERATIONS

Subcommittee on Legislation and National Security

Budget Process Reforms in H.R. 4057

"The Deficit Reduction Lock-Box Act"

Wednesday, June 29, 1994
Room 2154 Rayburn House Office Building

Thank you, Chairman (John) Conyers, Committee Ranking Member (Bill)
dinger, and Subcommittee Ranking Member (Al) McCandless, for
giving me the opportunity to speak on behalf of a critical Budget
process reform in the 103rd Congress. As you know, the nation
finds itself saddled with ever more federal debt. If the debt were
to be paid off today, some estimate that each person's share would
be over $17,000. Addressing this debt, and exploring ways of'
cutting this debt through budget process reform, has been one of my
primary goals as a Member of Congress.

Today, I would like to speak on a budget process reform that is
included in a bill which I am pleased to have engineered with my
colleagues from both sides of the aisle: H.R. 4057, "Deficit
Reduction Lock Box Act." This bill is currently before the
Government Operations and Rules Committees.

Congress debates on numerous amendments that are designed to reduce
spending for specific federal programs or agencies. Unfortunately,
passage of these amendments does not guarantee or mandate real
spending cuts .

We need to begin the process of bringing truth to the budget
process and MAKE OUR CUTS COUNT. When Congress votes for cuts they

should be just that CUTS ! Only by finding a method to reduce

the spending caps and the related subcommittee allocations will we
be certain that spending cuts to appropriations bills will ever be
realized. This is what H.R. 4057 addresses. And these spending
cuts would be self -initiating, unless otherwise specifically
designated or transferred.

Endorsing this legislation are several national groups including
the U.S. Chamber of Commerce, Citizens Against Government Waste,
the National Taxpayers Union, and Citizens for a Sound Economy.
This bill has some 135 co- sponsors in the House of Representatives.

218

It should be stressed that this bill, originally introduced in
March of this year, is a truly bi-partisan product that would lead
the way to making discretionary cuts count.

As the sponsor of H.R. 314 5, the original "Make Our Cuts Count"
bill of last year, I have a strong interest in proposals to require
appropriations bill cuts to be translated into actual budget
reductions. Soon after I introduced H.R. 3145, a similar bill was
introduced by Representatives Chuck Schumer (D-NY) and Bill
Brewster (D-OK) . Realizing that we had drafted coincidentally
similar bills which were completely independent of each other's
efforts, we decided to join together in creating what is now H.R.
4057. It incorporates major aspects of both bills.

Now that H.R. 4057 has 135 co- sponsors, it is more important than
ever to gather additional support for this bill. H.R. 4057 must be
considered as a "stand-alone" budget process reform measure, and a
first- step in passing other necessary budget process reforms. It

is an independent effort that does not seek to block other worthy
budget process reforms. If anything, this budget process reform
would complement other necessary efforts in this arena. Based on
its proven bi-partisan in Congress since its introduction early
this year, I feel it deserves its own vote on the House floor based
on its own merits.

As I mentioned earlier in this testimony, the House and Senate do
not save money when they vote against approval of a specific
program. What this means is that the whole Congress has no way to
cut discretionary spending without the cooperation of the
committees that appropriate federal funds. Even when both Houses
of Congress vote to defund a program, the committees that control
appropriations are free to design new ways to spend the federal
money that they control.

After repeated exhortations on the necessity for thrift in an age
of deficit financing by, for example, the space station's political
opponents, defenders like myself argued that its elimination is not
going to give one penny of deficit reduction. The spending that
has already been appropriated would merely be plowed back into
other programs .

The Lock-Box bill is geared toward finally doing what we constantly
tell the American people that we're supposedly doing. Many people
think that when we vote to make cuts and when we have success, that
cuts are actually going to take place. Under present law, these
dollars are reallocated. This proposal would ensure that we can
actually address the deficit, which the American people want us to
do.

When Congress votes to cut federal spending but the Treasury
doesn't really save any money, it harms both American taxpayers and
representative democracy. Congress should reform spending
procedures to make its cuts count. When it votes against federal
spending, there should be a way to create opportunities for savings

219

that are both substantial and mandatory. That way, money would in
effect be deposited in the federal treasury for deficit reduction,
not just retreat a step back in the spending pipeline. Until
Congress changes the way it approves federal spending so cuts can
really count, even if rank-and-file Members vote to cut every
program in the world, conference committees can simply reallocate
the money.

Before the Congress can reform the nation's health care, welfare,
and criminal justice systems it must first put its own house in
order. Ensuring real spending cuts through this Lock-Box bill is
a necessary first step in this process. Members of Congress must
seriously consider listening to their constituents about spending
cuts and place good government over the self-interest of specific
projects by indicating their support for this Lock-Box Bill. Only
through budget process reforms like this will Members be able to
vote for cuts and be able to communicate the authenticity of these
cuts honestly to the public.

###

220

Mr. Conyers. Thank you very much. We now turn to an unlikely
member of this panel. One of the things we are anxious to find out
is how the gentleman from New York ended up in this alliance,
and so I am delighted to recognize Chuck Schumer, my comrade
from Judiciary Committee with whom I worked on many subjects,
including the crime bill.

Welcome to Government Operations.

STATEMENT OF HON. CHARLES E. SCHUMER, A REPRESENTA-
TIVE IN CONGRESS FROM THE STATE OF NEW YORK

Mr. Schumer. Thank you, Mr. Chairman, and it is a pleasure to
testify before you. I know you have given leave that the entire
statements be put into the record, so I will be brief because I know
the committee has had a long day.

I don't consider myself a deficit hawk. I believe in an activist
government that can be a positive force in people's lives and so I
supported the President's 5-year reduction plan because I thought
the deficit was out of control and I also supported his economic
stimulus plan because we had tremendous needs which need Fed-
eral resources solve.

But this has been an issue that many of us — I know my col-
league from Oklahoma, my colleague from Texas and I, this came
about IV2 years ago at the Democratic issues conference when the
three of us were just at lunch and we were discussing the problems
in the appropriations process that has been outlined by my col-
leagues, and that is that we make cuts and those cuts don't go to
deficit reduction, and should go to deficit reduction unless specified
otherwise.

I have no problem with someone getting up and saying on the
HUD bill, lets take $2 billion out of the space station and put it
into veterans programs, but if they are going to say let's just take
$2 billion out of the space station, it seems to me that as a mere —
as a fact of honesty and accounting, that that ought to go to deficit
reduction. That ought not to go to a small group that decides, well,
OK, the Congress voted $2 billion out of the space station, let's put
it where we want to put it. So for me the No. 1 argument is hon-
esty.

I don't support most of the cuts that come before the appropria-
tions process, but I would like to see the ones where I do support
them, that the money actually go to deficit reduction rather than
go to some unspecified area of spending all over the lot. I think
that is very, very important.

The second point I would make is that I think that many Mem-
bers feel that way, and there are many that do that span the politi-
cal spectrum, and they ought to be given a way to do it that doesn't
wreck the whole committee process. I oppose A-Z. I think A-Z is
reckless, frankly. I don't think the lock box is reckless.

I think it is consummate with the committee process, but let the
floor of the House have its proper will when there is the will to
vote cuts. And the final thing I would say is, that one of the things
that bothers people about the appropriations process in this House
is that lots of little things appear that you don't know where they
came from, and in fact a lot of the debate we have been having this
week and last week is not aimed at the big programs.

221

I think it is a lot harder to cut some of the big programs, and
if you look at the record the last IV2 weeks, money that says let's
cut WIC or let's cut all of public broadcasting, two programs that
are not the most popular, but that are in the big range, fail big,
but programs that say let's cut $2 million tend to succeed.

The lock box concept would encourage people aiming their cuts
at the parts of the appropriation process, in my judgment, that
don't do credit to this House, that don't do credit to how we ought
to wisely spend our dollars and in fact for the amount of dollars
that are spent on those, they bring such negative feelings about
spending in general that people like yourself and myself, Mr.
Chairman, who basically believe in spending for a proper purpose,
get hurt across the board.

So my view is that this is rational and carefully thought-out re-
form. It does not do harm to the committee process. It does not do
harm to the basic concept for people who believe that there ought
to be — an activist government.

But at the same time, it brings honesty to the process and at the
same time allows Members who want to make cuts to see that
those cuts are actually made as opposed to a vote on the floor and
then somehow magically the money appears back somewhere else,
either to do the same, similar or even a different thing. So that is
how I — answer your question. That is how I became a member of
this coalition.

Mr. Conyers. That is a very

Mr. Schumer. Much to the chagrin of one of my roommates who
is a cardinal on the Appropriations Committee and has been giving
me unmitigated gas.

Mr. Conyers. Well, a number of people are looking to you for
this discussion and I am glad you made it on the record because
you can refer them to your testimony here and make it short: Here
are a couple of the problems that I think we have to be clear on
because I think the sentiment is noble. I think it is an honest pro-
posal. I think honesty is very important here, but the will of the
House in cutting appropriated items when we go to House-Senate
conferences raise a very important procedural question.

We make a cut, we go to conference and conferees don't always
win and we come back with a different figure. Does the fact that
the conference figure contradict what we did in the House work
any harm to the concept?

Mr. Brewster. Mr. Chairman, the way it is structured, if the
Senate appropriated one number, the House appropriated another
number, it would have to fall between those two. If in ours we cut
$50 billion out of who knows what, defense, and they cut $10 bil-
lion out, the numbers would have to — in the conference bill would
have to be between the two numbers. It could not exceed the larger
of the two numbers.

Mr. Conyers. Well, doesn't that harm the conference process,
and what we have done is implied that the Senate will now have
to cooperate with our concept.

Mr. Brewster. No, sir. If the Senate number is higher, it can be
above the House number, it just can't exceed the Senate number.

Mr. Schumer. So if the gentleman would yield, if the House had
a $200 million figure and tne Senate had a $300 million figure, you

222

would have to be somewhere between $200 million and $300 mil-
lion, which is what the conference was always supposed to be.
When I came here, I was surprised that they could go to either
$400 million or $100 million outside the bounds of either House.

The only other point I would make is, if this becomes law, it will
govern the Senate as well, so they will be operating, and many of
us have sort of bridled at the fact we do things in the House, then
the Senate doesn't do them. They spend much more than we do on
things and it goes back to the Senate.

Now there will be the opportunity, if the Senate does what it
tends to do far more than we do in the House, vote to cut on the
floor and then not do the cuts in conference, they would be dis-
ciplined in the same way that we would be disciplined.

Mr. Conyers. Very good. Do you feel that — the lock box proposal
always has a ratcheting downward effect and is going to throw into
disequilibrium many of the programs, because every time some-
thing is cut, this has a sort of permanency that won't let it go any
other way but down, and it seems to me that this may, in the end,
create a very difficult process in the House.

Dennis.

Mr. Hastert. Mr. Chairman, let's take the SSC for an example.
When the SSC was cut, at least most of it was taken off the budg-
et. I think most people had it in their minds that we could take
that money and use it for deficit reduction. What happened when
that money was cut is that it was redistributed to other areas, and
the good intentions of people that that money should go to deficit
reduction, didn't happen. I think what we are trying to say is that
when the Senate does make those cuts, then that cut should go for
what most people thought it was intended for, and that is to reduce
the deficit.

Mr. Crapo. Would the gentleman yield?

Mr. Hastert. Be happy to yield.

Mr. Crapo. I would like to add one more parameter there, it goes
back to the earlier question as well. That is, that I think that the
chairman's question also strikes at the situation that could occur
if the House were to cut, say, $200 million out of a program and
the Senate were not to cut anything out of the program. So we
would have a range of zero to $200 million, and in that cir-
cumstance, the conference committee is free to choose zero.

They could choose between zero and $200 million if I understand.
But it would be a decision made in the conference committee. It
would be a decision that would then have to be sent back to both
the House and the Senate for their vote, and both would have to
confirm that decision, but it wouldn't necessarily force a ratcheting
down if one of the bodies chose not to go along with the proposal
to cut that program.

Mr. Edwards. Mr. Chairman, if I could also clarify one final
point, I would like to differentiate our lock box bill with some other
Members who have introduced a subsequent lock box bill. Their ap-
proach affecting the budget process would actually affect out year
602(b) allocation levels. Our bill would not do that. Our bill impacts
the year at hand and not the out years.

223

Mr. CONYERS. Let me try this approach. Once approved by the
House, the proceeds of the lock box could not be modified in con-
ference, is that true?

Mr. Schumer. No.

Mr. Crapo. No, Mr. Chairman. Let me try at that. Once the
House has made a cut, let's again say $200 million, then the Sen-
ate has a shot at the same budget and the Senate picks a figure,
anywhere from zero to the entirety of the project. Once the Senate
has picked a figure, then you have two figures and they form the
parameters of what is in the lock box, and then that cannot be vio-
lated. The House — neither — the conference committee cannot go
lower or higher than those two figures, but they must be in be-
tween those two figures.

Mr. Schumer. Which if the gentleman would yield, was how it
was always supposed to be. I mean, as I understand it, 20, 30 years
ago, that is always what conferences were. Somehow, I don't know
when, but we got off — we got this idea that you could go either
below or above it, sort of like authorizing on an appropriation. We
never used to do it, now it is sort of done routinely. I think neither
of those make sense and they both take away power from the au-
thorizing committees.

Mr. Conyers. Let me try a final question. The portion of the
budget devoted to discretionary has been decreasing in recent
years. Discretionary spending is about 6.5 percent of the GDP and
the lowest level for discretionary spending that has occurred in 45
years, yet the lock box proposal will only clamp down further on
discretionary spending.

Does this raise any questions of public policy?

Mr. Hastert. Mr. Chairman, if I could start out and try to frame
this in my opening comments a little bit. One of the reasons that
we are being squeezed down in discretionary spending is because
if we have a $4 trillion indebtedness out there that we are paying
interest on, that debt starts to swallow us up.

We think it is important, when we want to take and put money
against that deficit, against the debt, that we eventually, if we are
religious in doing so, consistent in doing so, then all of a sudden
we don't spend as much money on interest and some of that money
is really freed up for the real appropriation process. But we have
adhered to a discipline that when we do a cut those dollars really
go for deficit reduction, so ultimately we are not paying those huge
amounts of interest. We free up some of that interest for real
spending.

Mr. Conyers. So you want it to go down further? Even though
discretionary spending is going down, you want it to go down more
with lock box?

Mr. Hastert. Not really. I am saying that when people — when
this Congress collectively, on a bipartisan basis, reduces the
amount of spending, because they think it is the right thing to do,
that savings ought to go to reduce the debt, the deficit. Ultimately,
when you start to squeeze down that deficit, we are not spending
as much interest on the deficit and real dollars are there to be
spent.

224

Now, that is over a long period of time, but the effort to move
down, to squeeze down spending, those savings should be savings,
not another way to spend money.

Mr. Conyers. Mr. Brewster.

Mr. Brewster. Mr. Chairman, I happen to be one who would
like to see more money in discretionary. I believe strongly in edu-
cating our youth. I believe strongly in many of the programs in this
country, but we must get some control out of here.

When we make a cut in a particular program, that money could
very easily in the future go back to discretionary spending. We
don't affect out years in ours. We are talking about a one-time deal.
When the majority of our House agrees on a subject, that is what
it is going to be in the lock box.

Now, it doesn't affect the conference. If the Senate has $200 mil-
lion and we have zero, the conference could just as easily pick $200
million. But I am certainly one who would like to see more dollars
in discretionary spending. I would like to see more dollars in pro-
grams for people.

We are paying 15 percent of the total dollars of our budget on
interest and if we don't do some things now on the things that we
can agree on cutting, we will never be able to properly finance the
things that we should be in this Nation.

Mr. Conyers. Thank you very much. Chet.

Mr. Edwards. Mr. Chairman, just very briefly. I don't believe we
can come close to balancing the budget by cutting discretionary
spending more deeply. But I do think it is the small discretionary
programs that give us the greatest credibility problems.

It is the Lawrence Welks homes that get added in after midnight
in a conference committee somewhere, a program that maybe most
of us never even knew was in a bill, then we vote on the conference
report. We take responsibility for that.

You worked, as I said earlier, you worked very hard to give this
institution credibility. So while the numbers may not be big on
some of these cuts, I think it would greatly enhance our credibility,
and furthermore, then help protect the integrity of the welfare pro-
grams that are needed, the education programs that are needed,
the housing programs that are needed.

Mr. Conyers. Chuck Schumer.

Mr. Schumer. Yes, I would like to underscore that. When we
came up with this, it was long before A-Z or anything like that.
We just sort of — we tried to get this in the budget last year, as you
may remember, and we had less success seemingly than we are
having this year, but Chet's point is really well taken. You read
things like the Wall Street Journal.

What they use to buttress A-Z and to buttress all this is not
WIC or chapter I or NEA — well, maybe they use NEA a little bit
because of a few of these things. It is these little higgledy-piggledy
things that make it much harder to defend — you know, discre-
tionary spending is still more than a third of the budget, defense
and nondefense, and it makes it impossible — they say we need A-
Z for those things, and then it is going to be — the result will be
hurting the kind of programs, particularly urban programs I think
that we defend.

225

Well, I think we have to come clean. I think we have to provide
the whole House a way of cleansing, if you will, the appropriations
process in certain ways, and this is to me a fair way to do it.

Mr. Conyers. What do you think of those who say we can have
both, that we should have both A-Z and lock box and some have
even added H.R. 4434 which deals with baseline reform, expedited
rescission, limitation of emergency designation.

Mr. Schumer. Well, if I might answer that, we have different
views across our spectrum here. I am opposed to A-Z. I think what
A-Z did is it took a good concept like the lock box and then decided
to just run rough shod over the whole committee process.

The A-Z people shouldn't have a Congress. They should have a
plebiscite where every person gets to vote on each program. What
we would end up getting then is real gridlock.

We have a committee process because, frankly, Mr. Spratt knows
more about defense than I do and I may know more about housing
than he does, and that is a good way. Now, the floor can modify
it and temperate it and maybe the balance should be a little more
so the floor has some say, hence the lock box, but the idea of pass-
ing over the floor — over the committee completely, to me, is truly
wrong and will lead to more wild and crazy spending in a
nonrational way.

So I don't think they are complementary. I think they are dif-
ferent. I think one, again, is respectful of the committee process,
albeit modifying it, the lock box one just runs rough shod over it.
That is why I can't support A-Z.

Mr. Conyers. Any other comments?

Mr. Brewster. Mr. Chairman, as you know, I don't agree with
the gentleman from New York on guns. I do agree with him on this
issue, and this issue, we aren't talking about budgetary process, we
are not talking about disrupting the committee process. We are
talking about a single vote on a single bill at a time and the money
going to a specific place.

I don't support the A-Z approach. I don't support any of the oth-
ers or — nor do I see this as a complement to the others. I see this
as a stand-alone issue. Now, that is not to say that if this becomes
law in 3 years down the road there may need something else to be
added, but at this point in time, I think this corrects the majority
of what I see is the problem in this body, and this is what I am
supporting, and what I would certainly hope would be possible to
do and make this Congress a better place.

Mr. Conyers. Dennis.

Mr. Hastert. Thank you, Mr. Chairman. I think they are indi-
vidual issues. I think they are all issues that this Congress and
this body in its own deliberative way, own individual and collective
conscience has to make a decision on. I don't think they are com-
plementary. I think they stand as individual issues, and I happen
to support A to Z. That is my own view.

I think it is a different issue altogether, but I think this is some-
thing which is part of the process, the appropriation process, that
we ought to bring credibility when we do make cuts to projects and
people in their intentions and their good conscience think that
those cuts should go for deficit reduction.

226

It never happens, and I think this should stand alone or it
should be looked at and it should go through the process. Now, peo-
ple who are pushing A to Z have chosen a different way. They have
chosen the discharge petition. I guess the body will look at it in
that way, but you know, I think it stands as an independent issue.
They are not hooked or tied in any way. I think that is how we
should look at them.

Mr. Conyers. Yes, Mr. Crapo.

Mr. Crapo. Mr. Chairman, I would just like to echo those com-
ments. I think, again, to repeat what I said earlier, one of the
strengths of this piece of legislation is that it does stand alone. It
is separate and distinct from other measures and should be per-
ceived that way, and as has been commented here, you see the
breadth of difference in political philosophy among those who are
sitting here at this table on the panel supporting this proposal. It
indicates that this is something that is a process-oriented proposal
that is designed to bring fairness and openness and honestly to the
budget process, and I would hate to see this get caught up in the
politics of any other issue.

I think that this is an issue that we have all started out on our
separate roads with long ago. We have now been able to come to-
gether in a coalition. We have now been able to get a hearing, and
one of my strongest hopes is that this issue does not get mixed in
with any other issues and is perceived on its own with its own mer-
its.

Mr. Conyers. Well, we plan to hold our hearings separating
these out so that the witnesses will be coming up on a bill and it
won't be just some sort of a catch-all budget reform hearing where
everything in the kitchen sink is going to be in order. We will re-
spect the differences that have brought us to this point.

Yes, Chet.

Mr. Edwards. Mr. Chairman, I am not a supporter of A to Z. I
think if it had not been for Mr. Zeliff, Mr. Andrews perhaps, there
wouldn't be as much public attention to the budget process reform,
so I appreciate what they have done, but I would like to say in a
very respectful way, in an objective observation, I guess, that there
are many of us that want budget reform, feel strongly about it.

Our districts feel strongly about it, and I think the practical fact
is that if we don't see some movement on what I think are more
responsible budget reforms, such as this lock box, then I think
there is going to be tremendous pressure for additional Members
to sign on to the A-to-Z bill. Please understand, I am not trying to
in any inappropriate way pressure you or this committee to vote
any other way than you normally would, but I do think it is fair
to say there are 10 to 20 members of the Democratic caucus that
feel we have to have some sort of reform. That alone isn't reason
to pass lock box, but when you consider it respects the committee
process, it is a responsible approach, I think it would help this Con-
gress and the country to try to pass this legislation rather than
take the risk of A-to-Z discharge passing and bypassing the com-
mittee process going directly to the floor.

Mr. Conyers. The chair recognizes the gentleman from South
Carolina, Mr. Spratt.

227

Mr. Spratt. Thank you very much, Mr. Chairman. A question we
have been pursuing with other witnesses today is when does the
cut become binding on the House and what are the brackets?

Mr. Brewster. The cuts become binding, Mr. Spratt, at the time
the bill passes.

Mr. Spratt. Passes the House or passes the Congress and is en-
acted into law?

Mr. Brewster. The cuts are binding to the conference as a bot-
tom parameter or as a top parameter if we are above the Senate.

Mr. Spratt. Let me give you an example which Jack Murtha
gave us in his testimony. Let's assume that the Senate in its wis-
dom kills the F-22 and saves $3 billion. And the House in its wis-
dom kills the C-17 and saves $3 billion. Now, what are the brack-
ets? Is it $3 billion? Is it each, or

Mr. Brewster. The brackets, Mr. Spratt, are whatever the top
number and the bottom number are in the two committees. If the
House had $3 billion in C-17 and the Senate had zero, those are
the two parameters.

Mr. Spratt. On that program then. You can only bracket as to
a particular program?

Mr. Brewster. On a particular program.

Mr. Spratt. I don't read the bill this way. It sounds to me like
all those cuts are fungible. They go as dollar cuts into this trust
account, but what you are saying is it has to be identified to a par-
ticular program, project or activity. If the House-Senate is zero and
the House is $22 billion, then the bracket is $2 billion.

Mr. Brewster. That is right, because normally a cut is on a par-
ticular program. Most amendments to the appropriation bills, as
you know, are on a particular program. The cuts would be — the
brackets would be whatever the House and Senate had on those.

If, on the other hand, the Senate had $3 billion in F-22 and the
House had zero, that would be the brackets there.

Mr. Schumer. But — right, the gentleman is correct, but you
would have to, and I think this is what Mr. Murtha is getting at
and this is a value choice that would have to be made. The House
has lowered the allocation, the 602(b) allocation by $3 billion, the
Senate has lowered it by $3 billion and overall they have to lower
it by $3 billion. They couldn't raise it back to the old number. They
could put all of it in one, all of it.

Mr. Spratt. You are saying two different things because Mr.
Brewster is saying if the Senate acted on the F-22 and the House
acted on the C-17, if one was zero, then you would have a bracket
of zero to $3 billion on the C-17 and zero to $3 billion on the F-
22.

Mr. Schumer. Correct. That is correct, but you have a third — he
is right about that, you could fully fund the one or fully fund the
other, or fully fund both, but you would — your third parameter is
you couldn't go higher than the overall 602(b) allocation of either
the House or the Senate. So in that example, the Senate and House
have each cut $3 billion from the allocation and somewhere in the
defense budget you would have to — in the defense budget, you
would have to find a $3 billion cut.

Mr. Spratt. Mr. Hastert disagrees with you.

228

Mr. Hastert. My understanding is if you cut the F-22, that is
a conferen cable issue.

Mr. Spratt. Between zero and $3 billion.

Mr. Hastert. Right, and the lock box is between — if the bill
leaves the House and goes to the Senate, there is a $3 billion lock
box. If the Senate goes to zero cuts, then they could go to zero, they
could go for a $3 billion — or $2 billion or anything we said, or any-
where in between. Then the next issue is another conferencable
issue.

Mr. Spratt. I know, but

Mr. Hastert. There is a disagreement.

Mr. Spratt. He seems to be saying that if both Houses put $2
billion in the lock box — $3 billion in the lock box, then the con-
ferees have to come back with $3 billion in cuts.

Mr. Schumer. Somewhere. In other words, if the overall — yes. If
the overall cut of the defense budget from what came on the floor
was $4 billion in the House and $7 billion in the Senate, the con-
ference would have to come back with a cut somewhere between $4
billion and $7 billion.

Mr. Spratt. Even if there was a total dissimilarity of programs.

Mr. Schumer. Correct. Otherwise what happens, Mr. Spratt, is
the kind of thing that we think is no good, which is that each
House cuts a separate thing and then the budget comes back high-
er than either of them.

Mr. Spratt. Is there agreement with that? Mr. Hastert, do you
disagree with that?

Mr. Hastert. My understanding is a conferencable issue is a
specific issue. It is the F-22 or it is an aircraft carrier, and that
is what the issue decides. That is where the lock box is. The point
is that if the Senate cuts and the House cuts on that issue, that
money, those savings are reserved and they go for deficit reduction
and not spread someplace else. That is the point of this legislation.

Mr. Spratt. This doesn't speak to 602(b), so I suppose if the lock
box reduction is on a particular bill, it stays out of that particu-
lar— and you don't have to care for carry-over problems. Because
Stenholm has a different problem because the question is whether
or not the committee can sit in judgment on the

Mr. Hastert. Only for this 1 year.

Mr. Spratt. Yes. Would there be a procession at all for revers-
ing? Suppose someone thought better of it. I guess you then would
have to— and everyone agreed, we have made a hell of a mistake
here. We have tied the budget into a Gordian Knot. We want to
undo this thing.

Mr. Schumer. You would have to go to the floor and amend the
Budget Act in the way you would now. You could make that same
mistake in the Budget Act, too.

Mr. Spratt. What you are effectively doing is waiving the ger-
maneness rule as it applies to an amendment to the appropriations
bill?

Ordinarily, if you went to the floor and offered an amendment
like this to an appropriations bill, the Parliamentarian would say,
you can't amend the Budget Act through the appropriations bill, it
is not germane to the appropriations bill?

229

Mr. Schumer. I think — I don't know if that has ever come up be-
cause

Mr. Sfratt. It did come up once when I was presiding and that
is the only reason it comes to mind. I may be wrong by my recollec-
tion.

Mr. Schumer. In other words, somebody came to the floor and
said I not only want to amend the appropriation, but I want to
amend the Budget Act as well, correct?

Mr. Spratt. Yes.

Mr. Schumer. We would be changing that. We wouldn't be abol-
ishing the whole germaneness rule. In fact, one of the things I
would want to do — on the Budget Act, per se, yes, I think that is
what will work.

Mr. Spratt. Do you think there ought to be reciprocity, so if
someone has a meritorious program desperately needed he could
offer an amendment to increase spending and also increase the
budget ceiling at the same time, the 601(a) allocation?

Mr. Schumer. From my point of view, if they find a consummate
cut somewhere else, yes, yes. We don't do that because that is an-
other rule you would have to get, but I believe that I would be for
that. In fact, Mr. Spratt, I would have gone so far, my colleagues
didn't agree with me and a lot of other people, I would have let
them go Deyond the 602(b)s.

If you wanted to say you should cut a program in HUD VA and
increase a program in HHS, I would let them do that. I think that
is how the floor should work its will. I think these are artificial
constraints but we are not trying to change the whole process. That
would have really driven the Appropriations Committee absolutely
crazy.

Mr. Spratt. We have got another slate of witnesses. I have got
another question. We wilftalk to you privately about it.

Mr. Conyers. Bill Zeliff.

Mr. Zeliff. I am just going to be very brief. Mr. Schumer, did
you use the committee process in your crime bill?

Mr. Schumer. Yes, I sure did.

Mr. Zeliff. You didn't bypass it in any way?

Mr. Schumer. Well, the trust fund, some might say, used the
committee process too much so. We bypassed the Appropriations
Committee. It was similar to the idea 01 a lock box.

Mr. Zeliff. I just threw that idea out for fun.

Mr. Schumer. No, no. I think they are consummate, and in fact
in the lock box, we are saying that the Appropriations Committee
can't rearrange things once the Congress has voted on it. It is the
same exact concept.

Mr. Zeliff. I just want to compliment you all on a great idea,
and I think A to Z equally is a great idea. I think any time that
we are in a process where we have $4.7 trillion debt, the next 5
years we are going to see that raise another trillion dollars, any
time we have a process that we have 200 and I guess $12 billion
worth of interest in year and it is going to project — continue along
the same grade level as our deficit, we can't really put it to the
bank, for example, and ask for more money.

Anybody answering that question would be crazy to give us more
money under those conditions. We have got to turn things around

230

and I think we have got to start looking at new ideas to do that
and I think certainly the lock box idea is one that is well worth —
the idea, the new idea, that we ought to, one of many, including
the A to Z again, and I will tell you, I think it is such a good idea,
that, Mr. Chairman, I will make this statement, that I have heard
a lot of testimony today, that I am going to be on that bill tomor-
row morning, first thing, and I encourage Mr. Schumer, Mr. Ed-
wards and Mr.

Mr. Schumer. But you were not going to change it to A to Z. Our
bill is B to S, Brewster to Schumer.

Mr. Zeliff. Mr. Schumer, are you going to join? Mr. Schumer,
did I hear you write? Can we put you down:

Mr. Conyers. No solicitation.

Mr. Schumer. I said you are not going to call our bill A to Z even
if you are on it. We are calling ours B to S.

Mr. Zeliff. I am only suggesting that you and Mr. Edwards and
Mr. Brewster join the wisdom and the commitment of your col-
leagues, Mr. Hastert and Mr. Crapo, who are on the A to Z, but
either way, and again, whether they are complementary or just
plain good ideas, we have got to do something different and it is
about time, that we are all willing to take the risk and we have
got to look at entitlements. We have got to stop playing games. We
have got to stop in terms of earthquake aid bills and tacking a
whole bunch of garbage on it, not paying for bills and passing it
on to future generations, things like supercollider and taking the
money and playing games with people back home thinking we are
really saving money but actually spending it and recycling it in
new Federal dollars is crazy. So I just — I think that is the extent
of it. I certainly agree with your concept and will support it and
I thank you, Mr. Chairman.

Mr. Conyers. You are not taking any chances, are you?

Mr. Brewster. Mr. Chairman.

Mr. Zeliff. I had a chance. I think there are three guys here,
along with Mr. Spratt, that might be partners and I don't want to
do anything to change that.

Mr. Brewster. Mr. Chairman, before Mr. Spratt gets away, I
would like to correct a point here. You made a point awhile ago,
could a person, if they had this great and wonderful program out
there, bring an amendment to the floor and put money in it out of
the lock box? The answer is they can, because this account operates
in the bill just like any other account.

Once the bill is passed, however, it is — the money is in the lock
box, but as you know, this time we have had some appropriation
bills that hung around out there for weeks, and while money may
be cut early on and it would go to a particular point, if in the wis-
dom of the House somebody can bring an amendment to put money
in a particular program, until such time as the bill passes, that
could be done.

The other thing, Mr. Zeliff, what you mentioned on the
supercollider is one of the very reasons why our program works. It
is very simple and we would certainly like to have your
coauthorship.

Mr. Zeliff. I think I already said I was going to do that.

Mr. Brewster. You are a good man.

231

Mr. Zeliff. Unless you change my mind. Would you consider —
no.

Mr. Conyers. Gentlemen, let's stay in touch regarding any wit-
nesses that you might want to testify, because we are going to have
more hearings on this. As the leaders of this measure, you have
others you want to refer to us outside of the Congress and we
would be happy to entertain them as future witnesses.

Thank you very much for your contribution.

Mr. Brewster. Thank you, Mr. Chairman.

Mr. Conyers. You are welcome. We will next hear from Chris
Cox, member of the committee, whose measure, H.R. 2929, would
require a joint budget resolution which must be signed into law,
prohibits baseline adjustments and requires support of two-thirds
of the Members of both Houses to spend in excess of budget levels.

Welcome to the committee and we are delighted to hear you give
us any additional details of your measure. Your full statement will
be replicated in the hearings record in its entirety.

STATEMENT OF HON. CHRISTOPHER COX, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Cox. I thank you very much, Mr. Chairman, and I am de-
lighted to be here. I admire your stamina. This hearing, as I under-
stand it, started an 11 a.m. It is now 9V2 hours later and you are
still here, so there isn't any doubt about the committee's commit-
ment to considering seriously proposals for budget reform. It is a
very core part of our jurisdiction and it is also a very core issue
for the American people right now.

Senator Shelby, Senator Lott, and Congressman Stenholm, who
testified here earlier, all send their regards and their testimony for
inclusion in the record. I will not refer to that testimony directly,
but each of them — and I know that Congressman Stenholm spoke
briefly about H.R. 2929 during his earlier testimony — each of them
wanted very much to be here. Given the schedule, it was a little
tough to get all four of us here.

Mr. Conyers. We welcome their statements into the record.

[The prepared statement of Mr. Shelby follows:]

232

STATEMENT OF SENATOR RICHARD SHELBY

SUBMITTED TO

THE SUBCOMMITTEE ON LEGISLATION AND NATIONAL SECURITY OF THE

HOUSE GOVERNMENT OPERATIONS COMMITTEE

JUNE 29, 1994

I thank the Chairman for the opportunity to submit my
comments on budget process reform to the Committee today. I was
pleased to join Senator Lott in sponsoring Congressman Cox's
Budget Process Reform Act in the Senate and appreciate the chance
to speak in support of the bill today.

I have long been concerned with not only how much Congress
spends each year, but also with the way Congress spends federal
dollars. Over the years, several attempts have been made to
address the first problem- -how much- -but few have sought to
reform the second- -the process by which we go about spending
federal dollars. And, I believe, it is only by reforming the
process by which we spend that we will ever be able to gain
effective control over Congress's excessive spending habits.

Next year, we will pay close to 300 billion dollars just on
interest on the debt or about l/5th of our budget for 1995.
Because we will spend so much of our budget just financing our
national debt, it is apparent that we are not effectively
addressing our chronic deficit and national debt problems.

Although "deficit reduction" was the justification for last
year's tax bill which raised over 230 billion dollars in new
taxes, federal spending is scheduled to increase from around 1.5
trillion to over 1.8 trillion by the year 1998. So at the same
time Congress was raising new taxes, it was also increasing
spending.

Most legitimate spending cut proposals have met with
relatively little success in both the House and Senate, and those
spending cut proposals that have achieved any modicum of success
have usually had nothing to do with actually lowering spending or
the deficit, but instead only authorized a shift in spending.
Without lowering the spending caps, spending cut proposals
represent nothing more than a reconf igurement of federal spending
priorities .

In light of these experiences, it has become increasingly
clear that our chronic deficit and mounting debt are a result of
Congress's institutional spending practices. They reflect a
weakness for greater spending; and only by changing how Congress
spends money, the process by which it spends federal dollars- -
can we positively affect our long-term deficit and debt future.

Our annual budget process lies at the core of our spending
problems . Our current budget . process favors increased federal

233

spending, is impotent in enforcing current budget ceilings, and
remains hostile to cuts in federal programs. In short, the budget
proces itself is impervious to efforts to cut the federal deficit
and balance the budget.

Thus far, Congress has sought simple, politically expedient
remedies to its complex fiscal ailments. Without the
institutional capability and resolve necessary to cut spending
levels and reel in the growth of federal spending, significant
"deficit reduction" will remain illusive.

Earlier this Congress, Senator Lott and I joined the efforts
of Representative Cox in offering a budgetary framework that is
receptive to curbing federal spending and balancing the budget.
The Budget Process Reform Act would reform the process to provide
greater budget discipline and stronger budget enforcement
mechanisms .

Specifically, the Act would require that a legally binding
budget resolution be in place prior to the consideration of any
appropriations or authorization bills. Such a budget would fit on
one page, setting aggregate spending totals for each of 19
spending categories .

The Act would eliminate baseline budgeting and require that
all entitlements, excepting Social Security and interest on the
debt are given fixed- sum appropriations. In addition, in order to
have effective enforcement, the bill would require a three-
fifths vote to spend over-budget and would grant the President
enhanced rescission authority when a budget category exceeds its
allowable spending level.

Mr. Chairman, this is effective legislation. It establishes
a process for spending federal dollars that imposes discipline
and order while providing the flexibility to prioritize federal
spending without draconian measures such as across-the-board cuts
or unlimited line- item veto authority.

It is imperative, I believe, that we change how we spend
federal dollars if we are ever to retake control of our budget
and ultimately, our economic future. The Budget Process Reform
Act would help us do that and it is my hope that more of our
colleagues in both the House and Senate join us in our effort to
see that it does.

# # # •

234

Mr. Cox. We now have 181 sponsors in the House comprising a
significant chunk of Democrats, as well as Republicans, as you can
tell by the sponsorship in the Senate. The bill over there is Diparti-
san, as well.

I say that because I started out working on this on the Repub-
lican side. I first put together mostly Republican sponsors and then
went across the aisle to begin to work with my Democratic col-
leagues. The consequence of that is that we have more Republicans
than Democrats for no real reason other than the sequence of
events.

I want to stress that because the way Congress works, my smile
and handshake on the floor aren't enough to get Democrats to jump
on a bill that I have written. It will require Democrats to champion
the cause and sell it to other Democrats if we are going to get a
bipartisan majority. But the reason that is likely in the case of this
bill is that unlike most of the other sweeping proposals that deal
with the big ticket issue of deficit spending, our $200 billion annual
deficit this bill doesn't tinker with numbers. It doesn't have any
caps.

It doesn't have any preference for one kind of spending over an-
other. It doesn't tell us to balance the budget. It doesn t do any-
thing that can be considered political in that sense. It doesn't put
the thumb on the scale in behalf of guns or butter.

In fact, it is utterly consistent with this bill that Congress could,
by majority vote, double the amount of Federal spending next year
from this year. Nonetheless, even though Congress retains its full
authority to do this, the procedures make that result less likely,
and make budget discipline and an organized spending process
more likely.

The reason is that the current system is really a nonsystem. Re-
placing it with one that works can have a dramatic impact on the
outcome. A lot of people argue whether process matters at all. I am
sure after listening for 9 hours, you are convinced, if you weren't
before, that process does matter.

But we have heard in debates on the floor that what is really re-
quired is courage. We have got to make the tough choices. We nave
got to swallow castor oil and until we are willing to self-immulate,
these problems won't be fixed. My view is just the opposite.

It is that if our salvation requires every single Member of Con-
gress to act against his or her constituents interest, we are going
to fail. We must have a process that indulges the predilections and
influences and incentives already operating for political reasons
and constitutional reasons on individual Members — and which
nonetheless comes up with a better result. And that is what the
Budget Process Reform Act does.

We have first got to ask ourselves what we expect of a budget.
It is worth taking out a blank sheet of paper and drawing up that
list, what should our budget do? Why do we want to have a budget?
Is it worthwhile? I know that our new chairman of the Appropria-
tions Committee argued earlier today that we shouldn't even have
a Budget Committee and that we don't need this function. But if
we are going to have it, what can it do to help us?

A budget process that works should do the following. First it
ought to be clear and understandable.

