Hearings of the Committee on Rules
Biennial Budgeting:
A Tool For Improving Government
Fiscal Management and Oversight
Thursday, March 16, 2000
The committee met, pursuant to call, at 9:30 a.m. in Room H-313, The Capitol, Hon. David Dreier [chairman of the committee] presiding.
Present: Representatives Dreier, Goss, Linder, Hastings, Moakley and Slaughter.
The Chairman. The committee will come to order. We have just found that we begin with two Members, and now Mr. Hastings is here, it is three. So we appreciate all of your being here.
This is the third and final hearing in a series that we have had to examine the various proposals for establishing a 2-year budget and appropriations cycle.
We have already heard from our colleagues and from the executive branch and congressional support agencies. Today we will receive testimony from members of the academic community, representatives of budget reform organizations, State legislatures and the U.S. chamber of Commerce. Later in the hearing we will be joined by our former colleague Leon Panetta, who also served as Director of the Office of Management, and Budget and Chief of Staff of the White House, and Chairman of the House Budget Committee. He will be testifying, if God and technology willing, by video conference from California.
But I want to first welcome our witness, our very respected former colleague with whom I have had the pleasure of working on a wide range of international policy questions, as well as institutional questions here. He is the director of the Woodrow Wilson International Center for Scholars. He and I served together as cochairmen back in 1993 of the Joint Committee on the Organization of Congress, which actually recommended the adoption of a 2-year budget and appropriations process. He was the deciding vote which allowed biennial budgeting to be part of the joint committee's recommendations to the House. I want to commend him for his continued dedication to following through with the work product of the joint committee.
Before I begin, I want to make note of the fact that just last night during their deliberations on the fiscal 2001 budget resolution, the House Budget Committee for the first time adopted a sense of the House amendment calling for the consideration of a biennial budget process as part of a comprehensive budget process reform.
Let me state that I consider biennial budgeting to be comprehensive budget process reform because of its potential to improve government fiscal management, programmatic oversight, budget stability and predictability and government cost-effectiveness. I would also note that the Rules Committee is already on record in support of other budget process reforms by nature of the fact that we have favorably reported out H.R. 853, the Comprehensive Budget Process Reform Act, last August.
I know I also speak for the distinguished Vice Chairmen of the committee Mr. Goss in saying that we will continue to work with the Budget Committee to advance these various reforms here in the House.
So I again extend a very warm welcome to you, Lee Hamilton. We are glad to have you back, and at this point I would like to call on Mr. Goss.
[The statement of Mr. Dreier follows:]
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Mr. Goss. Thank you, Mr. Chairman. I think you have summed it up extremely well and underscored our commitment. The committee has moved forward on this, and I think that the evidence of that is in the quality of witnesses we have before us today. And I join you in welcoming Mr. Hamilton back.
[The information follows:]
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The Chairman. Mr. Moakley
Mr. Moakley. It is always nice to be with Lee, and, Mr. Chairman, I want to thank you again for holding these hearings on this very important proposal.
I know we have some long-term proponents of biennial budgeting on the schedule, but I expect we will hear some words of caution about the idea, and I would just like to remind my colleagues of just a few points.
The evidence and the common sense tells us there will be more supplementals under a biennial system than an annual one, and this obviously is not a good thing. In my opinion, switching to a biennial system will make it harder to reach agreement on the budget in a timely fashion for two reasons: First, the agreement has to cover a longer period, namely, the entire Congress; and secondly, without the need to turn quickly to next year's budget, it is more likely that the difficult issues will slop over into the next year.
Most years we spend less than one-fifth of our time on budget-related measures. Authorization bills are not crowded off the schedule. They are more likely to falter over policy dispute, not lack of time. And good oversight is a challenge no matter how much time we have.
The fact is biennial budgeting does not lead to more or better legislative oversight. Connecticut converted to a biennial budget in 1993 to improve oversight and program review, and according to the General Accounting Office, State officials acknowledged that there has been no improvement in either of these areas.
Biennial budgeting actually weakens oversight in two ways. First, it removes 1 year of appropriations committee program review; and two, it shortens the leash on executive branch officials.
I hear some of my colleagues cavalierly saying, the current system just hasn't worked, so let us try something else. I am surprised to hear some of my conservative colleagues embrace radical change without considering all the consequences, but if my friends are dead set on going ahead with this proposal, I urge them to go very slowly, and please don't ask a brand new President to initiate a brand new process. Do not put the entire Federal budget on an untested biennial system all at once. Some parts of the biennial budget will be better suited to a biennial process; some will not.
That is what Arizona did it when it moved incrementally to bicentennial budgeting over several years, starting with the portion of their budget that was most stable. And keep in mind, what some States call biennial budgeting wouldn't be recognized as that by other States.