235

Right now not only the American people, but many Members of
Congress are mystified by our budget process. They don't know
what 302(b) allocations are, how tne current services baseline
works, or the purpose of undistributed offsetting receipts. A lot of
the budget process has the direct and intended effect of mystifica-
tion. Therefore, at least the public, if not many Members of Con-
gress, are functionally excluded from participation in the budget
process. But a good budget process would be clear and easy to un-
derstand. Even if we are going to continue to disagree about how
we spend our money, we shouldn't be confused about what is hap-
pening.

Second, it ought to be evenhanded with respect to the roles of the
President and the Congress.

Third, it ought to impose strict discipline.

Fourth, it should be simple so that the process is clear and un-
derstandable to Congress and the public.

Fifth, it should encourage early consultation between the Presi-
dent and the Congress.

We have seen in years past what happens when we wait until
the very end of the fiscal year to deal with appropriations. We shut
down the government; we play a game of chicken with $1V2 trillion
enterprise. We should produce binding decisions on overall budget
levels early in the year, rather than procrastinating and waiting
until the 11th hour.

Sixth, and most important of all, we should tie all of the individ-
ual spending decisions that we make, not just in our Appropria-
tions Committee, but in authorizing committees — to an overall
plan. That is what a budget is all about. It should be a forecasting
tool and a planning device.

Seventh, we should require explicit decisions on spending levels
for all Federal programs, not just those which are arbitrarily
deemed to be controllable. It is not consonant with the concept of
a budget that much spending operates outside a budget, on auto-
pilot.

Eighth, this new budget process shouldn't raise any difficult
questions of constitutionality. It should be very straightforward. Fi-
nally, we should build in a bias in favor of spending restraint that
could be overcome only if Congress wants to do so.

So these are the features of the budget process contemplated by
the Budget Process Reform Act.

To meet these objectives, the bill imposes the fundamental re-
quirement that there be a budget first, and spending second. The
budget, to be an effective planning tool, has got to come up front
in the process. That is a simple matter for most people outside of
Congress to understand and it should be a central part of our budg-
et process. Until a binding budget is signed into law, the Budget
Process Reform Act requires that no authorization or appropria-
tions bill could come before either House or before any committee.
We have got to have the budget in place first.

The budget should be simple, and therefore, under the Budget
Process Reform Act it is one page long.

In the existing system, the President starts off the process by
sending up hundreds of pages of budget detail. This does nothing
more than brew controversy. Members of Congress all open the

236

budget book to the page that contains their program and find out
whether it is underfunded or missing. If either of those is the case,
they declare the budget dead on arrival. We declare the President's
fiscal priorities all out of whack.

What Congress needs to do is function as a board of directors.
We are a big group. We are 535 people. We should be making
broad policy decisions to guide our government, rather than start-
ing out the process with attempted micromanagement. And yet the
1974 act builds in micromanagement. It drives us down the wrong
course from the first.

So under the Budget Process Reform Act, the one-page budget
comes before the President's budget submission. Congress will ask
the President to sign the budget into law — the bill will make the
budget a joint resolution. But this budget law is only the aggregate.
It is only the big picture. The President's detailed budget submis-
sion won't be due until 15 days afterward. That, by the way, is ex-
actly what President Clinton actually did in his first budget year.
He waited until after Congress passed a budget resolution before
he submitted his own budget. It worked very well. It happened to
violate the 1974 act, but it is a better system and it is one that
we should use.

Now, I am sure people have observed often today that whatever
budget reforms we come up with, Congress might find a way to end
run. We have got to make sure that whatever we do is enforceable.
The Budget Process Reform Act, more than anything else, is an in-
tegrated system of enforcement mechanisms. It is designed to pre-
vent all known methods of cheating.

The first is the super majority requirement. Congress can set the
budget at whatever level it wants. But, if Congress seeks to spend
outside the budget that it just passed, and then a super majority
will be required to break the budget. This is merely a requirement
that Congress obey the budget law it just passed. We need to follow
the law that we just passed only for that very same fiscal year. But
we must be serious about our budget, at least for that one fiscal
year, and in order to break our own budget, we will have to get
a super majority vote.

If Congress breaks the budget, the President will get a new en-
forcement tool. It is not the line item veto, which Congressman
Stenholm and others are not enthusiastic about, but line item re-
duction, not only is Congressman Stenholm enthusiastic about this
veto, but so too are several people who are concerned about the bal-
ance of power between Congress and the President. They find line
item reduction to be a superior alternative.

Line item reduction, which is what I call this variant of en-
hanced rescission in the context of the Budget Process Reform Act,
would give the President the power to pare back over-budget
spending to the level that Congress set in its own budget in the
form of a law. That is the President's job. He is supposed to be the
enforcer of the laws that Congress has passed.

The Congress will also be required to budget for all accounts, ex-
cepting only interest on the debt and Social Security, which has an
earmarked tax and its own trust fund. "Such sums' appropriations
would be abolished. In that fashion, all spending will be brought
within the discipline of the budget process.

237

The Lugar amendment to the Food Stamp Program illustrated
how this mechanism for appropriated entitlements — the Cabinet
Secretaries — in the case of Food Stamps adjust benefit and eligi-
bility levels requirements so that the Secretary of Agriculture —
would be empowered to adopt regulations that the program costs
what Congress appropriated for it.

Again, we are not telling Congress to cut spending in any of
these programs. We are only telling the American people that we
are going to bring entitlement programs within the budget process
and affirmatively decide how much we want each program to grow.

To maintain the integrity of congressional control over the legis-
lative process, the Congressional Budget Office, not OMB, will be
the scorekeeper for determining whether a particular spending bill
is within or without the budget that we pass.

The Budget Process Reform Act outlaws budget waivers. I men-
tioned that most of the time Congress end-runs the requirements
we have already got. The 1974 act is a good example of that.

Mr. Cox. In the 102d Congress, half of all of the rules adopted
by the House waived the Budget Act in its entirety. We are all fa-
miliar with how that works. Waivers of the Budget Process Reform
Act on the other hand will be subject to a super majority vote on
the floor of the House.

Another is avoiding government shutdowns priority that I men-
tioned earlier. The Budget Process Reform Act provides a safeguard
against the contingency that on October 1, the start of the fiscal
year, Congress and the President have as yet done nothing. In that
case, the previous year's funding levels would be automatically
reappropriated. This automatic continuing resolution would apply
to all accounts except interest and Social Security.

The political reality of this mechanism for avoiding government
shutdowns is that neither the Congress nor the President will want
to live with last year's priorities. It will, therefore operate as an in-
centive for people to do things on time. Its essential function is to
avoid procrastination and delay, so that we don't go beyond the
start of the next fiscal year without the budget process having been
completed.

Today's nonsystem mocks the law. The 1974 act is observed in
the breach, if at all. Every year since the law was passed we have
had a different budget process. Sometimes it might take the form
of ad hoc negotiations at Andrews Air Force Base. Another time it
might be a yearend CR or reconciliation bill but in no case is it
what the 1974 act says it is supposed to be.

When it took place out at Andrews, the people who were there
weren't even the chairs of the budget committees. We have to have
a legal system that Congress follows and that makes sense. That
is why it is time to fix the 1974 act in the way that I have de-
scribed.

I will continue to work to gain the necessary bipartisan support
for a bill that is not a silver bullet that does not promise to balance
the budget, and that does not promise to do anything but organize
our affairs. I will do so because the better organized our financial
affairs are, the more likely it is that we will achieve our deficit ob-
jectives reduction and the more likely it is that the priorities of the
1990's will rise to the top while the hoary and ancient spending

238

that is built into our system will finally give way. That is the
Budget Process Reform Act in a nutshell, and I appreciate the op-
portunity to talk to you about it.

[The prepared statement of Mr. Cox follows:]

239

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AN ENFORCEABLE BUDGET:
KEY TO SPENDING RESTRAINT

TESTIMONY OF THE HONORABLE CHRISTOPHER COX
MEMBER OF CONGRESS FROM CALIFORNIA

BEFORE THE SUBCOMMITTEE ON LEGISLATION AND

NATIONAL SECURITY OF

THE HOUSE COMMITTEE ON GOVERNMENT

OPERATIONS

JUNE 29, 1994

Mr. Chairman:

Congress simply has abdicated its control over most government
spending. Every year Congress in effect writes a blank check for welfare and
other so-called "entitlements" it declares "uncontrollable."

Congress fails spectacularly to control even the things it declares it can
and will control. Year after year, Congress violates the deadlines and ceilings
it has established to regulate the way it spends money.

With just cause, the people of the United States are clamoring for lower
taxes, less government, and less government spending. An overwhelming
majority of both Houses of Congress have voted for a constitutional
amendment requiring a balanced budget.

The citizens of this country have made it plain: They are demanding
that Congress accept fool-proof discipline in the way we spend their money.

For this reason, 180 members of the House from both parties have
joined as sponsors of the Budget Process Reform Act, H.R. 2929. Preparing
this legislation was a bipartisan exercise. We drew upon the experience and
ideas of Democratic and Republican Administration officials, congressional
leaders, and academic experts across the past seven decades.

240

Our study found that the chronic failure to balance the budget is the
inevitable result of a poorly designed congressional budget process. This
process not only permits but actually encourages violation of the very laws
1 designed to force rational choices among competing priorities. The process
virtually guarantees wasteful spending and financial chaos. Any sincere effort
at deficit reduction must be based on reform of our broken-down budget
process.

Not least among the reasons that the system is subject to manipulation
and abuse is that very few people understand how it works. Even within
Congress itself, terms like "current services baseline," "section 302(b)
allocation," and "undistributed offsetting receipts" often produce blank stares.
The budget committees, whose members should have the incentive and
opportunity to understand the process, are powerless to enforce the law.

We must adopt a new budget system worthy of the people's trust. It
must be strong enough to withstand the wiliest efforts of those who don't want
to accept restraints on spending. It must be strong enough to survive the
inevitable attempts to replace it with some less restrictive expedient.

The hallmarks of the Budget Process Reform Act are clarity,
evenhandedness regarding the role of the President and Congress, and strict
discipline. It is based on the premise that an effective budget process must do
each of the following:

o Be as simple as possible in concept and means of

implementation, so that the process is clear and understandable to
Congress and the public;

o Encourage early consultation and cooperation between Congress and
the President;

o Produce decisions on overall budget levels early in the budgeting year;

o Be evenhanded with respect to the President and the Congress, not
giving either an advantage in dealing with the other or in establishing
spending priorities;

o Tie each individual spending decision to an overall, binding budget total;

o Require explicit decisions on spending levels for ail federal programs,
not just those arbitrarily deemed "controllable;"

241

o Prevent threatened shut-downs of the government;

o Not raise difficult questions of constitutionality;

o Contain a bias in favor a spending restraint that could

be overcome only if both the President and the Congress wish to do so.

Here are the key features of the Budget Process Reform Act:

Budget First. Spending Second: This proposal would require that
Congress enact a legally binding budget (in the form of a joint, rather than a
concurrent resolution) by April 15 of each year. Until the budget is signed
into law, no authorization or appropriations bill could come before either the
House or the Senate floor, or before any committee. The budget would set
ceilings on all federal spending (except Social Security and the interest on the
debt) for the coming fiscal year. The President would submit his highly
detailed budget proposal only after having signed into law the simple, 19-line-
item Congressional budget resolution.

The Act's requirements, if followed, will end the current chaos of the
budget process. But experience has shown that Congress will seek ways to
avoid—if not simply ignore and violate-any legal requirement aimed at
promoting fiscal responsibility.

We must not slide down that road again. The people have lost patience
with government waste and smooth-talking congressional deception. We must
ensure that Congress will no longer be able to escape the discipline of a
reformed budget process. That is why the Budget Process Reform Act
establishes a series of enforcement mechanisms which, in effect, lock the door
on all the exits— and even deny Congress the tools to pick the locks.

The Supermajority Requirement: First, Congress would be permitted to
enact spending legislation in excess of its own budget law enacted fhat year
only by a supermajority vote. The only way to adopt spending proposals by
simple majority would be to authorize and appropriate within the ceilings of a
duly enacted budget law.

No More Blank Checks: The Act will require Congress to determine the
desired level of spending for each federal program except Social Security and
interest on the debt. Open-ended "blank-check" appropriations-such as those
for entitlement programs, which authorize the spending of "such sums as may
be necessary"~would no longer be allowed. Instead, the one-page budget
enacted by Congress would include spending on entitlement programs.

242

Line-Item Reduction: If Congress spends in excess of its own budget,
the President would be granted "line-item reduction" authority. That is, the
President could pare back the over-budget portion of any spending to the level
set by Congress in its own budget. The President's reduction could be
overridden by Congress through legislation expressly disapproving the specific
rescission.

This "line-item reduction" authority is applicable only to the over-budget
portion of the proposed spending. In the event that Congress failed to adopt
any budget at all, the President would get the same authority to cut back any
spending in excess of the previous year's levels.

Line-item reduction is actually preferable to a line-item veto. A veto
gives the President the power to eliminate an entire category or program with
the stroke of a pen. But a line-item reduction would give him the power to
reduce over-budget programs incrementally, leaving intact that portion of the
program which has been budgeted by Congress. And a veto must be exercised
within 10 days after a bill is sent to the President, whereas line-item reduction
can be exercised at any time during the fiscal year.

To maintain the integrity of congressional control over the legislative
process, the Congressional Budget Office, not the Office of Management and
Budget, would be the "scorekeeper" for determining whether particular
authorization and appropriations measures are consistent with the budget.

No More Budget Act Waivers: In recent years, one of the most
notorious ways that Congress has cheated the budget process is to "waive" the
requirements of the 1974 Act. In fact, during the 102nd Congress, half of all
rules adopted by the House waived the Budget Act. Waivers of the Budget
Process Reform Act will be subject to a supermajority vote on the floor.

Avoiding Government Shutdowns: Finally, the Act provides a safeguard
against the contingency that on October 1 , the beginning of the fiscal year,
Congress has failed to complete action on appropriations for all or part of the
budget. In that case, the previous year's funding level would automatically be
reappropriated for the upcoming fiscal year. This "automatic continuing
resolution" would apply to all spending, except Social Security and interest.
An added virtue of this sustaining mechanism is its bias in favor of spending
restraint. If no action is taken, spending does not increase from year to year.

Today's system mocks the law. It perpetuates gridlock. It treats
spending as "uncontrollable." And I believe the greatest scandal is that our
system is designed to keep the taxpayers confused.

243

Through the Budget Process Reform Act, we will enforce the law. We
will require cooperation between the President and Congress. We will bring
entitlement programs under budget control. Above all, we will make the
system clear and understandable to the people whose money we are spending.

Mr. Chairman, I believe Congress can do what it must do. We can win
back the people's trust. I believe the time is coming when a majority in the
Congress will recognize it must accept this kind of reform. Unless Congress
intends to mock the majority of Americans clamoring for tight control of the
federal budget, we must enact a tough new budget enforcement law.

Thank you, Mr. Chairman. I would ask that the full text of my remarks
be included in the record at the appropriate point, together with the statements
of Senator Lott and Senator Shelby, who were unable to be here today.

# # #

244

Mr. Conyers. Well, thank you very much. You have done an ex-
cellent job of separating the concept from lock box and A to Z, and
I think there is a great deal of merit in this third path that I see
emerging. Because you are trying to put concepts and principles
into place rather than just additional numerical limitations and
procedures that where we may not be able to predict what their ul-
timate effect is going to be.

Sometimes those unintended consequences take over, and you
create a whole new set of problems, as we have seen happen time
and time again.

So I want to thank you for bringing your proposal forward, and
I think the proof of the growing numbers and the bipartisan sup-
port testify that you are on a path that more and more people will
be considering. We will be holding more hearings on it, so we invite
you to submit any witnesses that you might want us to consider
when we go into more detail on your measure.

Mr. Cox. Well, I appreciate it. As I said at the outset, I am
amazed you are all still here.

So thank you very much.

Mr. Conyers. We won't be here much longer.

Mr. Cox. Good.

Mr. Conyers. You are the final witness. Bill Zeliff.

Mr. Zeliff. Thanks, Mr. Chairman. I am not going to ask any
questions; I think you are on to something that makes a lot of
sense, and I appreciate you coming before us, and we will look for-
ward to any additional testimony as we have additional hearings.

But again, today has been an excellent hearing and in listening
to a whole bunch of ideas, most of which I certainly support, but
I certainly support what you are doing, so thank you for coming be-
fore us.

Mr. Cox. Thank you very much. I appreciate the work you have
been doing.

Mr. Conyers. Mr. Spratt.

Mr. Spratt. Thank you, Mr. Cox.

Mr. Conyers. Chris Cox, we appreciate your contribution to this
budget reform process. Thank you very much.

Mr. Cox. Thank you.

Mr. Conyers. And the subcommittee stands adiourned.

[Whereupon, at 8:50 p.m., the subcommittee adjourned, to recon-
vene subject to the call of the Chair.]

BUDGET PROCESS REFORM

THURSDAY, AUGUST 4, 1994

House of Representatives,
Legislation and National Security Subcommittee

of the Committee on Government Operations,

Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room
2154, Rayburn House Office Building, Hon. John Conyers, Jr.
(chairman of the subcommittee) presiding.

Present: Representatives John Conyers, Jr., John M. Spratt, Jr.,
Al McCandless, and William F. dinger, Jr.

Legislation and National Security staff present: James C. Turn-
er, staff director.

Full committee staff present: Frank Clemente, senior policy advi-
sor; Kevin Cronin, associate counsel; Mechita O. Crawford, staff as-
sistant; and Martha B. Morgan, minority professional staff.

Mr. Conyers. Good morning. The Subcommittee on Legislation
and National Security will come to order.

We continue the hearings on proposals to reform the Federal
budget process. The current budget process reform proposals are
driven by a desire to reduce the deficit, so it is first worth review-
ing Congress' latest accomplishments at deficit reduction.

Last year, Congress cut $500 billion through budget reconcili-
ation. These budget cuts, combined with the robust economy,
should reduce the deficit below $170 billion in the fiscal year 1995.
That is more than $100 billion less than the deficit projected when
President Clinton took office, representing a 40 percent cut in the
deficit inherited by the President.

For the first time since Harry Truman, the budget deficit will de-
cline 3 years in a row.

On the legislative front, much has happened since we began
these budget process reform hearings a month ago. Last month, the
House adopted H.R. 4604, legislation introduced by our colleague
from South Carolina, Mr. Spratt, to better control entitlement
spending.

It is a responsible, yet flexible piece of legislation. If entitlement
spending exceeds the targeted level, the President can decide to re-
cover some, none, or all of the increases. If savings are needed, the
President must recommend legislation to achieve the savings. Nor
can we hide. The Congress must meet the President's rec-
ommended savings through reconciliation, or vote to raise the enti-
tlement targets to reflect the increases.

(245)

246

Also, the House passed H.R. 4600, expedited rescission authority,
strengthening the Presidents authority to cut spending on a line
item basis.

These are very significant steps, and they represent a clear re-
sponse to the concern of all Members for greater control over Fed-
eral spending.

Just as this committee has contributed to the development of
these previous reforms, we will continue to fulfill our obligations to
the House to serve as a forum for considering other refinements to
the budget process. And that is what we will be doing today.

We will continue to air difficult and sometimes controversial
budget process reform issues, including examining proposals to re-
form emergency spending laws. We need to know whether or not
there is a better way to provide urgently needed money to dis-
tressed people, regions and cities without making an exception to
spending caps.

We will also consider recommending further ways to cut spend-
ing, such as base closure-style commissions. Some Members want
Congress to change the way new property is scored to facilitate its
acquisition.

Others want the Federal budget to show the below-cost sale of
resources to properly reflect the cost to taxpayers of mining and
grazing on Federal lands.

The legislative process of budget reform is moving forward, and
given the interest of Members on all sides, a thorough review of all
issues is required. These issues should not be buried from view, but
neither should we rush blindly down an unwise and untested path.

So I look forward to hearing from our colleagues who are here
today, and I recognize the gentleman from California, Mr. McCand-
less.

Mr. McCandless. Thank you, Mr. Chairman.

In the interests of moving forward and getting to our subject, I
would waive any opening remarks and welcome our guests at tne
appropriate time.

Mr. Conyers. Thank you very much.

Do you have any comments, Mr. Clinger?

Mr. Clinger. Just, Mr. Chairman, to ask unanimous consent
that my opening statement might be submitted for the record.

Mr. Conyers. Without objection, so ordered.

[The prepared statement of Mr. Clinger follows:]

247

Statement of the Hon. William F. dinger, Jr.

Subcommittee on Legislation and National Security

August 4, 1994

Thank you, Mr. Chairman. I'd like to commend both you and our
witnesses for your continued commitment to a thorough and wide-
ranging discussion of the many budget issues confronting this
Congress. As our persistent $200 billion dollar deficits and $4.6
trillion dollar debt clearly show, this is a problem which must be
addressed through serious process and spending reforms.

My only regret, Mr. Chairman, is that this committee is not being
allowed to put its knowledge to use. Once again, we have waived
jurisdiction over the budget process — we have declined to mark-up
the two budget bills which will reach the Floor next week. As a result,
even though our first witnesses will be sponsors of the major
emergency spending reform bills now pending before the House,
those Members will have to petition the Rules Committee for
consideration during mark-up and on the Floor. Government
Operations has again missed the opportunity to help craft the best

248

and strongest bill possible, and neither our Members, nor the House,
nor ultimately, our constituents, have been well served. I urge you
and the leadership to reverse this unfortunate trend by allowing our
Members to employ their expertise in these much-needed reform
efforts. Allow us to mark-up these bills to help bring federal spending
under control.

249

Mr. Conyers. Mr. Spratt.

Mr. Spratt. Thank you, Mr. Chairman.

As the chairman knows from my meeting with the leadership, we
will be moving additional budget process legislation. We hope to
take up in the near future a bill that will clarify what can be in-
cluded and cannot be included on emergency spending bills.

In addition, we hope to take up a bill which will deal with the
presentation of the budget to ensure that there will be a current
funding or an existing funding level as the first line with which to
compare the year's appropriation or the year's budget request,
functions, and subfunctions, when it is presented to the Congress.

In addition, in the near future we hope to have legislation that
will respond to three different bills, at the last count, which provide
for the idea of having a lock box or a way of not only cutting spend-
ing items but also carrying those items over the discretionary
spending limit and reducing that limit to that amount. This hear-
ing is to give us an opportunity to offer and consider those ideas
in providing that legislation.

So, I thank all the witnesses for appearing. I thank the chairman
for calling the hearing.

Mr. Conyers. Thank you.

We will start off with the former Governor of Delaware, now our
colleague, the Honorable Michael Castle. We will ask Sam Johnson
of Texas to join you, if you don't mind.

We began the hearing considering emergency spending reform
and the issues that revolve around this subject.

And we are delighted to have you start us off, Mr. Castle. You
have had some experience in both directions on this, and we would
be delighted to hear from you.

And I would ask unanimous consent that your testimony and all
of the witnesses' today be incorporated in full in the record.

Welcome. You may begin.

STATEMENT OF HON. MICHAEL N. CASTLE, A REPRESENTA-
TIVE IN CONGRESS FROM THE STATE OF DELAWARE

Mr. Castle. Well, thank you very much, Mr. Chairman. Con-
gratulations to you, sir, in your recent victory.

I would like to ask unanimous consent to submit a statement in
full and I will try to summarize my position here today.

First of all, I listened to your statement, and indeed to that of
the others who spoke here, and do agree that a number of things
have happened in recent years which are of a positive nature with
respect to budget processes on the Federal Government level. And
I do believe the Federal Government's budgeting is as difficult as
probably all the States put together. So there is nothing simplistic
about the answers that we need to achieve.

Having said that, I still think that the Federal Government is
very inefficiently run, both not only in terms of what we do in Con-
gress, and I think we need to make some changes there, but in
terms of how we deliver the services and what we expect of the
people who work for us.

And I am very pleased that this committee under your leadership
is looking at this issue as is the full Congress. I hope it is some-
thing that continues for the next 10 or 12 years until we have proc-

250

esses which the public recognizes are probably in order as far as
coming to the bottom line expenditures and how we deliver our
services.

Under current law, emergency spending is not subject to annual
budget limits and deficit reduction requirements. Congress does not
have to plan for the costs associated with natural disasters or other
emergencies. When a disaster occurs, as we all know, Congress
simply appropriates emergency funds. These funds do not have to
be offset by other cuts and they are added to the deficit.

In addition, as we have seen even in the IV2 years that I have
been here, Congress often adds funds for unnecessary pork-barrel
projects to the emergency bills, including other appropriations for
emergencies beyond the one that is under consideration.

I consider this to be very poor public policy. While we cannot pre-
dict the exact time and nature of a disaster, it is quite probable
that they will occur. And Congress should make an attempt to plan
and pay for these emergencies within existing budget limits.

My legislation, H.R. 4189, I hope would be a solution to this. And
it does the following.

This legislation would help restore planning and accountability
to budgeting for natural disasters by making emergency appropria-
tions part of the annual budget process, and holding these funds
in a budget reserve account ior emergencies. This, by the way, is
done in many States today.

The legislation would require Congress to annually appropriate
funds in a budget reserve account to pay the cost of natural disas-
ters or other emergencies. These funds would be included under
the annual discretionary spending caps set by the budget resolution
and administered by the appropriations committees.

The reserve account would lower the amount of funds available
for other programs, the only responsible approach to spending, and
that obviously would include tough decisions. If the reserve funds
are not used during a particular year, they would be used for defi-
cit reduction. That is returned to the U.S. Treasury.

Congress would be forced to set aside an adequate amount of
funds in the account because the emergency spending authority
would be eliminated. The average cost of these bills has been $2.5
billion since 1989. If Congress set aside that amount each year, we
would go a long way toward reducing the deficit.

That is iust a suggested amount based on the historical record
which we have examined carefully. The Office of Management and
Budget would be required to report to Congress each year about
how the funds were spent, and the reserve account would begin in
1996.

Now, some existing laws would have to change, and briefly they
would be: the bill would amend the Congressional Budget Act of
1974, to create the reserve account that requires that these funds
be included in the annual budget resolution and section 602 alloca-
tions administered by the Appropriations Committee, and the bill
would amend the Balanced Budget and Emergency Deficit Control
Act of 1985, which we all know is Gramm-Rudman-Hollings, to re-
peal the authority for Congress to appropriate emergency funds not
subject to budget limits.

251

I understand the process here. I understand that the legislation
Mr. Spratt is sponsoring is apparently going before the Rules Com-
mittee. And I have also asked the Rules Committee to consider this
as an amendment as a proper part of the process. But I would hope
that parts of this, if not in its entirety, would be considered as the
next natural progression to deal with the area of emergencies.

I will say finally, as I look at the budget process in this Congress,
if I had to point to one area of concern in terms of pork barrel-type
legislation, the kind of thing people really resent, it is in this emer-
gency appropriation situation.

And we need, in my judgment, to do something with respect to
this as soon as possible, and hopefully get to the point, if not now,
at least at some point in the future, where it is indeed under the
budget caps, part of the budgeting process, reserved for that par-
ticular purpose, and hopefully used for deficit reduction.

So I will submit my statement in full and be prepared to answer
any questions the committee may have, and yield back.

[The prepared statement of Mr. Castle follows:]

252

STATEMENT OF CONGRESSMAN MICHAEL N. CASTLE

GOVERNMENT OPERATIONS SUBCOMMITTEE ON LEGISLATION AND NATIONAL SECURITY

HEARING ON BUDGET PROCESS REFORM

AUGUST 4, 1994

MR. CHAIRMAN AND CONGRESSMAN MCCANDLESS, I APPRECIATE THE
OPPORTUNITY TO APPEAR BEFORE THE SUBCOMMITTEE TODAY TO DISCUSS
POSSIBLE IMPROVEMENTS TO THE FEDERAL BUDGET PROCESS,
PARTICULARLY IN THE AREA OF EMERGENCY APPROPRIATIONS.

I BELIEVE WE NEED TO TAKE A VARIETY OF STEPS TO IMPROVE HOW
OUR GOVERNMENT SPENDS THE PEOPLE'S MONEY. A STRENGTHENED
BUDGET PROCESS WILL NOT ELIMINATE THE FEDERAL DEFICIT, BUT IT WILL
MAKE A REAL CONTRIBUTION TO THE EFFORT AND HELP RESTORE OUR
CONSTITUENTS' FAITH IN HOW WE ARE MANAGING THEIR TAX DOLLARS.

THIS HEARING IS IMPORTANT AND I HOPE IT PRODUCES LEGISLATIVE
ACTION. THE IMPETUS FOR THIS SESSION WAS PROVIDED BY THE A TO Z
SPENDING CUT PROPOSAL AND I CONTINUE TO SUPPORT THE EFFORTS OF
BILL ZELIFF OF THIS COMMITTEE AND MIKE ANDREWS TO MOVE A TO Z
FORWARD. WE NEED ADDITIONAL SPENDING CUTS AS SOON AS POSSIBLE.

I ALSO HOPE THAT THIS HEARING IS NOT TOO LATE TO INFLUENCE
LEGISLATIVE ACTION ON THE WAY CONGRESS APPROPRIATES FUNDS FOR
NATURAL DISASTERS AND OTHER EMERGENCIES. IT IS MY UNDERSTANDING
THAT AS EARLY AS TODAY, THE RULES COMMITTEE MAY MARK-UP
LEGISLATION BEING DRAFTED BY MR. SPRATT TO LIMIT EMERGENCY

253

APPROPRIATIONS BILLS TO ONE EMERGENCY. THIS IS A WORTHWHILE
REFORM, BUT IT IS NOT ENOUGH. WE MUST CHANGE THE BUDGET RULES TO
REQUIRE CONGRESS TO INCLUDE EMERGENCY SPENDING IN THE ANNUAL
SPENDING LIMITS.

AS YOU KNOW, UNDER CURRENT BUDGET RULES, EMERGENCY
SPENDING IS NOT SUBJECT TO THE ANNUAL SPENDING LIMITS. THIS IS A
CRITICAL SHORTCOMING IN OUR SYSTEM. IT PERMITS US TO AVOID
PLANNING FOR EARTHQUAKES, HURRICANES, FLOODS AND OTHER
DISASTERS. WE KNOW THAT THEY WILL ALMOST CERTAINLY OCCUR, YET
WE FAIL TO PLAN FOR THEM. WHEN THEY DO HAPPEN WE SIMPLY DECLARE
AN EMERGENCY AND APPROPRIATE X BILLIONS OF DOLLARS TO RESPOND TO
THE DISASTER.

FROM A BUDGETING STANDPOINT, THE WORST PART OF THE CURRENT
SYSTEM IS THAT EMERGENCY FUNDS DO NOT HAVE TO BE OFFSET BY OTHER
SPENDING REDUCTIONS. THEY ARE JUST ADDED TO THE DEFICIT. WHEN
MEMBERS ATTEMPT TO OFFER AMENDMENTS TO OFFSET THE COST OF
EMERGENCY SPENDING THEY ARE ACCUSED OF DELAYING HELP TO THE
VICTIMS OF THE NATURAL DISASTER. THIS IS AN UNFAIR AND
UNNECESSARY CONFLICT.

ALSO EXTREMELY TROUBLING IS THAT BECAUSE EMERGENCY
APPROPRIATIONS ARE NOT SUBJECT TO ANNUAL SPENDING LIMITS IT
ENCOURAGES SOME MEMBERS, AND OFTEN THE ADMINISTRATION, TO ADD
FUNDS FOR PROJECTS WHICH ARE CLEARLY NOT PART OF THE EMERGENCY
AT HAND.

OC _oi n

254

MR. CHAIRMAN, WE CANNOT PREDICT THE EXACT TIME AND NATURE
OF A DISASTER, BUT IT IS QUITE PROBABLE THAT THEY WILL OCCUR AND
CONGRESS SHOULD MAKE AN ATTEMPT TO PLAN AND PAY FOR THESE
EMERGENCIES - WITHIN EXISTING BUDGET LIMITS.

I HAVE INTRODUCED H.R. 4189, WHICH WOULD CREATE A BUDGET
RESERVE ACCOUNT INTO WHICH CONGRESS WOULD ANNUALLY
APPROPRIATE FUNDS FOR EMERGENCIES. THE FUNDS IN THE RESERVE
ACCOUNT WOULD BE INCLUDED IN THE ANNUAL DISCRETIONARY SPENDING
CAPS SET BY THE BUDGET RESOLUTION AND ADMINISTERED BY THE
APPROPRIATIONS COMMITTEE. THE FUNDS IN THE RESERVE ACCOUNT
WOULD LOWER THE AMOUNT OF FUNDS AVAILABLE FOR OTHER PROGRAMS.
THIS IS A KEY POINT AND IS THE ONLY RESPONSIBLE APPROACH TO
SPENDING.

THE TEETH IN THIS PROPOSAL IS THAT H.R. 4189 WOULD ELIMINATE
CONGRESS'S AUTHORITY TO SPEND MONEY OUTSIDE THE BUDGET LIMITS.
THIS WOULD FORCE CONGRESS TO SET ASIDE AN ADEQUATE AMOUNT OF
FUNDS IN THE RESERVE ACCOUNT.

WHAT IS AN ADEQUATE AMOUNT? I TfflNK CONGRESS AND THE
PRESIDENT SHOULD TAKE A CAREFUL LOOK AT THE AMOUNT OF
EMERGENCY FUNDS NEEDED IN PREVIOUS YEARS AND BASE THE RESERVE
ACCOUNT ON THIS EXPERIENCE. FOR EXAMPLE, THE AVERAGE COST OF
EMERGENCY APPROPRIATIONS BILLS SINCE 1989 HAS BEEN $5.2 BILLION. IF
CONGRESS SET ASIDE THAT AMOUNT IT WOULD GIVE OUR GOVERNMENT

255

ENOUGH FUNDS TO HANDLE MOST DISASTERS AND PROVIDE PROTECTION
AGAINST UNNECESSARY DEFICIT SPENDING.

IF WE ARE FORTUNATE ENOUGH TO ESCAPE A HURRICANE OR FLOOD
IN A PARTICULAR YEAR AND THE RESERVE FUNDS ARE NOT USED, THEY
WOULD REVERT TO THE TREASURY AND THEREFORE LOWER THE DEFICIT.

MR. CHAIRMAN, I HAVE BASED THIS LEGISLATION ON MY EXPERIENCE
AS GOVERNOR OF DELAWARE. MOST STATES MUST OPERATE WITH A
BALANCED BUDGET. THIS IS TRUE IN DELAWARE. WHEN THE STATE HAS A
SURPLUS AT THE END OF ANY FISCAL YEAR, THESE FUNDS ARE PLACED IN A
BUDGET RESERVE ACCOUNT WHICH IS NOT TO EXCEED 5% OF THE
ESTIMATED STATE REVENUES. WHEN THERE IS AN EMERGENCY THE
GENERAL ASSEMBLY CAN ALLOCATE THE RESERVE FUNDS BY A THREE-
FIFTHS VOTE. I HAVE ADOPTED THIS PROPOSAL TO THE FEDERAL BUDGET
SYSTEM.

IN DELAWARE, THE RESERVE FUNDS ARE ROLLED-OVER FROM YEAR
TO YEAR. I DID NOT ADOPT THAT FEATURE BECAUSE IN THE FEDERAL
BUDGET AN ANNUAL APPROPRIATION IS STANDARD PRACTICE AND
FRANKLY, BECAUSE ON THE FEDERAL LEVEL ACCOUNTS WITH MONEY IN
THEM FROM YEAR TO YEAR TEND TO BE SPENT.

MR. CHAIRMAN, I BELIEVE MY PROPOSAL IS A SOUND ONE, BUT I WILL
NOT INSIST THAT IT IS THE ONLY APPROACH WHICH SHOULD BE
CONSIDERED. I THINK CONGRESSMAN SAM JOHNSON'S "LOOKBACK"
PROPOSAL HAS MERIT. HIS LEGISLATION WOULD ALSO ADJUST THE BUDGET
CAPS TO INCLUDE EMERGENCY APPROPRIATIONS.

256

THE CRITICAL CHANGE WHICH MUST BE MADE IS TO BRING EMERGENCY
SPENDING WITHIN THE BUDGET LIMITS. IT IS NOT "FREE" MONEY AND
SHOULD BE ACCOUNTED FOR JUST LUCE ANY OTHER EXPENDITURE.
I URGE THIS COMMITTEE TO APPROVE LEGISLATION THAT ACHIEVES THIS
GOAL. THANK YOU.

257

Mr. Conyers. Thank you very much, Mr. Castle. We appreciate
your prepared statement and comments.
We turn now to the gentleman from Texas, Mr. Johnson.

STATEMENT OF HON. SAM JOHNSON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS

Mr. Johnson. Thank you, Mr. Chairman. I appreciate the oppor-
tunity to be before you.

I agree with my colleague, and Mr. Spratt, too, that we have got
to do something about the way we spend money. And I hope you
will get a bill filed pretty soon so we can get on with the program.
I know you are working hard on it. And maybe you can include
some of these ideas.

I know you are well aware that, you know, in 1990, the Congress
implemented these supplementals without paying for them, since
that time we have spent a lot of money and added to the debt. And
even if you take two-thirds of the money out that was to fund
Desert Storm, we still had about $26 billion that went to the defi-
cit.

If I can enter my whole statement I will, and I will just highlight
the points, if that is OK with you, Mr. Chairman.

Mr. Conyers. Do you have a prepared statement? I don't have
it.

Mr. Johnson. Well, I have comments which I can give you.

Mr. Conyers. It doesn't matter. If you don't, it is fine. We will
have your full statement in the record.

Mr. Johnson. Thank you.

Well, this bill simply changes section 251(c)(2) in current law
that provides for a look-back provision and allows that any breach
of the discretionary caps would be subtracted from next year's
spending.

We just apply this to supplementals, which means you don't have
to set up any funds, you don't have to set up any mechanism to
do it. So it reduces the discretionary caps in next year's funding by
the amount of whatever the emergency supplemental is.

It eliminates delay, partisan bickering, and, you know, I think it
would ensure a speedy delivery of funds where we on the floor, as
you know, argue about whose money goes where and why. We
wouldn't have that argument. If it was indeed an emergency, we
could vote it through, and reduce the caps in the next year and
take care of it.

I think from a media standpoint it would stop some embarrass-
ing headlines as well for some of us who have to vote for those
things. And I am not saying that this is the reason you ought to
do it. But it eliminates the argument that reducing funding in the
current fiscal year will disrupt important programs because it
doesn't take away from them. It will reduce the deficit by paying
for disasters and not adding them to the deficit.

And it is not another hollow promise. It is a small step, in my
view, to the long road of bringing fiscal responsibility back to the
Federal Government.

And all the other proposals leave some kind of loophole for Con-
gress to bypass the system. Even if you tell the Appropriations
Committee to reduce spending in certain areas for supplementals,

258

by putting a rainy day fund in, you and I know that doesn't always
happen or they may not have the money to do it, or you don't know
where it is going to come from.

We tried this in Texas, and had a rainy day fund there, which
seemed to work except there never was any money in it. We always
managed to find a way to spend it on something at the year end.
So I think that would happen with a rainy day fund here, or it
could.

And with that, I will leave myself open to questions, and thank
you for allowing me to testify in front of you.

[The prepared statement of Mr. Johnson follows:]

259

COMMITTEE ON GOVERNMENT OPERATIONS
CONGRESSMAN SAM JOHNSON
JUNE 29, 1994
THANK YOU MR. CHAIRMAN,

FIRST, I WOULD LIKE TO THANK THE CHAIRMAN FOR
HOLDING THESE IMPORTANT HEARINGS ON BUDGET
REFORM. I AM LOOKING FORWARD TO DISCUSSING THIS
PROPOSAL WITH THE COMMITTEE.

THE BILL THAT CONGRESSMAN STENHOLM AND I BRING
BEFORE THE COMMITTEE TODAY, IS LIKE SO MANY THAT
WANT TO CORRECT THE ABUSE OF EMERGENCY
SUPPLEMENTALS. BUT OURS IS DD7FERENT BECAUSE IT
WILL ENSURE THAT "EMERGENCES" ARE PAH) FOR AND
ARE NOT CmCUMVENTED BY CONGRESS.

OUR BILL WDLL HELP CONGRESS GAIN CONTROL OF TWO
CONTROVERSIAL TOPICS, ONE BEING THE WAY CONGRESS
APPROACHES AND PAYS FOR THESE NECESSARY BUT
HIGHLY EXPENSrVE "EMERGENCY" SUPPLEMENTALS AND
THE OTHER IS THE NO WORRY ATTITUDE OF THE

260

CONGRESS TOWARD THE NATIONAL DEBT. BOTH BRING
HEATED PARTISAN DEBATES, POLITICAL POSTURING AND
DELAYS THAT ONLY INCREASE THE PUBLIC'S
DISSATISFACTION WITH THE WAY THE FEDERAL
GOVERNMENT OPERATES. THE FINAL RESULT IN THESE
SITUATIONS IS A DELAY IN AH) FOR THOSE IN NEED.

THE JOHNSON/STENHOLM BILL WILL CHANGE THAT BY
EXPEDITING "EMERGENCY" SUPPLEMENTAL BDLLS WHILE
BRINGING ACCOUNTABILITY BACK TO CONGRESS. LET ME
START BY TELLING THE COMMITTEE HOW WE PLAN TO
ACCOMPLISH THIS TASK BY SIMPLY MAKING A MINOR
CHANGE IN BUDGETARY LAW.

OUR BILL AMENDS SECTION 251 (C)(2) WHICH PROVIDES
FOR A "LOOKBACK" PROVISION. THE PROVISION STATES
THAT IF THERE IS A BREACH IN THE DISCRETIONARY CAPS
FOR THE CURRENT FISCAL YEAR, THEN THE CAPS WOULD
BE LOWERED BY THE SAME AMOUNT IN NEXT YEAR'S
FUNDING. OUR BILL ALLOWS THE "LOOKBACK" PROVISION
TO BE DIRECTLY APPLffiD TO EMERGENCY
SUPPLEMENTALS.

261

MEMBERS, UNDER CURRENT LAW, MUST HASTILY THROW
TOGETHER A PACKAGE OF SPENDING RESCISSIONS TO
OFFSET THE EMERGENCY.

THIS PACKAGE OF SPENDING REDUCTIONS GIVES MEMBERS
VERY LITTLE TIME TO STUDY OR THOROUGHLY
UNDERSTAND THE LONG TERM IMPACT OF THESE
REDUCTIONS. OUR BDLL WOULD ALLOW MEMBERS TIME
TO PUT TOGETHER A CONCISE AND WELL THOUGHT OUT
GROUP OF RESCISSIONS THAT WILL NOT TAKE AFFECT
UNTBL THE NEXT FISCAL YEAR.

THIS WD1L ALSO ALLEVIATE THE ARGUMENT THAT
REDUCTIONS IN THE CURRENT FISCAL YEAR WHX
SEVERELY DISRUPT THE CURRENT YEARS FUNDING
PROCESS WHICH COULD POSSIBLY JEOPARDIZE
IMPORTANT AND WORTHY PROGRAMS.

THIS REFORM WOULD VmTUALLY END THE HEADLINES WE
ALL KNOW TOO WELL. EVERY TIME CONGRESS PASSES AN
EMERGENCY BHX THE MEDIA REPORT THAT CONGRESS
HAS DELAYED, BLOCKED OR ADDED PET PROJECTS TO A

262

BILL THAT SUPPOSED TO HELP AMERICAN'S REBUILD
THED* LIVES.

NOW I HAVE EXPLAINED HOW WE CAN PAY FOR THESE
BILLS - BUT THIS PROPOSAL ALSO SERVES ANOTHER
PURPOSE. THIS BILL WILL ALSO END MEMBERS' DESIRES
TO ATTACH EXTRANEOUS REQUESTS TO THESE
IMPORTANT SUPPLEMENTALS.

UNDER CURRENT LAW, ALL OF THESE EXTRANEOUS
REQUESTS ARE CONSIDERED AS PART OF THE
"EMERGENCY" SUPPLEMENTAL AND ARE PUSHED THROUGH
QUICKLY AND USUALLY WITHOUT QUESTION. BUT, THEY
ARE ADDED DIRECTLY TO THE DEFICIT AS WELL.

UNDER THIS PROPOSAL THESE MEMBERS WILL BE MADE
TO PAY FOR THEm EXTRANEOUS REQUESTS. I WONDER
HOW MANY MEMBERS WILL BE ABLE TO PERSUADE THED*
COLLEAGUES TO SUSTAIN CUTS IN NEXT YEARS FUNDING
TO PAY FOR A PET PROJECT THEY ADDED TO AN
EMERGENCY RELDZF BILL.

263

I DON'T NEED TO CONVINCE YOU THAT OUR NATION IS IN
A SERIOUS FINANCIAL SITUATION. BUT, I MUST CONVEY
TO YOU THE IMPACT REFORM IN THIS AREA CAN HAVE.

SINCE 1991 CONGRESS HAS USED IT'S POWER TO DECLARE
$25.8 BILLION IN DISCRETIONARY DOLLARS UNDER
"EMERGENCY" DESIGNATION. THAT IS $25.8 BILLION
DOLLARS OVER FOUR YEARS THAT WAS ADDED TO THE
CURRENT DEFICIT OF $254 BDLLION, WHICH IN TURN WAS
ADDED TO THE CURRENT $4.3 TRILLION DOLLAR NATIONAL
DEBT WHICH NOW REQUIRES INTEREST PAYMENTS ON THE
OF OVER $290 BILLION PER YEAR.

I KNOW THAT COMPARED TO THESE UNTHINKABLE
NUMBERS $25 BILLION DOLLARS MIGHT SEEM SMALL, BUT
IT DOES HAVE AN IMPACT. CONGRESS MUST TAKE ACTION
TO CONTROL THIS DISASTROUS PROBLEM.

WE MUST BE MORE RESPONSD3LE WHEN WE ARE
MANAGING THE AMERICAN TAXPAYERS MONEY. WE
BELD2VE THAT THE JOHNSON/STENHOLM BILL IS A SOUND
AND PLAUSD3LE STEP IN THE RIGHT DIRECTION. IT WILL

264

HELP REDUCE OUR DEFICIT, PAY FOR "EMERGENCES,
CURTAIL ADDED "PORK" PROJECTS AND ENSURE A SPEEDY
DELIVERY OF NEEDED FUNDS TO HELP THOSE IN NEED TO
REBUILD THEIR LrVES.

THANK YOU MR. CHAHUVLAN AND I WOULD BE GLAD TO
ANSWER ANY QUESTIONS THE COMMITTEE MIGHT HAVE
ABOUT THIS BILL.

265

Mr. Conyers. Well, thank you very much.

This is a sort of what you have called a look-back proposal?

Mr. Johnson. I reckon that is a good name for it, Mr. Chairman.

Mr. Conyers. Yes, when we talk about emergency spending we
are really talking about the unpredictable. There could be so much
uncertainty in our level of spending due to the unpredictability of
these disasters.

Representative Johnson, if we have multiple emergencies which
are higher than expected due to particularly severe disasters and
large losses, how do we handle it? Are we going to cut into other
programs in which there has already been an allocation?

It seems to me that the problem that you rightly describe backs
us up into another problem that may worsen our situation. I would
like to talk this through with you.

Mr. Castle. If I could go first on this, Mr. Chairman, we looked
at the emergency funds, and as I have mentioned in my testimony,
it comes out to $5.2 billion on average since 1989. But you are ab-
solutely right, emergencies are totally unpredictable, either in
terms of the extent of them or the number that may occur. So we
don't know in any particular year if it is going to be less or more
in some instances.

But while the emergencies can't be predicted, I think sort of an
average cost can be. And I would presume that in our budgeting
process that we could cover emergencies in most years, which I
think we should do.

When you have the exceptions, I would not mind having some
tightly — and that means we will be spending under the midget
caps, if you will. I think when the exception is de minimis, that is,
within a few million dollars or even tens or hundreds of millions
of dollars, that we should have some responsibility to go back in
and look at our budget and see if we can make some cuts to accom-
modate, stop spending so much during the course of the year.

If we get an emergency that is of greater scope, a wartime emer-
gency or something of that nature, clearly I think separate and dis-
crete legislation that would absolutely do nothing else but that,
similar to what Mr. Spratt has talked about, and I think that Mr.
Johnson has a very good concept, too, with a look-back in the next
year to try to make up for it is a way to approach it.

I don't suggest that we absolutely cap it so if people are indeed
in distress we would do nothing to help them. I am just saying let's
plan for what we expect the emergencies to be and let's have some
sort of a release valve only if it is absolutely essential to do so with
very strict limits on what that release valve would be.

Mr. Conyers. Mr. Johnson, are you two in agreement generally
about the proposals that each of you have? They do vary a little.

Mr. Johnson. Yes, we are. I just think that, from my experience
in State legislature and from what I have seen up here, it is going
to be very difficult to get an Appropriations Committee to set aside
funds, whatever the number might be, without mandating it in law
each year.

And if you do that, as you state, the emergencies vary from year
to year, and you never can be sure you are putting enough aside
or maybe you have too much laying out there.

266

And in our current deficit position, really a fund doesn't mean
anything. As long as we are spending more than we are taking in,
you don t have any money really sitting out there to protect your-
self with.

Mr. Castle. I do agree with Mr. Johnson's proposal. In fact, I
like it quite a bit. I also agree with what Mr. Spratt is trying to
do. I just feel we should go further.

Let me comment on my State. I think a lot of these ideas come
from State backgrounds.

In 1978, the then Governor of Delaware said that Delaware was
bankrupt, basically, had a lot of trouble with our bond ratings and
everything else. But from that time on we started taking these
measures. We went to the line-item veto, balanced budget amend-
ment. We started to introduce reserves. We have a 5 percent rainy
day set-aside each year and a 2 percent cushion on top of that for
emergency appropriations. We do not have that go toward deficit
reduction because we do not have a deficit. Admittedly, it goes back
into next year's budgeting if there is any left over. That is Dela-
ware, a small State. It is also true of a lot of States which have
taken such measures.

I would like to at least start to drive Congress in that direction.
The technicalities of how we are to do it, whether it is a combina-
tion of all these things, frankly is not of as much importance to me
as the fact that we do it.

No piece of legislation I have introduced has been adopted by a
majority of this Congress, and I don't expect it to start now. But
I hope to add to the dialog.

Mr. Johnson. I would like to comment, if I could. You know Mr.
Stenholm is on this with me; we are cosponsors of the bill. So I
have had some input from that side. He was unable to make it to
the hearing this morning, but, you know, should we go to Rules
with it, he will be there with me.

Mr. Conyers. Well, don't feel bad if you are a prophet ahead of
your time, Mr. Castle. Your day may come yet. So hang in there.

Now, neither of your proposals mention the national security
emergency which is included in the current emergency exception.
How do you propose to address potential national security needs
that might confront us in an emergency?

Mr. Johnson. I think this proposal will do just that, because it
authorizes any overexpenditure to be reduced in the budget in the
next year, the limitations by omitting that particular paragraph
out of the law.

Mr. Conyers. So you don't want national security emergencies to
be involved in this? That is a pretty important distinction under
your proposal, don't you agree?

Mr. Johnson. Well, I think we have to pay for them too, and,
you know, two-thirds of the deficits that we incurred during the
Middle East years when that war was going on, were because of
Desert Storm. So, you know, I think we just added it to the debt.

I don't see any reason why under those conditions, when we do
have a national emergency, and God help us if we don't have one
like that again, of that expenditure, we can find a way to pay for
it by reducing the caps in the next year.

267

Mr. Castle. Actually mine does refer to national security. It does
include it in section 1(c) on page 2. It says, "Recession on use of
funds, notwithstanding any provision of law, the amounts of the ac-
count shall not be available for other than emergency funding re-
quirements for particular natural disasters or national security
emergencies, so designated by acts of Congress."

And I am told the $5.2 billion average includes Desert Storm and
some of the national emergencies that we have managed during
that period of time.

Again, I don't want to tie totally the hands of Congress. There
could be a year in which either emergencies or regular natural
emergencies plus a wartime emergency of some sort or another
could compel us to have to appropriate more. I recognize that par-
ticular fact.

But I do believe that we can set levels at which, in most years,
we would be able to manage it within the budget that we have, and
if exceptions have to be made we can determine that in completely
separate and discrete legislation at that time.

But I think we should include emergency appropriations for war-
time and those kinds of uses.

Mr. Conyers. But separate from the natural disaster emergency?

Mr. Castle. No, as part of. As part of the whole package, I think
it should be part of it.

Mr. Conyers. So you do not change that, then.

Mr. Castle. No, I do not.

Mr. Conyers. Finally, there is always a possibility that we get
a use-it-or-lose-it mentality around by prefunding emergencies, be-
cause you are looking at billions of dollars for sure. If things are
going pretty smoothly, and we have money in the reserve fund,
something may come up on the screen that will qualify for an
emergency that might not in other times.

How difficult a problem might that be?

Mr. Castle. That is a problem. That is a tremendous problem.
I imagine you will see all kinds of emergencies that nobody ever
thought of remotely as being an emergency, and that is going to
take discipline, too. I think it is going to take leadership in this
Congress to say this is money solely for emergencies. If we do not
use it, it is going to be returned for deficit reduction.

And maybe a President and a leader of the House and the budget
leaders of the House can take pride in saying that we were able
this year to return $3 billion for deficit reduction in addition to
what was appropriated because there were not emergencies or
whatever it may be.

But I will be the first to say, you can't really, I guess, shackle
everybody with respect to that. So it is going to take the power of
persuasion to make sure that kind of thing does not happen.

If it becomes a Christmas tree at the end of the year to be spent,
then I say, don't even bother to do it. But there is no way to write
a law that is so controlling that somebody wouldn't take a run at
that, and you raise a valid point, Mr. Chairman, which would con-
cern me, but one which I think we can manage correctly.

Mr. Conyers. I hope so.

Mr. Johnson. In that regard, again referring to the State, we
had that problem with the fund we set aside. We ended up putting

268

a super majority on it to spend it, or in other words two-thirds
vote, or four-fifths, whatever.

Mr. Conyers. Let me turn now to Mr. McCandless.

Mr. McCandless. Thank you Mr. Chairman.

Mike and Sam, I applaud you for this. It is long overdue and re-
minds me of my former life as a supervisor when we had to balance
the budget. We had what we called a reserve for contingencies. It
was a sacred account that you only went into at the risk of being
beheaded, almost.

We have not seen the word discipline used in the Federal Gov-
ernment as it relates to fiscal matters, particularly that of the
budget process. And so when we talk about supplemental appro-
priations, we purposely sometimes short a particular budget item
in the regular budget and then make it up in the supplemental in
order to make the product look better at budget time.

I think we need from you gentlemen some thoughts relative to
definitions. And I would like to ask, Mike, what would you refer
to as adequate? That is a word that is used. And I have a
spreadsheet here that has been supplied — I believe this is yours,
Sam. Would you take an average of the previous 5 years or some-
thing like that and say, all right, this is where we are going to
start, we will see how it goes, and go from there?

Mr. Castle. Yes, I think that is what you would do. To deter-
mine the amount, I think you would have to — the budget analyst
would have to look very carefully over a period of time — I think 5
years is a reasonable period of time — of all kinds of emergencies,
and reach some sort of an average number. That should be part of
the process each year. We go back and look at what it was, make
a determination as far as the future year is concerned.

I think it has another effect. I think if we set the amount, and
it is, say, for the purposes of example, that it is $5.2 billion. We
might be more cautious when we start to reach that limit when you
get into some of these emergencies.

So I don't know this, but my suspicion is that when we get into
these emergency spending bills, which I really have disliked here,
we tend to spend money not just on the pork barrel-type things, if
you will, but even within the emergency itself we tend to layer it
on. It is an emergency, we want to help the people of California or
wherever it may be in their particular circumstance, and I think
we probably pay less attention to the total amounts there than we
do in the budgeting process that we have in this Congress.

And I think if we have some sort of stated amount, that we
would be more cautious about that, knowing it is early in the year,
there might be another emergency or whatever it may be.

I don't think we do a very good job of budgeting in emergencies,
because of the nature of what they are. And I think this would help
enforce that discipline as well, and to get an amount, I would look
at some average over some period of time.

And I am not trying to name what that time is, but to me 5 years
is the usual period of time for measuring budgetary matters around
here, and that seems fine.

Mr. McCandless. We have all seen emergency appropriations
being used for virtually everything, the last of which I remember
being the overhaul of New York's Central Station.

269

Sam, another word that is a part of this is the word "emergency."
Now, one can define emergency a number of ways. One could say,
well, Desert Storm was an emergency. FIRREA was an emergency.
Various types of weather conditions and geological conditions are
emergencies, i.e., the Georgia hurricane, floods in the Midwest, the
earthquake in the West, and so on and so forth.

How would you go about defining emergency? What would be
your general thought on that?

Mr. Johnson. Well, it seems to me that when we have hurri-
canes and floods of that nature, the President authorizes emer-
gency help.

Mr. McCandless. That would be a kicker, then.

Mr. Johnson. Yes, that is a definition of an emergency, is
when

Mr. McCandless. He declares an area a disaster area at the re-
quest of the Governor of that State and the counties and the cities.
And that would automatically trigger the word emergency.

Mr. Johnson. True. Now, I don t know, in the case — maybe you
know, Mr. Chairman, whether or not we have declared an emer-
gency in the case of Africa and the support over there. I don't know
how that is being funded. But if he did declare that an emergency,
that would be an emergency under this example.

Mr. McCandless. I believe that the State Department along
with training funds from the Department of Defense probably are
the major source of revenues there.

Mr. Johnson. Operational funds, I think.

Mr. McCandless. Instead of just flying back and forth some-
where they are flying over there and back.

Mr. Johnson. I think also in an emergency, did we declare
Desert Storm an emergency? I wasn't here then so I don't know.
But I think certainly a national emergency could be considered
under the same rule, where you involve military activity.

Mr. McCandless. The whole point here of the definition of emer-
gency is to omit and reduce to the maximum degree possible these
tag-ons we have all witnessed in supplemental appropriations. It
looks like a road map going across the United States, particularly
if you are a senior Member of Congress, your name is in there one
way or another as far as a project is concerned.

We have one other item here that we want to discuss with you.
The leadership, along with Congressman Spratt, are crafting a bill
which will create a point of order against consideration of a bill
which includes money for programs not designated as emergencies,
and we have been talking about that, and I am certainly in accord
with that. It allows more than one emergency to be funded in a sin-
gle bill and does not prevent an entire bill with everything in it
from being designated as an emergency.

Your thoughts on how we might be able to short circuit that sup-
plemental to the supplemental to the supplemental aspect that we
have been talking about. Is there a way of doing it?

Mr. Castle. I am not sure that I know enough about procedures
here to say here is what we should do. But I feel very, very strong-
ly, very strongly, that when we come to pass appropriations, that
we should absolutely — first of all, do what Mr. Spratt generally is
trying to do which is to limit it to whatever that emergency is, pe-

270

riod, no ifs, ands or buts about that. To do what you said, Mr.
McCandless, to define emergencies per se.

I would eliminate — repeal the authority from Congress to appro-
priate emergency funds not subject to budget limits as sort of a
way of dealing with that and just deal with that defined amount
of money that we are talking about in this particular legislation.

And — i>ut I don't know, other than explicitly laying all that out
in legalese that I have not been able to draft, I cannot tell you the
exact procedures except that I just think we should do that and do
that this year, if we do nothing else, and that is absolutely limit
what we are spending emergency money on, and absolutely define
emergency more explicitly.

Mr. McCandless. Emergency, in parenthesis, discipline.

Mr. Castle. Exactly. I mean, it is a matter of will, and it is im-
portant to make up our minds that this is just nonsense, that the
American public has had enough of the add-ons, and let's just go
about adopting legislation that does something.

Mr. Johnson. I am sure you all have looked at that definition
very thoroughly, particularly Mr. Spratt, and trying to weed out
the extraneous material. But I think you are on track doing that,
and I hope you succeed.

Mr. McCandless. Thank you.

Mr. Spratt.

Mr. Spratt. One reason we haven't been more ambitious with
sticking to the basics is there is a task force within the Congress.
Dick Durbin heads it; and when you talk with Dick Durbin, he
warns us this is only on the surface, that is, when you get into it,
it gets extremely complex. There are lots of questions that obvi-
ously I think we need to address as part of budgeting.

For example, we might provide for something like an across-the-
board abatement, even looking forward to some period of time that
would pay for the cost of an emergency, or you might have an
across the board surcharge to income taxes.

I know your side wouldn't necessarily agree to that, but there
could be a mix of the two. There could be rescissions, across-the-
board abatements, and there could be some sort of income tax sur-
charge. We would be forced to choose when we appropriate for
emergencies exactly how we would fund it out of these three cat-
egories.

I think this task force is some distance away from having a re-
port, so in the meantime, the very least we can do is try to keep
the process particularly relevant to the problem at hand, which is
keeping it confined to emergencies.

If we do what Governor Castle would propose and fund the
FEMA with the moving average or the average for the last 5 years,
then, as I understand the objection to that, we owe FEMA a sub-
stantial sum of money and both of you are aware of the con-
sequences of that, because I believe Mr. Castle in your particular
proposal you would have it lapse at the end of the year if it were
not spent, on the theory that if vou leave money in the coffers of
a government agency, they will likely find ways to spend it.

I was on the military construction committee at one time, and
they do authorize the money for civil defense. And FEMA at that
time — this was the Reagan administration — was requesting a lot of

271

money for research and development. They wanted to triple their
research and development budget.

We asked, what in the world is FEMA spending $25 million on
research and development for? And they gave us a mushy answer
so we asked for specifics and we got a voluminous list of consultant
contracts. They must have had a contract from every Beltway ban-
dit in Washington, Virginia, and Maryland on some aspect of emer-
gency management. They were about to spend $25 million on it.
We didn't fund it.

I think if you gave FEMA this kind of money and it got close to
the end of tne fiscal year and they didn't need it, you know what
would happen. They would be buying things that they wouldn't
need. I believe the prevailing attitude around here has been, let's
not give them the money until they clearly need it, and at that
time we will appropriate it.

I think both of you even recognize the wisdom in that from hav-
ing been in government. And I have to recognize the wisdom in
what you are saying. We ought to try to actuarially determine what
it is likely to be and provide for it.

There is something not clear in my mind in your proposals. Right
now, an emergency is an exception to the Budget Enforcement Act
if the President declares an emergency and Congress passes the
money.

Would you declare an exception so it would be over the $540 bil-
lion limit, or would this have to be funded within the $540?

Mr. Castle. It would have to be funded within the $540.

If I could comment quickly on the other part, I couldn't agree
with you more, and I want to make sure you understand my bill
doesn't do that.

When I was Governor, we had a hurricane in Delaware and they
put me in the emergency command vehicle. It made the limousine
I road around in look like a play toy. This thing was unbelievably
loaded with equipment. I don t know how they got it or paid for it.
You could live in the dog-gone thing.

You give any agency, frankly — I am not faulting FEMA at all
when I say this, I am sure they are well run — a substantial amount
of money — my bill calls for putting this money in a reserve account
and Congress must appropriate in accordance with very strict limi-
tations. I would never want to give an agency this kind of money
outright. That would create some substantial problems, I think.

Mr. Johnson. I think that an emergency has to go over discre-
tionary limits, because I think last year was a good example of
that, when that emergency came up after the appropriations proc-
ess had been finished. There is no way to go back then and recover.
And I am sure you face that.

So I think that you have to allow it to go over discretionary and
then cut the limits in the next year. That is my proposal.

Mr. Spratt. Thank you both for your contribution. We appreciate
your interest and look forward to working with you on this.

Mr. Conyers. Thank you very much, Mr. Spratt.

Bill dinger, please.

Mr. Clinger. Thank you, Mr. Chairman.

Gentlemen, thank you for your very valuable contribution to an
obviously thorny problem, one that is being looked at from a vari-

272

ety of points of view. I think clearly our problem is that you can
define something as an emergency in order to break the caps.
Therefore there is tremendous pressure to find something to be an
emergency.

So I think in fact, what Mr. McCandless is talking about — there
is a real need to have a very precise definition of what we mean
by emergency. I gather you would agree we would have that defini-
tion included in the legislation. In other words, you would not leave
it to the executive branch to define what is an emergency.

We have all dealt with dire emergency/catastrophic supplemental
appropriations. And we found some pretty interesting things that
were defined as dire emergency needs.

So I take it you both would say that we really need to be pretty
precise in how we define it, it should be defined in legislation.

Mr. Castle. Absolutely.

Mr. CLINGER. Thank you very much, gentlemen.

Mr. Conyers. Gentlemen, we are grateful to you. You started off
our emergency spending reform discussion in a very excellent way.
And your recommendations will be given thorough consideration.
Please be assured.

Thanks so much.

Mr. Castle. Thank you.

Mr. Johnson. Thank you, Mr. Chairman.

Mr. Conyers. We call our own colleague, Bill Zeliff of New
Hampshire, forward to move to the second part of our consider-
ation, how we cut additional spending.

And we heard from you in the last meeting, Bill, and we would
like you to continue your discussion this morning. Welcome again
to our subcommittee. ,

STATEMENT OF HON. WILLIAM H. ZELIFF, JR., A REPRESENTA-
TIVE IN CONGRESS FROM THE STATE OF NEW HAMPSHIRE

Mr. Zeliff. Thank you, Mr. Chairman. I appreciate your leader-
ship on this very important subject.

My colleagues, I am in another Government Operations hearing
where I serve as ranking minority leader, and we are talking about
iob training. And I couldn't help but think that what a natural
lead-in to the A-to-Z concept.

Here we have 154 iob training programs that cost us $24 to $25
billion. Much consolidation is needed. And that is just one example.
But on my A-to-Z idea, which I have worked with Rob Andrews,
Democrat from New Jersey, the A portion of this, we just want to —
we didn't want to miss this opportunity to reinforce how important
this is, how important all of your individual ideas on budget proc-
ess reforms are.

In my judgment, when I go out to my town meetings and we talk
to folks back home, and we present an idea that our deficit is $4.7
trillion, it is going to be close to $6 trillion in the next 5 years, our
interest on the debt, some $212 billion, projected to be $272 billion
in the year 2002. The annual dent is somewhere around $200 bil-
lion, a little less this year, but projected on an average. So we
clearly can't say we are doing enough.

I think that would be irresponsible. And there are so many dif-
ferent areas and good ideas you are trying to cope with here and

273

weed out. Our A-to-Z concept is merely a process which would give
every Member of Congress over 56 hours of debate, an opportunity
to make amendments, to cut the deficit, to include entitlements.
And most important, to put all of those savings directly to the bot-
tom line.

And so even though we have 230 cosponsors of that bill, clearly
the will of the majority, both sides, Republicans and Democrats
working together, we somehow have not been able to get much
progress on it.

We have elected to go through the discharge route. We are at 204
and holding. And with your cooperation and leadership and the op-
portunity for exposure, maybe that can change as well.

So I appreciate your leadership on this, and the opportunity to
testify and appear before you.

Mr. Conyers. Thanks, Bill.

We know of your work, before this subcommittee, and any other
committees and we are very aware that the discharge process is
under way on your measure, and we are hoping we can meet you
somewhere down the road halfway and see what can be worked
out.

Mr. Zeliff. Thank you, Mr. Chairman.

Mr. Conyers. You are welcome.

Any comments from any of my colleagues?

Mr. McCandless. Yes, Mr. Chairman.

With your indulgence, I would like to share a couple of thoughts
with Mr. Zeliff and see what his responses are.

Bill, this is a characteristic of what happens not only on this
floor, but in other areas of government where somebody really tries
to do a job of holding down spending, to the point that they do not
leave any wiggle room in their budget. Now in theory it would
come to the A to Z part of what we are talking about, and someone
on the floor who had no knowledge of what had transpired would
argue that there is always 10 percent in the A budget that you can
cut.

So his motion to cut that budget 10 percent, which then encour-
ages everybody else the next year to add 15 percent to their budget
and scream and holler. This is now a tradition and accepted.

I had some direct experience with this in the Coast Guard a few
years back, with the Falcon chase planes stationed in Florida. They
didn't have enough money to buy extra engines, and so the engines
were sent to the Garrett Corp. in Phoenix for overhaul. In the
meantime, they would switch engines from airframe to airframe to
keep half of the fleet going.

We really got into the budgetary process. And what had hap-
pened was very similar to what I have outlined to you.

How do we avoid that in a situation such as you are talking
about?

Mr. Zeliff. I would like to assume that we are dealing with re-
sponsible people in this House, and that as we debate over an hour,
we hear both pros and cons, and that we do our homework. It will
be published in the Congressional Record 5 days. It will be scored
by CBO. And we will certainly have the background we need to
make intelligent arguments.

274

Now, you can always make examples, no matter what procedure
we go forth with. In 1991, at 4:30 a.m., you know, on voice vote
we passed $55 billion to refund or put more money into FDIC/RTC.
I think that is an irresponsible act. That doesn't mean all acts are
irresponsible here, but, you know, I think we can look for examples
where it doesn't work, but I would rather go for the 98, 99 percent
rule, in most cases it will work.

A to Z is merely a process we use in business and a process that
we use in town meetings, where you review some programs, you
get an open rule or up-or-down vote.

Would it be better to go through the committee process and take
the time? Sure. But we have been denied that opportunity.

And frankly our only route now to force real, concentrated focus
on budget reform is to come out with something as strong as A to
Z, where it scares the living daylights out of everybody, and now
we are starting to get serious about it. The leadership is saying,
now we will do 1 day on entitlements. Just think. I don't know
when that day is going to be, but let's assume it is a day, and as-
sume we do some progress. Think how exciting it woula be if we
did 8 days or 56 hours.

I don't know if I answered your question directly, but it is some-
thing that I think is a responsible answer to solving our Nation's
biggest problem. We have tried balanced budget amendments. We
have tried line-item vetoes. We have tried Penny-Kasich. We have
tried a whole bunch of things. I have been willing to support al-
most everything I have heard on the budget process reform. But I
think A to Z is the strongest measure that will force some solid re-
form.

Mr. McCandless. Would you liken it to the equivalent of a con-
gressional 2 by 4?

Mr. Zeliff. It depends on the person who looks at it. Unfortu-
nately there are many that have looked at it as a 2 by 4. What I
would rather see it looked at, frankly, is someone saying, gee whiz,
maybe it makes sense.

I heard the testimony in this committee by Chairman Obey, and
basically on appropriations, and I believe also on the budget end
of it, that, hey, we are doing a great job, we have gotten discre-
tionary spending pretty well frozen.

They have made some good progress. We can do better. We still
have a big debt. But what is fueling the debt is entitlements. We
haven't done a great job on entitlements. I think everybody has to
admit that.

So if we do no more than get people to focus on entitlements and
finally have more than 1 day on something that is the No. 1 issue
that is facing our country, we have accomplished an awful lot.

So I would like to see us be successful. I hope we will be success-
ful. We are not going to go away. We are not going to hide in the
closet. We made a commitment to this thing and we are going to
be around for a long time.

But I think it can be done in a very responsible way, and one
that I am very proud as a Member of this Congress to say that I
think it is making some changes here.

Whether we get our bill passed, we are going to have a light A
to Z. If you want to do all trie things you can do to block it by giv-

275

ing something else, we are making progress. I think frankly leader-
ship has blocked us in every way they possibly could and we are
still moving forward.

Mr. McCandless. Thank you.

Mr. Conyers. I think there is a spirit of progress coming from
way back there. It is a little dim right now, but it is discernible.
And I think you should keep hope alive on that bill.

Mr. Zeliff. Thank you, sir. That is why I mentioned that. I ap-
preciate your leadership.

Mr. Conyers. John Spratt.

Mr. Spratt. No, thank you, Mr. Chairman.

Mr. Conyers. Bill dinger.

Mr. Clinger. Thanks, Mr. Chairman.

I just want to commend Mr. Zeliff for his persistence and his te-
nacity and hanging very tough. I think you are right, it has had
an impact. It has moved the envelope, as we say. And I think we
are seeing some progress. So I think it is important that you con-
tinue to be persistent. It really made a difference.

Mr. Zeliff. Thank you.

Again, my colleagues and, Mr. Chairman, you know, I know you
have grandchildren and children. I have two grandchildren, and
frankly after I leave here, after 10 years, I would like to be able
to say that I have done something about living within our means,
and I hope A to Z is the thing that is made us get to that point.

I thank you very much for your time.

Mr. Conyers. You are very welcome. I would like now to call
Representative David Minge and Peter Barca forward to testify —
Representative Herb Klein, who will return in a minute or two, will
join you shortly.

Gentlemen, we welcome you, and thank you for your patience.
We have your statements which will be made part of the record.

And, Dave, why don't you kick it off with your recommendation
on cutting additional spending.

STATEMENT OF HON. DAVID MINGE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MINNESOTA

Mr. MlNGE. Thank you, Mr. Chairman.

First, parenthetically, I would like to note that the discussion on
the disaster funding, off-budget emergency declarations, things
such as that, is of keen interest to me. I am serving on the task
force with Dick Durbin and Bill Emerson.

I did introduce a national disaster trust fund bill, H.R. 2974,
which is not why I am here today, but due to the interest you indi-
cated in this subject, I would just like to briefly indicate that that
would use a gasoline tax to raise approximately $10 billion and
then set that aside as a trust fund and replenish that fund when-
ever it is drawn down because of a disaster, so that we would in-
clude the funding of disasters within the budget.

Mr. Conyers. An interesting idea. I am glad you put it into the
record. We will take a good look at it.

Mr. Minge. Thank you. If it is enacted this year, I would feel
very proud. But if it waits until next year, I will still appreciate
the support.

276

The reason I am here this morning is to speak with respect to
a base closing commission approach to dealing with the deficit. Two
years ago, when I talked to a variety of people about my concerns
about deficit reduction and how we as a country could try to move
ahead on it, I was struck by the difficulty we face in Congress with
trying to make tough political decisions with respect to programs
that many of us may have worked on creating during our tenure
in Congress and have a very strong feeling that these programs are
vital to the Nation, and I hate to see anything done that might rein
them in or compromise their effectiveness, depending on your per-
spective.

At the same time each of us represents a diverse jurisdiction in
the country, and we would very much like to see our area at a min-
imum fairly treated, and our concept of fairness usually means
something Deyond what most other people in the country would
think should be adequate for our congressional district.

And so as a consequence, we are partisans for, advocates for our
congressional district. In that context, it is very difficult on a bill-
by-bill or program-by-program basis to make cuts in the deficit,
cuts in the budget that in turn cut the deficit, eliminate the deficit.

And my observation is if I am asked to vote to reduce the agricul-
tural budget, just as an example, it is terribly difficult for me to
cast a vote to make that reduction, because I represent what is
probably the most agricultural congressional district in the country.

Yet, if there is a series of cuts that includes agriculture, and I
can go back to the people in Minnesota and say, look, we are taking
our hit, but so is everyone else, I can vote for that bill. I don't have
a problem.

Now, we tried that with the Budget Reconciliation Act. That was
an attempt to move in that direction. But we found afterwards that
the Veterans Administration, the Department of Veterans Affairs,
is not going to be exempt from cuts, from any reductions in the
Federal work force.

We have this very, very great difficulty in making a decision and
sticking with it. And part of what we need is something that has
the shared-sacrifice concept, and part of what we need is someone
else to essentially blame for the tough decisions that we have to
make.

And I know if I go back to Minnesota or if I go out to speak to
a group and I say, gee, this program for our area is great, but, you
know, it is President Clinton that is doing this to us, or it is the
Republicans that are doing it to us, or something like that, and
they are cutting everything else, again, it is easier for people to ac-
cept.

So the base closing commission concept struck me as a very use-
ful way to deal with the task, the difficult task of balancing the
budget. And I am here today to endorse that concept. We flirted
with the concept of a National Economic Commission in 1988 and
1989. Unfortunately, it did not succeed for a variety of reasons,
which appear to be largely political.

I am pleased to see that John Kasich has sponsored a bill of this
type, again, in 1993. Mr. Kasich's bill is H.R. 2953. I am simply
here to say that a bill like John Kasich's is, in my opinion, the
right way to proceed. I urge this committee to very carefully look

277

at this bill, look at the concept that was embodied in the National
Economic Commission, and I would hope we could report this out
to the floor as something we could try as a way to balance the
budget within the next 4 years or 4 years after the enactment of
the legislation.

I appreciate the chance to visit with you this morning for a few
moments about this. I do have a prepared statement which I trust
is at your desk. And I would recommend that to you.

Thank you.

[The prepared statement of Mr. Minge follows:]

278

STATEMENT OF
CONGRESSMAN DAVID MXNGE

BEFORE THE HOUSE COMMITTEE ON GOVERNMENT OPERATIONS

SUBCOMMITTEE ON LEGISLATION AND NATIONAL SECURITY

DURING A HEARING ON BUDGET PROCESS REFORM

AUGUST 4, 1994

Mr. Chairman and distinguished members of the Committee, I would
like to thank you for the opportunity to participate in these
important and much needed discussions on budget process reform.
We are here today because we are all concerned about our looming
budget deficit. Each year since 1969, our federal government has
been operating in the red. As a result, our national debt has
increased exponentially. Today, the gross federal debt stands at
approximately $4.5 TRILLION dollars. Unless we take action now
to reduce and eliminate our deficit, future generations will find
themselves so entrenched in debt that the American dream will be
only a memory.

CREATION OF A SPENDING REDUCTION COMMISSION

I am here today to support a budget process reform bill that
would reduce and eliminate the deficit quickly and fairly. The
bill, H.R. 2953, was introduced by my colleague from Ohio, Mr.
Kasich. Referred to as the "Spending Reduction Act of 1993,"
this measure would provide a fair, nonpolitical process that
would achieve $65 BILLION in spending cuts each fiscal year until
a balanced budget was reached. To do this, the bill would
establish a Spending Reduction Commission that would be required
to recommend specific spending reduction proposals to the
President and Congress. Under the provisions of the bill, the
Spending Reduction Commission would be subject to guidelines when
crafting their recommendations. The Commission would attempt to:

1) Eliminate redundant and outdated programs, as well

as those whose missions can be effectively accomplished
by the private sector.

2) Reduce those programs with excessive administrative
costs or consolidate them with other programs.

3) Eliminate programs that provide subsidies that
benefit narrow special interest groups at the expense
of the national interest.

4) Reduce or eliminate those programs that have low
priority in meeting a national interest criterion.

279

The Commission's final recommendations, being approved by the
President, would be sent to Congress for a vote. Both Houses of
Congress would be required to vote on the entire package of
recommendations without amendment, much like the successful
system of the Military Base Closing Commission. The Spending
Reduction Commission would be composed of seven individuals
appointed by the President and confirmed by the Senate. In order
to avoid the political stalemates that have blocked such
commissions in the past, no current Member of Congress, employee
of the Executive branch, or current or former registered lobbyist
would be allowed to serve on the Commission.

IMPROVEMENT OVER FORMER NATIONAL ECONOMIC COMMISSION

If this Spending Reduction Commission was formed, it would not be
the first time Congress created a special commission to address
the deficit problem. As you may know, the memorable National
Economic Commission (NEC) was created by the Omnibus Budget
Reconciliation Act of 1987. The vague provisions in that bill
which created the NEC did not require the Commission to recommend
cutting specific government programs. The provisions also did
not require Congress to vote on any recommendations. The NEC was
only asked to study the budget deficit problem and make
recommendations to reduce the growing deficit. The NEC, despite
ideological and philosophical divisions, reported some general
recommendations on March 1, 1989. No specific spending cuts were
recommended by the NEC in its report and Congress did not vote on
any deficit reduction measures as a result of the NEC. The NEC
endeavor was, for the most part, fruitless. The deficit
continued to grow.

Mr. Kasich's bill to create a Spending Reduction Commission has
the teeth that the NEC lacked. The provisions of the bill would
require the Commission to ferret out wasteful or extravagant
government programs and make specific spending cut
recommendations equal to $65 BILLION a year until a balanced
budget is reached. Most importantly, the bill also requires
Congress to vote on the recommendations of the Commission. The
Spending Reduction Commission would not provide political cover
for those who talk about deficit reduction and do nothing. The
Commission would be a strong, effective, and fair tool that
Congress could use to reduce our overwhelming budget deficit.

WE NEED STRONG DEFICIT REDUCTION MEASURES

We are here today to discuss budget process reform because
working under the present system, Congress has been unable to
control the deficit. Political gridlock and the unwillingness of
members to vote for specific spending cuts have created a
frustrating atmosphere where marginal government programs enjoy
eternal life and we, the Members of Congress, have excuses for
lack of action. We need to invent effective means to deal with

280

the deficit before it is too late. The establishment of an
independent, nonpolitical commission that could provide Congress
with specific recommendations on wasteful government spending
would be a useful tool for balancing the federal budget. Mr.
Chairman, members of the Committee, I strongly urge your support
for this Spending Reduction Commission and any other measures
that will reduce our federal budget deficit quickly and fairly.
Thank you again for allowing me to appear before your committee .

281 *

Mr. Conyers. It will be included in the record. And thank you
so much, David.

We are now turn to the gentleman from Wisconsin, Peter Barca.
And we are delighted to hear from you this morning.