Each year Ohio works on a 2-year plan for half of the budget. One year they decide on a 2-year operating budget. Next year they decide on the capital budget. This is continual budgeting and not biennial budgeting under my definition.
So, Mr. Chairman, I really believe it is a mistake to move in this direction, but if you insist on change for change's sake, let us find the way to get there that causes the least damage. Thank you
The Chairman. Thank you very much, Mr. Moakley.
[The statement of Mr. Moakley follows:]
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The Chairman. Let me just make a couple of comments on your statement. First, I was talking to our former colleague Leon Panetta day before yesterday on the telephone in anticipation of his coming, and he told me that he has been pushing this since the mid-1970s, so we have really taken a quarter of century, and that is the point of the hearings. We are trying to spend a lot of time thinking about it. When Lee and I chaired the joint committee on the organization of Congress in 1993, we had exhaustive hearings on this. So we spent a great deal of time looking at it.
So your point on inflicting this on a new President, I think that the statement that was made by your former employee, now the Director of the Office and Management and Budget, Jack Lew, he was very clear in encouraging us to spend time thinking about that transition process that would take place for a new administration, and so I think that there is some very valid points that have been raised.
Mr. Moakley. But, Mr. Chairman, you have to take the testimony where it comes from. Absolutely the administration would love to have a biennial process. It puts them in a stronger position. So Jack Lew, my dear friend, is in the administration. Leon Panetta later became the Budget Director for the administration. So I think that the executive department would love to have it. I think it weakens the legislative process, and it doesn't make anybody more interested in oversight.
The Chairman. Well, we are going to continue that discussion.
Mr. Linder
Mr. Linder. I am just anxious to hear the testimony of the thoughtful and sober gentleman from Indiana, and his style is sorely missed around here. Thank you.
The Chairman. Mr. Hastings.
Mr. Hastings. Thank you, Mr. Chairman. I will say right up front, I am a strong proponent of the biennial budget. I suppose that is because of my background in the legislature. Nevertheless there are some concerns that are obviously legitimate concerns from those that oppose that, and I hope that these public hearings will address some of those concerns that the other side has.
So with that, Mr. Chairman, I look forward to the testimony we have today.
The Chairman. Thank you very much. Let me say that we are audiocasting this to the World Wide Web, and so I encourage you to turn your microphone on, Lee, so that your wonderful words of wisdom can go throughout the entire world. And welcome. It is nice to have you back, and look forward to your testimony.
STATEMENT OF LEE HAMILTON, DIRECTOR, WOODROW WILSON CENTER
Mr. Hamilton. Thank you very much, Mr. Chairman, and my friends and colleagues on the committee, former colleagues. Of course, I will ask that my statement be made part of the record in full.
The Chairman. Without objection.
Mr. Hamilton. I will try to just hit some of the highlights of it. I want to thank you for giving me opportunity to appear before you, and I appreciate, Mr. Chairman, the leadership you have given on this issue.
And I recall with great favor our work together on the Joint Committee on the Organization of Congress. One of the main recommendations of that joint committee was for biennial budgeting. It was not adopted at the time, but I still think it is a very sound proposal.
I understand this is an issue you have gone over pretty carefully in the past, and I don't want to take unduly time from your deliberations. I do think biennial budgeting would improve government, primarily for a simple reason, and that is I think it would free up Members' time for important work that is now being squeezed out by competing pressures. I will not try to recap the arguments that you are very familiar with and which I set out in the early part of my statement. They are familiar to you, I am sure.
I have come to the view -- came to the view, I guess, some time ago that the present budget process was just too cumbersome, and that the process made every problem in this body a budget problem. That, perhaps, is a little exaggeration, but not too much. Now, obviously, the budget is enormously important, but to view every problem that you confront as strictly a budget problem, and that tends to be the case, it seems to be, more and more, is not good, and Congress, I think, is in a kind of a perpetual budget cycle with a budget crisis nearly every year. So I don't think this process of the way we handle the budget now serves the American people very well. I think it is too -- far too little oversight is involved. I am going to talk a little bit more about that.
I believe under the present system -- and here I would take odds with my friend Mr. Moakley -- I believe under the present system you have way too much power in the President as it is today in the budget process. The President is by far the dominant figure in the budget process today. His budget is adopted -- 95, 90 percent of it is just adopted. I can remember Members of Congress saying over and over and over again, the President's budget is dead on arrival. Well, that is malarkey. A President's budget is adopted by the Congress year after year, 90, 95 percent of it, and when you come down to the final negotiations on a budget, all the power is with the President -- or not, all of it but most of it, simply because he has got the veto power, and he has the bully pulpit.