STATEMENT OF HON. PETER BARCA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN

Mr. Barca. Thank you, Mr. Chairman.

Just for the record, it is Barca. There is a Jim Barcia and Peter
Barca, and our offices are right next door to each other, and at
times we do get mixture of mail and so forth. We are good friends,
so it is not so bad.

At any rate, I appreciate the fact that you are holding this hear-
ing today and I had a chance to review your opening remarks, Mr.
Chairman. I agree with much of what you said in your remarks.

I do have a written statement for the record that we are provid-
ing for you. But I thought rather than belabor that, I would just
speak for a few minutes.

You know, I agree with much of what you have said. I am very
proud of much of the progress that we have made and your state-
ment speaks to that, that over a 2-fiscal-year period we have cut
the deficit by about a third.

So I think in the short term we have made very strong progress
that we have to build on, and similar to what Mr. Minge hadjust
stated, we have to figure out a means so that we can get at the
final two-thirds. And nopefully over the course of the next 4 fiscal
years or somewhere thereabouts, we can get at the final two-thirds
effort we need to get at to finally have a balanced budget. And this
hearing, I think, is important so we can look at ways where over
the long term we can accomplish that goal.

I strongly support the lock box bill that I believe your committee
has already held hearings on and is looking at. I think that is a
very strong measure, similar to the testimony of Mr. Zeliff.

I also am a sponsor of the A to Z bill. Because I would like to
see us have another budget session similar to what we had last
fall. I thought that was a very productive session that we held. And
I was 1 of the 30 people that worked as part of that budget group
that brought forward what became known as the Penny-Kasich
amendment. While we fell somewhat short of that effort, we did fi-
nally pass a budget rescission amendment that was 3 times the
level of what the President brought forward.

I do believe that through having these kinds of opportunities, we
can have success in bringing down our Nation's deficit. And I look
to this committee to provide some leadership for making sure that
we have another opportunity of that sort. I think that is what the
people of our districts are calling for. I know there is strong sup-
port throughout the country for making sure we continue the
progress that we have built on. And that is why I am here before
you today.

I think it is incumbent upon you to figure out a meaningful
method by which amendments can be brought forward, by which
Members can have a full opportunity to debate and consider
amendments for reducing our Nation's deficit. Perhaps it makes
sense to focus it on the entitlement section of the budget, because

282

we did just finish our budget process. In that budget process, we
did have virtually open rules on every single one of the appropria-
tions bills.

In fact, I was very active in debating and offering spending cut
amendments, as were many other Members. But the entitlement
section, of course, is something that is not part of that process. But

1 think what I would ask your committee to do is to look for a
means where we could have another budget cutting session day, or

2 days or 3 days, however much time could be set aside in a mean-
ingful manner, within the constraints of the time we have left in
this session.

Also, I would like to see you move forward on a lock box-type
concept. And I would also ask you to give serious consideration to
the ideas that Mr. Minge has brought forward in regard to a base
closure type of commission.

Personally I think we can do it ourselves. I think we have dem-
onstrated that over the course of the past 2 years. We know it will
not be easy, but I think through the efforts of your committee and
through the efforts of many Members that we can make that hap-
pen.

So thank you for providing me this opportunity to testify here
today, and I appreciate your leadership, and that of your committee
members, in taking on this important challenge.

[The prepared statement of Mr. Barca follows:]

283

U.S. Representative Peter W. Barca

Statement on Budget Process Reform

Hearing ox tbe Subcommittee on Legislation and National Security

Committee on Government Operations

August 4, 1994

Mr. Chairman and Subcommittee members, thank you for scheduling
this hearing to consider the critical issue of budget process
reform. You are demonstrating your commitment to providing
thorough and deliberative consideration to proposals advanced by
Members of Congress to address deficit reduction.

I am sure the views of my constituents in the First Congressional
District in Wisconsin are not unique from those of any other state.
They want Congress to continue to identify and eliminate wasteful
spending, increase efficiencies, and make the tough choices
necessary to cut the deficit until we achieve a balanced budget.
We cannot afford to continue spending $1.50 for every $1 we take
in. It is not fair to our children or our grandchildren.

Our budget-cutting session last fall demonstrated that we can work
in a bipartisan fashion to cut spending. I am very proud of the
progress we have made this past year to reduce the deficit. I was
also pleased to have the opportunity to offer, and debate on,
amendments for almost every appropriations bill we considered this
year. I was somewhat surprised, in fact, that we did not have more
participation by members in offering spending cut amendments during
consideration of the 13 appropriations bills.

Today, my remarks will be directed to the procedures we use for
amending the budget and cutting unnecessary spending. We took very
important action last month when we passed a strong enhanced
rescissions bill to give the President a type of item veto.
Hopefully, the Senate will follow our lead.

I am a cosponsor of H.R. 3205, the Deficit Reduction Lock Box Act,
and H.R. 3266, better known as the A to Z Bill. I am a cosponsor
because I strongly support the goal of deficit reduction. The two
bills offer important possibilities to advance this important goal.

First, I would like to see us pass a lock box bill to ensure that
our spending cuts will actually reduce the deficit. Your committee
has had hearings on this bill and I am hopeful you will report out
a bill very soon.

Second, the A to Z bill offers another opportunity, similar to the
special budget rescission session we conducted last year. I
strongly support expanding the opportunities for Members to be
involved in making those tough choices needed for deficit
reduction.

284

This committee should move a bill of this sort forward under a
process by which amendments introduced and debated will ensure that
Members have the fullest opportunity for consideration and debate.

Since the A to Z bill was introduced, it has been the subject of
negotiations to establish a meaningful rule which would structure
the debate and allow advance publication of amendments. I support
having the amendments printed in the Congressional Record at least
five legislative days before the beginning of debate.

He should exclude any amendments that had been earlier considered
and rejected in order to maximize our prospects for passing
amendments that will go all the way through to the President.
However, if a spending cut measure had passed the House and not
been considered by the Senate, I believe those amendments should be
allowed.

A method must also be established to hear amendments in a timely
fashion. Perhaps ordering of amendments by issue area could ensure
more meaningful debate and fuller consideration.

Further, I believe it may be most productive to have this session
focus on entitlement cuts and budget process reform. Since we just
completed our budget process in the House and Members had many
opportunities to present cuts in discretionary spending as
virtually every bill was considered under an open rule.

Most importantly, we need to focus on the long term prospects of
balancing the budget. While we have virtually cut the budget by a
third over these two fiscal years, the greatest challenge is to cut
the final two thirds.

In conclusion, I commend the subcommittee for scheduling this
hearing. I look forward to your prompt consideration and timely
report so we can schedule an additional budget cutting session yet
this year.

285

Mr. Conyers. Thank you very much, Mr. Barca.

Tell me, do you agree that one of our national deficits is the
budget deficit, but the other is an investment deficit where we have
another kind of problem that is less prominent. We may want to
direct funds to important investment areas but we may not be able
to do it if we cut spending, drive spending down and down and
then investment gets stunted.

Do you see a pretty big problem there?

Mr. Barca. There is an investment deficit to some degree. But
if you look at the changes we have made over the past IV2 years,
I think we have been able to make important progress on many of
those considerations at the same time we do reduce the deficit.

The President last night indicated we had invested more in Head
Start, child immunization, which are some of the human concerns
that are very critical that we face. We were able to do that at the
same time as we did bring down our Nation's deficit.

That is one of the reasons I think those pay-go provisions we are
operating under are so important, so that we have to make the dif-
ficult decisions of what other areas of the budget could stand cut-
ting at the same time as we make investments elsewhere.

I was somebody that supported eliminating the supercollider
superconducting program. I support eliminating the space station.
These aren't bad programs. They are good programs. But I think
we have to make tough choices and I think that when you look at
some of the investment needs we need to make as a country, I don't
think they rise to the top of the priorities.

And I just cite those two because those are two very big-ticket
items that free up a lot of capital for reducing the deficit and also
making those kinds of investments that you referred to, Mr. Chair-
man.

Mr. Conyers. Well, I am glad to know you support further deficit
reduction. But the discretionary spending is frozen for the next sev-
eral years, and will actually decline when compared to the size of
our economy. Last year this legislature was able to fund less than
half of the President's investment initiatives in job training and
health.

And I think that may create a problem because it will only get
worse. And, you know, much of the titlement spending is around
Medicare and Medicaid. So it seems to me that we have some ten-
sion between these two kinds of deficits, one the budget deficit, and
the other an investment deficit.

Let me call on David. Do you have an observation about this part
of the problem we are tackling?

Mr. Minge. Well, I agree there are investment problems. We
have an infrastructure that in many areas is decaying and needs
maintenance. I have certainly seen that in highways, roads, bridges
in my area. And I know we have problems with young people in
this country, and if we don't invest in them in terms of education
in their future, it takes a toll on a Nation's economy.

I would like to think that these are investments that we can
make on a pay-go basis. We are a large enough country that we
should not have to, so to speak, borrow or bond for that purpose.
I would also observe that there are many things we can do to cut
our costs.

286

I have heard over and over on the labyrinth, almost Alice in
Wonderland process of defense procurement, and what it costs the
Defense Department here to purchase items compared to what it
costs the Canadians to purchase the very same items from the very
same manufacturers.

And if we can't move on things like this, we are in bad shape.
And if we can move on them, we can free up some funds for some
of that important investment without even compromising our Na-
tion's defense.

At the same time we have programs that we are financing at the
national level that, with all due respect to one of the previous
panel members, the States can finance. The State of Minnesota had
a $600 million budget surplus when it finished its fiscal year. We
should be asking the State of Minnesota for a grant. They shouldn't
be coming to us for a grant. And I think that there are a lot of
States in that position.

The time has come when we have to say to the States, Revenue
sharing is moving in the other direction, and you have to take more
responsibility for this investment feature that is so very important
that you are referring to and that we can't expect the Federal Gov-
ernment to carry the Dall on each of these programs.

Mr. Conyers. Very good.

Al McCandless.

Mr. McCandless. Thank you, Mr. Chairman.

This is a very difficult subject to even scratch the surface. When
we talk about the task force concept, the base closure idea, cer-
tainly it has a lot of merit, if for no otner reason than that it takes
the political heat off the elected representative and gives the sub-
ject matter an objective forum.

I am reminded of the Peter Grace Commission, and the number
326 sticks in my mind. There were over 300 recommendations.
They spent I believe it was 14 months in their investigation of the
various aspects of government operation, expenditures, et cetera. It
cost something like $75,000 total for these executives to do this
work. And they were doing it as a public service. The various cor-
porations were paying for what it was they were involved in. And
for the time and effort and many resources that were used.

I take the time of the committee because to me some of those rec-
ommendations were outstanding. But it seems the response of some
was everything's fine but don't get in my rice bowl. I think we fi-
nally ended up with maybe somewhere around 20 of these rec-
ommendations being adopted in the process.

Do you see your proposal going the same way?

Mr. Memge. Having spent some time reviewing what the Grace
Commission did, I think that the end product, and also the spirited
way in which it was presented, gave a certain partisan flavor to it,
and made it more difficult to implement than if that flavor hadn't
been there.

The other thing is that I think that the Grace Commission did
not really start with a commitment, as a bipartisanship input. So
it was a simpler task for the Grace Commission. And so I think
that if we choose the commission members with an eye toward
building support for the final product, that we would have more
success in trie implementation of the final product.

287

Finally, I would say that what I am proposing, what John Kasich
has in his proposal, is an up-or-down vote in Congress on the whole
report rather than a smorgasbord approach where you pick those
items that are politically easiest to implement and you work on
them. This might mean the whole thing goes down, but I think
there is also a pretty good chance the whole thing would be ap-
proved.

And if the military base closing commission approach is any ex-
ample, I think that there is a decent chance of success.

Mr. McCandless. If I have a correct analysis of your bill, you
put absolutely everything on the table from entitlements to the De-
partment of Defense. Is that a correct assessment?

Mr. Minge. Yes.

Mr. McCandless. How do we equip a commission such as this
with the knowledge to be able to make good judgments on such
things as the Department of Defense?

Mr. MlNGE. I think many of the proposals for reduction and ex-
penditure have been discussed, and you can take the Grace Com-
mission report or the National Economic Commission or any one of
a number of different studies, and so you have the examples, and
there are certain — just take defense as an example. Again, there
are weapons systems that the Pentagon has said it doesn't want,
and Congress continues to appropriate funds for. The President has
not requested them.

So I think that there are ways that the commission can operate
that would not require that it have a staff the size of, say, a con-
gressional committee staff on each area of government operations,
but instead could proceed with a somewhat smaller staff and hope-
fully provide a report that both would be balanced and also politi-
cally viable.

Mr. McCandless. We are talking primarily then about the ad-
ministrative and mechanics of the department rather than a politi-
cal or an international commitment as established by the Presi-
dent's policy?

Mr. Minge. I wouldn't want to prejudge it and I wouldn't want
to hold myself out as such an expert on either the budget or the
Defense Department, to say this is the way it would be. But I agree
with your observation, that we ought to be able to do it in ways
that would not compromise our global commitments.

Mr. McCandless. They wouldn't be establishing policy relative
to commitments of the Defense Department?

Mr. MlNGE. That is a good point. I think that any time you make
a budget decision, it has some policy implications. And certainly
there would be that side to it.

But I don't think their responsibility would be to overtly try to
set national policy.

Mr. McCandless. Your ideas are excellent. I am not trying to
hassle you. We have been involved here with the C-17 in one way
or another for quite some time. The whole idea is that this is sup-
posed to be theoretically the next generation of airlift. And that is
a program that has had controversy.

Although a civilian commission, the type that you are talking
about, that is bipartisan, would theoretically then visit the Defense
Department and would say, "Well, is this u-17 program really es-

288

sential?" And they would get the versions, the script, so to speak,
and they would come back and say to Congress, "We have reviewed
this and we don't think it is a good idea."

Yet, in reality, what do you use in the future to airlift equip-
ment, supplies, and troops into friendly or unfriendly Rwandas, or
whatever, because of what we have in the way of aged equipment
in the past?

Those are the kind of concerns that come to mind when we talk
about a civilian commission, irrespective of how bipartisan.

Mr. MlNGE. I recognize what you are saying. It has a problem.
I think you are correct that if we set up a commission of this type,
we take some risks and what you have identified is probably one
of them.

Mr. McCandless. This is nothing you would be able to do on the
floor of the House after the budget has been established. This
would all be done in committee as a result of their recommenda-
tions. Is my understanding correct?

Mr. MlNGE. Right, that this committee, not a congressional com-
mittee, but this committee or commission would come in with a
proposal and it would be voted up or down.

Mr. McCandless. Thank you very much.

Thank you, Mr. Chairman.

Mr. Conyers. Thank you very much.

Mr. Spratt.

Mr. Spratt. Thank you for your testimony.

One of the reasons the National Economic Commission came to
naught was that the Democratic and Republican Members couldn't
agree among themselves about recommendation for revenues. The
Republicans were adamantly opposed to recommendations on reve-
nues and wanted to insist on a settlement solely on spending cuts.
It seems to me the Kasich proposal takes the same tack.

It raises a question, why exclude revenues? Why not give this
commission the authority to look at tax expenditures, interest de-
ductibility, and second home mortgages?

I am not saving I am in support of that, but there are lots of tax
expenditures left in the code that might be worthy of examination.
Put that in the package.

Mr. Minge. I agree that it ought to be evenhanded. The economic
commission was not so limited. I think that the Presidential cam-
paign in 1988 had a chilling effect on the commission's work. After
the inauguration, it was clear that there would be no Presidential
support for any tax increase.

I would, in the next session, try to work with Mr. Kasich to intro-
duce a bill that included the revenue side.

One thing that sort of has affected my interest in introducing a
bill in this session is that I felt in this session we would have a
fairly significant adjustment in terms of revenue, and initially we
had talked about a 2V2 to 1 ratio of cuts to new revenue, then it
was maybe 2 to 1, then 1.5, now it looks like 1 to 1. So I thought
for this session at least, if we were actually going to move on this,
that the revenue side had been addressed, and this would bring it
into balance.

Mr. Spratt. I guess the underlying problem is a problem Mr.
McCandless raises: How do you give this commission knowledge

289

commensurate to its power? Because if you give them authority to
comb through the tax code and look for tax expenditures that are
no longer justifiable in view of the deficit we have, give them au-
thority over the Defense budget to decide whether or not we should
have a C-17 or a less expensive, less capable 747, or whether or
not we should have a Social Security COLA every year based upon
the CPI — in that assumes a vast knowledge of government pro-
grams.

Do you think any commission could be empaneled that would be
wise enough to make all of these decisions? About $65 billion a
year until they wipe out the deficit, that is about $300 billion worth
of wisdom.

Mr. MlNGE. There are 535 of us. I suppose we haven't had quite
enough wisdom to figure it out yet. But I have thought we have
men and women in this country of remarkable talent, some of
whom have been directors of the Office of Management and Budg-
et, some of whom have been President, and Members of Congress.
And some of these individuals probably would be able to sit on a
commission of this type, and they have spent a decade or more al-
ready on the exact issues that we are discussing right now, and the
programs, even, and probably would bring some Dackground and
information to bear that would enable them to do it without a large
staff or having to spend a year or so getting up to speed.

So that is the type — people of that stature are the people that I
think would be appropriate members of a commission of this type.

Mr. Spratt. In the case of the base closing commission, the com-
mission really doesn't make these decisions. They have a staff that
reviews the decisions that have been made by the Department of
Defense and the four services, and they sit in judgment as an ap-
pellate court.

Mr. Minge. I hasten to add that in H.R. 2953, the Office of Man-
agement and Budget plays a crucial role in coming up with rec-
ommendations and so on. So I believe that we have something re-
sembling that in Mr. Kasich's bill.

Mr. Spratt. I thank you both.

Mr. Conyers. Could I ask Herb Klein to come on up and join us?
I know you have got hearings that are going to take you away. We
are in the question-and-answer period, but if we could just take a
few minutes to see how your recommendations complement Pete
Barca's and David's.

STATEMENT OF HON. HERB KLEIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW JERSEY

Mr. Klein. Thank you very much, Mr. Chairman. I do appreciate
your courtesy and that of the committee members. If I have a few
moments, I would like to present my prepared statement. Would
that be

Mr. Conyers. Yes, we are going to include your statement in the
record, so why don't you lift up a few nuggets of wisdom and lay
them on us at this point.

Mr. Klein. Well, first of all, I want to thank you, Mr. Chairman,
and the ranking minority member, for giving me the opportunity
to appear before the committee.

290

My primary purpose in appearing before the committee is to urge
that H.R. 4057, the Deficit Reduction Lock Box Act of 1994, be ap-
proved by this committee and released for early consideration by
the House.

As I am a cosponsor of the bill, it seems to me that the lock box
approach is crucial to deficit reduction. Too often we have seen that
we have cut appropriation bills that were wasteful and unneces-
sary only to find that it doesn't do a thing in terms of what we
really want to get at, which is reducing the ultimate deficit. And
the lock box approach ensures that those spending cuts that we
made will be allocated directly toward deficit reduction. It ends
what I view as the shell game that often occurs in the appropria-
tions process.

And the bill which Congressman Spratt is certainly the leader on
automatically provides that it goes into the lock box account. I un-
derstand that Congressman Spratt is preparing another lock box
bill which contains improvements to this bill. I certainly endorse
the new bill and hope to become a cosponsor of it as well.

There are obviously a number of different approaches to the lock
box concept. But I think that the one that is contained in H.R.
4057 with the improvements represents the best one.

I strongly urge that the committee permit this bill to be released
so that we can vote on it and so that we can do what I think the
American people have been asking for a long time — is that we end
the shell game and start using our cuts in appropriation bills in the
way we all want them to be used, and that is to reduce the deficit.

[The prepared statement of Mr. Klein follows:]

291

TESTIMONY FOR
THE HONORABLE HERB KLEIN

HOUSE GOVERNMENT OPERATIONS COMMITTEE

AUGUST 4, 1994

292

I would like to thank Chairman Conyers and Ranking Minority
Member William dinger for holding these hearings toaay on budget
process reforms. These are important hearings that are urgently
needed so that we can bring the deficit under control.

I appear here today to urge that H.R. 4057, the Deficit
Reduction Lock Box Act of 1994, be approved by this Committee and
released for consideration to the full House of Representatives.
As a cosponsor of this bill, I believe that this legislation is
vital in our efforts to reduce the deficit. This bill currently
has 152 cosponsors, both Democrats and Republicans, and is a
truly bipartisan effort that will help control the deficit.

For far too long, the cuts that are made in the
appropriations process have not been real cuts. Money that is
cut from appropriations bills is often freed up and later spent
when the bills go to conference. This process must stop if we
are to get serious about deficit reduction.

This Lock Box bill will insure that spending cuts in
appropriations bills go directly towards reducing the deficit
instead of being reallocated to other programs. It can help to
end the shell game that often occurs in the appropriations
process.

H.R. 4057 creates a deficit reduction account in each of the
13 appropriations bills. This bill will "lock in" deficit
reduction when Congress approves spending cuts in Committee or on
the Floor through several mechanisms:

--First, spending that is cut in an appropriations bill will
automatically go into the Lock Box account unless part or all of
the funds are designated to another program under the
Subcommittee's jurisdiction.

--Second, to guarantee that spending cuts are not shifted to
other programs in conference, the Lock Box account in the
Conference report must be between the House and Senate levels .
For example, if the House Agriculture Lock Box has $200 million
and the Senate has $300 million, the Conference Lock Box must be
between $200 and $300 million.

--Third, the discretionary cap for the ensuing fiscal year
will be reduced by the amount in the Lock Box Conference. For
example, if the President signs the Agriculture bill with $200
million in the Lock Box, the discretionary cap will come down by
that amount .

In addition, this Lock Box bill does not lower discretionary
budget authority in the out years, but rather only affects the
ensuing fiscal year. In this way, the deficit is reduced without
imposing draconian hardships on Congress or strapping the

293

Appropriations Committee for future years. This provision has
allowed this bill to gain strong bipartisan support.

There are several proposals that use the term "Lock Box". I
believe that this bill, H.R. 4057, will be the most effective in
insuring that spending cuts are definitively "locked up" for
deficit reduction. H.R. 4057 will force Congress to spend more
wisely and make cuts more honestly.

In the last eighteen months we have already gone a long way
towards substantially reducing the deficit. However, we can and
must do more. This bill will provide the tools to make a giant
leap forward and bring fiscal sanity to the budget process. I
strongly support the immediate mark-up of this legislation by the
Committee. This is the only way to guarantee consideration of
this important deficit reduction measure by the full House.

Mr. Chairman, I thank you for giving me the opportunity to
testify today and for the Committee's consideration of these very
vital budget reform measures. Thank you very much.

294

Mr. CONYERS. Thank you very much, Mr. Klein.

Let me turn now to Bill dinger to ask him to continue any ques-
tions he may have.

Mr. Clinger. I just had one question, Mr. Minge. As I under-
stand it, your proposal or Mr. Kasich's proposal would include all
entitlements, all the sacred cows?

Mr. Minge. I think they should all be on the table, yes.

Mr. Clinger. Including Social Security?

Mr. MlNGE. Reluctantly, I think for fairness in the process, Social
Security should be considered.

Mr. Clinger. I applaud your courage. We have always felt there
were certain sacred cows that couldn't be touched. That is the prob-
lem of why we have really not done anything of any significance
on reducing the deficit because we have been unwilling to face that.

The only question I have is, if the commission reports nothing
but entitlement cuts, I would be somewhat concerned that the
whole package could go down because of that.

Mr. MlNGE. I think that is one of the reasons we would like to
have input from OMB, which I expect would not just look at enti-
tlements; and second, to have people on a commission like this of
real stature in our country, statesmen and stateswomen, because
that would ensure that would have the type of perspective that
would know what politically is feasible, as well as what is nec-
essary budgetarily.

Mr. Clinger. I think we do need something to bolster our cour-
age.

Mr. Minge. One thing I have observed, as Members of Congress,
as individuals, even in groups of 20 we can do it. The problem is
we are a huge body, and we have so many diverse interests and
constituencies that we are trying to represent, and it is so rare that
as Democrats and Republicans we are presented with what I would
call a moderate proposal that we vote up or down not so much on
the basis of party label and where the proposal originated, but on
the basis of merits of the proposal. And this is one of the things
that appeals to me, is to some extent shed the party labels.

And I would also hasten to add that the investment side of this,
which the chairman has referred to, I think is important, and I
think that a commission of this type would be sensitive to it so that
we are not reducing the human investment, which is one of the
critical functions that this Federal Government has played and I
think has a responsibility for in the future.

Mr. Clinger. Thank you.

Thank you, gentlemen.

Mr. Conyers. Would anybody like to ask Herb Klein any ques-
tions?

Well, let me just raise the gridlock possibility that always goes
along with lock box. Let's say that the Senate cannot accept B-2
spending cuts and the House won't accept C-17 reductions and
gridlock moves in. There seems to be a built-in possibility of us
tying ourselves into a knot, Herb, and that is what makes me very
carenil as we approach and evaluate the lock box idea.

Do you worry about that a little?

Mr. Klein. Well, I certainly do worry about it, and I know it rep-
resents a problem. I also know that Mr. Spratt has some sugges-

295

tions along those lines in the bill which he is about to present. But
it seems to me that we can lose sight of the overall goal, and the
fact that it represents a problem doesn't mean that we ought to
avoid the lock box concept.

I think we must tackle the deficit head on and make sure that —
and a cut to a particular wasteful program is not spent elsewhere.

Mr. Conyers. Well, let's keep looking at it, because this is on the
table.

Did you have any comments, Mr. Spratt?

Mr. Spratt. I was just going to comment in response to your
question. The proposal we have made would be to have program-
by-program entries in the lock box, so that when the House and
Senate went to conference, the scope of the conference would be as
to that particular program rather than as to total dollar amount.

The Murtha problem which he presented in the testimony which
he submitted to us in the last hearing wouldn't be raised. He was
suggesting the House would take a billion out of the R-17, the Sen-
ate would take a billion out of the Seawolf, and as originally draft-
ed, that would leave us with a $1 billion requirement but no meet-
ing of the minds at all between the House and Senate as to how
that would be accomplished. Indeed, we would be at totally dif-
ferent poles.

The way we are currently thinking about doing it is there would
be a billion-dollar reduction in the C-17 in the Senate. In the
House there would be a billion-dollar reduction, but either cuts in
the program would have to go to the deficit reduction account.

Mr. Klein. That certainly would go a long way toward solving
that problem.

Mr. Conyers. Mr. Minge, I want to add one comment about the
commission proposal. Base closings are problems because Members
argue don't close any base in my district, but anywhere else you
need to cut is quite all right. When we talk about a deficit reduc-
tion, we are talking about nationwide money programs, and it
seems like we might be more likely to be able to decide the merits
of these programs without another commission, which takes the de-
cision out of the Congress' hands.

The commission, you know, places the power in the hands of a
very few people. Does that problem create any reservations in your
proposal?

Mr. Minge. There is a member of the budget committee from my
State who has counseled me that cutting the deficit and looking at
specific programs is exactly what Congress is about. We don't need
any commission at all to do that.

My response is that there are many programs which politically
are so sensitive that for many of us, and I think usually a majority,
we can't put our name to it on a program-by-program basis, which
is the way we usually have to move ahead. As a consequence, I
think the commission approach is necessary.

I would point you back to the Social Security Commission estab-
lished in the early 1980's. Although it did not have immediate suc-
cess, and has had a somewhat divisive report, within a fairly short
period of time its recommendations were embraced and they were
adopted.

296

And I think that that indicates that the commission has worked
in its own way in another context. And it would be useful to at
least try it. Nothing ventured, nothing gained.

Mr. Klein. Mr. Chairman, if there are no further questions for
me, I would like to be excused. Again, I want to thank the commit-
tee.

Mr. Conyers. Absolutely. I thank you for coming. Lock box is
very much under consideration in this committee. As a matter of
fact, we have sponsors on the committee itself.

So we appreciate your coming this way. Thank you all very
much.

We will now just hold for a couple of minutes. We know that
Henry Waxman is on the way.

Thank you, Dave, Pete, Herb.

We say to our colleague on Government Operations and Energy
and Commerce, we have divided this hearing into emergency
spending reform, cutting additional spending, and budget process
reform. I know you have thought about all these matters, but today
we look forward to your comments on cutting additional spending
and the need for health care reform.

So we would now love to hear your comments, and we will of
course put your printed statement into the record to be reported in
its entirety.

STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Waxman. Thank you very much, Mr. Chairman, members of
the panel. I appreciate you holding these hearings and giving me
an opportunity to appear before you.

Exactly 2 weeks ago a very important vote took place in the
House; 392 Members voted against a proposal by Representative
Stenholm to cap all entitlement programs at a level that would re-
quire $150 billion in cuts over the next 5 years; 233 Members voted
against the proposal by Representative Kasich to require the estab-
lishment of annual caps on each entitlement program except for So-
cial Security.

For some of the advocates of budget process reform, a phrase
that is becoming a code for capping entitlements, this vote was a
defeat for fiscal responsibility. But I believe it was a victory for
those of us who think that the Federal Government has an obliga-
tion to assure that the elderly and the poor have coverage for basic
health care services.

It is obvious that the two fastest growing entitlements are Medi-
care, which CBO estimates will grow about $87 billion over the
next 5 years, and Medicaid, which CBO estimates will grow by
about $65 billion over the next 5 years.

Why are Medicare and Medicaid growing so fast? Because the
number of elderly and poor people in need of health care is grow-
ing, and because the cost of hospital and physician and nursing
home care that these Americans need and that these programs buy
for them is growing. Of course there are other factors that affect
the cost of these programs, such as the provision of unnecessary
services, and the introduction of expensive new medical technology.

297

But the primary driving forces are the number and health needs
of the elderly and poor and the inflation in the price of covered
services. A cap on Medicare and Medicaid is not going to do any-
thing about these driving forces. It won't cap the number of elderly
and poor Americans or their need for health care.

It won't cap the prices of the medical care that these programs
buy. It won't cap advances in medical technology. Instead it will
simply allow the Federal Government to limit its financial exposure
and snift the cost of these programs to someone else — the States,
the providers, or the beneficiaries.

If you think there is a lot of waste, fraud, and abuse in those pro-
grams that can easily be pruned, you haven't been around during
the last six budget reconciliation bills. In 1989, Medicare spending
was reduced by a total of $10 million over 5 years, in 1990, by $43
billion, and in 1993, by $56 billion. And in these same budget bills,
we cut Medicaid spending by $1.8 billion, $600 million, and over $7
billion.

These are the kinds of reforms we've already made on Medicare.
We've tightened down the Medicare payment systems for hospitals
and physicians so that they are now well below the rates that pri-
vate insurers pay. We have raised the monthly premiums and cost
sharing requirements for the program's 34 million elderly and dis-
abled beneficiaries, and we have gone after private insurers to
make sure that they and not Medicare pay out on policies that they
have sold to program beneficiaries.

On the Medicaid side, we have allowed States to set payment
rates for hospitals, nursing homes, and physicians even lower than
those on Medicare. We have demanded and received rebates from
drug manufacturers. We have closed loopholes that allowed
wealthy individuals to transfer assets to their children in order to
qualify themselves for Medicaid-financed nursing home care.

Can we reduce Medicare and Medicaid spending by imposing an
entitlement cap? Yes. Under a cap, can these spending reductions
be achieved responsibly? My answer would be no. Can they be
achieved without shifting more costs to the poor and disabled and
the elderly? No. Can they be achieved without shifting costs to the
States and private employers? The answer is no.

Is there an alternative to an entitlement cap? Yes, it is called
health care reform with cost controls. Earlier this week the major-
ity leader outlined a health care reform bill that reduces the rate
of increase in Medicare and Medicaid spending while at the same
time guaranteeing basic health care services to all the Americans.

I would urge the members of this committee to reject entitlement
caps. We do not have to renege on our commitment to basic health
care for the elderly and the poor in order to reduce the rate of in-
crease in Medicare and Medicaid spending.

I would be happy to answer questions you might have.

[The prepared statement of Mr. Waxman follows:]

298

Remarks of Henry A. Waxman, Chairman

Subcommittee on Health and the Environment

before the

Subcommittee on Legislation and National Security

Budget Process Reform

August 4, 1994

Mr. Chairman, thank you for holding this hearing and giving me an opportunity to
appear this morning.

Exactly two weeks ago, a very important vote took place in the House.

Three hundred and ninety two members voted against a proposal by Representative
Stenholm to cap all entitlement programs at a level that would require $150 billion in cuts
over the next 5 years.

Two hundred and thirty three members voted against a proposal by Representative
Kasich to require the establishment of annual caps on each entitlement program except for
Social Security.

To some of the advocates of "budget process reform" - a phrase that is becoming
code for "capping entitlements" ~ this vote was a defeat for fiscal responsibility.

I believe it was a victory for those of us who believe that the Federal government has
an obligation to assure that the elderly and the poor have coverage for basic health care
services.

It is obvious that the two fastest growing entitlements are Medicare, which CBO
estimates will grow about $87 billion over the next 5 years, and Medicaid, which CBO
estimates will grow by about $65 billion over the next 5 years.

Why are Medicare and Medicaid growing so much?

Because the number of elderly and poor people in need of health care is growing.

And because the cost of hospital and physician and nursing home care that these
Americans need and that these programs buy for them is growing.

Of course, there are other factors that affect the cost of these programs, such as the
provision of unnecessary services and the introduction of expensive new medical technology.

But the primary driving forces are the number and health needs of the elderly and
poor, and inflation in the price of covered services.

299

A cap on Medicare and Medicaid is not going to do anything about these driving
forces.

It won't cap the number of elderly and poor Americans or their need for health care.

It won't cap the prices of the medical care that these programs buy.

It won't cap advances in medical technology.

Instead, it will simply allow the Federal government to limit its financial exposure and
shift the costs of these programs to someone else - the States, the providers, or the
beneficiaries.

If you think that there's a lot of waste, fraud, and abuse in these programs that can
easily be pruned, you haven't been around during the last six budget reconciliation bills.

In 1989, Medicare spending was reduced by a total of $10 billion over 5 years; in
1990, by $43 billion, and in 1993, by $56 billion. And, in these same budget bills we cut
Medicaid spending by $1.8 billion, $600 million, and over $7 billion.

These cuts have reformed and tightened down on the Medicare payment systems for
hospitals and physicians so that they are now well below the rates that private insurers pay.

We've raised the monthly premiums and cost-sharing reqruiements for the program's
34 million elderly and disabled beneficiaries. And we've gone after private insurers to make
sure that they - and not Medicare - pay out on policies that they've sold to program
beneficiaries.

On the Medicaid side, we've allowed States to set payment rates for hospitals, nursing
homes, and physicians even lower than those under Medicare.

We've demanded - and received - rebates from drug manufacturers.

And we've closed loopholes that allowed wealthy individuals to transfer assets to their
children in order to qualify themselves for Medicaid-financed nursing home care.

Can we reduce Medicare and Medicaid spending by imposing an entitlement cap?
Yes.

Under a cap, can these spending reductions be achieved responsibly? No.

Can they be achieved without shifting more costs to the poor and disabled and
elderly? No.

No.

300

Can they be achieved without shifting costs to the States and to private employers?

Is there an alternative to an entitlement cap? Yes. It's called health care reform
with cost controls.

Earlier this week, the Majority Leader outlined a health care reform bill that reduces
the rate of increase in Medicare and Medicaid spending while at the same time guaranteeing
basic health care coverage to all Americans.

I would urge the Members of this Committee to reject entitlement caps. We do not
have to reneg on our commitment to basic health care for the elderly and the poor in order
to reduce the rate of increase in Medicare and Medicaid spending.

301

Mr. Conyers. Thank you very much for focusing in on the health
care problem which has a lot to do with entitlements and their
rapid growth.

Isn't it true in Medicaid that we keep adding benefits that cause
additional costs? We find that there are certain procedures, certain
treatments, certain benefits that are so minimal when they are
added and they inevitably cause increase in Medicaid spending.

Is that one way of looking at this problem?

Mr. Waxman. We haven't added benefits. The Medicaid law says
that the people entitled to the benefits under that program should
get medically necessary physician and hospital services. If there is
new technological breakthroughs that produce new services, those
services are covered.

We haven't really added new coverage for benefits. We have, on
the other hand, added new population groups that have been left
out, because Medicaid, while it claims to be the health care pro-
gram for the poor, only covers the very poorest of the poor. The ma-
jority of those below the poverty line are still not covered by the
Medicaid program.

We have tried to increase the coverage for low-income women
and children, even above the poverty line because it is important
to give them that prenatal care, and I think we end up saving
money when children are born healthier because prenatal care
services were available.

Mr. Conyers. Well, thanks, Henry Waxman. I know you have
been working hard on this area for being years, and are very much
involved in how we cut through to a new health care system, a re-
formed system, an improved system. And we will be looking care-
fully at the majority leader's proposal.

Al McCandless.

Mr. McCandless. Thank you, Mr. Chairman. Henry, you come
to us this morning with a little cloud. The majority leader an-
nounced on the floor of the House we will be here until August 19.
I am sure this has nothing to do with Banking. It has nothing to
do with Government Operations. One has to assume it has some-
thing to do with the health program. I thought I would mention
that in passing.

Mr. Waxman. I am not happy about it either.

Mr. McCandless. My wife assembles the family biannually. It
happens to be that week, and people come from various locations.
That is a personal matter. It has nothing to do with Government
Operations, but it will have a lot to do with the operations at home.

I am interested, you refer to the cuts that have taken place in
these various entitlements, and I think for purposes of our hearing
here, we should define whether these are cuts on the baseline or
cuts on the increased percentage.

This was an area in which the budgetary process expanded on
the floor of the House this last time with all kinds of charts and
graphs about how we were not actually cutting below what we are
spending now, but rather we were reducing the expected future in-
creases. We were cutting that increase that was proposed.

Is this still a part of what we are doing here in terms of your
testimony?

302

Mr. Waxman. You are correct. We are projecting an increase to
buy these medical services, and we are cutting back on what the
increase would otherwise be.

Mr. McCandless. We are reducing the percentage of increase,
then, we are cutting the baseline?

Mr. Waxman. That is right.

Mr. McCandless. Now, the $64 question here, and this is what
is being asked, and that is why we are sitting here, how do we bal-
ance the budget if we don't address some of these entitlements?

Mr. Waxman. There is no way we can balance the budget unless
we address some of these entitlements. And I think the two entitle-
ments that are growing the fastest are the two health care entitle-
ments. My view is we have to do that in the context of health care
reform that limits the growth of health care spending.

There are many people who are anxious to put limits on the pub-
lic side of the health care expenditures without doing it on the pri-
vate side. And that simply causes a shift onto the private side and
doesn't reduce the cost for health care and the amount of money
going into the health care system, a lot of which is wasted, I be-
lieve, because we have so much shifting going on in that health
care sector.

Mr. McCandless. Thank you.

Thank you, Mr. Chairman.

Mr. Conyers. Mr. Spratt.

Mr. Spratt. Thank you, Mr. Waxman, for your testimony. I was
just curious, do you have a breakdown of how much the increase
in Medicaid has been due to the fact that we expanded eligibility
to these new population groups?

For example, I think in 1991 we progressively expanded eligi-
bility to children and families below a certain level, poverty level
of households. How much of the increase since then is due to the
fact that we have expanded the eligibility base?

Mr. Waxman. I can get that for you for the record.

[The information referred to follows:]

303

Supplementary Materials for the August 29, 1994 Hearing Record

The following material is to be submitted in the record for Congressman Henry A. Waxman:

According to the Kaiser Commission on the Future of Medicaid, the rate of growth
of Medicaid spending between 1992 and 1993 was 11 percent, well below the growth rates
of 27 and 29 percent for the previous two years. Most - more precisely, 67 percent — of
this growth in Medicaid spending between 1992 and 1993 was due to an increase in the
number of poor people enrolled. Increases in the number of children and pregnant women
with incomes below certain poverty thresholds accounted for only 8 percent of the total
growth in Medicaid spending during that year. In contrast, increases in the numbers of
elderly and disabled persons eligible for cash assistance and therefore Medicaid accounted
for 20 percent of the growth in Medicaid spending between 1992 and 1993. (Source: Kaiser
Commission on the Future of Medicaid, "Medicaid Update: Expenditures and Beneficiaries
in 1993" (August, 1994)).

304

Mr. Waxman. I would like to point out that when you look at it,
you will see that the overwhelming increase in costs in Medicaid
have been due to the inflationary factors in health care services.
Even if we had not expanded eligibility in the 1980's, we would still
have a huge increase in Medicaid costs. But I want to get that for
you specifically.

Mr. Spratt. I read the report by the Kaiser Commission a couple
of years ago, which tried to deal with it; and they seemed to be
blurred in their analysis.

What about a disproportionate share of hospitals? As a result of
that rule, is it possible to do a take on the budget and estimate
what it has cost us for allowing a disproportionate share of hos-
pitals a greater rate of reimbursement?

Mr. Waxman. I don't know. Let me see if I can get a breakdown
on that for you. We addressed that last year. I think that was an
area for a lot of abuse. States were claiming large number of Fed-
eral Medicaid disproportionate share dollars and then in many
cases not using these Federal funds for health care at all.

Mr. Spratt. Tax schemes — that was my next question. As a re-
sult of what we did last year, can we expect to see some reasonably
diminishing rate of increase? Like Al, we are not talking about cut-
ting, we are just saving the ramp of the increases.

Mr. Waxman. Yes, we can, and I don't know the dollar figure,
but the Congressional Budget Office has given us a dollar figure on
the estimates for what the savings would be and what we would
otherwise spend when we adopted the budget last year. This was
an important part of the reductions in spending for the future in
the Medicaid program.

Mr. Spratt. Thank you very much.

Mr. Conyers. So your view is that health reform becomes a very
important part of ways to approach cutting additional spending,
and that this is the key in dealing with this whole problem, and
if we deal with it effectively in the health care bill, we will be deal-
ing with it in a very important way here in terms of budget proc-
ess.

Mr. Waxman. That is correct. I don't think we can talk about
dealing with the budget deficit without health care until we can
control the spending in health care through health care reform that
brings in the system overall, both the private and public side. I
think we are going to have a very, very difficult time, both to meet
the expectations of people for services if they are elderly or poor,
and for keeping those costs under some kind of manageable levels.

Mr. Conyers. Thanks so much. It is a pleasure to have you here,
Mr. Waxman.

The gentleman from Florida is here, Mr. Tom Lewis. Welcome to
our subcommittee proceedings. I know you have had some thoughts
about budget process reform. And in walks Bob Walker at the pre-
cisely correct moment. If you would like to come up, we are just
starting out, Bob, on budget process reform.

So if you two want to begin, we would be delighted to hear from
you as the minority.

305

STATEMENT OF HON. ROBERT WALKER, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF PENNSYLVANIA

Mr. Walker. Thank you, Mr. Chairman. It is a pleasure to re-
turn to this room where so much good work has been done on the
issue of government efficiency and saving money over a period of
years. I am pleased to be with you. I think what you have is a pre-

Eared statement that I have on the subject of taxpayer debt
uydown. I ask unanimous consent, if I could, that that be made
a part of the record.

Mr. Conyers. Without objection, and welcome back to your old
committee.

Mr. Walker. Thank you. Mr. Chairman. Just to summarize, this
concept of taxpayer debt Duydown is in fact something which is
rather a unique, some have called a revolutionary concept on how
we can begin getting the average citizen involved in the process of
doing something about the deficit of this country.

In simple terms what debt buydown suggests is that individual
citizens on their tax form could check off up to 10 percent of their
taxes to go for one purpose alone and that is to buy down the Fed-
eral debt. However, if you do only that, it is a gimmick, because
obviously we would continue to pile up deficit and debt would con-
tinue to climb.

What this idea suggests is that for every $1 committed to debt
buydown, $1 also has to be subtracted from spending. It is either
subtracted from spending by Congress making decisions about the
prioritization of this spending of the country, or it is done across
the board by the Office of Management and Budget, and thereby
you have a built-in sequester if Congress doesn't do its job.

Now, it has been scored by a number of outside groups, including
most of the taxpayers' organizations in the country who have come
out in favor of this idea. More importantly, it has been scored by
CBO. CBO was asked to look at this idea on an optimal basis most
recently when this bill had a hearing before the subcommittee on
select revenue of the Ways and Means Committee.

CBO says that this concept if worked optimally could balance the
budget in 6 years and could totally wipe out every penny of na-
tional debt now on the books within a period of 15 years. And so
what you have here is a large element of hope that there is indeed
a process that involves the American people that not only brings
us to a balanced budget, but actually begins to reduce the debt and
even wipes the debt out.

In my view, we need to put that kind of program in place. There
are a large number of Americans who really do believe that they
have some responsibility to become involved in government them-
selves. This gives them that opportunity.

There are also large numbers of Americans who believe some-
thing has to be done about debt and deficit. This gives them a
chance to become involved in an issue that many regard as No. 1
on their agenda.

So I would urge this committee to consider this idea as one of
the ways that we can approach both balancing the budget and be-
ginning to reduce the debt, and do so in a way that engenders citi-
zen participation and interest, because remember, under this idea.
Congress would do no spending cuts that the American people had

306

not authorized to be done. That empowers not only them. It em-
powers us because then we are acting in their name in doing
spending cuts that all of us realize are very difficult to do.

And so I would urge the committee to take a look at the idea,
and I would be happy to answer any questions, and I would cer-
tainly be happy to work with you in the future toward trying to im-
plement this concept.

[The prepared statement of Mr. Walker follows:]

307

COMMITTEE ON GOVERNMENT

OPERATIONS

SUBCOMMITTEE ON LEGISLATION AND

NATIONAL SECURITY

HEARING ON H.R.429
THE TAXPAYER DEBT BUY-DOWN ACT

Thursday, August 4, 1994

308

INDEX

SECTION A

- - Copy of H.R. 429

- - Summary of H.R. 429

- - Cosponsor list

- - Supporter list

SECTION B

- - Statistics/Polling

SECTION C

- - Newspaper Clips and Editorials

SECTION D

- - Testimony submitted to Subcommittee on
Legislation and National Security for hearing on
H.R. 429

309

103d CONGRESS
1st Session

H. R. 429

To amend the Internal Revenue Code of 1986 to allow individuals to designate
that up to 10 percent of their income tax liability be used to reduce
the national debt, and to require spending reductions equal to the
amounts so designated.

IN THE HOUSE OF REPRESENTATIVES

January 5, 1993

Mr. Walker (for himself, Mr. Gingrich, Mr. Barton of Texas, Mr. Bliley,
Mr. Camp, Mr. Coble, Mr. Crapo, Mr. Doolittle, Mr. Dornan, Mr.
EWING, Mr. FAWELL, Mr. GEKAS, Mr. GOSS, Mr. HANCOCK, Mr.
Hefley, Mr. Kingston, Mr. Kolbe, Mr. Lewis of Florida, Mr.
McCollum, Mr. NUSSLE, Mr. Oxley, Mr. Packard, Mr. Ravenel, Mr.
ROHRABACHER, Mr. SANTORUM, Mr. THOMAS of Wyoming, Mr. Upton,
Mr. Zeld?f, and Mr. Zbimer) introduced the following bill; which was
referred jointly to the Committees on Ways and Means and Government
Operations

A BILL

To amend the Internal Revenue Code of 1986 to allow indi-
viduals to designate that up to 10 percent of their income
tax liability be used to reduce the national debt, and
to require spending reductions equal to the amounts
so designated.

1 Be it enacted by the Senate and House of Representa-

2 tives of the United States of America in Congress assembled,

310

1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the "Taxpayer Debt Buy-

3 Down Act".

4 SEC. 2. DESIGNATION OF AMOUNTS FOR REDUCTION OF

5 PUBLIC DEBT.

6 (a) In General. — Subchapter A of chapter 61 of the

7 Internal Revenue Code of 1986 (relating to returns and

8 records) is amended by adding at the end the following

9 new part:

10 "PART IX— DESIGNATION FOR REDUCTION OF

11 PUBLIC DEBT.

"Sec. 6097. Designation.

12 "SEC. 6097. DESIGNATION.

13 "(a) In General. — Every individual with adjusted

14 income tax liability for any taxable year may designate

15 that a portion of such liability (not to exceed 10 percent

16 thereof) shall be used to reduce the public debt.

17 "(b) Manner and Time of Designation. — A des-

18 ignation under subsection (a) may be made with respect

19 to any taxable year only at the time of filing the return

20 of tax imposed by chapter 1 for the taxable year. The des-

21 ignation shall be made on the first page of the return or

22 on the page bearing the taxpayer's signature.

23 "(c) Adjusted Income Tax Liabhjty. — For pur-

24 poses of this section, the term 'adjusted income tax liabil-

25 ity* means income tax liability (as defined in section

•HR 429 IH

311

1 6096(b)) reduced by any amount designated under section

2 6096 (relating to designation of income tax payments to

3 Presidential Election Campaign Fund)."

4 (b) Clerical Amendment. — The table of parts for

5 such subchapter A is amended by adding at the end the

6 following new item:

"Part DL Designation for reduction of public debt."

7 (c) Effective Date. — The amendments made by

8 this section shall apply to taxable years ending after the

9 date of the enactment of this Act.

10 SEC. 3. PUBLIC DEBT REDUCTION TRUST FUND.

1 1 (a) In General. — Subchapter A of chapter 98 of the

12 Internal Revenue Code of 1986 (relating to trust fund

13 code) is amended by adding at the end the following sec-

14 tion:

15 "SEC. 9512. PUBLIC DEBT REDUCTION TRUST FUND.

16 "(a) Creation of Trust Fund. — There is estab-

17 lished in the Treasury of the United States a trust fund

18 to be known as the 'Public Debt Reduction Trust Fund',

19 consisting of any amount appropriated or credited to the

20 Trust Fund as provided in this section or section 9602(b).

21 "(b) Transfers to Trust Fund. — There are here-

22 by appropriated to the Public Debt Reduction Trust Fund

23 amounts equivalent to the amounts designated under sec-

24 tion 6097 (relating to designation for public debt reduc-

25 tion).

•HR 429 IH

312

1 "(c) Expenditures. — Amounts in the Public Debt

2 Reduction Trust Fund shall be available only for purposes

3 of paying at maturity, or to redeem or buy before matu-

4 rity, any obligation of the Federal Government included

5 in the public debt. Any obligation which is paid, redeemed,

6 or bought with amounts from such Trust Fund shall be

7 canceled and retired and may not be reissued."

8 (b) Clerical Amendment. — The table of sections

9 for such subchapter is amended by adding at the end the

10 following new item:

"Sec. 9512. Public Debt Reduction Trust Fund."

11 (c) Effectpte Date. — The amendments made by

12 this section shall apply to amounts received after the date

13 of the enactment of this Act.

14 SEC. 4. TAXPAYER-GENERATED SEQUESTRATION OF FED-

15 ERAL SPENDING TO REDUCE THE PUBLIC

16 DEBT.

17 (a) Sequestration To Reduce the Public

18 Debt. — Part C of the Balanced Budget and Emergency

19 Deficit Control Act of 1985 is amended by adding after

20 section 253 the following new section:

21 "SEC. 253A. SEQUESTRATION TO REDUCE THE PUBLIC

22 DEBT.

23 "(a) Sequestration. — Notwithstanding sections

24 255 and 256, within 15 days after Congress adjourns to

25 end a session, and on the same day as sequestration (if

•HR 429 IH

313

1 any) under sections 251, 252, and 253, but after any se-

2 questration required by those sections, there shall be a se-

3 questration equivalent to the estimated aggregate amount

4 designated under section 6097 of the Internal Revenue

5 Code of 1986 for the last taxable year ending before the

6 beginning of that session of Congress, as estimated by the

7 Department of the Treasury on May 1 and as modified

8 by the total of (1) any amounts by which net discretionary

9 spending is reduced by legislation below the discretionary

10 spending limits (or, in the absence of such limits, any net

1 1 deficit change from the baseline amount calculated under

12 section 257, except that such baseline for fiscal year 1996

13 and thereafter shall be based upon fiscal year 1995 en-

14 acted appropriations less any 1995 sequesters) and (2) the

15 net deficit change that has resulted from direct spending

16 legislation.

17 "(b) Applicability. —

18 "(1) In general.— Except as provided by

19 paragraph (2), each account of the United States

20 shall be reduced by a dollar amount calculated by

21 multiplying the level of budgetary resources in that

22 account at that time by the uniform percentage nec-

23 essary to carry out subsection (a). All obligational

24 authority reduced under this section shall be done in

25 a manner that makes such reductions permanent.

•HR 429 IH

314

1 "(2) Exempt accounts. — No order issued

2 under this part may —

3 "(A) reduce benefits payable the old-age,

4 survivors, and disability insurance program es-

5 tablished under title II of the Social Security

6 Act;

7 "(B) reduce payments for net interest (all

8 of major functional category 900); or

9 "(C) make any reduction in the following

10 accounts:

11 "Federal Deposit Insurance Corpora-

12 tion, Bank Insurance Fund;

13 "Federal Deposit Insurance Corpora-

14 tion, FSLIC Resolution Fund;

15 "Federal Deposit Insurance Corpora-

16 tion, Savings Association Insurance Fund;

17 "National Credit Union Administra-

18 tion, credit union share insurance fund; or

19 "Resolution Trust Corporation.".

20 (b) Reports. — Section 254 of the Balanced Budget

21 and Emergency Deficit Control Act of 1985 is amended —

22 (1) in subsection (a), by inserting before the

23 item relating to August 10 the following:

24 "May 1 . . . Department of Treasury report to Con-

25 gress estimating amount of income tax designated pursu-

•HR 429 IH

315

1 ant to section 6097 of the Internal Revenue Code of

2 1986.";

3 (2) in subsection (d)(1), by inserting ", and se-

4 questration to reduce the public debt,";

5 (3) in subsection (d), by redesignating para-

6 graph (5) as paragraph (6) and by inserting after

7 paragraph (4) the following new paragraph:

8 "(5) Sequestration to reduce the public

9 DEBT REPORTS. — The preview reports shall set forth

10 for the budget year estimates for each of the follow-

1 1 ing:

12 "(A) The aggregate amount designated

13 under section 6097 of the Internal Revenue

14 Code of 1986 for the last taxable year ending

15 before the budget year.

16 "(B) The amount of reductions required

17 under section 253A and the deficit remaining

18 after those reductions have been made.

19 "(C) The sequestration percentage nec-

20 essary to achieve the required reduction in ac-

21 counts under section 253A(b)."; and

22 (4) in subsection (g), by redesignating para-

23 graphs (4) and (5) as paragraphs (5) and (6), re-

24 spectively, and by inserting after paragraph (3) the

25 following new paragraph:

•HR 429 IH

316

1 "(4) Sequestration to reduce the public

2 debt reports. — The final reports shall contain all

3 of the information contained in the public debt tax-

4 ation designation report required on May 1.".

5 (c) Effective Date. — Notwithstanding section

6 275(b) of the Balanced Budget and Emergency Deficit

7 Control Act of 1985, the expiration date set forth in that

8 section shall not apply to the amendments made by this

9 section. The amendments made by this section shall cease

10 to have any effect after the first fiscal year during which

1 1 there is no public debt.

•HR 429 IH

317

SUMMARY OF THE TAXPAYER DEBT BUY-DOWN

ACT

> The proposal would amend the IRS code to allow taxpayers
the opportunity to voluntarily designate up to 10 percent
of their INCOME TAX LIABILITY for the purpose of deficit
reduction. When the budget is balanced, monies designated
would apply to debt reduction.

> All monies designated would be placed in a national debt
reduction fund established in the Department of Treasury.

> On May 1st of each year, the Treasury Department would
be required to provide Congress with an estimate of the
total amount designated by the taxpayers.

> Congress would then have from May until the end of session
to find alternative spending cuts in discretionary spending

- or entitlements.

> If Congress - in conjunction with the President - failed to
enact spending reductions to meet the amount designated
by the taxpayers, an across-the-board sequester of all
government accounts - except Social Security, Deposit
Insurance, and net interest - would occur at the end of
the session.

> If Congress and the President enacted only half of the
necessary cuts, the sequester would ensure the other half.

> ALL SPENDING CUTS WOULD BE PERMANENT - THE CUTS
WOULD PERMANENTLY REDUCE THE SPENDING BASELINE.

> Although nothing in the legislation would prohibit Congress
from increasing taxes on their own, TAX INCREASES COULD
NOT BE USED TO SUBSTITUTE FOR THE SPENDING
REDUCTIONS DESIGNATED BY TAXPAYERS.

318

Most Common Misconceptions and Disinformation on the 10% Debt

Buy-Down Proposal

1) "It's a gimmick that won't really do anything."

(CBO's own analysis documents it would work as claimed. What hasn't
done anything is Congressional budget reduction efforts - the 1994 deficit
is projected at $253 billion. Trust and give the American people
a chance!)

2) "The offsetting spending controls are unspecified and unlikely to be enacted. "

(This simply reflects a total lack of understanding of the provisions of the
proposal itself. The spending reductions could not be more specific: every
Federal program, including defense, international, domestic and
entitlements (except for the Social Security Retirement Fund, deposit
insurance and interest on the debt) would be cut by an equal percent across-the-
board to offset the amount of taxes collectively set aside for debt reduction.
After passage of the law giving the taxpayer this power, no further spending cuts
would need to be enacted by an indecisive Congress.)

3) "It is undemocratic — only allowing people with income to initiate spending
cuts that affect people without"

(It is the opposite of undemocratic to give the middle-class worker who
pays most of the taxes in this country a corresponding say over how their
money is spent. Taxpayers would still have no direct control over how
90% of their taxes are spent.)

4) "This proposal is just another checkoff. "

(First of all, this proposal is not really a checkoff at all, but a new
taxpayer right. It would involve a taxpayer filling in on a new line
on their 1040 the amount of their total tax (from $0 up to 10% of
such tax) that they want to be used only to reduce the debt. Most
income tax checkoffs (such as state and local checkoffs) involve
additional contributions by the taxpayer in addition to their tax.
They increase the taxpayers' liability or reduce their refund. This
proposal would not increase the taxpayer's payment one cent. Income
tax checkoffs (such as the Presidential campaign fund) also generally
earmark additional spending (and therefore debt) — the opposite
intent of this proposal.
5) "Checkoffs are not popular and don 't get good participation. "

(Not to differentiate between the taxpayers' motivation to earmark their
hard-earned money for Presidential candidates they do not support and
for solving the biggest problem facing this country does the American
people a disservice.)
6) "// will never pass Congress."

(That's why we need a new Congress. America deserves a better Congress!)

319

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Cosponsors

for

THE TAXPAYER DEBT BUY- DOWN ACT

Representative Robert S. Walker
Representative Newt Gingrich
Representative John Kasich
Representative Wayne Allard
Representative Dick Armey
Representative Spencer Bachus
Representative Richard Baker
Representative Bill Baker
Representative Cass Ballenger
Representative Roscoe Bartlett
Representative Michael Bilirakis
Representative Lucien Blackwell
Representative Thomas Bliley
Representative Peter Blute
Representative John Boehner
Representative Henry Bonilla
Representative Jim Bunning
Representative Dan Burton
Representative Dave Camp
Representative Charles Canady
Representative Howard Coble
Representative Larry Combest
Representative Christopher Cox
Representative Michael Crapo
Representative John Doolittle
Representative Bob Dornan
Representative Jennifer Dunn
Representative Terry Everett
Representative Thomas Ewing
Representative Harris Fawell
Representative Bob Franks
Representative Gary Franks
Representative Tillie Fowler
Representative Dean Gallo
Representative George Gekas
Representative Pete Geren
Representative Paul Gillmor
Representative Bob Goodlatte
Representative Porter Goss
Representative Rod Grams

PRINTED ON -UCTCUO t*A««

320

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James Greenwood

Mel Hancock

James Hansen

J. Dennis Hastert

Joel Hefley

Wally Herger

David Hobson

Pete Hoekstra

Stephen Horn

Duncan Hunter

Tim Hutchinson

Bob Inglis

James Inhofe

Ernest Istook

Sam Johnson

Jay Kim

Jack Kingston

Scott Klug

Joe Knollenberg

Jim Kolbe

Jon Kyi

David Levy

Tom Lewis

Jim Lightfoot

John Linder

Bob Livingston

Donald Manzullo

Alfred McCandless

Bill McCollum

Jim McCrery

Buck McKeon

John Mica

Dan Miller

Carlos Moorhead

Jim Nussle

Mike Oxley

Ron Packard

Bill Paxon

Richard Pombo

Rob Portman

Deborah Pryce

Jim Ramstead

Arthur Ravenel

Dana Rohrabacher

Edward Royce

Rick Santorum

Dan Schaefer

Steven Schiff

F. James Sensenbrenner

Christopher Shays

Bob Smith

Nick Smith

Gerald Solomon

Cliff Stearns

321

Representative Bob Stump

Representative Craig Thomas

Representative Peter Torkildsen

Representative Fred Upton

Representative Barbara Vucanovich

Representative Curt Weldon

Representative Bill Zeliff

Representative Dick Zimmer 4/13/94

322

PEOPLE AND ORGANIZATIONS WHO

SUPPORT

H.R. 429

THE TAXPAYER DEBT BUY-DOWN ACT

Mr. Lawrence Kudlow, Economics Editor, National

Review

Americans for a Balanced Budget

Americans for Tax Reform

The American Legislative Exchange Council (ALEC)

Association of Concerned Taxpayers for a Fair

and Simple Tax
The Council for Citizens Against Government Waste
Citizens for a Sound Economy
Dr. Norman B. Ture, President, Institute for the
Research on the Economics of Taxation (IRET)
National Taxpayers Union (NTU)
U.S. Business and Industrial Council
National Federation of Independent Business (NFIB)

323

TortC iW3

Ics. .

MANDATE

YOUR OPPORTUNITY TO DETERMINE NFIB'S LOBBYING POSITION ON KEY LEGISLATIVE ISSUES

1. SHOULD TAXPAYERS BE ALLOWED
to designate up to 10% of their tax
payment to reduce the deficit9

Q Yes Q Undecided

□ No □ No Interest in This Issue

Background: The federal deficit will top $300
billion this year. Some lawmakers have pro-
posed creating a checkoff system on IRS forms
permittuig taxpayers to direct up to 10% of their
tax payments into a special deficit reduction
fund. For each designated tax dollar the fund
receives Congress would be required lo cut fed-
eral spending by an equal amount.

Supporters contend Congress lacks the disci-
pline to cut federal spending on its own. A
checkoff system would give individual taxpayers
the means to directly reduce the growth in gov-
ernment spending and cut the deficit. Tax
checkoffs could potentially slash the deficit by
$500 billion in five years.

Opponents say the economy could be hurt,
and business recovery stalled, if the system trig-
gered a sudden drop in federal spending.
Society's truly needy would be at real risk if
domestic programs struggling under earlier
budget cuts were automatically reduced more
Other critics say the amount of money designat-
ed for this deficit reduction fund ukely would be
insignificant.

2. SHOULD PART-TIME WORKERS
be entitled to partial benefits?

□ Yes D Undecided

n No □ No Interest in This Issue

Background: One of four U.S. workers is
employed part time. Fulltime employees often
receive company sponsored benefits such as
health care and paid vacations. Some lawmakers
want to require employers to extend partial ben-
efits (o part-time employees, prorated to the
number of hours they work.

Supporters say the growth in part-time em-
ployees represents a fundamental and perma-
nent shift in the work force. Giving part-timers
benefits would help small firms attract and keep
skilled workers, lowering staff turnover and
increasing' productivity. Many part-timers can't
afford their own health and retirement plans.
Providing partial benefits would save employers
money by reducing uncompensated medical
care costs nationwide.

Onnonenl* <nv nari-tim«"-lrthnf-inl*rKrvp

-Send A Message

Jo Washington'

^sSwrteffiKrfaa

!^ritracommentfo^S=

jump in payroll expenses partial benefits could
cost. The high turnover among part-timers
means figuring benefits would be a paperwork
nightmare. New benefits are unnecessary as
most part-timers are covered by another family
member's plan.

3. SHOULD THE MINIMUM WAGE BE
indexed for inflation?

□ Yes

D No

□ Undecided

□ No Interest in This Issue

Background: Congress is considering legisla-
tion to annually increase the current hourly
minimum wage by a percentage equal to the
rale of inflation

Supporters contend increasing the minimum
wage would help the economy as consumer
spending goes up whenever the minimum wage
rate rises. Three of ten minimum wage earners
head households and can't support families on
a minimum wage constandy being eroded by
inflation. Many state welfare benefits exceed the
minimum wage. Tying base wages to inflation
would give the poor more incentive to seek
jobs, lowering welfare costs.

Opponents argue few poor families would
benefit as only 4.6 percent of adults over age 25
work for minimum wage. Automatically adjust-
ing the base wage for inflation would hike up all
wages; hundreds of thousands of jobs would be
lost because firms couldn't afford to pay all
employees higher salaries. Lower tax receipts
plus higher unemployment payments could cost
taxpayers nearly $7 billion.

4. SHOULD THE MEDICAL PORTION
of workers' compensation be moved
into a new standard healtb plan?

Q Yes □ Undecided

D No D No Interest in This Issue

Rnrktrrtnnrl: Thp cn*t nf hrth worker*' rt\m-

rockenng As part of its health care reform
package, the Clin ion administration is consider-
ing merging the medical portion of workers'
comp with group health insurance, creating an
integrated employer- provided health plan.

Supporters say integrating plans would
increase efficiency and save employers money.
The workers' comp program would benefit
from federal health care reforms and employers
would pay for just one medical plan. The legal
protection shielding employers from WC dam-
age suits would be left in place.

Opponents argue merging health coverage
with state required workers' comp will lead to
mandated employer provided medical insur-
ance. Smaller firms that couldn't afford cover-
age would be forced out of business. Savings
are overstated as firms would still need to buy
wage replacement insurance. Merging the two
systems means WC benefits could be subject to
co-payments and deductibles — exposing firms
to possible lawsuits.

5. SHOULD INDIVIDUALS BE
permitted to fully deduct the cost
of health insurance if they are not
covered by an employer plan?

□ Yes □ Undecided

□ No Q No Interest in This Issue

Background: Before 1981, individuals who
bought their own health insurance could claim
a tax deduction. Some lawmakers have pro-
posed making health insurance purchased by
individuals for themselves and their families
100 percent deductible.

Supporters say this would make health insur-
ance financially accessible to at least 10 million
people not currently covered. With more people
covered there would be less government spend-
ing on health care programs. The pressure on
employers to provide medical plans would be
reduced, helping break the link between health
coverage and employment

Opponents say taxpayers can't afford the %A
billion a year in lost federal revenues this
deduction could cost, considering the size of
the defidL Those most needing coverage —
such as the workers earning less than $15,000
a year who make up half the uninsured popula-
tion — still couldn't afford to buy insurance.
Making health insurance fully deductible
wouldn't help those who can afford to buy a

notirv Km nnnnl <w* r*wrrn><* rwaiw of "h*<r

324

'rinted especially for Representative Robert S Walker

Questions:

Results in percent:

Should taxpayers be allowed
to designate up to 10% of
their tax payment to reduce
the deficit?

Should part-time workers be
entitled to partial benefits?

Should the minimum wage be
indexed for inflation?

Should the medical portion
of workers ' compensation be
moved into a new standard
health plan?

Should individuals be
permitted to fully deduct the
cost of health insurance if
they are not covered by an
employer plan?

Your

District

(16)

Your

State

(PA)

The
Nation

Favored
Opposed
Undecided

: 76
: 13
: 11

Favored
Opposed
Undecided

: 9
: 84
: 7

11
83

Favored
Opposed
Undecided

15
78

19
74

17
76

Favored
Opposed :
Undecided:

23
57
20

21
60
19

19
63
18

Favored :
Favored :
Undecided:

77
13
10

81
12

600 Maryland Avenue, S.U., Suite 700 * Washington, O.C. 20024 * (202) 554-9000

iiu wuuiu ncifj oiiitui uiiiia dtiu

325

Legislative
Update

"We The
People"

NATIONAL "WRITE YOUR CONGRESSMAN" INC., Founders Bldg., 96% Skillman, Dallas, TX 75243-8253

VOL. 93, NO. 102

Dear Member

This month we are asking our members to voice their thinking on the "Freedom of Choice Act" which would prohibit States from
limiting access and availability of a woman's choice to have an abortion. This is a very controversial issue and we suggest that you
also express your views to your Senators and President Clinton. Please tell them that you are a member of N.W.Y.C, there is
strength in numbers.

President Bill Clinton

The White House

1600 Pennsylvania Avenue, N.W.

Washington, D.C. 20500

The Honorable

United States Senate
Washington, D.C. 20510

CONGRESSIONAL DISTRICTS

Due to the shift in population, almost all Congressional Districts changed their boundaries. Some
states lost Members of Congress, while others gained. Therefore, some of our members will be writing
to a different Member of Congress. All mailings should include the Congressperson where you vote.

VOTER'S VOICE VOTE — DECEMBER 1992

r-NATIONAL RESULTS
1. DEFICIT REDUCTION:

Should Congress pass the "checkoff" plan to
reduce the deficit?

YES

75%

NO UNDECIDED
17% 8%

2. SHIR JOBS OVERSEAS:

Do you agree with Congressman George Brown
that our Government should stop shifting jobs
overseas?

70% 16% 14%

FIRST-TIME HOME BUYERS:

Do you agree with Congresswoman Nancy
Johnson that a tax credit should be given to first-
time home buyers to spur economic growth?

65% 29%

CONTENTS

VOTER REGISTRATION
MEDICAL LEAVE
BUSINESS INVESTMENT
TAX FAIRNESS
FREEZE SPENDING
WETLANDS REFORM
MONEY LAUNDERING
MINIMUM WAGE
FREEDOM OF CHOICE

National Voter Registration Act of 1993:

( Rep. Al Swift (D-WA) says, "Mr.
Speaker, I am pleased today to introduce
H.R. 2, the National Voter Registration
Act of 1993. This bill is not only a priority
of President-elect Bill Clinton, and a
priority of the leadership of both Houses
of Congress, but it certainly is also a
priority for the American people. All
those people, some of them on the floor
Hon. Al Swift today, who argued so hard against the
basic principle of this bill in the last two Congresses, have
been proven wrong by the statistics from the 1992 election,
ireased registration produced an increase in voter turnout.
, >nd where did the bulk of that increase in registration occur
— in States that implemented the registration procedures of

BILLS IN CONGRESS

H.R. 2. The so-called motor-voter States showed a 3-percent
increase in 1992 registration over 1988, and a voter turnout
increase of almost 7 percent. All the other States had a regis-
tration increase of less than 1 percent and a voter turnout in-
crease of 3 percent. The motor-voter States led the way in
citizen participation in 1992 and, with the enactment and im-
plementation of H.R. 2, the whole country will enjoy a
similar participation bonus in 1996. H.R. 2 is not a new con-
cept. It was passed by the House in the 101st Congress, only
to be filibustered to death in the Senate. It was passed by
both the House and Senate in the 102nd Congress, only to
be vetoed by President Bush ... I would say to my distin-
guished new colleagues, those who for the first time have
been sworn in today as Members of Congress to defend our
Constitution, that H.R. 2 offers them a unique opportunity to

(CONTINUED ON NEXT PACt)

326

Hit* ire him propoMIt en vertoue domeetie leauM- For each on*, plea* tell me H yew thine. It It • very good IdM, « tom«wh»t
good IdM, • *omewhat poor IdM. or ■ very poor IdM.

Total

OK/

Qood Poor

R»f.

Jdu J4u

Very Smwt Smtwt Vary
./ Qood Good Poor Poor

Idaa IdM |dM IdM DjB*

Q36. Give taxpayers the right to check. • box on
their tax return* to that up to ten percent of
their (mm can go to (educing the national
^diot, and require that for avary dollar tot
etkJe to cut (M* debt, currant spending wU
ba cut by an equal amount. 39% 31 10 16 1 3 70% 26

the proposal to ghrt ivtpiyaa » new efitcJtoff..

060. If you could check • box on your tax return to that up to tan percent of your tax** went to reducing the national debt end
. that current government wending would be cut by an equel emount, how likely would you be to check thle box • definitely,
probebly, probably not, or definitely not?

Definitely 26%

Probably 40

Probebly not 18

Definitely not 14

Don't know 2

Refuted/NA •

Cotapted

Definitely/Probably 66%

Probably not/Oofinitely not i 32

Q61 . Of definitely or probably In Q60) What pereent of your tax payment, up to ten percent, would you tpecffy for reducing the
national debt?

1-4

6-9

Main

7.2

JK/Refueed

Not tiked

/Vi /a 00 re*/ifend v\h+s

327

The following charts illustrate the most recent CBO estimates of
H.R. 429. For an explanation of the statistics, please refer
to the CBO letter which immediately follows the charts.

TABLE I. CBO BASELINE PROJECTIONS (By fiscol year, in billions of dollars)

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Roveiuies

Individual income taxes

512

545

593

628

661

699

735

778

811

851

894

All other

639

699

740

_27J

811

847

_88i

JX£

997

1.040

Toi«!

1,150

1,244

1,332

1 ,403

1,472

1 ,547

1,617

1.690

1,768

1.848

1,934

Onllajn

Social Seouritv •/

302

319

337

354

372

391

410

431

452

475

499

Interest •/

198

203

217

7.42

253

265

278

292

311

327

Deposit Insurance »/

-26

-10

-8

-4

-3

•3

-3

Medicare

143

160

178

196

216

239

264

292

323

357

395

Medicaid

100

112

125

139

155

172

190

210

231

Other mandatory programs

243

241

240

239

256

266

275

285

295

305

316

Diacrouonary spending

547

542

548

547

564

581

598

616

634

Oiticttlnjt receipts b/

• 67

-7(1

_J4

-76

•80

-85

-89

-93

-^22

-102

-107

Total

1,416

1,497

1,529

1 ,592

1,670

1,747

1.840

1,941

2.050

2,168

2,292

"-licit (-)-or "Surplus (+)

.266

-253

-196

-190

-198

-200

-223

-251

-282

-320

-359

i,ebl Held by the Public

3,249

3,507

3,713

3.919

4,137

4.357

4,601

4.873

5,176

5.517

5,896

Memorandum-

Total Nonexempt Outlays

1,009

1,031

1.060

1,094

1,144

1,192

1.259

1,329

1,406

1,488

1.576

SOURCE: ConftfCMionul Du<j£Cl Office, September 1993 baiclinc projections. The prnjc-ctioiu nuiume compliiiwc wilh Ihe diicrctiorMry spending cipi
in ihe 1990 Budget Enforcemenl Act and iho OmnibUi Budyct Recoiicillallon Acl of 1993.

It. Program exempt from sequestration under Congressman Walker's proposal.

li. Offsetting receipts are effectively exempt became ihey arc not asaooiMed wilh scqucateraMe Imdgetary rcw>urco*.

328

TABLE 2. ILLUSTRATIVE MAXIMUM EFFECTS OF PROPOSAL (By flsc*! ye*r, in billion* of dollar*)

1094

1995

1996

1997

1998

2000

2001

2002 2003

Auumod Ch*vkufT Amount ■/

Automatic Spending Cut* b/
Noiwxempl program* c/
liuerett Mvinga
TntAl

Roullini: Outlay!

Deficit (-) o, Suiplut( + )

Dobt Held by tlic Public

Baseline Outlays fur
Noncxcmpt Program* d/

Cumulative Scqucilrallon c/

Resulting Outlays for
None-xcmpt Pirtgrama

Percentage Keduction

Miuulluiu Effect ou Officii lujd Dvbt
55 59 «3 66 70

15.

-51

•53

-107

•6

-113

-172
-136

-242
•27

-269

-321
-45

-366

-409
■68

-477

•506

■9*

-604

-613
_J36
-749

■731
-182
-913

1.416

1,497

1,476

1.479

I.4K4

1.478

1,474

1.463

1,445

1.419

1,380

•266

-253

144

-76

-12

143

227

323

429

554

3,249

3,507

3.661

3,753

3,785

.1,736

3,614

3,409

3.107

2,699

2.166

Mnxiiuuui Kffwt on Soqubsli-rubtc Programs.

1,009 1,031 1,060 1.094 1.144 1,192 1,259 1.329 1,406 1,488 1,576
0 0 -51 -107 -172 -242 -321 -409 -506 -«13 -731

1,009

1.031

1,008

986

972

950

937

920

900

874

K45

-5

-10

-15

-20

-26

-31

-36

-41

-46

SOURCE: Congressional Budge! Officii.

*, CDO has htiiod UlU ftiintyniii on the assumption, previously upaciGed by Congressman Walker, thai all individual income tax ruyeri would choose iho
maximum checkoff, 10 peroeiil of liabilities, Although tax collections (on a fiscal yearhaiis, ai shown earlior in Table 1) are not ihc nine ai liabilities
(which ins on ft calendar year hasi..), they ere aimilar enough for this illustration.

b. Taxpayers would designate the checkoff in relurna filed on or before April 15, »nd sequestration would begin the following October (or at the end
of the Congressional *cssion, if later). HenOe, there ia a two-year lug between iho time taxpayers incur liabilities and the spending ouis that they could
order.

0. According to Congressman Wellccr'a staff, ii ii intendod that a single year's checkoff should gercralo savJugi in all future year*, a» programs »ra hsrr*d
from reluming to proviout attending plana or benefit formulas. Additional legislative language would be needed to achieve this result.

d. In Congressman Walker's proposal, only Social Security, deposit insurance, and net interest are exempt. Offsetting receipts are effectively oxempl
because they are not aasocialod with tctpicstcrablc budgetary reiourccs. The Cungrcii can substitute other spending reiluctions (hut not revenue
incnstites) for the required sequestration.

329

Congressional Budget Office

U.S. Congress
Washington, DC 20515

Robert D. Reischauer
Director

February 26, 1993

Honorable Robert S. Walker
U.S. House of Representatives
Washington, D.C. 20515

Dear Congressman:

This responds to your letter of January 26, asking for an updated CBO
analysis of your proposal to permit individual income taxpayers to determine
automatic spending reductions. Please note that our analysis is illustrative
only, and— as you specifically requested— assumes that taxpayers choose the
maximum checkoff permitted by your bill.

Your proposal would not affect tax liabilities at all, but would allow taxpayers
to designate as much as 10 percent of their tax liabilities to go into a "Public
Debt Reduction Trust Fund." The proposal provides for automatic spending
reductions that are linked to the amount checked off by taxpayers. That is,
the proposal affects the spending side of the budget, not the tax side. Cuts
would apply across the board to all programs except Social Security, deposit
insurance, and net interest.

At present, CBO has no basis to judge how many taxpayers would choose this
option, and for how many years. Other income tax checkoffs (such as for the
Presidential campaign fund, or state and local income tax checkoffs) generally
permit additional spending for the stated purposes. Under your proposal,
taxpayers have no choice about the mix of spending cuts; nor can they voice
a desire for greater spending— factors that may limit their participation. The
illustration presented below depicts the largest effects possible under your
proposal.

330

Honorable Robert S. Walker
Page 2

The starting point. The starting point for our analysis is CBO's baseline
projections, recently published in The Economic and Budget Outlook: Fiscal
Years 1994-1998 and summarized in Table 1 . These sketch the likely path of
spending and revenues if current laws and policies remain unchanged. The
table divides revenues between individual income taxes and other sources;
only the former is tied to spending cuts under your plan. The table also lists
major categories of spending, and shows that about one-third of spending
would be exempt from automatic reductions under your proposal.

Illustrative effects of your plan. Maximum effects of your plan are shown in
Table 2, assuming that taxpayers take full advantage in all years.

Your proposed income tax checkoff would affect spending with a lag. The
legislation provides that taxpayers cast their votes with their annual tax
returns, filed on or before April 15. For example, taxpayers will file returns
for 1993 liabilities by April 15, 1994. The Treasury would inform the'
Congress on May 1 of the required cuts. Sequestration, if any, would begin
in October 1994, the start of fiscal year 1995 (or somewhat later if the
Congress is still in session). During the intervening period, the Congress can
come up with substitute spending cuts to avert a sequestration; revenue
increases, however, could not substitute for the required sequestration.

Your legislation also provides that "obligational authority... [shall be reduced]
in a manner that makes such reductions permanent." In previous correspon-
dence, you have made clear that this provision is intended to bar programs
from returning to previous spending levels or benefit formulas after a
sequestration. That is, even a single year's checkoff would result in multiyear
outlay savings, and savings would grow dramatically if taxpayers persisted in
choosing the checkoff. Although additional legislative language is needed to
achieve this outcome, we have based our illustration on your intent.

Under these critical assumptions that you specified, spending cuts could total
as much as $50 billion in 1995, the first year. They could reach nearly $400
billion in 2000 and— together with interest savings-could result in a balanced
budget. If taxpayers continued to mark the checkoff-presumably to pay off
the public debt—sequestration could total $700 billion in 2003. In that year,
the cumulative sequestration could exceed 40 percent of non-exempt spending;
the government could run a surplus of over $200 billion; and only $3.9 trillion
of debt could remain (versus $7.5 trillion under the current outlook). Of
course, neither CBO nor other analysts can estimate how many taxpayers
would actually elect the checkoff, particularly as spending cuts deepen and the
budget moves into surplus.