To say that the President does not have disproportionate power today in the budget process is to totally ignore the reality. The President is overwhelmingly the chief budget officer of the United States Government. So the question is how do you begin to get back some of that clout and power in the executive branch, and I disagree with my friends who think that the biennial budgeting process would cede power to the President. The President already has most of the power with regard to budget.
I think the Congress spends way too much time on the budget. I think it leaves very little time for long-term thinking -- I am going to pick up that in just a moment -- and having served on authorizing committees, I think the authorizing committees today are almost out of the picture; not completely, I guess, but almost out of the picture because of the total focus on the budgeting process here.
Now, let me emphasize two things about the biennial budget process that I think is very important. Number one is oversight, and number two is long-term thinking. I know you have had a lot of testimony on the oversight point. I believe that the oversight function of the government is -- of the Congress is enormously important. I think it is at the very core of good government. I think the Congress obviously has to do a lot more than just write the law. It has to make sure those laws are carried out the way Congress intended.
Oversight has a lot of purposes, and the blunt fact of the matter is the way Congress operates today, we just don't have time for good oversight. Let us take a look at the congressional schedule in the House. Most of the time we know you are meeting from Tuesday night to Thursday night. That means everything gets compressed into Wednesday and Thursday. Legislation has to be produced. Very little time for extended oversight hearings under the present schedule of the Congress.
Now, biennial budgeting is not going to solve all the problems, but I think it would give the committees more time for rigorous oversight.
Oversight makes sure programs conform with congressional intent and ensures that programs and agencies are administered in a cost-effective and efficient manner. It ferrets out waste, fraud and abuse. It sees whether or not certain programs have outlived their usefulness, and it compels the administration to make an explanation or justification of policy; incidentally, something that administrations often do not like to do, to articulate policy completely. So I believe oversight is one of the most important and effective tools of the Congress if it is properly done.
I would not argue that biennial budgeting will increase the power of the Congress relative to the President. I would argue that it would give the Congress the opportunity to increase the power relative to the President, and that opportunity would come about if the Congress aggressively pursued its oversight responsibility.
I think oversight can protect the country from an imperial Presidency, and I think it can protect the country from bureaucratic arrogance, both of which are all too common, in my view, in government today.
The responsibility of the Congress in its oversight function is to look into every nook and cranny of government affairs and uncover wrongdoing and put the light of publicity on it. It is an enormously important power, and I believe the Congress underuses and underestimates its power in oversight. I think that Federal agencies begin to get very nervous whenever someone from the Congress starts poking around, and I believe that is to the good. Federal bureaucracies do not stay on their toes unless they expect review and oversight from the Congress.
My personal belief, and I am sure I am in the minority here, is that oversight is every bit as important a function of the Congress as passing legislation. President Wilson thought, quote, "The informing function of Congress should be preferred even to its legislative function," end of quote. So a very strong record of congressional oversight or of continuous watchfulness I think would do a lot to restore public confidence in this institution.
I am, therefore, encouraged in the interest that the committee and many of you have shown in effective oversight, and I believe that moving to the biennial budgeting process would give oversight a significant boost by freeing up the committee's time and giving the Congress an opportunity to be more assertive with regard to the executive branch.
Now, the second point I want to emphasize is the long-term strategic thinking. The first year I was in the Congress, a very wise person said to my that the problem with the United States Congress -- this was back in 1965 -- the problem was that Members never had enough time to put their feet up on the desk, to look out the window and to think about the long-range needs of the country. I have had many, many occasions to reflect on the wisdom of that statement, and I have come to appreciate it more and more.
The fact of the matter is that the Federal Government simply does not spend enough time in long-term thinking. Now, it may be unavoidable. Policy-makers have to focus on urgent problems. You have what is becoming now a popular phrase: The tyranny of the in-box. You can't give attention to challenges that lie over the horizon.
I think we have to learn something from the private sector here. The private sector is much, much better in thinking out ahead to the problems that they are going to be confronted with, and we need to find ways and means of improving the ability of not just the Congress, but of the executive branch as well to think long term. There are all kinds of challenges out there.
I had a conversation the other day, I would recommend it to you. Just sit down with one of the leading demographers in the country and talk with them about what they can see the problems are going to be in this country on the basis of the demographic makeup of the country today and the trends that are coming. It will astound you what they can already see in terms of challenges the country is going to confront. Congress doesn't do enough of that, but neither does the executive branch, and we have got to find ways and means of making the Congress and the executive branch able to think long term, to think ahead of the next election, to think ahead of the next 6 months, to think ahead of the next year, to think in terms of 5 years, and 10 years, and 20- and 30-year time frame.