331

Honorable Robert S. Walker
Page 3

Please call me if I can be of additional assistance, or your staff may wish to
contact Kathy Ruffing (62880) for further information on this matter.

Sincerely,

Robert D. Reischauer
Director

Attachments

cc: Honorable Dan Rostenkowski

Chairman, Committee on Ways and Means

Honorable Bill Archer

Ranking Minority Member, Committee on Ways and Means

Honorable John Conyers, Jr.

Chairman, Committee on Government Operations

Honorable William F. Clinger, Jr.

Ranking Minority Member, Committee on Government Operations

332

"oooraWe Robert S. Walker
If*
TABLE I: CBO BASEUNE PROJECTIONS (By fiscal year, in billions of dollars)

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Revenues

Individual income taxes

501

531

567

600

629

662

690

720

762

786

821

All other

642

684

723

756

785

820

849

880

903

947

983

Total

1,143

1,215

1,291

1,356

1,414

1,482

1,540

1,600

1,664

1,733

1,804

Outlays

Social Security a/

302

319

335

351

368

385

403

420

439

459

480

Interest a/

198

211

231

250

270

292

314

339

368

400

437

Deposit insurance a/

-1

-14

-10

-9

-10

-9

Medicare

146

167

188

211

234

259

286

316

350

389

432

Medicaid

105

118

131

146

162

179

198

219

240

Other mandatory programs

241

238

237

234

251

261

269

277

286

296

305

Discretionary spending

547

539

554

569

584

600

616

633

650

668

Offsetting receipts b/

-65

-68

-72

-73

-76

-78

-81

-84

-87

-91

-94

Total

1,453

1,507

1,575

1,643

1,733

1,839

1,943

2,055

2178

V12

2,458

Deficit (-) or surplus (+) -310 -291 -284 -287 -319 -357 -404 -455 -513 -579 -653

Debt held by the public 3,290 3,585 3,874 4,169 4,496 4,863 5,275 5,739 6,261 6,850 7,512

Memorandum: Total non- 1,015 1,035 1,070 1,116 1,185 1,250 1,317 1,389 1,468 1,553 1,645
exempt outlays

SOURCE Congressional Budget Office, January 1993 baseline projections (assuming compliance with the discretionary spending caps in
the 1990 Budget Enforcement Act),

a. Program exempt from sequestration under Congressman Walker's proposal.

b. Offsetting receipts are effectively exempt because they are not associated with sequesterable budgetary resources.

333

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X Issue Bulletin

fctitage ^oundathii

The Heritage Foundation ■ 214 Massachusetts Avenue. N E ■ Washington, DC 20002-4999 • (202)546-4400 • Telex 440235

September 28, 1992

THE TEN PERCENT TAXPAYER CHECKOFF:
BREAKING SPECIAL INTEREST BUDGET GRIDLOCK

Daniel J. Mitchell
John M. Olin Fellow

INTRODUCTION

In this election year, voters understandably are voicing their frustration at the
inability of Washington politicians to put America's economic house in order.
The 1990 budget deal was supposed to balance the federal budget. But legislation
implementing the deal gutted the enforcement mechanisms of the 1985 Gramm-
Rudman-Hollings Deficit Reduction Act, and the deficit widened in the past two
years. Instead of the promised era of fiscal restraint, record tax and spending in-
creases are consuming larger and larger amounts of national income.

While it is difficult to be optimistic about Congress imposing real controls on
spending and the deficit, one idea could well force Congress to do so. Representa-
tive Robert Walker, the Pennsylvania Republican, has introduced legislation in
the House that will put into the hands of each taxpayer power to determine di-
rectly how fast the federal budget grows. Walker's plan (H.R. 5773) is co-spon-
sored in the Senate by Robert Smith, the New Hampshire Republican (S. 3158),
and was given an important boost in August when George Bush endorsed it in his
convention acceptance speech.

Taxpayer Antidote. The Walker-Smith proposal allows taxpayers, through a
checkoff on their u \ form, to dedicate up to 10 percent of their personal income
tax liability to a fund to retire the national debt. Further, it prohibits politicians
from simply replacing the old debt with new borrowing by mandating that federal
spending be reduced by the same amount as the total taxpayer checkoff. If ap-
proved, the plan could balance the budget in as little as four years.

An attractive feature of the Walker-Smith plan is that it gives taxpayers the
power to act as an antidote to the disproportionate influence now exercised over
the budget by interest groups. Beneficiaries of federal largesse closely monitor
budget developments, lobby policy makers, and devote considerable resources to
maintain or increase their slice of an ever-growing budget pie. Ordinary taxpay-
ers, on the other hand, usually lack the time, detailed knowledge, and resources to

Nor* Nothing written her* it to be conttrued aa neceaaaritf reflecting the inewa of The Hehtege Foundation of ma en
attempt to eta or hinder the peasege of eny Ml before Congrats-

336

counter the organized efforts of special interest groups. And while many members
of Congress portray themselves as fiscal conservatives when campaigning in their
home states and districts, in Washington they often yield to the pressure of inter-
est groups demanding higher spending.

By giving each taxpayer the direct power to limit the growth of federal spend-
ing, the Walker-Smith checkoff plan would allow families to challenge and defeat
the spending coalitions without having to organize themselves into a political con-
stituency. As such, the plan profoundly would change the dynamics of spending,
and could at last force fiscal discipline on Washington.

HOW THE TAXPAYER CHECKOFF WOULD WORK

The taxpayer checkoff is a technically simple method of allowing individual
taxpayers to make modest changes in the total level of federal spending. Under
the plan, all taxpayers will have the option, when filing their annual tax returns,
of dedicating up to 10 percent of their personal income tax liability to a debt re-
tirement trust fund. Lawmakers then will have to reduce federal spending by the
total amount dedicated to the fund. Should lawmakers fail to reduce total spend-
ing as required, budget cuts would occur automatically in a process known as se-
questration.

To understand exactly how this would work, consider an example. Let us say
that after all the tax return checkoffs were tallied when Americans filed their 1992
returns next April, taxpayers had dedicated $40 billion of their personal income
tax liability to the trust fund. Total federal spending for the 1994 fiscal year, be-
ginning in October 1993, would have to be reduced by the same amount — $40 bil-
lion— below projected 1994 baseline spending levels. This process would repeat
every year. If, in early 1994, taxpayers dedicated $45 billion of their 1993 tax lia-
bility to the trust fund, fiscal 199S federal spending would have to be reduced by
that amount

Slowing Spending Growth. The taxpayer checkoff could have a significant im-
pact on the deficit The actual level of savings would depend on the level of tax-
payer participation, which in turn would reflect the importance placed by individ-
ual taxpayers on deficit control. It is also difficult to estimate precisely how fast
government spending would grow if the taxpayer checkoff were enacted since the
cuts would be made from whatever spending level lawmakers approved for that
year. The growth of spending, however, certainly would be slowed. For instance,
assume the current services baseline projected that spending would have to grow

The spending "cut" mandated by the Walker-Smith plan is a reduction from the upcoming fiscal year's current

services baseline. Since the current services baseline projects higher spending, due to inflation, demographic

shins, and program expansions, the actual effect of the checkoff would be to reduce the size of the budget's

increase.

Tax returns for any particular calendar year are due by April IS of the following year. It would be shortly after

this dale that the government would tabulate the total amount dedicated to the trust fund. This amount then

would be sequestered from the upcoming fiscal year's budget which would begin October 1.

337

by $65 billion. If, then, taxpayers selected $40 billion on their tax returns, law-
makers would be allowed to spend only $25 billion above the previous year's
level. Failure to comply would trigger a sequester, which would bring spending
down to the legally required level.

Nor would politicians be able to evade this fiscal discipline by simply increas-
ing spending by an extra $40 billion above the baseline. The current rules govern-
ing the budget, while considerably weakened in 1990, still impose some limit on
the overall level of spending. Discretionary spending growth is limited by a spend-
ing cap. Entitlement spending, meanwhile, is subject to pay-as-you-go rules orig-
inally implemented by Gramm-Rudman back in 1985. These rules prohibit the cre-
ation of new entitlement programs, or expansion of existing ones, unless that
spending is paid for by higher taxes or cuts in other entitlements. The discretion-
ary and entitlement budget rules do allow spending to grow by more than twice
the rate of inflation, but they place an upper limit on how much Congress can
spend in any given fiscal year.

THE POTENTIAL SAVINGS

The following table, prepared by the Congressional Budget Office (CBO),
illustrates the maximum potential savings the checkoff plan could achieve when
compared with current projections of how federal spending will grow. If all tax-
payers were to choose the maximum checkoff, today's record deficits would fall
quickly and a budget surplus of $26 billion would occur as early as 1997, accord-
ing to the CBO. And even if currently projected spending levels grow because of
the "economic" and "technical" re-estimates allowed under the 1990 Budget En-
forcement Act, worst-case scenarios indicate that these re-estimates would delay a
balanced budget only by one year.

One reason why the savings become so large in future years is that the seques-
ter is designed to reduce permanently the federal spending baseline. This is a cru-
cial feature of the legislation because the federal budget is prepared each year
using baseline projections as the benchmark or starting point If, for instance, the
baseline projects that spending should rise by $75 billion because of inflation, de-
mographic shifts, and program expansions already built into the law, reducing
that $75 billion increase to a $50 billion increase is counted as a $25 billion bud-
get "cut" This process, known as current services budgeting, biases budgetary
choices by allowing interest groups to portray even modest program reforms as
deep cuts, since both the general public and the media tend to assume that govem-

While discretionary spending has been subject to three separate caps, one each for domestic, defense, and
international, these firewalls disappear beginning in fiscal 1994 when a single unified cap for all discretionary
spending takes effect

The budget rules do allow for emergency spending which is exempt from the budget caps. It is this loophole,
for instance, which will allow politicians to approve hurricane relief spending. While this provision
theoretically could be used to remove any and all fiscal discipline imposed by a taxpayer checkoff, it is more
likely that politicians would just repeal the law if they ever reached that stage.

338

ment budget numbers refer to nominal year-to-year changes. The taxpayer check-
off will not repeal current services budgeting, but the multi-year impact of seques-
ters on the spending baseline will reduce the problem.

Taxpayer Checkoff Deficit Savings

(in $ billions)

1994 1995 1996 1997 1998 1999

Current

Spending 1,529 1,543 1,602 1,726 1,843 1,962

Estimates*

Current

Deficit 267 203 189 236 265 296

Estimates

Maximum

Checkoff 49 107 178 263 360 474

Savings

Resulting

Outlay 1,479 1,435 1,424 1,464 1,482 1,487

levels

Resulting

Deficit 218 96 11 (26) (96) (178)

Levels

'These baseline spending estimates Incorporate spending caps and pay-as-you-go-rules.
Source: Congressional Budget Office

Another reason why the taxpayer checkoff saves so much money over time is
that the federal government will not need to pay interest on borrowed money.
Every dollar saved by the checkoff means one less dollar that the federal govern-
ment borrows from private credit markets. Not only does this mean more funds
for consumers seeking car loans and mortgages, and more money for businesses
attempting to build new factories and create jobs, it also means that taxpayers will
be paying less interest since the national debt will have grown at a slower rate.

WHY THE TAXPAYER CHECKOFF IS NECESSARY

The fiscal picture has deteriorated at an alarming pace in recent years. More-
over, there is little reason to believe that the situation will improve without a
major change in the budget process. Allowing taxpayers to "vote" on federal
spending would be such a change because it would empower taxpayers at the ex-
pense of the special interest groups that currently wield so much power in Wash-
ington. Decisive action of this kind is necessary. Consider:

X Federal spending is projected at $1 .407 trillion for fiscal 1992, some
$262.9 billion higher than it was when George Bush took office. By
next year, it is projected to be $1,504 trillion, or $359.7 billion
higher.

339

Federal spending now consumes 24.0 percent of Gross Domestic
Product (GDP), up from 22.1 percent in 1989. Next year, federal
spending is projected to consume 24.3 percent of GDP.

Over the eight years of his presidency, Ronald Reagan reduced do-
mestic spending from 14.83 percent of GDP to 12.24 percent of
GDP. In just three years, George Bush and Congress have permitted
domestic spending to climb to 14.92 percent of GDP, wiping out all
the gains achieved during the Reagan years.

In inflation-adjusted 1987 dollars, domestic spending has increased
by a total of $134.1 billion from fiscal 1989 to fiscal 1992, an aver-
age annual increase of $44.7 billion during the Bush Administration.
This compares with a total increase between fiscal 1981 and fiscal
1989 of $22.54 billion, averaging $2.82 billion annually, under
Reagan and a total increase between fiscal 1977 and fiscal 1981 of
$61.24 billion, or $15.31 billion annually, during the Carter Admin-
istration.

Inflation-adjusted domestic spending has climbed by an average of
7.14 percent annually under Bush, or more than thirteen times faster
than the 0.53 percent average annual growth under Reagan and
nearly two and one-half times faster than the 2.95 percent average
annual domestic spending growth under Carter.

The budget deficit, which was $153.5 billion in fiscal 1989, when
Bush became President, is expected to reach $333.5 billion this fis-
cal year and an all-time record of $341.0 billion next fiscal year.
This $187.5 billion jump represents an increase of 122 percent in
just four years.

The 1990 budget agreement included provisions which eliminated
the fixed annual deficit targets that were the key feature of the 1985
Gramm-Rudman-Hollings Deficit Reduction Act These fixed defi-
cit targets effectively capped the growth of federal spending since
automatic budget cuts, known as sequestration, would be triggered
if lawmakers attempted to increase spending by more than the sum
of projected revenues plus the allowable deficit for each year. The
Budget Enforcement Act (BEA), which replaced Gramm-Rudman
after the 1990 budget agreement, does not cap the total growth of
federal spending.

Supporters claimed that the BEA was an improvement over Gramm-
Rudman, but inflation-adjusted domestic spending has grown at an
8.38 percent annual average rate under the new budget law, or more
than seven and one-half times faster than the growth rate under
Gramm-Rudman. Inflation-adjusted domestic discretionary spend-
ing under the BEA is climbing at a 5.4 percent annual clip, or more
than five times the 1.01 percent average annual growth rate under
Gramm-Rudman.

340

X With Gramm-Rudman's cap on overall spending gone, Congress
and the Administration have allowed entitlement spending to grow
unchecked. Under the BEA, inflation-adjusted entitlement spending
is growing at an annual average rate of 9.43 percent, or more than
eight times faster than the 1.13 percent annual growth rate under
Gramm-Rudman.

As these figures demonstrate, America's federal spending crisis is real and
must be addressed urgently. The taxpayer checkoff is not the only way to achieve
meaningful deficit reduction, but it may be the only realistic way to break the spe-
cial interest control of the budget process. Failure to act will burden future genera-
tions with even higher levels of debt.

CRITICISMS OF THE CHECKOFF PLAN

Interest groups already have mobilized against the taxpayer checkoff. They rec-
ognize that the plan's sequester provision would put an end to the record spend-
ing increases of recent years. In order to fight the taxpayer checkoff, opponents
have marshalled several arguments. These are either wrong or misleading.

Among the objections:

Claim #1 : The taxpayer checkoff is a budget gimmick that will not work.

The Congressional Budget Office (CBO) rarely acknowledges the effectiveness
of fiscal policies that reduce or restrain government spending and taxes. Yet even
the CBO has stated that the taxpayer checkoff would work. Indeed, the savings es-
timates outlined above come direcdy from CBO estimates.

The sequestration provision is the key to the legislation's workability. Should
Congress fail to act voluntarily to reduce spending by the amount of the checkoff,
spending cuts would occur automatically, reducing by equal percentages all pro-
grams other than Social Security, deposit insurance, and net interest And Con-
gress could not avoid the automatic cuts by raising taxes; the only way to cancel
the sequester is through a package of spending cuts of equal magnitude. This in-
sures that the deficit will be reduced in a way that does not undermine economic
growth.

Claim #2: The taxpayer checkoff will cause draconian budget cuts.

In direct contradiction to the charge that the proposal is an ineffective gimmick,
opponents also argue that the cuts forced by the taxpayer checkoff would be too
severe. Under the Walker-Smith legislation, full participation in the checkoff
would limit fiscal 1997 federal spending to $1,464 trillion. While still 4.5 percent
greater than the $1,407 trillion projected for the 1993 fiscal year, a $1,464 trillion
budget is more than 13 percent below the baseline fiscal 1997 projection made by
the CBO in February 1992.

By Washington standards, these "cuts" might seem harsh, but by real world
measurements they represent modest and long overdue steps to control federal
spending. Moreover, if the Walker-Smith legislation were enacted, not all taxpay-
ers would choose to check off, and many of those that did would not choose the

341

full 10 percent. So, the actual amount of spending discipline mandated by the
Walker-Smith legislation would be less than critics claim.

Claim #3: Excessive spending cuts will hinder economic recovery.

Another line of attack comes from Keynesian economists who argue that in-
creased federal spending is needed to lift the economy out of the doldrums. Ac-
cording to the Keynesians, legislation which mandates less spending will weaken
the economy by reducing aggregate demand.

But years of experience demonstrates the hollow ring of the Keynesian argu-
ment. Record spending increases and record deficits in the last few years have
been associated with slow economic growth, not a boom. Keynesian policies pro-
duced the stagflation of the 1970s — theoretically impossible in the Keynesian
model. Keynesians also predicted that the Reagan tax cuts would lead to more in-
flation. In fact, inflation dropped from 13 percent to 4 percent following the
Reagan tax cuts, and the tax cuts triggered the longest peacetime economic expan-
sion in America's history.

Claim #4: The taxpayer checkoff will undermine Congress's ability to allocate funds.

Opponents assert that an across-the-board sequester treats all programs as if
they had equal value, subjecting monies for AIDS research to the same percent-
age cut as subsidies for honey production and spending for pork-barrel mass tran-
sit projects. A "meat-ax" approach to the budget, critics say, denies lawmakers
the power to channel federal funds to where they are needed most

Not true. Politicians concerned about the wise use of federal money can comply
with the law by enacting their own package of spending cuts. And even if Con-
gress fails to produce an alternative package, sequestration does not eliminate con-
gressional discretion. When preparing a budget for an upcoming fiscal year, law-
makers will be free to increase or decrease funding for any program as long as
they keep spending levels within already existing budget constraints such as the
overall cap on discretionary spending and the pay-as-you-go rules for expanding
entitlement programs. Lawmakers simply would have to choose priorities, to
spend less on one program to spend more on another.

Nothing in the Walker-Smith legislation would prevent Congress from appropri-
ating more money to politically popular programs. Indeed, even if taxpayers
checked off enough money to force a S percent reduction, Congress could guaran-
tee the level of funding for any particular program by appropriating 5 percent
more than they really wanted to spend. They would just have to find the money
from other programs.

Rather than putting the budget on autopilot, the Walker-Smith legislation thus
would force lawmakers to set priorities by shrinking the overall federal spending
pie and making interest groups compete for fewer federal dollars. This discipline
would put an end to the current practice of giving all programs big increases, re-
gardless of how poorly the money is being spent

342

Claim #5: The taxpayer checkoff Is a one-way street, allowing taxpayers to cut
projected spending levels but not permitting taxpayers to choose to increase
spending.

If there was any evidence that federal spending was too low, this criticism
might have some merit But spending is growing so rapidly that the budget deficit
now exceeds $300 billion. The economy is suffering because government spends
too much, not too little. Even so, the legislation could be modified to give taxpay-
ers the option of increasing spending.

As the law currently stands, there is nothing that prevents taxpayers from mak-
ing contributions to the federal government. Indeed, tax forms already include a
procedure encouraging individuals to pay additional taxes to help reduce the na-
tional debt. In fact, the taxpayer checkoff could be amended to allow taxpayers to
increase their tax liability and dedicate the extra money to whatever program they
preferred.

There would be several advantages to this modification. First, allowing taxpay-
ers to choose higher spending would give voters who want higher spending on
specific programs the chance to achieve this goal. Second, the fact that almost no
taxpayers would voluntarily choose to pay more taxes for higher spending would
dispel the myth, disseminated by the media and some politicians, that the Ameri-
can people want taxes to increase to fund more domestic spending.

Claim #6: The taxpayer checkoff gives those with high tax liabilities greater
Influence over the budget than those with low tax liabilities.

It is true that those who finance a higher percentage of the federal budget would
be able to trigger more budget cuts than those who pay fewer taxes. But rather
than a shortcoming of the legislation, this is a powerful argument on behalf of the
taxpayer checkoff. For too long, the federal budget has been used as a mechanism
to redistribute income. Some of this redistribution is designed to transfer income
from rich to poor, a policy which reduces incentives to work, save, and invest for
all parties involved. A surprisingly large portion of the redistribution, however, is
from taxpayers in general to well-organized interest groups, many of which al-
ready have high incomes.

The taxpayer checkoff begins to redress this problem. While it does not directly
reduce the tax liability of any taxpayer, it does give taxpayers some authority over
how their income is spent.

CONCLUSION

Just as interest groups condemned the Gramm-Rudman Act for reducing the
growth of federal spending, the intensity of the criticism levelled at the Walker-
Smith legislation is a sign that the legislation would be effective. The real ques-
tion is not whether it will work, it is whether Congress voluntarily would enact
legislation that so clearly would curtail lawmakers' ability to funnel resources to
favored constituencies. As important, a checkoff system would place in the hand
of frustrated taxpayers the power to deal directly with the plague of excessive gov-
ernment spending.

343

This is why the President's endorsement of the checkoff in his acceptance
speech at the Republican convention is so important. It raises the stakes, forcing
public consideration of a plan that really would bring deficit spending under
control.

Mi Heritage Foundation papers are now available electronically to subscribers of the "NEXIS" on-line data

retrieval service. The Heritage Foundation's Repms(HFRPTS) can be found in the OMNI. CURRNT, NWURS,

and GVT group flies of the NEXIS library and in the GOVT and OMNI group files of the GOVNWS library.

344

1/"Z/13

Citizen empowerment

US. Rep. Robert Walker thinks he knows how to reduce
annual budget deficits, and eventually eliminate the
nation's staggering $4.3 trillion debt Let the taxpayers do
it.

We think he has something there.
; Under his proposal, citizens could voluntarily designate
a portion of their taxes — up to 10 percent — to be used
solely to cut annual deficits. And for every dollar ear-
marked for the special fund. Congress would have to cut
an equal amount from government spending.

If Congress failed to act, most of the cuts would be trig-
gered automatically. Moreover, they would be permanent.

How effective could all this be? Well, the Congressional
Budget Office calculates that if every taxpayer participat-
ed, the potential exists to wipe out the deficit by the year
2000. and the national debt by 2009.
' Granted, CBO is being highly optimistic. And Walker, a
Pennsylvania Republican, admits no one knows how
many taxpayers would get involved, or what percentage of
their tax dollars would be committed.
, Still, he sees his plan — to be aired next month at a
hearing of the House Ways and Means Committee — as
one way of dealing simultaneously with the massive debt
and annual budget shortfall. The plan would be improved
ff teamed with a line-item veto or a balanced budget
amendment, added Walker.

: Naturally, it has its critics. When a similar proposal was
defeated last year in the upper chamber, Sen. Robert Byrd,
D-W Va„ called it a "poison pill," and said it could lead to
spending cuts so massive government would be crippled.
Others fear it could damage the economy and threaten
growth.

"No one would have control over how much is actually
done," says Paul Leonard, an analyst at the Center on
Budget and Policy Priorities, a nonpartisan research
group.

Such arguments, however, are not persuasive. Indeed,
they seem more attuned to defending and maintaining the
status quo of a Congress unresponsive to the electorate
than to any sense of fiscal sobriety.

Walker sees his proposal as a way to get more citizens
involved in the nation's budgetary process. It's that, all
right.

It is also a realistic way of dealing — at least in part —
with the nation's financial ills. And its passage or defeat
could be a clear indicator of just how serious Congress is
about deficit and debt reduction.

345

EDITORIALS

-iputer on everybody's desk. Nowa-
i the biggest question facing com-
puter users isn't whether the data-process-
ing department will accept their job order
but whether to watt six months to buy an
even better machine at an even lower price

Despite its best efforts to keep up, and at
umes they were very good, the old IBM
couldn't adapt to a decentralized, often
chaotic market in which desktop machines
took on the power of mainframes and brand
loyalty was nearly nonexistent. "Every-
thing I learned at IBM is worthless." a
laid-off engineer told the Los Angeles
Times. It remains to be seen whether IBM
can reinvent itself or whether, like the
Sears catalog, it belongs to the ages.

The anxiety peddlers never ask. Would
you give up your laptop to preserve 1 50,000
jobs at IBM? Do you wish the Mac had
never been invented? If you could, would
you wipe out desktop publishing, saving
not only all those IBMers but also untold
numbers of typesetters and paste-up artists?

The personal-computer revolution,
like the industrial revolution, is not a nat-
ural disaster, though it may feel like one
to those whose jobs it flooded out. It is,
like the transportation revolution that
made possible oranges in Chicago, a tech-
nological response to the desires of mil-
lions for abetter life.

Those desires do not please our social
critics. In an age of mass production, they
railed about the alienation of the worker.
Now they complain about the service eco-
nomy and the shortage of high-paid, work-
in gmen's jobs even as they denounce frivo-
lous consumption and planet-threatening
growth. They long for dark, satanic mills.

It is easy to be nostalgic for the world
we have lost, easier still when voters can
be bought with nostalgia for the jobs they
once held. But the age of discontinuity,
too, recalls earlier ages. It asks a familiar-
sounding question: Are we better off than
we were 100 years ago? Who was right —
the farmer or the fair? fl

FEDERAL DIET PLAN

RICK HENDERSON

Bill Clinton and Al Gore have some
decent ideas about reinventing
government — streamline purchasing reg-
ulations, make it easier to reward com-
petent employees and fire slackards,
consolidate redundant agencies. But the
vice president's National Performance
Review is, in truth, a pretty wimpy effort.
Gore says reinventing government can
save S108 billion over five years. That's
a mere 1 .2 percent of total federal spend-
ing. And, unlike the Grace Commission
and other watchdogs that have tried to
root out "waste, fraud, and abuse," Clin-
ton and Gore have no intention of return-
ing these savings to taxpayers. Health
care, national service, and other new
-pending programs will expand the bu-
icracy as it becomes more "efficient."
he review's purpose — and its Achilles'
heel — was identified by David Osborne (a
performance review consultant) and Ted

Gaebler in their 1992 manifesto: "Re-
inventing Government addresses how
governments work, not what they do."

Reform-minded Americans, however,
want elected officials to streamline the'
civil service and eliminate costly pro-
grams. An exit poll last November re-
vealed that more than half of Clinton's sup-
port came from people who wanted lower
taxes and smaller government. The presi-
dent's desire to endlessly expand federal
programs also contrasts sharply with the
priorities of the much-ballyhooed "Perot
voters" and other grass-roots reformers.

Fortunately, there's a proposal that would
force the White House and Congress to
put the federal government on a diet Rep.
Robert Walker (R-Pa.) has introduced the
Taxpayer Debt Buy-Down Act of 1993.
Walker's bill would reinvent government
by shrinking it — and let individual taxpay-

ers decide how strict the diet would be.

The Walker plan would let taxpayers
use their income-tax forms to set aside as
much as 10 percent of their tax payments
to retire federal debt Every dollar
checked off would buy down a govern-
ment bond or other form of debt.

Unlike Clinton's deficit-reduction trust
fund, the Walker plan is no gimmick: Every
dollar designated for debt retirement would
also permanently cut federal spending by
a dollar. Politicians wouldn't be able to
dodge these cuts If Congress didn't slash
programs, then an across-the-board
sequester would automatically make the
cuts. (The plan exempts Social Security,
deposit insurance, and interest payments.)

We're talking real money. Say the plan
passes this year. The Congressional
Budget Office projects that if every tax-
payer checked off the maximum, in fiscal
year 2003 the program would have retired
more than $700 billion in debt and federal
spending that year would be $70 billion
less than it was in the first year of the plan.
(Spending in the sequesterable programs
would drop from a scheduled $1,645 tril-
lion to $945 billion.) The federal debt
could be paid off within 15 years.

Even if no one checked off a dollar for
debt reduction, the plan would freeze spend-
ing at its current budgeted level. The antic-
ipated growth in tax revenue could balance
the budget within six or seven years.

Of course, Congress could introduce
new spending programs and pay for them
with new excise, consumption, or payroll
taxes. But people might be less likely to
endorse additional government programs
if they weren't "free."

And the Walker plan would force Con-
gress to explain, for instance, why taxpay-
ers should pay farmers not to grow crops,
give every 65-year-old virtually free med-
ical care, and guarantee any high school
graduate both a free college education and
a government job after graduation.

Desperate times often require extreme
measures. Since Ronald Reagan promised
to balance the budget and pay off the debt
in 1980, federal debt has grown by nearly
$3 trillion. At a Cato Institute forum in
September, Walker admitted his fiscal rev-
olution would result in fierce debates. Just
remember, dieters: no pain, no gain. n

MOVcMBER 1993

reason 5

346

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HOUSTON. TEXAS

O. OUI7

OCT 20 1992

Tax checkoff would put the people in control

»r WATNB WINgCKHDgM L#fl~

r ra-alected, G*cr gt Buih propoaea to of fir
you a new way to beJp control excei il v«
gov«rorr.«nt awndlng: a 10 perwnt lacoma
Ux checkoff provlaloo. Busb'i proposal, while
not a panacei for the country'* economic DUs,
could force focal res|jonalblir - ■"! Waahlnjton.

Wlnagardan .a a policy analyst tor Citizens
for a bound Economy, a Washing ton -oasac:
2BCT^D^TVrrnHa7"nb?i- Portia an, non-profit citi-
zen advocacy group tfiae promotes market--
oriented solutions to publlo policy problems.

f..

The propc-sj). Introduced by Rep. Robert
Walker. R-P». and Sen Bob" Smith, R-N.H,, allows

itiipiytn to sarmnrk up to 10 percent ol locoma
■ Uz rtvtoue to "reduce the n aticVial dobi." Tai-

6ayers can express the desired percentage of
leir taxes the f edarat govemm en ', should re-
'aerve for debt reduction by checking the appro*
prists box on the federal tax form. -

Federal tax returns currently offer taxpayers
'the option to directly reduos the national debt.
But the currant d sot-reduction cheokoff requires !
already overtaxed Americans to voluntarily ax- |
pend mora money In addition to their tax liabil-
ity.

The checkoff proposal may sound like another I
political gimmick. But the Buah and Walker prb-
poaaU couple (he checkoff with automatic , .
spending cuts. This ensures apendjog will de- '
crease dollar for dollar with desired debt reduc-
tion. Congress must cut all eligible programe by
the dollar amount taxpayers choose. And only
Social Security retirement benefits, interest on
the debt and depositinsursnee escape the ma n-
dstoryculs.

Armed with a tool capable of causing a 10 per-
cent across- th *- board spending cut, voters can
regain control over Congress' spending habit, the
root cause of the federal debt. Congress spends
11.89 for every dollar It raises In new taxes. ;
Hence, the Slpercent Increase In federal tax rev-
enues since 11-82 has not prevented the extraordi-
nary growth In the s pending-driven federal debt.

However, the recent fslluro of the Walker pro-
posal In the Senate demonstrates that the same
political process that created the debt also, de-
nies taxpayers the power to reduce the debt
Many politicians oppose attempts lb limit tnelr
control over federal spending because govern-
ment spending provides them with a powerful
re-election tool. Nevertheless, voter-Imposed
discipline offers the bast solution to the govern-
ment's spending problem. -

Congress' accounting agency, the Congress-
ional Budget Office, estimated the effects of a 10
percent checkoff proposal If every taxpayer des-
ignated 10 percent of his taxes toward debt re-
duction. Under these Ideal circumstances, the
checkoff would eliminate the deficit within five

Sirs. The deficit Is currently projected to total
)0 billion for fiscal year 1992.

The national debt, the accumulation of sll past
deficits, stands at more than H trillion. 11 the
current spending pattern continues until 1002,
the debt will increase to more than 16 trillion. On
the other hand, the CBO estimated that's 10 per-
cent checkoff could, over the same time period,
reduce the national debt to (2 3 trillion, saving
almost U trillion over our current spending
path.

Without sensible action, the government's
spending problem will continue to create his-
toric debt levels. The Bush and Wa Iker proposal
presents a sensible solution to this problem. But
the failure of the checkoff proposafln the Senate
demonstrates the Inability of the political estab-
lishment to impose a solution on It-soli. This In-
tensifies the need to include the American peo-
ple In the solution process via a 10 percent'
checkolf.

347

TESTIMONY BY

CONGRESSMAN ROBERT S. WALKER

BEFORE THE

HOUSE SUBCOMMITTEE ON LEGISLATION AND NATIONAL SECURITY

OF THE
HOUSE COMMITTEE ON GOVERNMENT OPERATIONS

H.R. 429, THE TAXPAYER DEBT BUY -DOWN ACT

AUGUST 4, 1994

MR. CHAIRMAN, MR. MCCANDLESS , MEMBERS OF THE COMMITTEE: THANK YOU
FOR THE OPPORTUNITY TO TESTIFY ON WHAT I BELIEVE IS AN EFFECTIVE,
INNOVATIVE PLAN TO CUT THE RUNAWAY FEDERAL BUDGET DEFICIT AND
REDUCE THE $3.5 TRILLION NATIONAL DEBT.

AS I WILL DISCUSS IN MY TESTIMONY, H.R. 429, THE TAXPAYER DEBT
BUY -DOWN ACT, IS MORE THAN A DEFICIT REDUCTION PLAN. IT IS A
REVOLUTIONARY ATTEMPT TO BRING THE AMERICAN TAXPAYER DIRECTLY
INTO THE BUDGET PROCESS; A PLAN THAT WILL GIVE TAXPAYERS THE
POWER THEY NEED TO PARTICIPATE IN CONTROLLING FEDERAL SPENDING.
IN FACT, IF PASSED, THIS LEGISLATION WOULD BE A REFERENDUM EVERY
APRIL 15 ON FEDERAL EXPENDITURES.

THERE IS MUCH CONFUSION ABOUT HOW THIS RELATIVELY MODEST IDEA
WORKS. ALLOW ME TO BRIEFLY SUMMARIZE IT. WHEN PASSED, THE BILL
WOULD GIVE TAXPAYERS THE OPTION OF VOLUNTARILY DESIGNATING UP TO
10% OF THEIR INCOME TAX LIABILITY- -NOT THEIR REFUND, BUT THEIR
LIABILITY- -TO A PUBLIC DEBT REDUCTION FUND MANAGED BY THE
DEPARTMENT OF THE TREASURY. THIS FUND WOULD BE EARMARKED
STRICTLY FOR BUYING BACK THE NATIONAL DEBT.

ON MAY 1ST OF EACH YEAR, THE TREASURY DEPARTMENT WOULD BE
REQUIRED TO PROVIDE CONGRESS WITH AN ESTIMATE OF THE TOTAL AMOUNT
DESIGNATED BY THE TAXPAYERS FOR DEBT REDUCTION. CONGRESS WOULD
HAVE, FROM THE TIME OF THE REPORT IN MAY, UNTIL THE END OF
SEPTEMBER TO FIND SPENDING CUTS IN ANY AND ALL BUDGETARY
ACCOUNTS. IF CONGRESS FAILED TO ENACT SPENDING CUTS EQUALING THE
AMOUNT DESIGNATED BY THE TAXPAYERS, AN ACROSS-THE-BOARD SEQUESTER
OF ALL ACCOUNTS EXCEPT SOCIAL SECURITY, INTEREST ON THE DEBT AND
DEPOSIT INSURANCE, WOULD BE IMPOSED. THIS SEQUESTER WOULD
PERMANENTLY REDUCE THE BUDGET BASELINE AS WOULD ANY SPENDING CUTS
ENACTED BY CONGRESS.

A LOT OF CONTROVERSY AND MISINFORMATION HAS ARISEN ABOUT THIS
LAST POINT. DIRE PREDICTIONS HAVE BEEN MADE ABOUT THE COLLAPSE
OF GOVERNMENT UNDER THE SEVERITY OF THESE CUTS. THOSE
PREDICTIONS ARE NONSENSE! I WOULD LIKE TO POINT OUT THAT, EVEN
WITH MAXIMUM TAXPAYER PARTICIPATION, OUTLAYS WOULD CONTINUE TO
INCREASE ACCORDING TO THE OMB ESTIMATES. GOVERNMENT SPENDING
WOULD GROW BY ALMOST 10% DURING THE TIME WE ARE COLLAPSING THE
DEBT TO ZERO IN 15 YEARS. HOW CAN SOMEONE PREDICT THE COLLAPSE
OF THE GOVERNMENT ON FUNDING LEVELS WHICH ARE HIGHER THAN THOSE
WE HAVE TODAY? SPENDING PRIORITIES WOULD HAVE TO BE REALLOCATED

348

AND GOVERNMENT NON-ESSENTIALS WOULD HAVE TO BE ELIMINATED, BUT
THERE WOULD BE PLENTY OF MONEY TO DO THE NECESSARY WORK OF
NATIONAL GOVERNMENT.

ANOTHER, ADDED BENEFIT OF DIRECT TAXPAYER INVOLVEMENT IS THAT
NECESSARY SPENDING CUTS WOULD BE REQUIRED BY THE AMERICAN PEOPLE
AND WOULD BYPASS SPECIAL INTEREST PLEADING. THEREFORE, THE
BURDEN OF TRYING TO "SELL" VARIOUS CUTS WOULD BE REMOVED FROM
CONGRESS, FOR CONGRESS WOULD ONLY BE DOING WHAT THE AMERICAN
PEOPLE SPECIFICALLY ASKED IT TO DO. THIS WOULD BE OF
IMMEASURABLE BENEFIT IN THE LEGISLATIVE PROCESS. A CONSTITUENCY
OF MILLIONS OF VOTERS WHO WANT SPENDING CUTS WOULD BE FORMULATED
EACH APRIL.

I AM THANKFUL TO THE GROWING NUMBER OF ORGANIZATIONS AND
INDIVIDUALS WHO HAVE ENDORSED H.R. 429. LAWRENCE KUDLOW,
ECONOMIC EDITOR FOR NATIONAL REVIEW. NORM TURE, PRESIDENT OF THE
INSTITUTE FOR THE RESEARCH ON THE ECONOMICS OF TAXATION, CITIZENS
AGAINST GOVERNMENT WASTE, THE NATIONAL TAXPAYERS UNION, AND
CITIZENS FOR A SOUND ECONOMY, ARE ALL SUPPORTING THIS
LEGISLATION.

ONE HUNDRED AND TWO MEMBERS OF THE HOUSE HAVE ALREADY COSPONSORED
THIS BILL, AND SENATOR BOB SMITH HAS INTRODUCED A COMPANION BILL,
S.449, WHICH HE IS VIGOROUSLY PURSUING IN THE UNITED STATES
SENATE .

MR. CHAIRMAN; MEMBERS OF CONGRESS, NUMEROUS BUDGET EXPERTS, AND
AN ARRAY OF TAXPAYER ADVOCACY ORGANIZATIONS SUPPORT THE TAXPAYER
DEBT BUY -DOWN ACT FOR ONE REASON: THEY RECOGNIZE THAT A
BALLOONING NATIONAL DEBT IS MORTGAGING OUR NATION'S FUTURE AND
THE LIVELIHOODS OF OUR CHILDREN AND GRANDCHILDREN.

THE HOUSE AND SENATE HAVE PASSED PRESIDENT CLINTON'S BUDGET FOR
THE LAST TWO YEARS. BUT MEMBERS SHOULD KEEP IN MIND THAT EVEN
AFTER IMPOSING THE LARGEST TAX INCREASE IN HISTORY AS PART OF THE
FISCAL YEAR 1994 BUDGET AND CUTTING DEFENSE SPENDING MASSIVELY,
THE NATIONAL DEBT WILL STILL INCREASE BY MORE THAN A TRILLION
DOLLARS OVER THE NEXT FIVE YEARS.

MR. CHAIRMAN, THE GROWING PROBLEM OF NATIONAL DEBT IS THE MOST
POWERFUL ARGUMENT FOR TAKING THE CORRECTIVE STEP EMBODIED IN H.R.
429. BUT YOU NEED ASSURANCE THAT THIS PLAN CAN DO THE JOB.
THEREFORE, I ASKED BOTH THE OFFICE OF MANAGEMENT AND BUDGET AND
THE CONGRESSIONAL BUDGET OFFICE TO ESTIMATE THE IMPACT OF THE
DEBT BUY -DOWN PLAN ON THE NATIONAL DEBT. OMB RAN THE NUMBERS OUT
TO FISCAL YEAR 2009; CBO TO 2003. THE RESULTS ARE QUITE CLOSE
AND THEREFORE CAN BE REGARDED AS PARALLEL.

CBO'S TREND LINE AGREES WITH THE OMB PROJECTIONS WHICH SHOW THAT
IF THE DEBT BUY -DOWN WORKED OPTIMALLY, THE BUDGET WOULD BE
BALANCED BY FISCAL YEAR 1998. THE DEBT WOULD BE ZEROED OUT BY
FISCAL YEAR 2009. COMPARE THAT WITH THE PROBLEM WE FACE UNDER
CURRENT CIRCUMSTANCES. ON OUR CURRENT PATH, THE DEBT WILL BE

349

OVER THIRTEEN TRILLION DOLLARS BY FY 2009! INTEREST ALONE WILL
BE IN THE BILLIONS OF DOLLARS EACH YEAR AND THE OPTIONS FOR
MEETING REAL NATIONAL NEEDS WILL BE SEVERELY LIMITED.

PRESIDENT CLINTON INCHED TOWARD THE CONCEPT OF DEBT BUY -DOWN WITH
HIS DEFICIT TRUST FUND PROPOSAL. BY ESTABLISHING A PARKING PLACE
FOR DEBT REDUCTION AT THE U.S. TREASURY, THE PRESIDENT
ACKNOWLEDGED THE NEED FOR AN ACCOUNTING TOOL TO ASSURE THE PUBLIC
THAT DEFICIT REDUCTION MONEY WAS TRULY GOING TO DEFICIT
REDUCTION.

BUT THE PRESIDENT'S FUND HAS NO LEGS BEYOND ITS ACCOUNTING
CLEVERNESS. FOR DEBT AND DEFICITS TO BE REDUCED, THE SPENDING
CUT AND SEQUESTRATION MECHANISM OF H.R. 429 ARE NEEDED. ONLY
THEN CAN CBO AND OMB SCORE REAL SAVINGS.

SEVERAL OTHER POINTS SHOULD BE NOTED FOR A FULL UNDERSTANDING OF
H.R. 429. TAX INCREASES CANNOT BE USED TO OFFSET THE SPENDING
CUT DEMANDS MADE BY TAXPAYERS EACH YEAR. WHILE CONGRESS WOULD
STILL BE PERMITTED TO RAISE TAXES FOR OTHER REASONS, TAX REVENUES
WOULD NOT COUNT AGAINST THE BASELINE REDUCTIONS REQUIRED BY THE
BUY -DOWN PLAN. AND, ANY TAX INCREASES ON PERSONAL INCOME WOULD
HAVE THE EFFECT OF GIVING TAXPAYERS MORE OF A LIABILITY AGAINST
WHICH TO REQUIRE SPENDING CUTS.

THERE HAS BEEN SOME PUBLIC REACTION TO THE DEBT BUY -DOWN CONCEPT
AND THAT REACTION HAS BEEN HIGHLY POSITIVE. PRESIDENT BUSH'S
ENDORSEMENT OF THIS IDEA AT THE 1992 REPUBLICAN NATIONAL
CONVENTION LED POLLSTERS TO GAUGE PUBLIC OPINION. A POLL DONE
FOR THE BUSH CAMPAIGN SHOWED 66% OF AMERICANS SUPPORTING THIS NEW
IDEA IN THE SUMMER OF 1992. PUBLIC SUPPORT INCREASED TO 75% IN A
NATIONAL OPINION BALLOT DONE IN DECEMBER 1992. IN JUNE, 1993,
THE NATIONAL FEDERATION OF INDEPENDENT BUSINESS FOUND 77% OF
THEIR MEMBERSHIP FAVORED THE PLAN.

DEBT BUY -DOWN HAS BEEN INCLUDED IN A NUMBER OF CONGRESSIONAL
INITIATIVES. THE FUNDAMENTAL COMPETITIVENESS ACT CONTAINED DEBT
BUY-DOWN AS ONE OF ITS PROVISIONS. THE KASICH BUDGET DEBATED ON
THE FLOOR EARLIER THIS YEAR CONTAINED THE DEBT BUY- DOWN PLAN.
AND, CONGRESSMAN AL MCCANDLESS SOUGHT TO SUBSTITUTE H.R. 429 FOR
THE PRESIDENT'S TRUST FUND PROPOSAL LAST YEAR WHEN CONSIDERATION
TOOK PLACE BEFORE THE FULL HOUSE GOVERNMENT OPERATIONS COMMITTEE.
THE HOUSE SUBCOMMITTEE ON SELECT REVENUE MEASURES OF THE
COMMITTEE ON WAYS AND MEANS HAS ALREADY HELD A HEARING ON THIS
LEGISLATION LAST FALL.

TAXPAYER DEBT BUY-DOWN HAS SEVERAL FACETS TO APPEAL TO YOU. THE
CONGRESSIONAL BUDGET OFFICE HAS DOCUMENTED THAT OPTIMAL
PERFORMANCE OF THIS PLAN, AS IT IS PRESENTLY DRAFTED, WOULD
REDUCE BOTH FUTURE DEFICITS AND NATIONAL DEBT.

DEBT BUY -DOWN HAS PUBLIC SUPPORT. BETWEEN TWO- THIRDS AND THREE-
QUARTERS OF THE AMERICAN PEOPLE WHO HAVE BEEN SURVEYED LIKE THE
IDEA AND MOST WOULD PARTICIPATE IF GIVEN A CHANCE.

85-810 - 95 - 12

350

DEBT BUY -DOWN TAKES THE INTRACTABLE ISSUE OF SPENDING CUTS
OUTSIDE THE HALLS OF CONGRESS AND INTO THE HOUSEHOLDS OF THE
AMERICAN PEOPLE. THEY WOULD HAVE AN OPPORTUNITY NOT ONLY TO HELP
DECIDE HOW MUCH CUTTING WOULD BE DONE, BUT THEY WOULD HAVE AN
OPPORTUNITY TO HOLD THEIR REPRESENTATIVES ACCOUNTABLE FOR ACTING
OR FAILING TO ACT ON THEIR WISHES. AND AT ANY TIME THE AMERICAN
PEOPLE BEGAN TO BELIEVE THE SPENDING CUTS HAD GONE TOO DEEP, THEY
WOULD HAVE AN ANNUAL OPTION OF NOT ASKING FOR ADDITIONAL
REDUCTIONS .

DEBT BUY -DOWN IS A REVOLUTIONARY APPROACH TO A GROWING PROBLEM.
THE NATIONAL DEBT PROBLEM HAS GROWN SO LARGE THAT IT DEFIES
TINKERING AROUND THE MARGINS. REAL SOLUTIONS ARE GOING TO DEMAND
BREAK-THROUGH IDEAS. THE DEBT BUY -DOWN BREAKS THROUGH MANY OF
THE PROBLEMS CONNECTED WITH THE DEBT AND DEFICIT BY BYPASSING
SPECIAL INTEREST PLEADINGS FOR EVER- LARGER BUDGETS AND GIVING A
BROAD SEGMENT OF THE POPULATION A CHANCE TO REGISTER AN ANTI-
S PENDING MANDATE EACH AND EVERY YEAR.

EMPTY PROMISES OF FISCAL RESPONSIBILITY ARE NO LONGER ADEQUATE.
PUBLIC DISCOURSE WILL DEMAND REAL SOLUTIONS. ONLY BOLD ACTION
WILL CONVINCE OUR CONSTITUENTS THAT WE ARE FINALLY PUTTING OUR
FISCAL HOUSE IN ORDER. A BIPARTISAN EFFORT TO PASS THE DEBT BUY-
DOWN ACT, AND THEREBY DEAL WITH THE TWIN TOWERS OF DEBT AND
DEFICIT, WOULD BE WARMLY RECEIVED. YOU CAN BEGIN THAT BIPARTISAN
EFFORT BY APPROVING H.R. 429. THANK YOU.

351

Mr. Conyers. Well, thanks very much. It is one that is gaining
popularity. But are you afraid that it does more for the wealthy
than for ordinary citizens?

Mr. Walker. I don't believe that that is the case at all, Mr.
Chairman, because everybody is given a chance to take up to 10
percent of their tax liability. Of course, the tax liability of the
wealthier citizens is greater, and they would be allowed to deduct
up to 10 percent of their amount. But the fact is that all of it is
money being collected by the government that average citizens
then are designating to go to a purpose that they happen to believe
in.

In order to reach the optimal circumstances that I talked about,
virtually everybody would have to participate. I think that is what
the country is all about.

And those who are wealthy would only be contributing an
amount that we have previously designated is their portion of the
tax burden.

Mr. Conyers. I don't agree with Herbert Stein frequently, but as
you know, he has suggested that this is a system for allowing the
rich to decide on benefits for the poor. I am worried about the
elitist possibilities of the wealthy weighing in, and then cutting en-
titlement benefits. Is this a legitimate concern?

Mr. Walker. Well, entitlements are one place that Congress can
cut. Remember, Congress prioritizes this. I would suggest to you,
Mr. Chairman, that if in fact the rich were weighing in on this and
this was the place where they were designating this money to go,
toward debt buydown, it gives us a perfect excuse for ending imme-
diately a lot of the entitlements that are out there for the rich.

There are a whole host of programs out there where the rich ben-
efit and the average American does not. This would give us the
perfect opportunity to suggest to the rich that if they want the debt
bought down and they are so designating, maybe it is the entitle-
ment programs that head their way that we ought to eliminate
first. And we would do so on their own direction that that is what
they want done.

I would suggest that that is the right way of approaching this.
The other side of this is, at the moment the American people be-
lieve that the cuts that we are making are unfair or go beyond
what they think is necessary, then next year they simply wouldn't
designate the money.

If there was anything that spoke of inequitability in this, the
American people would control that because the next year they
would decide not to designate the money for debt buydown.

Mr. Conyers. I am glad to find many wealthy are also getting
entitlements and that they could reduce their own share. But it
still leaves the wealthy taxpayers deciding the future of the Na-
tion's less wealthy citizens. And it might be that they may not
choose to put their own self-interest on the block. I am afraid I
don't think that that would happen.

I think it would happen maybe in the opposite way.

Mr. Walker. Only if Congress didn't make it happen. I mean,
the fact is that would be up to Congress. They aren't designating
any particular programs. All we would have is the fact that the
money was designated for debt buydown and therefore for deficit

352

reduction. So Congress could then easily make the decision, OK,
this is where the money is coming from, let's look at the programs
for those people who contributed to this.

And I would suggest there are a whole host of programs out
there that wealthy as well as poor Americans participate in, that
are entitlements from the government or in many cases discre-
tionary programs that benefit the very wealthy.

And I would join you in suggesting that maybe it is high time
when we have $4.5 trillion in aebt that we allow some citizens to
pay their own way if they can afford to pay their own way. This
gives them an opportunity to utilize their own decisionmaking to
get to that point.

Mr. Conyers. It is certainly unique and it is something we have
to face up to. Your proposal is receiving more and more attention.
When CBO looks at it, that certainly grabs the attention of the
members of this committee. I want to thank you for bringing it to
our attention and recognize Al McCandless at this time.

Mr. McCandless. Thank you Mr. Chairman.

Bob, I like the concept, but in the private sector we used to have
what was referred to as cash-flow, and so I pose this question to
you within that framework: How are we going to ascertain how
much is going to be devoted to the trust fund, public debt reduction
trust fund, in any one given year based upon the desires or willing-
ness or the motivation of the individual tax payers?

Mr. Walker. The amount would be the amount that — in other
words, on their tax form they would specify that a certain amount
of their taxes is — let's say they are paying $2,000 in tax. They
could designate 10 percent of that money. That would be $200.
That $200 would be put into the trust funa. The trust fund already
exists. President Clinton has put into place the trust fund. It is vol-
untary at this point in time.

This would allow the money to be collected in that trust fund.
That money would be used to buydown the debt instruments that
are already in place. The calculation that would have to come here,
that is fairly easily done. You have the tax forms coming in. The
calculation that would have to be done is how much you would
have to designate then to the overall amount of spending.

That is the reason why we allow time for Congress within the
appropriations process to actually adjust then the accounts to take
care of what people have designated they want cut.

Mr. McCandless. Here is what I am referring to: For lack of a
better way of expressing it, it would be a motivation of the individ-
ual or individuals, political motivation, let's say that Congress is
doing everything that this person considers wrong.

I am going to show these people I haven't been able to get my
Congressman. So I am going to show him. I am going to commit
the whole enchilada, 10 percent. Conversely, somebody else says, I
really like what they are doing and I think the money should be
given to them for budgetary purposes, so I am not going to do any-
thing.

How do we reconcile what is eventually going to end up being the
resources of the Federal Government for purposes of the budget?

Mr. Walker. That is the reason

353

Mr. McCandless. You don't know this until after the tax returns
have been filed and the figures compiled.

Mr. Walker. And what we have is we have a time sequence
within the bill that allows those calculations to be made based
upon the reality of what arrived on the tax returns, and then we
allow the process to work through. I think the cutoff date on all
this is September 30, so that you would have a total understanding
of all of the moneys by that particular time.

And I would have to go back, but we have worked through all
of that, and at the time that President Bush endorsed this in his
campaign in 1992, we worked it through with OMB and with oth-
ers to assure that the time sequences and so on would be such that
the government would have a firm idea of what their obligations
were, and that they could be worked into the budget process in a
way that gives us real figures.

There is no doubt that what would happen here is that you
would have the percentage of the government's participation in the
GDP would be steadily reduced if this worked optimally.

But I don't believe there is a cash-flow problem because we have
allowed sufficient time for all of those calculations to be made and
then worked into the appropriations process.

Mr. McCandless. One last question. This is the $64 question.
There is a shortfall based on what the majority of Congress wants
in the way of a final budget, for whatever reason, that money is
to be expended. So they simply say, we are going to raise taxes and
take care of it.

Mr. Walker. Under this particular plan, you cannot use tax in-
creases against the amount that the American people have des-
ignated. It would not prevent Congress from raising taxes to do
things, but they could not be included as a part of meeting your
obligation for the debt buydown under the bill I have in. So tax in-
creases are not a part of the debt buydown.

Mr. McCandless. I understand that, but there is a shortfall in
my favorite program, and I am a committee chairman. With all due
respect, Mr. Chairman, I want to see that program continue in its
current funding. So here is a tax to make up

Mr. Walker. But then the political process comes into play and
you have to be able to pass that tax increase. You have to go to
the American people and tell them that you are raising taxes on
them for the program. Ultimately there are major political con-
sequences on passing tax increases.

But that is not involved in this program. This program says that
you cannot use taxes for this program, and so therefore insofar as
it forces us to decide that we are going to fund things either
through taxes or we are actually going to cut them, it seems to me
we take that debate to the American people.

I happen to believe that my side of the argument wins that de-
bate both times, if it is a debate between taxes and spending and
debt and spending. The problem right now is that we are doing the
spending, but we are simply adding it on to debt and that looks
like easy money.

What you are suggesting is exactly the argument I think we
ought to take to the country, and that is if you are going to have

354

the spending, you ought to be able to pay the political price of sug-
gesting the taxes to pay for it.

Mr. McCandless. Thank you.

Mr. Conyers. An interesting concept, and we are going to con-
tinue to study it. As you can see, there are parts of it that are fa-
vored and then there are those hidden concerns behind any new
proposal of this dimension. I thank you, though, for bringing it for-
ward here again. Good to see you.

Could I invite Mike Synar to join Tom Lewis? I understand you
are on a tight timeframe. Tom, why don't you start off?

STATEMENT OF HON. TOM LEWIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA

Mr. Lewis. Let me congratulate you for adding another notch to
your political biography. I also want to thank you for the oppor-
tunity of allowing me to be here this morning to discuss with you
H.R. 1056, which removes the civil service retirement and disabil-
ity fund from the budget.

In 1986, Federal retirees were denied cost-of-living adjustments
due to a budget sequester under the Gramm-Rudman Deficit Re-
duction Act, and Social Security retirees received their full COLA.
And Federal retirees were justifiably upset about this blatant in-
equity.

Congress took action in 1986 to ensure future Federal retiree
COLAs. I felt we should correct the unequal budget status of Social
Security and the civil service retirement fund. That is when I first
introduced legislation to remove the civil service fund from the
budget. Specifically, H.R. 1056 removes receipts and disbursements
of the fund from the President's budget, the congressional budget,
and the Gramm-Rudman Deficit Reduction Act. This bill serves two
purposes, Mr. Chairman. It seeks to achieve some measure of fair-
ness for Federal retirees. It does this by giving their pension fund
equal budgetary status with Social Security.

No. 2, truth in budgeting, to get a more accurate picture of the
spending. The civil service fund was created, as you know, as an
independent fund in 1920 and remained so until 1968 when it was
removed and placed in the budget by President Johnson.

Since that time, the surpluses of the fund have contributed to
hiding the true size of the Federal deficit. Now, I realize that re-
moving the civil service fund from the budget raises some technical
questions and issues regarding budget rules.

It is my understanding that the Office of Personnel Management
has had the off budget idea under consideration for some time, and
OPM could be very helpful in resolving these technical questions.

I would like to stress that restoring the fund's off-budget status
results in no additional expenditures. Federal retirees deserve to be
treated equally with other retirees, and I am grateful to the sub-
committee for its consideration of this issue.

Mr. Chairman, I would like to request that the subcommittee
look into this, hopefully next year, and start looking at a vehicle
that would place tne Federal retirees' pensions off budget.

That is the picture, Mr. Chairman. Equality and fairness is what
this legislation is all about.

[The prepared statement of Mr. Lewis follows:]

355

Testimony of the Honorable Tom Lewis of Florida

before the Subcommittee on Legislation and National Security

of the Committee on Government Operations

August 4, 1994

Mr. Chairman, thank you for allowing me the opportunity to come
before you today to testify on H.R. 1056, legislation I introduced to
remove the Civil Service Retirement and Disability Fund from the
federal budget. This bill, which is endorsed by the National
Association of Retired Federal Employees, is intended to provide
federal retirees' pensions equal budgetary status with Social
Security. Among the bill's 75 bipartisan cosponsors are 9 members of
the Committee on Government Operations, including Ms. Brown and Ms.
Maloney of this Subcommittee.

Social Security was removed from the federal budget in order to
protect retirees' benefits from budget cuts. Because Social Security
is off-budget, the benefits of the majority of American retirees are
not subject to the budget reconciliation process. Unfortunately,
federal retirees' pension benefits remain vulnerable to cuts, they are
still included in reconciliation, because their retirement fund
remains on -budget.

This vulnerability resulted in federal retirees being denied
cost-of-living adjustments due to sequestration in 1986. That same
year, Social Security retirees received a full COLA. While Congress
took positive action to restore federal retiree COLAs in 1987, we
still have not addressed the unequal budgetary status of these two
retirement systems.

I first introduced this legislation in the wake of the 1986 '
sequestration that so vividly illustrated the unequal status of
federal retirees, and I have reintroduced it in every subsequent
Congress. H.R. 1056 would remove the receipts and disbursements of
the Civil Service Retirement and Disability Fund (CSRDF) from the
President's budget, the Congressional budget, and the Balanced Budget
and Emergency Deficit Control Act of 1985.

From its beginnings in 1920 until 1968, the CSRDF was an
independent trust fund. President Johnson first included the fund in
the general budget when he submitted his fiscal year 1969 budget. At
that time, the fund's surpluses served to mask the cost of the Vietnam
War. Today, the CSRDF surplus helps hide the true size of the federal
deficit.

Removing the CSRDF from the general budget will give us a
clearer, more accurate picture of the federal deficit and will ensure
that CSRDF moneys are used for their intended purpose. This is a
basic truth- in-budgeting issue that should be addressed.

I recognize that granting off -budget status to the CSRDF raises
several technical issues with respect to pay-go mandatory spending
requirements and the discretionary spending caps. These issues can be
resolved, and it is my understanding that the Office of Personnel
Management has had the off -budget idea under consideration for some
time and may have some solutions to offer.

I commend the members of this subcommittee for your interest in
this issue, and encourage your continued to efforts to improve the
budget process and bring fairness to federal retirees. Thank you.

356

Mr. Conyers. Thanks, Tom. Before Mike Synar begins, could I
invite Chairman Mineta and Mr. Traficant to join us? This is our
last panel, and we will go right down the line. We have several dif-
ferent, but not particularly competing ideas, so don't feel alarmed
about the nature of this panel as we have reformed it.

Subcommittee Chair Mike Synar.

STATEMENT OF HON. MIKE SYNAR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OKLAHOMA

Mr. Synar. Thank you, John. Congratulations on your victory on
Tuesday. Glad to have you back for another term.

Let me say real briefly that the testimony you have heard pre-
sented by my colleagues, and what I am going to say with respect
to reform, is significantly different. You know, the simple truth, is
that while responsible process reform, which is what a lot of these
colleagues of mine are arguing for, may help on the margin, only
tough, consistent, fiscally responsible spending and revenue legisla-
tion based upon substantive common sense budgeting is going to
get the Congress and the President to balance the Nation's budget
and to reduce the national debt. \

Now, making those tough budget decisions and sticking to them,
I think, has put our Nation on the road to economic recovery. We
have been prepared and have made the tough cuts and the tough
budget process reforms. However, they have to be sensible.

You know, there is an argument to be made that too much medi-
cine can kill the patient, and those who have proposed some of
these budget reforms may result in more draconian cuts or what
are called politically unpopular, but fiscally responsible programs
may be affected. And that indeed will adversely affect the economy.

One thing I think we ought to consider, though, and I think it
is sensible budget reform, is a process called fire sale disclosure,
which I have been involved in along with Leon Panetta when he
was here and then at OMB. Basically it comes down to this: We
as taxpayers lose billions when the Federal Government sells or ex-
changes. Our Federal Government often fails to obtain the fair
market value. The deficit is impacted because the government
agencies refuse to operate as proven sellers of our public resources.

Let me give you some of the examples of this. Low cost timber
sales, no royalty on mineral claims, questionable land exchanges,
no rent land leases and transfers, under collection of oil and gas
royalties, subsidized grazing on public lands, below market value
concession contracts in recreation areas, and below cost uranium
enrichment services, buildings lost each year because the govern-
ment is basically a sucker when it does not run like a business.

I would offer in the legislation to require the administration in
its annual budget submission to Congress to include a separate
statement of the projected revenues that are anticipated from the
sale, lease, and transfer of any fiscal asset, and, in addition, to in-
clude the estimated fair market value of those programs and trans-
actions. Now, why do we need that?

That will allow all of to us make an informed decision and to
judge it against the program's benefits to society and make an in-
formed decision on the merits of each category of loss or subsidy.

357

Now, let me emphasize that I am not against subsidies per se.
Congress has shown that many of them can have important social
goals. But we are ill-equipped in Congress to make those iudg-
ments if we don't even know what the actual cost of the subsidy
is.

I would note in closing that the legislation I am offering doesn't
require similar informational statements with respect to so-called
revenue expenditures or tax subsidies. However, in light of Con-
gress' increasing need to probe every nook and cranny of the budg-
et for additional savings, I believe your committee may want to
even add that to this proposal.

This requirement is simple, direct and useful, and I hope it will
either be adopted as part of the package or a freestanding bill as
we advance this legislation through Congress.

[The prepared statement of Mr. Synar follows:]

358

STATEMENT OF THE HON. MIKE SYNAR (D-OKLA)

Chairman, Subcommittee on Environment,

Energy and Natural Resources

Before the Government Operations Subcommittee on

Legislation and National Security

Regarding Budget-Related Reforms

August 4, 1994

Mr. Chairman, members of the Subcommittee, I appreciate the opportunity to appear today
as you continue your series of hearings on budget process reform. Let me say at the outset that
my views on budget process reform differ significantly from some of the testimony presented by
my colleagues today.

Solid fiscal leadership from the White House, the budget package narrowly approved by
Congress last August, and a recovering national economy have reduced the budget deficit and
federal spending more than many of the process reforms currently under consideration could ever
hope to achieve. The simple truth is that while responsible process reform may help on the
margin, tough, consistent votes for fiscally-responsible federal spending and revenue legislation
based on substantive, common sense budgeting is the only way Congress and the President will
balance the nation's budget and begin to reduce our national debt.

Proof of this is in the impact of the budget package we passed almost a year ago today.
That package cut spending by S2SS billion — including a twelve percent real cut — in
discretionary spending over 5 years. In the first year alone, over 300 programs were cut and
there were reductions in nearly every entitlement — amounting to over $80 billion in entitlement
savings. Year two of budget plan, sent to Congress by the President in February, cut spending
in 379 of the 626 major spending accounts (60% of all accounts) including the complete
elimination of 1 IS programs. In addition 10 of 14 major Departments were cut in real terms and

359

7 of 14 were cut even if no inflation is taken into account. Many of these cuts have been
preserved, and expanded on, by Congress as the 13 appropriation bills have moved toward final
passage during the year. None of these cuts were the result of budget process reform. They
resulted from tough decisions made by the President and those in Congress willing to practice
fiscal responsibility.

The result of this responsible fiscal leadership? Current economic data predicts an FY '95
budget deficit of approximately $170 billion, still unacceptable but over $100 billion less than
was forecast when President Clinton took office - a 40 percent decrease in the projected deficit.
As a percent of GDP, the deficit has dropped from an estimated 4.3 percent in FY '93 to a
predicted 2.4 percent of GDP in FY '95. According to the OECD, this represents the lowest
deficit, as a percent of GDP, of all the world's major economies.

Making tough budget decisions and sticking to them has put our nation on the road to
economic recovery. Tough cuts and tough budget process reforms, however, must also be
sensible. Too much medicine can kill the patient and those who propose budget reforms that
result in more draconian cuts, or cuts in politically unpopular, but fiscally responsible programs,
may adversely impact our economy. Early returns on last summer's budget package indicate that
the economy is growing at a healthy, job-creating pace without showing any ill effects from the
cuts in government spending already enacted. At 6.5 %, unemployment is the lowest it has been
in years, business investment is growing at its fastest pace since 1972, 2.3 million new jobs have
been created in the last 14 years and core inflation in 1993 was the lowest in 20 years.

One sensible budget reform process proposal that I have championed in the past before
this Subcommittee is H.R. 742, the so-called "FIRE SALE Disclosure" bill which I introduced

360

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early last year. Leon Panetta was the primary cosponsor of this proposal when I introduced it
in the last Congress and I hope we can count on his continuing support for it now that he is
sitting at the other end of Pennsylvania Avenue trying to help us balance our budget. The
proposal makes good sense and, in my view, should be included in any package of budget-related
reforms adopted by the Congress.

Mr. Chairman, each year the federal government and the taxpayers lose billions of dollars
selling, leasing, renting and exchanging taxpayer-owned assets. In thousands of transactions a
year, the federal government fails to obtain the fair market value for these taxpayer-owned assets,
because the pricing decisions are either shielded from Congressional and public scrutiny, or are
masked by questionable accounting practices. As a result, the deficit is impacted because
government agencies refuse to operate as "prudent sellers" of the public's resources.

The Subcommittee on Environment, Energy and Natural Resources, which I chair, has
investigated many such transactions and natural resource subsidy programs over the past decade.
Many others have as well: the General Accounting Office, the Congressional Budget Office,
Inspectors General, and numerous private groups have detailed monumental sums of lost revenues
attributed to "fire sale pricing" for disposal or use of various federal assets.

Billions of dollars have been lost over the past few years to pricing practices such as
below-cost timber sales, no-royalty hardrock mineral claims, questionable land exchanges, no-rent
land leases and transfers, undercollection of oil and gas royalties, subsidized grazing on public
lands, below-market value concession contracts at recreation areas, and below-cost uranium
enrichment services. Yet nowhere in the President's 1,300-page budget submission can Members
of Congress or the public find a detailed listing of these subsidies or the cost to the Treasury of

361

each program or category of transactions that actually lose money.

I want to be very clear about one point: there are sound and justifiable reasons for many
federal subsidies. The problem, however, is that many of the subsidy pricing decisions are made
outside legitimate public policy parameters, and many have not been reviewed for years because
Congress is not routinely provided information by the Executive Branch on the real cost of these
programs and transactions. In this respect, they're like the Energizer Bunny: they just keep
going and going.

Let me give you an example of these losses. Almost every year, the U.S. Forest Service
issues a press release announcing how much net revenue, or "profit", the timber sales program
made in the past fiscal year. That announcement usually cites hundreds of millions of dollars in
"net revenues" to the Treasury. In fact, Mr. Chairman, the Forest Service can claim "net profits"
to the Treasury only by way of some creative bookkeeping techniques, and it took extensive
investigation for us to leam that fact When necessary to help show "profits" to the Treasury,
the Forest Service accounting system allows them to amortize roads (a major program expense)
over 500, 1,200 or - remarkably - even 1,800 years. (By comparison to reality, these roads
actually last about 25-30 years.) Only the government is allowed to cook its books with such
ridiculous and misleading accounting techniques. In the absence of investigations like the one
I just mentioned, Congress would have no way of knowing that the timber sales program actually
loses hundreds of millions of dollars a year in real money.

This is just one example of the problem, but unfortunately there are many more. Mr.
Chairman, I submit that Congress shouldn't have to do that kind of extensive investigation to
learn the truth about these important budget issues. But we do, because there currently is no

362

requirement that the Executive Branch provide specific information to Congress about the real
costs of these transactions in terms of losses to the taxpayers and the subsidies provided to
various beneficiaries under these programs.

To correct this deficiency, and to ensure that Congress has the information it needs to
make sensible budgetary and policy decisions about asset-based losses and subsidies, I introduced
H.R. 742. It is a very simple bill, based on a simple premise: information is power. In this time
of extraordinary concern over the deficit, Congress must have the information it needs to
scrutinize each and every federal expenditure or revenue loss.

My bill helps Congress carry out that responsibility, by requiring the Administration, in
its annual budget submission to Congress, to include a separate statement of the projected
revenues anticipated from the sale, lease, or transfer of any physical asset and, in addition, to
include the estimated fair market value of those programs or transactions. This itemization and
comparison will disclose to Congress and the public the actual amount anticipated to be lost each
year from these transactions, and will allow us to take that information, judge it against the
program's benefits to society, and make an informed decision about the merits of each category
of loss or subsidy.

Let me emphasize again: I am not against subsidies per se. We know from experience
that many are useful and advance important societal goals; these should be retained. But
Congress is ill-equipped to make these judgments if we do not know the actual cost of the
subsidies. In short, information disclosure is the sole purpose of my legislation. I might add,
parenthetically, that the estimates required of the Administration for both expected revenues and
the fair market value of these transactions are calculations they are well-equipped to make.

363

The requirements of the bill are simple, direct, and useful and I hope this Committee will
look favorably upon it and adopt it as a free-standing bill or as part of any budget-reform
legislation advanced by the Committee.

I would note before closing that the legislation, as currently crafted, does not require a
similar informational statement in the budget submission concerning the costs of so-called
"revenue expenditures" or tax subsidies. However, in light of Congress' increasing need to probe
every nook and cranny of the budget for additional savings and potential sources of revenue, I
believe the Committee may want to give serious consideration to expanding the scope of the bill
to include such an informational statement concerning tax subsidies.

As the Congressional Research Service testified on February 3, 1993: "Many, perhaps
most, [tax expenditures] persist unchanged year after year", even though the conditions that gave
rise to them "may frequently bear little relationship to today's conditions".

As I reflect further on the legislation, I believe the same argument can be made
concerning these tax expenditures as can be made about resource-based losses: we cannot make
well-informed budget decisions until and unless we know the facts. In my view, it's high time
Congress insisted on knowing the extent of all of these losses— both resource-based and tax-based
—in a clear, concise and honest way. Only then will we be able to scrutinize each and every one
and make informed, reasoned judgments about their individual merits.

Many subsidies will be continued by Congress because they advance goals that are
important to the public and to the Nation. Others may be cut back or eliminated on grounds that
they are no longer justified or are unreasonably costly. But we can not wisely chose between
them if we do not know their real cost to the taxpayers.

364

I strongly urge the Committee to act favorably on H.R.742, so that any budget-related
reforms can include this very simple and responsible requirement. Thank for the opportunity to
present this statement in support of H.R. 742 and sensible budget process reform.

365

Mr. Conyers. Thanks, Mike. I have one question I want to ask
you. Have you considered the fact that the government is not just
another business, but also receives significant benefits in lieu of
money, such as the consideration of increased economic activity,
employment, that in ways fully compensate the Federal Govern-
ment beyond the marketing cost theory?

Mr. Synar. Absolutely. In fact to say we ought to run a govern-
ment like a business really demeans the role of government. My ar-
gument is that in running Federal resources, in just simply run-
ning the resources that we have the responsibility to run, we
should at least get the fair market value for those resources be-
cause anything less than that really takes away from the economic
responsibility and fiduciary responsibility that this government has
to our taxpayers.

Mr. Conyers. We are in agreement there, and I see where you
are coming from. And I think you have got an attractive rec-
ommendation— because you are only asking for a statement, a sep-
arate statement that would address this subject matter.

Let me turn now to Chairman Mineta and Jim Traficant of Ohio,
both of whom have been talking with me about the lease situation
and how it might be considered in under the budget rules, since
there is so much property being bought, sold, rented, leased by
GSA and the Federal Government.

And I know both of you gentleman have given this a lot of con-
sideration. Jim Traficant has approached me about this subject on
more than one occasion, and I am delighted that you are both here
to put it in the record.

I would ask that your statements be reproduced fully in the
record, and then you may make additional comments as you
choose.

STATEMENT OF HON. NORMAN MINETA, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Mineta. Thank you very much, Mr. Chairman, for this
chance to be with you and Mr. McCandless and Mr. Spratt. As
chair of the full Committee on Public Works and Transportation
and with my very distinguished colleague and friend, Mr. Trafi-
cant, who chairs our Subcommittee on Public Buildings and
Grounds, we want to be here to testify in support of H.R. 2680.

This would amend the Public Buildings Act of 1959 concerning
calculations of public building transactions. This is just a very
short, one-paragraph bill which returns to the General Services Ad-
ministration the authority to acquire an equity position in real es-
tate in those instances where a long-term stable Federal need has
been identified.

The General Services had this authority prior to passage of the
1990 Budget Enforcement Act. However, the scoring rules which
were established by that act effectively stopped GSA from using the
most effective method of meeting the Federal Government's long-
term real estate needs.

Mr. Chairman and members of the committee, it is the classic
case of the law of unintended consequences. While the Budget En-
forcement Act was well intended in its attempts to control spend-
ing, the application of the current scorekeeping, as it relates to real

366

estate, and only real estate, has created a spending and financial
situation which frankly, from our perspective, is a congressional
embarrassment.

The leasing budget has rocketed up like a Titan missile over the
last 6 years. In fiscal year 1988, the leasing budget was approxi-
mately $1.1 billion. In fiscal year 1990, the rental budget had in-
creased by $200 million— from $200 million to $1.3 billion.

The fiscal year 1995 budget request was approximately $2.2 bil-
lion, a 100 percent increase in just 6 years.

There has been a spectacular vertical rise in leasing costs since
the Budget Enforcement Act of 1990, and the application of the
scorekeeping rules as they relate to the acquisition of real estate.
We believe that real estate is a particular capital asset whose very
use generates income through a rental payment, and therefore
should be seriously considered for financing which takes advantage
of and leverages this income stream.

Lease purchase, as we would commonly call mortgage-type pay-
ments, would do for the Federal Government what it does for indi-
vidual consumers such as you and me.

This acquisition strategy allows us to acquire an equity at the
same time through periodic payments. This asset increases in value
and is viewed as an investment. Practice is, it will return benefits
to the owner.

It seems to us that the Federal Government should be allowed
that same flexibility to make an intelligent decision regarding how
to spend its money in real estate, and not be harmed or hampered
by accounting and budget rules which are aimed at short term fixes
for the deficit.

Congress plays a vital, pivotal role in that decisionmaking proc-
ess. However, due to the scorekeeping rules, the Congress in gen-
eral and our committee in particular are not presented with a full
range of acquisition options.

We are limited to only two choices: either direct appropriation for
Federal acquisition or, at the very extreme, very costly, long-term
leases, and both choices are to satisfy and establish long-term Fed-
eral need in a particular location.

Even in this time when there are a number of real estate bar-
gains, there have been no funds allocated to GSA to purchase exist-
ing buildings. And since 1988, GSA has not had funds to enter the
marketplace as a competitive consumer.

So let me just indicate to you again, Mr. Chairman, how very,
very important it is that we have this kind of flexibility and that
we be allowed to do essentially this kind of lease purchase and be
able to get away from the scorekeeping that hampers us from doing
the right thing, especially in a real estate market as we are experi-
encing today.

And we feel that both in terms of good public policy and in terms
of good financial decisionmaking, that H.R. 2680 will restore to the
General Services Administration the authority that it had pre-
viously enjoyed and that will give us in the Congress the ability to
make a fully informed decision.

H.R. 2680 is not intended to promote construction of new Federal
buildings. Its purpose is to ensure that the Federal Government

367

has the tools available to it to make the best financial decisions for
the American people.

So again, Mr. Chairman and Mr. McCandless, Mr. Spratt, we
thank you for this opportunity to be before you, and let me at this
time call on, if I might, Mr. Chairman, my very fine colleague, the
chair of the Public Buildings and Grounds Subcommittee, Mr.
Traficant.

[The prepared statement of Mr. Mi n eta follows:]

368

STATEMENT BEFORE

COMMITTEE ON GOVERNMENT OPERATIONS

SUBCOMMITTEE ON LEGISLATION AND

NATIONAL SECURITY

CHAIR NORMAN Y. MINETA

H.R. 2680

AUGUST 4, 1994

ROOM 2154

Good morning, Chairman Conyers, and members of
the Subcommittee on Legislation and National Security.
I thank you for your kind invitation and opportunity to
appear before you today, along with Congressman
Traficant, Chair of our Subcommittee on Public Buildings
and Grounds, to testify in support of H.R. 2680, the
Committee on Public Works and Transportation bill which

369

-2-

would amend the Public Buildings Act of 1959 concerning
calculations of public building transactions. This short
one-paragraph bill, in essence, returns to the General
Services Administration the authority to acquire an equity
position in real estate in those instances where a long-term,
stable Federal need has been identified.

The GSA had this authority prior to passage of the
1990 Budget Enforcement Act. However, the scoring
rules which were established by that Act effectively stopped
GSA from using the most effective method of meeting the
Federal government's long-term real estate needs. Mr.
Chairman, and members of the Committee, it is the
classic case of the "law of unintended consequences".
While the Budget Enforcement Act was well intended in its
attempts to control spending, the application of the

370

-3-

current scorekeeping rules to real estate, and only to real
estate, has created a spending and financial situation
which is a Congressional embarrassment.

The leasing budget has rocketed up like a Titan missile
over the last six fiscal years. In FY 1988 the leasing
budget was approximately $1.1 billion. In Fiscal Year
1990 the rental budget had increased by $200 million to
$1.3 billion. The Fiscal Year 1995 budget request was
approximately $2.2 billion, a 100% increase in just six
years! There has been a spectacular vertical rise in
leasing costs since the BEA of 1990 and the application of
scorekeeping rules to the acquisition of real estate. We
believe that real estate is a particular capital asset whose
very use generates income through a rental payment, and

371

-4-

therefore should be seriously considered for financing
which takes advantage of, and leverages this income
stream. Lease purchase, or as we would commonly call
"mortgage type" payments, would do for the Federal
government what it does for individual consumers such as
you and I. This acquisition strategy allows us to acquire
an equity interest in real estate through periodic payments.
This asset increases in value, and is viewed as an
investment: that is, it will return benefits to the owner.
The Federal government should be allowed the same
flexibility to make an intelligent decision regarding how to
spend its money in real estate, and not be hampered by
accounting and budget rules which are aimed at short-term
fixes for the deficit. Congress plays the vital, pivotal
role in that decision making process. However, due to

372
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the scoring rules the Congress in general and my
Committee in particular are not presented with a full range
of acquisition options. We are limited to only two
choices ~ either direct appropriations for Federal
acquisition, or at the other extreme very costly long-term
leases - both choices are to satisfy an established long-
term Federal need in a particular location. Even in this
time of exciting real estate bargains there have been no
funds allocated to GSA to purchase existing buildings.
Since 1988 GSA has not had funds to enter the
marketplace as a competitive consumer. Congress is
faced with the confounding choice of either authorizing and
appropriating for direct Federal construction or authorizing
and funding long-term leases. The Congress is precluded
from analyzing and comparing these alternatives to lease

373

purchase, lease with an option to purchase, lease with
an option to purchase at fair market value or a pre-
determined price. Due to the current scoring rules,
these options are not available for consideration.

Long ago, we acknowledged that direct Federal
construction, or even acquisition was usually the most
economical choice. However, our members have
steadfastly held that lease purchase is more appropriately
compared to other leasing strategies - and in almost all
cases when this more appropriate comparison is made,
lease purchase is less expensive than long-term leases.

Congress's inability to evaluate and analyze a full
range of acquisition strategies has produced some bizarre

85-810 - 95 - 13

374

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results. Each year my Committee is presented with GSA
prospectuses for real estate which include such information
as agency, location, delineated area, size, and special
needs. Many of you have Federal projects in your
districts and are familiar with this process. In addition,
the financing alternatives are included using 30-year
present value analysis. For Fiscal Years 1993-1995
budget submissions we have seen prospectuses which
recommend some form of equity acquisition. But due to
the scoring rules, long-term leasing is chosen. In black
and white are figures which indicate this choice is by far
the most expensive choice over 30 years. This kind of
decision making, based on limited choices, is debilitating
and non-productive for Congress. These practices are
wasting billions of dollars at a time when the

375
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Administration is actively pushing, as we all are, deficit
reduction activities.

According to OMB these rules were put in place to
save money. But in testimony given on this bill last
October before our Subcommittee, OMB was unable to
quantify any savings associated with the current
scorekeeping rules. OMB says these rules will save
money, yet they approved a $700 million project in
Atlanta which was fashioned as a long-term lease due to
scoring requirements. Only direct action by the
Committee on Public Works and Transportation succeeded
in reducing the figure to approximately $300 million.

376

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Even the President's and Vice President's National
Performance Review concedes there is a bias in the budget
against long-term investment.

Mr. Chairman, and my fellow colleagues, we have
studied this situation for almost two years. We have
written to OMB on several occasions. We have
introduced a bill which has strong bi-partisan support, and
we have held hearings. The principles and the staffs
have met. We have even offered several suggestions to
allow for a small program of real estate acquisition to move
forward. Now is the time for Congress to reassert itself,
on behalf of the American taxpayer, into the decision
making process and for Congress to decide which financing
option, chosen from a full range of traditional real estate

377

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financing schemes, will be the preferred and most
beneficial financing strategy for the Nation. Congress
can only be responsive if GSA's fully authorized to present
Congress with all the funding choices. H.R. 2680 will
restore to GSA the authority it previously enjoyed, and
will allow Congress to make a fully informed decision.
H.R. 2680 is not intended to promote construction of new
Federal buildings. It's purpose is to ensure that the
Federal government has the tools available to it to make
the best financial decisions for the American people.

Thank you again Chairman Conyers for holding this
hearing on H.R. 2680, and I urge your Committee's
support for the bill.

378

STATEMENT OF HON. JAMES TRAFICANT, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF OHIO

Mr. Traficant. Congratulations on your victory, Mr. Chairman.
I am very proud to be with you and proud to be with our chairman
of Public Works. I think our committee has done a fine job in a lot
of areas and Mr. Mineta deserves much of that credit.

This bill has come about for several reasons, and I think it has
been explained rather well by the chairman. I think we have a
problem with OMB. And OMB is running the real estate program
of the U.S. Congress, not the Congress.

I think the chairman was very nice about that, as chairman of
the subcommittee, that is my analysis. Here is why: The Office of
Management and Budget approves a lease for Atlanta. It was close
to three-quarters of $1 billion. A 30-year lease. OMB signed off on
that. That would have been three-quarters of $1 billion. And there
would be no equity position for the U.S. taxpayer at the end of that
lease.

I would not approve of that. Our subcommittee and our commit-
tee took issue to get around the scoring. OMB directed a $240 mil-
lion acquisition up front rather than change scoring.

Our committee believes we are tying the General Service Admin-
istration's hands behind their back. They can't make the best deal
for the American taxpayer, it is impossible under our scoring rules.

So if you will, for the deficit-minded people trying to make things
look rosy, they would much rather have had a 30-year lease in At-
lanta at three-quarters of $1 billion. They come up with the first
1-year appropriation because that is the only choice they had.

The GSA in 1989 was subject to review of 43 projects by the Gen-
eral Accounting Office and they reviewed 43 leases. The General
Accounting Office said we could have saved $12 billion in those 43
projects with more prudent congressional behavior.

Here is exactly what we are saying: We are not trying to open
up the mechanism to finance submarines and aircraft carriers.
H.R. 2680 deals strictly with real estate. The chairman said, "We
don't want to build an awful lot of new buildings, but we want to
effect the best deal the taxpayer can have."

Right now there is only two choices. A lease looks good because
only the annual cost of the lease is second, and a 1-year cost of a
30-year lease is a lot less than building and financing an equity po-
sition in that year. So Atlanta underscores it, and here is where
we are.

We have the Office of Management and Budget basically running
the real estate policy of the country. Contrary, I am not under the
impression Congress should do that, I am that the Budget Commit-
tee will move away from the numbers game and start talking about
the quality and quantitative aspect of a loss of huge amounts of
money by limiting our real estate program.

That is what H.R. 2680 is all about. As the chairman of the sub-
committee, I am asking if there is no specific intention of your com-
mittee to involve that in any legislation, to report it out as soon
as possible, and if there is, we welcome your improvements. Your
improvements have been very helpful and we appreciate them.

But if in fact there is none, let our committee go forward in our
appointed rounds, pursue this legislation that is in the best inter-

379

ests of our taxpayers, and furthermore underscores the fact that
the Congress of the United States sets policy, not the Office of
Management and Budget. And the General Services Administration
should be reporting to its oversight process throughout Congress
and not to the White House. I appreciate the opportunity to testify
here. I hope that we can get some help from you, some collateral
position to aid us in our goals.
[The prepared statement of Mr. Traficant follows:]

380

STATEMENT BEFORE

COMMITTEE ON GOVERNMENT OPERATIONS

SUBCOMMITTEE ON LEGISLATION AND

NATIONAL SECURITY

THE HONORABLE JAMES A. TRAFICANT, JR.

H.R. 2680

AUGUST 4, 1994

ROOM 2154 RAYBURN HOUSE OFFICE BUILDING

THANK YOU, CHAIRMAN CONYERS
AND OTHER MEMBERS OF THE
GOVERNMENT OPERATIONS COMMITTEE
FOR HOLDING THIS HEARING AND FOR
INVITING CHAIRMAN MINETA AND ME
TO TESTIFY ON H.R. 2680, A BILL TO
RESTORE TO GSA THE AUTHORITY TO

381

-2-

TIME FINANCE REAL ESTATE
TRANSACTIONS. AS CHAIRMAN MINETA
HAS STATED, CHAIRMAN CONYERS, THIS
ISSUE OF SCORING AND GSA'S INABILITY
TO TIME FINANCE REAL ESTATE IS AN
ISSUE MY SUBCOMMITTEE HAS
REVIEWED, STUDIED, AND EVALUATED
FOR OVER A YEAR AND A HALF. IT IS AN
ISSUE WHICH HAS BROAD BIPARTISAN
SUPPORT AMONG ALL MEMBERS OF MY
COMMITTEE. ATTEMPTS HAVE BEEN
MADE TO PORTRAY THIS FUNDING ISSUE
AS COMPLEX AND COMPLICATED.
BUDGET JARGON, TECHNICAL CBO
TERMS, AND FEARS OF EXPLOSIVE
SPENDING BY CONGRESS HAVE BEEN

382

-3-

INTRODUCED INTO THIS DISCUSSION.
HOWEVER, WHEN ALL THE TECHNICAL
"MUMBO JUMBO" IS PUSHED ASIDE THE
ISSUE IS WHETHER CONGRESS IS GOING
TO CONTINUE TO UNNECESSARILY
WASTE BILLIONS OF SCARCE TAX
DOLLARS EVERY YEAR ON LONG-TERM
LEASES, WHEN ANALYSIS CLEARLY
SHOWS THAT GOVERNMENT OWNERSHIP
IS MUCH MORE ECONOMICAL. MR.
CHAIRMAN, AS MR. MINETA HAS STATED,
WE HAVE OPENLY ACKNOWLEDGED
THAT OUTRIGHT PURCHASE OR
CONSTRUCTION IS USUALLY THE MOST
ECONOMICAL MANNER TO ACQUIRE

383

-4-

FEDERAL SPACE. IN FACT, IN A
DIFFERENT BUDGET CLIMATE IT WOULD
BE EASIER TO REQUEST DIRECT
APPROPRIATIONS FOR THE ACQUISITION
OF ALL NECESSARY FEDERAL OFFICE
SPACE. HOWEVER, WE ALL HAVE TO
LIVE WITH THE REALITY OF
COMPETITION FOR THE FEDERAL TAX
DOLLAR. IN THE CASE OF REAL ESTATE
FINANCING, THE COMPETITIVE PLAYING
FIELD IS NOT LEVEL. FINANCING, BY
LEASE PURCHASE, IS INAPPROPRIATELY
BEING COMPARED TO DIRECT FEDERAL
CONSTRUCTION, WHEN THE CORRECT
COMPARISON SHOULD BE WITH THE

384
-5-
COSTS OF LONG-TERM LEASING.

SINCE 1990. OFFICIALS FROM GSA
HAVE TESTIFIED ON NUMEROUS
OCCASIONS REGARDING THE NEED TO
REEXAMINE THE WAY THE AGENCY,
INDEED THE FEDERAL GOVERNMENT,
FINANCES REAL ESTATE TRANSACTIONS.
GAO HAS TESTIFIED THAT "GSA COULD
SAVE BILLIONS OF DOLLARS A YEAR BY
INCREASING THE AMOUNT OF FEDERAL
OWNED SPACE AND REDUCING LEASED
SPACE. ACCORDING TO GAO "CURRENT
BUDGET SCOREKEEPING RULES SERVE
AS DISINCENTIVES FOR NECESSARY

385

-6-

OWNERSHIP BECAUSE THEY ARE BIASED
IN FAVOR OF OPERATING LEASES AND
DRIVE DECISION MAKERS TOWARD
CONTINUED USE OF COSTLY LEASES." A
1989 GAO REPORT REVIEWED AND
ANALYZED 43 GSA LEASE PROJECTS, AND
NOTED THAT THE 43 LEASE PROJECTS
COST APPROXIMATELY $12 BILLION
MORE THAN CONSTRUCTION.

H.R. 2680 WOULD PERMIT GSA TO
SCORE LEASE PURCHASES AND TIME
FINANCING ARRANGEMENTS BASED ON
ANNUAL OUTLAYS -- AS OPPOSED TO THE
CURRENT SCORING RULES WHICH FORCE

386

-7-

GSA TO SCORE THESE COSTS UP FRONT.
H.R. 2680 WOULD CHANGE THE SCORING
RULES ONLY FOR REAL ESTATE, AND
WOULD APPLY EXCLUSIVELY TO THE
GENERAL SERVICES ADMINISTRATION.

THIS KIND OF WASTEFUL SPENDING
SHOULD NOT AND CANNOT CONTINUE.
LAST WEEK I RECOMMENDED TO THE
SUBCOMMITTEE ON PUBLIC BUILDINGS
AND GROUNDS THAT WE NOT
AUTHORIZE ANY LEASES FOR FISCAL
YEAR 1995. THE SUBCOMMITTEE
MEMBERS HAVE BEEN CONFRONTED
WITH LESS THAN BEST, OR EVEN SECOND

387

-8-

BEST FINANCING ALTERNATIVES. THIS
YEAR'S LEASING PACKAGE BRINGS WITH
IT A PRICE TAG OF ALMOST $2.2 BILLION
DOLLARS. THIS IS MORE THAN A
BILLION DOLLAR INCREASE SINCE 1988'S
LEVEL. IN TODAY'S BUDGET CLIMATE,
WITH COMPETING INTERESTS RANGING
FROM HEALTH CARE TO SPACE
EXPLORATION, IT IS UNREASONABLE
FOR THIS SUBCOMMITTEE TO
AUTHORIZE SUCH A HUGE
EXPENDITURE, WHEN MORE EFFICIENT
METHODS OF MEETING FEDERAL OFFICE
SPACE NEEDS ARE AVAILABLE.
THEREFORE, I HAVE DECIDED NOT TO

388

TAKE ACTION ON THESE LEASE
PROSPECTUSES. I STATED EARLY IN MY
CHAIRMANSHIP THAT I WOULD NOT
CONTINUE TO "RUBBER STAMP"
REQUESTS FOR LEASE SPENDING
BECAUSE CONGRESS HAD BEEN
STRIPPED OF ITS ABILITY TO EVALUATE
A FULL RANGE OF FUNDING
STRATEGIES. I CONTINUE TO BELIEVE
THAT THERE IS A BETTER WAY TO
FINANCE REAL ESTATE. VARIOUS GAO
EMPIRICAL STUDIES SUPPORT OUR
POSITION AND RE-ENFORCE MY
DECISION NOT TO ACT ON THE LEASING
PACKAGE OF PROSPECTUSES.

389
-10-

MR. CHAIRMAN, AND MEMBERS OF THE
SUBCOMMITTEE, THIS LEGISLATION
DOES NOT MANDATE SPENDING, IT DOES
NOT MANDATE USE OF LEASE
PURCHASE. THE LEGISLATION MERELY
RESTORES TO GSA THE AUTHORITY TO
PROPOSE THIS FINANCING STRATEGY TO
CONGRESS FOR CONSIDERATION AND
COMPARISON WITH OTHER FINANCING
STRATEGIES.

CHAIRMAN CONYERS, THANK YOU
AGAIN FOR HOLDING THIS HEARING ON
H.R. 2680.

390

- 11 -

I URGE YOU SUPPORT FOR THIS
WORTHWHILE COST-EFFECTIVE
LEGISLATION.

391

Mr. Conyers. Thank you both for bringing this matter to our at-
tention. We are going to look at it.

Let me go back to Tom Lewis, though, before we get into your
proposition, because Tom wants to take civil service retirement and
trust fund off-budget. That is your contribution to this idea session
that we have been having here. Where we have had ideas about
a 10 percent tax directive. We have heard Henry Waxman's empha-
sis on health care, the Medicare/Medicaid problems and how they
are impacting on our budgetary problems, leading us to the subject
of health reform if to ease part of the entitlement pressures off us.

But, Mr. Lewis, what I am worried about is that if we move in
your direction, taking a trust fund, which has a surplus and con-
tributes to a lower Federal deficit, off budget, we will make our
present deficit worse, wouldn't we?

Mr. Lewis. According to the way that CBO scores, that is correct,
Mr. Chairman. But that is also phony. Shouldn't we tell the tax-
payers of this country what the actual deficit really is? It doesn't
cost any money to make this change. It would be a reduction of ap-
proximately $5 billion in the deficit.

There is confusion, as I mentioned in my opening statement, be-
tween the way the CBO scores and the way that OPM scores. And
there is a big difference in the numbers.

Mr. Conyers. Well, let's take a look at it this way, Tom. Suppose
we look at the civil service retirement as a Federal workers only
program, but Social Security involves everybody. And so we are
talking about a retirement program that is unique to Federal work-
ers. We want to be careful about in this, because taking it off-budg-
et, insulating it from deficit reduction pressure, and placing civil
service retirement on equal footing with Social Security, is really
running a kind of a favoritism to the Federal retirement system,
would you concede that?

Mr. Lewis. Well, yes and no, Mr. Chairman.

We are showing favoritism to the Social Security recipients. We
have to take into consideration that the Federal retirees, there arc
many of them that don't have much more in retirement income
than the Social Security folks. The majority of Federal retirees are
not big pension getters. They are in a sense the same as Social Se-
curity and sometimes they are receiving both Social Security and
Federal moneys as well.

And every time that we are looking for cost savings on the defi-
cit, we say we are going to take care of Social Security, and I have
no problem with that, but immediately we say, the Federal retirees
are going to take the hit.

Now, why should these people that are receiving the same
amount of money per annum as the Social Security recipients take
the hit? I realize there are a few people that get very good Federal
retirement pensions, but the majority of them are not much better
than anybody else's.

Mr. Conyers. Let me recognize Al McCandless for a comment or
two.

Mr. McCandless. Tom, let me go back and walk you through a
couple of things here. I am not in total disagreement with what you
are trying to do. The retirement fund is made up of three areas.
We have the employer, or Federal Government contribution. We

392

have the employee contribution. Then we decide at the end of a
given period, well, we have this amount of money now from these
contributions, but we have this payout obligation.

To date the two have not matched. Which means then the Fed-
eral Government pays the difference from the general fund. It isn't
paid by either the employer or the employee, other than the em-
ployer is the Federal Government. Am I on the right track?

Mr. Lewis. You are on the right track.

Mr. McCandless. With respect to Social Security, the employer
and employee make up the total payment except for what the Fed-
eral Government has been generous enough to contribute to the ad-
ministration of the program, through HHS.

This is not a popular comment, but I think we need to talk about
it. The Social Security program got in trouble because the em-
ployer/employee contributions did not keep up with the benefits
being given by the Federal Government, the increases in COLAs
and the expanded program. And you and I saw that in 1983.

So why don't we bring this into balance by simply saying what
goes in and what comes out has to equal, and that we take the
Federal Government out of the program of subsidizing directly, sep-
arate from the withholding aspect of it, the amount of money nec-
essary to pay the retirement programs?

Last year we contributed $20 billion to this program over and
above what the employee and the Federal Government as the em-
ployer contributed.

Mr. Lewis. Well, that is not much different than the private sec-
tor who insures their pension fund and allows the pension fund to
make the adjustments for the rate of increase in inflation. The only
way we can do that in the Federal pension is to make the direct
contribution.

Mr. McCandless. But that is the problem, as I see it.

Mr. Lewis. And if I may, then with the Social Security, we allow
them to have the COLA, which keeps them basically in line with
the private sector pensions.

Mr. McCandless. But Social Security COLAs are based upon the
fact that they are taken from the trust fund, paid into by the em-
ployer and the employee, and are not a result of an additional sub-
sidy or any kind of subsidy on the part of the Federal Government
to the direct fund operation and activity.

Mr. Lewis. Well, my staff came up with these numbers. In 1993
we had $37.37 billion contributions and we only paid $34,665 bil-
lion.

Mr. McCandless. What year was that?

Mr. Lewis. 1993.

Mr. McCandless. That is somewhat contrary to the information
we have.

Mr. Lewis. That depends on who does this.

Mr. McCandless. I am not disagreeing with the gentleman. My
understanding was that there was this third contribution depend-
ing on how much was needed to balance the books. This refutes
that.

Mr. Lewis. Well, that is a problem.

Mr. McCandless. Philosophically I couldn't agree with you more
with respect to these trust funds, including Mr. Mineta's favorite

393

trust fund, the airports and facilities trust fund. He has a special
interest in that, and the highway trust fund and all those items
under his control, custody and so forth.

Mr. Lewis. But anyway, Mr. McCandless and Mr. Chairman, I
do ask you to have the staff of the subcommittee look at this. There
is a difference between the way it is scored between OPM and
CBO. That shouldn't surprise us.

But it is a gargantuan difference in numbers that they bring for-
ward. In fact, in one CBO says that we are costing the taxpayers
dollars by doing this. OPM says no, we are saving $5 billion in defi-
cit reduction.

I have a set of numbers here, and you say they are different from
yours, and I will make this available to you as well.

Mr. McCandless. I think the better off we are with our budg-
etary process, the better we will be able to separate out those pro-
grams that are specific for our purpose. Then we know what we
nave in the way of a general fund rather than all of this, for lack
of a better word, Mickey Mouse bookkeeping.

If we ever got involved in the generally accepted accounting prac-
tices in this country as far as the Federal Government is con-
cerned, that is the first step we should take to finally straighten
this thing out. But we have been used to doing this now for 200
years and we are not about to change, I guess.

I appreciate you coming by and sharing your thoughts with us.

Mr. Lewis. Thank you. Thank you again, Mr. Chairman. I do
hope your staff will look at this. I think it is important that the
Federal retiree get a fair shake in his retirement. I know Federal
retirees I have talked to and I think that it is highly unfair that
they are the first ones hit or hurt when we cut their COLAs.

Mr. Conyers. We are glad you opened this subject up, because
it is a unique proposal, but it has got some merit in it. We are
going to look at it very carefully.

Thanks for coming and staying with us as long as you have.

Mr. Lewis. Thank you for the time, Mr. Chairman.

Mr. Conyers. Let me turn toward my two friends here, one of
whom is a distinguished chairman of a great committee here,
Norm, what I am looking at in your proposal, and Jim has put it
forward to me informally more than once, is that maybe at least
three other committee chairmen are looking for as a way to turn
leasing into a great opportunity for increasing the scope and size
of their activities in their committee.

It is like buying a car. If it is only $200 a month, the fact that
it is a Lincoln and it is going to cost a lot over the long run may
obscure the fact you really spent $50,000 for that car. You are com-
mitted then and there. And leasing has this same kind of mislead-
ing quality. If we are to change the scoring method and overturn
OMB, which I don't mind doing because OMB is just another agen-
cy that we have created, as a matter of fact, out of this committee,
what would be the consequences.

What about the 1921 Anti-Deficiency Act, and what about article
1 of the Constitution? What I am saying here is that unless we put
all of this money up front, leasing will become not just a wave of
the future for the Public Works Committee other committees as
well. What am I going to tell the chairman of Armed Services when

394

they find out that you talked me into this and they are saying,
well, look, the same real estate logic applies to other long-term ex-
pensive purchases.

And what about the fact that leasing may not always be the best
way to acquire? I know you are caught between buying outright
and leasing. But that is just the way it goes. Congress always has
to make choices. In your Atlanta example, which I am going to look
into, it may be that there may have been a mistake made in which
way to go in this particular instance. We are looking at a lot of
GSA's transactions from the point of view of them being imperfect.

But I think you have to recognize that the leasing concept is
going to go way beyond the application that you would have in-
tended for buildings alone. I can't see how I can argue that other
kinds of expensive long-term purchases would be any less applica-
ble to the leasing theory and the scoring concept that you would
ask us to modify.

Mr. MlNETA. First of all, Mr. Chairman, if I might respond, you
are absolutely right. The real estate logic may not be applicable to
every other instance. Maybe we can't use the real estate logic to
say, yes, we are going to build an aegis or a carrier on the basis
of lease/purchase.

So the fact that lease/purchase is applicable to a real estate situ-
ation does not mean that, yes, we can use that real estate logic to
apply over here.

Second, that $200 month lease of the Lincoln, right now under
these scorekeeping rules, we have to take that $50,000 and put it
up front. And so when you say leasing may not always be the best
answer, you are right.

But right now we are even precluded from looking at lease/pur-
chase as an option, because if we have $100 million building and
we are going to pay for this at $10 million a year over a 10-year
period, the owner is willing to pay our costs of moving into the
building from where we are right now, he is going to be willing to
pay the phone costs, the computer costs, all of that, first year free
rent, all of this, and we say, gee, thanks a million, but we can't do
it, because that $10 million a year lease for 10 years, we have got
to score keep it as $100 million the first year.

Now, does that make any sense? Even if it made sense from a
financial perspective, we are precluded from even looking at that
as an option. And right now there are needs that exist for the Fed-
eral Government. We are in leased spaces. We could move over
here and buy a building under a lease/purchase. But we are not
able to do that, because if you have only got, let's say, a cap, and
we have caps all over the budget now, there is no wiggle room for
us to even be able to come up with the $120 million we may need
the first year for scorekeeping purposes to say, yes, here is a real
good building, and we ought to be able to go ahead and negotiate
with the owner on a lease/purchase.

GSA is precluded from doing that because we know it is going
to be impossible for us to come up with $120 million up front for
scorekeeping purposes. And so recently we had a subcommittee
meeting in which we had requests from Members and from agen-
cies for leases. And I believe the total was about $2 billion, $3.4

395

billion in leases. And we said, hey, hold it. Let's stop this mockery
right now. Let's deal with the real problem.

And the real problem is scorekeeping because we have leases in
there that maybe we ought not go ahead with the leases because
there are other ways of dealing with them. And we know that

Mr. Conyers. I see what you are saying. But we have got two
problems here. One is the scorekeeping problem, which you have
some objection to. The other is the administrative decision to pur-
chase or to lease, which is another valid consideration. There are
times when one is better than the other. But GSA isn't precluded
from lease purchasing.

Mr. Mineta. Mr. Chairman, you are the chairman of a very great
committee here. I happen to have the privilege of chairing a great
committee. And as Members of Congress, I think it is our respon-
sibility to make that decision you just mentioned, not some bureau-
crat down at OMB, unelected.

Mr. Conyers. To buy or lease?

Mr. Mineta. Absolutely. Absolutely.

Mr. Conyers. That is going to give you a lot of weekend duty,
because GSA is the landlord for an awful lot of property.

Mr. Mineta. Mr. Chairman, we had it before 1990, and I chaired
the Subcommittee on Public Buildings and Grounds in my second
term in Congress, and I went up to Juneau, I went down to Hunts-
ville, I have been all over this country looking at facilities that are
needed. I went at the request of Mayor Coleman Young, excuse me,
but I did go up there to look at some things in Detroit, which I did,
which are now in ground. I did those on construction, because we
were able to — we decided that in those instances, we had to do con-
struction rather than lease or lease/purchase.

But at least in those days we had the option of looking at what
are our alternatives. In the $1.2 million building, go ahead and do
it on the lease. But I will tell you, at some point, there are scales,
the economies of scale where we really ought to be looking at these
options, but we are precluded from looking at those options.

Mr. Conyers. Would it be fair to say that you can take the op-
tions, but they come at a high price of scoring? I mean, in other
words, nobody is being — you are not telling GSA and GSA dare not
tell you that we can't buy this outright or that we can't lease this.

The question is when is it more prudent to do one versus the
other at the scoring price that you have got to pay?

And that is really what you are trying to get at.

Mr. Mineta. I think any time we have leases probably in excess
of term of $50 million, we don't even get to make the decision. We
have a 10-year lease, $5 million a year, we don't even have a
chance to say, hey, should we take a look at that as an option be-
cause we know from a budgetary perspective.

And again, if the ceiling is, let's say, $1 billion, and it is never
that high, but whatever the ceiling, it seems to me we ought to be
able to have the option of what we are going to do over a 5-year
capital improvement program as to what are we going to purchase,
what are we going to lease.

You know, we nave got to have that kind of ability to have a
good mix of straight leases, lease/purchase, and construction. But

396

right now we are excluded from even looking, because of the
scorekeeping issue.

It is just a practical

Mr. Conyers. Nobody can stop the Committee on Public Works
from oversighting GSA. That is very modest for you to say that, but
I don't believe anybody over in GSA thinks that you are precluded.

Mr. Mineta. Tnat is right. Here is a person who actively does
oversight work because we — as chair of the full committee, I look
to the subcommittee chairs to say, how are you making sure that
the agencies that are within your jurisdiction are towing the mark?

Mr. Conyers. Well, Jim, you have been handcuffed in that chair-
manship job in subcommittee for so long. It is awful the way those
GSA people push you around. By God, we are not going to let them
do that to you anymore. This is outrageous. I didn't think anybody
could do this to my favorite sheriff from Ohio.

Mr. Traficant. Mr. Chairman, you can only provide oversight
pursuant to the law that Congress has directed. And the law that
Congress has enforced really makes it impossible to make those de-
cisions.

I don't think anyone wants to micromanage decisions GSA must
make. We are saying when we see those decisions predicated on
the law of the land are not in the best interests of the taxpayers,
we must act.

Our committee did the only thing we could do, our subcommittee.
We would not authorize the lease. They are now figuring out how
to go forward, because one-third of the cost of those leases can be
saved with a different direction. So we did not authorize the leases.

But I want to offer two things that the chairman had offered to
you for your consideration. Real estate is different than an aircraft
carrier or submarine. As soon as that Lincoln or as soon as that
aircraft carrier hits either the street or the water, they start depre-
ciating. We are talking about fixed value in real estate.

In addition to that, we have a Federal building fund where mon-
eys go in on a revolving basis. There is an applicable management
apparatus charged to the Congress of the United States to make
sure it is done properly. What the Congress has done, worried
about the deficits, is gone ahead and passed a law, made a change
in scoring that makes deficits look good now, but kills us and
drowns us in red ink in the outyears.

So what we are saying is this hypocrisy of making a favorable
impression on the deficit now is not in the best interests of the
Congress and we cannot provide oversight. We cannot help the tax-
payers. We cannot do that which the Congress tells us we can't do.

So we are recommending to the Congress that there has been a
mistake and there needs to be a change in policy.

Mr. Conyers. Should we repeal the budget provision?

Mr. Traficant. No. But remember, we are asking that we just
go back to scorekeeping rules in effect before 1990.

Mr. Conyers. That is what I mean. Should we

Mr. Traficant. Only on scorekeeping.

Mr. Conyers. Should we change that? That would be, I be-
lieve

Mr. Traficant. Just for the real estate.

397

Just for scorekeeping, for real estate activities, as it affects the
General Service Administration for specific costs as referenced by
the Federal building fund and the fixed versus depreciating value
problem.

Mr. Conyers. That is awfully tempting. It sounds real good. And
you know, what I want to do is enlarge upon this part of our hear-
ing, because I think it deserves more attention.

And so what we are trying to do is, let's look at this together,
and what I am thinking, and it had not been brought to my atten-
tion before, is that we might want to do a hearing in a little bit
more depth on this subject, because this real state exception would
be carving a big hole into a budget rule. I want to make sure that
we are looking at all the implications, so that it fits into our budget
reform hearing today, but it also fits into our oversight of GSA,
which is one of your major government sources of jurisdiction.

So we are going to begin to look at it a little bit more deeply
based on your comments here today.

Mr. MlNETA. Mr. Chairman, if I might, just very quickly.

Mr. Conyers. And then I will yield to Al McCandless.

Mr. MlNETA. I hope my colleague from California won't mind my
taking a minute here. H.R. 2680 has been reported out by the Sub-
committee on Legislation. You have sequential referral until some
date certain.

Mr. Conyers. August 12.

Mr. Mineta. So to that extent, I would hope we would be able
to report something out by that time.

Mr. Conyers. Between August 2 and August 12 opens up a
whole knew universe for me to give attention to these important
matters.

Mr. Mineta. I am hoping during the week of the 15th we might
be able to take it to the floor on suspension.

Mr. Conyers. There is nothing like optimism in this business,
Mr. Chairman. You know, without it, where would we be?

Al McCandless.

Mr. McCandless. Thank you, Mr. Chairman. I am reminiscing
a bit about my former life when I leased trucks and cars and trac-
tors and whatever else had wheels. And the main reason for the
leasing was that the capital was not there to buy all of the equip-
ment necessary to function as a farm or as a packing shed or what-
ever.

So what you had then was a cost of doing business which mean
that at the end of the month, the four trucks you had leased was
like the telephone bill or the power bill, and the government paid
for the lease by and large.

It freed up your money then to operate. What we are saying
there is, OK, we are going to lease this $1 million building. If you
score it now, you have to show it as a purchase to begin with, even
though you are going to lease it for whatever length of time. I don't
see that as being an acceptable kind of thing because a lease is a
lease is a lease, irrespective of what takes place.

So I am wondering, the background behind how this came about
how the change came about to begin with, other than as maybe a
way by which to put the brakes on an overzealous program of leas-
ing virtually everything that came down the pike.

398

Is there some background here you can share with me?

Mr. Traficant. Mr. Chairman, first of all, in the leasing, if it
was a lease/purchase, you would have to score the entire project
and its entire cost up front the first year. So lease/purchase is no
option. The only option you have is the lease when I look at the
up-front scoring costs.

What we are saying is, there are times when a lease/purchase
agreement is in the best interests.

Mr. McCandless. So the key word is lease/purchase rather than
just lease.

Mr. Traficant. Right. We want that option. We want to give
whatever option is available.

Mr. McCandless. You have the option at the end of 10 years to
buy it. You have to score it up front if it were a lease/purchase.

Mr. Mineta. In my statement I had used the phrase it is the
classic case of the law of unintended consequences.

Part of the reason this occurred in 1990 was because there was
some thought of maybe the possibility of the Department of De-
fense going to leasing, an aegis, an aircraft carrier, a battleship,
whatever. Then people said, hold it, we don't want to do that. So
let's do this.

So in 1990, the law was changed. As it relates to the Budget
Act

Mr. McCandless. To preclude this from-

Mr. Mineta. It wasn't directed at GSA at the time, but it is one
of those, again, of cases of unintended consequences. And so as
they tried to block this program here, so let's do this, then it hit
everybody else like this.

Mr. McCandless. I knew in our infinite wisdom we had some
reason for doing it.

Mr. Mineta. It was not much wisdom, and it has been infinite
in the sense that the consequences is what we are having to pay
for.

Mr. McCandless. Essentially, the elements of a lease is that if
the money is too high, you are not going to be able to lease some-
thing. Then the cost of construction, the cost of maintenance, you
have got to take kind of a consequential item at all, you have the
cost of administration. The person who has put all this together,
including finding a lessee, is looking for a little profit, which is old
fashioned, I know, but I am still kind of profit oriented.

And then you have a residual value. If the lease is going to be
25 years, I would say you are better off not to try to gamble on the
fact that the real estate is going to appreciate in that 25 years, be-
cause we have gone through some rather traumatic experiences
here in recent times that have demonstrated this is not necessarily
true. If there is any question about it, the savings and loan pro-
gram would point that out to you.

In your reviewing these leases, are you given breakdowns as to
how they arrive at what the cost of the money is going to be? It
is not within the field of improbability that some guy pads a little
bit here, pads a little bit there, then goes down to the banker and
says, hey, I have got the Federal Government really going on this.
I have got a 25-year lease, and the banker says, I have got it made
on this loan, I will give him x percent. He comes back and says,

399

OK, it is x plus 7 percent in a formula, and we end up as the Fed-
eral Government paying another bonus over and above what his
percentage of profit is.

Do our people look at these things that wav?

Mr. Traficant. Yes, they do, very detailed, and they submit that
in their lease packages. But again, their driven only by the first-
year scoring on the project.

Mr. McCandless. I understand the scoring part. But now you
have got me interested in the program.

Mr. Mineta. That building may not be standing in 25 years, but
the U.S. Federal Government and its responsibilities are still going
to be there. And just as in your case of that vehicle, at least we
are going to be able to have ownership at the end of the lease/pur-
chase period. Right now we are doing it. We are leasing. We are
leasing for 10 years, 20 years, 30 years. But what do we have at
the end of that 30-year period but a bunch of rental receipts?

We don't have one iota of ownership. But at least when you were
leasing that Cadillac or whatever it was, as you were doing selling
and leasing, at least the customer you had had ownership at the
end of that lease period.

Mr. McCandless. If they wanted to exercise it.

Mr. Mineta. Right. We don't even get to exercise that as an op-
tion right now.

Mr. McCandless. I understand where you are coming from. I ap-
preciate the time you have spent going over this with the commit-
tee. I am not quite sure where our chairman is.

I am in charge.

Mr. Mineta. Our father.

Mr. Traficant. We are glad to be here with you, Mr. Chairman.

One last thing, Mr. Chairman. In 1975 G£>A lease costs were
$388 million. In 1995 what we will not authorize is $3.38 billion.
They were again signing up and extending those leases because
there was no place to go if they didn't have that lease and under
scorekeeping, there could be no equity.

Mr. McCandless. The second go round, if you negotiate it prop-
erly, is the best of the best worlds. The first go round you are pay-
ing for the second one. You are getting the benefit of the first one.
So I couldn't agree with you more. Thank you both, and those who
have advised you in the back there, by whispering in your ears.

Mr. Traficant. Thank you, Mr. Chairman.

Mr. McCandless. The subcommittee is adjourned.

[Whereupon, at 1:30 p.m., the subcommittee adjourned, to recon-
vene subject to the call of the Chair.]

APPENDIX

Material Submitted for the Hearing Record

CAROLYN B MALONEY

t4)TN District New York

COMMITTEE ON BANKING. FINANCE
AND URBAN AFFAIRS

COMMITTEE ON
GOVERNMENT OPERATIONS

CONGRESSIONAL CAUCUS
ON WOMEN'S ISSUES
EXECUTIVE COMMITTEE

CONGRESSIONAL ARTS CAUCUS
EXECUTIVE COMMITTEE

Congress of the ®niteb States
%ouit of fcepreaentattbei.

vfflasfiington, 3BC 20515-3214

WASHINGTON OFFICE

I 504 Lohowohth BUILDING

Washington. DC 20615-3214

(202) 225-7944

DISTRICT OFFICES

950 ThiRO AVENUf

19TH FLOOR

NEW YORR. NY 10022

(212) 832-4531

28-1 I Asrom. BlYD
ASTORIA. NY 11 102

(7 18) 932-1804

619 Lorimer Street

Brooklyn. NY 11211

(718)349-1260

Rep. Carolyn B, Maloney - Opening Statement
Hearing on Budget Process Reform — August 4, 1994

Thank you Mr. Chairman.

I would like to commendTyou for holding this hearing, our second on
budget process reform. In my view, the Federal deficit remains one of the
most critical problems facing our nation. The discussions we have had in
this committee provide a- good record for addressing some of the
institutional processes which must be addressed if Congress is to confront
the problem at a systemic level.

Just last month the House passed a strong version of expedited
rescission legislation which \ would provide the President with more
authority to cut wasteful spending, while protecting the prerogatives and
power of the legislative branch. I Urge the other body to pass this measure
as well so we can send it to the President for signature.

During today's hearing I will listen with particular attention to the
ideas presented to deal with so-called "emergency spending" authority. I
believe that these emergency supplemental appropriation bills have all too
often in the past been loaded down with extraneous spending. This
practice must end and I am glad it is being discussed here today.

Thank Mr. Chairman.

FWNTED ON HtCTCUD PAWr

(401)

402

STATEMENT OF

REPRESENTATIVE KAREN L. THURMAN

before

THE SUBCOMMITTEE ON LEGISLATION AND NATIONAL SECURITY

August 4, 1994

Mr. Chairman, I appreciate the opportunity to discus H.R. 1056, legislation to place the
Civil Service Retirement Fund off-budget. I am a cosponsor of Mr. Lewis' bill and I fully
support it.

The Federal Government is the largest employer in the United States. The government
has a responsibility to ensure the financial security of its retired workers. Since the Social
Security Trust Fund was removed from the U.S. budget by provisions in the 1990 Budget
Reconciliation Act, the Civil Service Retirement Fund (CSRF) became the largest trust fund to
remain in the unified budget. When it was established in 1920, the CSRF was made independent
from the Federal budget. But in 1968 President Lyndon Johnson decided to include the fund in
the unified budget beginning in Fiscal Year 1969.

The CSRF was never intended to be part of the U.S. budget. It is time that we return
the trust fund to its original place. Like the millions of Americans who pay into the Social
Security Trust Fund, millions of Federal workers contribute to their own retirement fund and
expect it to be there when it is needed.

The trust fund has no effect on the Federal budget or deficit. Critics who point to the
unfunded liability problem with the fund fail to take into account that, unlike other business
entities, the Federal Government is not going out of business.

The same and successful argument that helped to place the Social Security Trust Fund
off-budget applies here: Removing the fund from the budget will make cuts to Federal retirees'
annuities less attractive because it will be standing separate from the myriad of other programs
in the budget.

Opponents of taking the fund off-budget claim that, if we reinstate CSRF's independent
status, then it will be subjected to public criticism and thus be made the easy target of the
Congressional budget-cutting ax. The fact is that as long as the CSRF remains on-budget, it will
be subjected to intense political pressure because it is included in the budget.

As the Committee continues its investigation of budget process reform, I would once
again urge that the Civil Service Retirement Fund be removed from the U.S. budget. As the
role of the Federal government becomes redefined and more of Vice President Gore's National
Performance Review proposals become a reality, we cannot forget those civil service workers
who have served the citizens of this country so ably. Let us give Federal retirees the same
protection that Social Security recipients have: Re-establish the Civil Service Retirement Fund's
independent trust fund status.

BOSTON PUBLIC LIBRARY

3 9999 05982 407 6

ISBN 0-16-046985-6

9 780

60M69855

90000

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Full text of "Budget process reforms : hearings before the Legislation and National Security Subcommittee of the Committee on Government Operations, House of Representatives, One Hundred Third Congress, second session, June 29; and August 4, 1994"

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