Now, I know that some of that is being done in the executive branch, some of it is being done in the Congress, and I applaud all of that. I mentioned to one of you a moment ago that we had George Tenet come down to the Wilson Center a few days ago and talk about the CIA, and he was saying -- Mr. Goss will be interested in this, I am sure he has heard it from him -- that he must free up more time for his analysts to look to the future because the Agency has been too focused on the short term, and I think the Congress needs to do the same thing.
Congress is predominantly focused on short-term needs for many reasons, but one of the principal ones is that you have a 1-year budget cycle.
Now, the point of this kind of long-term thinking is not that the government is going to solve all of these problems easily, but I think we should at least be considering the issues and examining how best to deal with them, and moving to a biennial budgeting would allow the Congress, I believe, to focus more on some of America's future challenges, much more than it currently does.
So, Mr. Chairman, I conclude my testimony. There are a number of reasons for it. I know you are familiar with them. I would emphasize the oversight function which I think needs to be markedly improved in the Congress, and the ability to think long term, and I think the biennial budgeting process would assist, would give us the opportunity, I guess this is the best way to put it, to improve those functions and to improve the performance of the Congress. I thank you.
The Chairman. Thank you very much, Mr. Hamilton.
[The statement of Mr. Hamilton follows:]
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The Chairman. That is a very, very helpful statement that you have provided, and I will tell you that the focus on the issue of deliberation is one which I think can't be underscored enough when we go back to the framers and realize what it is that they were trying to establish here. Deliberative process was a very, very high priority for them, and I am reminded of our former colleague Mo Udall, who, when I came here in my first year, said to me that Congress is like a fire station. We rush to put out a fire, and the moment that fire is under control, we simply rush to another one, and sometimes that fire is not completely put out. And so I do think that the need for deliberation is very important, and I appreciate your bringing that to this debate on the issue of biennial budgeting.
I will call on Mr. Goss.
Mr. Goss. Thank you very much. I am very glad that I was here to hear that testimony. I think you hit on two themes that are absolutely critical that, frankly, we haven't had brought before us before. I would like to talk to you further on the subject of long-term vision and strategic concept, as it were, both domestic and international, because I think that is the single greatest gap. Things are moving so fast, we don't seem to have the opportunity to understand the vision as we set about the task of trying to provide the capabilities to get to the vision, so consequently we are running at a fire quite often, whether it is the tyranny of the in-boxes, as you say, or just too darn much to do.
On the oversight question I also couldn't agree with you more. I think that the more time we have, one of the reasons for my interest in the biennial budgeting is to give us that time is that it can be applied to oversight, and I do have a specific question. You mentioned you talked with Mr. Tenet. You probably recall that the intelligence authorization is mandatory. We have to mandate. It was unlike international relations or any of the other committees that are supposed to authorize. But, as you know, Rules Committee can waive, and we get on with our business. That was not true in intelligence, and consequently in intelligence we have a rather penetrating focus, very intense, very broad scope of everything that is going on in the Intelligence Community, which is entirely appropriate because this is the safeguard that the Intelligence Community operates within bounds.
But we also have that mandate to authorize, and I find that it assists us in doing our oversight to have that, and I find that we have a better understanding both with the people we are overseeing and the appropriators about what we are doing as a result of this process. But I am perpetually pressed for time on annual budgeting. That comes to a conclusion that you can come to, an ergo, that therefore biennial budgeting is something that might profit.
My thought was if that is true, do you think that there would be any wisdom in going back and looking at the authorizing committees, which you have portrayed as not as important as they should be, and requiring mandatory authorizations before these appropriators move; some or all of the committees, as we do it on intelligence? It is a thought I am kicking around in my mind and with a few other of the chairmen. I would be interested to know if you think that is too extreme a step.
Mr. Hamilton. Porter, I just haven't thought about mandating it. I knew that was the situation with regard to the Intelligence Committee. I have been greatly distressed at the decline in the impact and influence of authorizing committees. I guess I just have to think about the question of mandating. It might be part of the solution to do it, to require an authorization before you get to the appropriation. So I am open to it.
Mr. Goss. I would like to take advantage of our friendship and this occasion to invite myself to extend this dialogue, if I could, down the road, because I think these are both areas that need looking at. It's --
Mr. Hamilton. You know what happens all the time now is that the executive branch just moves up on the authorizing committee, so why fight the battle? We are going to have to fight it. Let us push it over on the appropriators, and we will fight the battle over there. That is understandable why that happens, but it is the process that bothers me a great deal because I think it turns all kinds of issues into strictly a budget issue, and this is not desirable. That is not the perspective which you ought to have on -- not the total perspective that you ought to have on a given problem.
Mr. Goss. The other point, if I may continue for just a moment, Mr. Chairman, the other point is we have heard a lot of concern, and I think Mr. Moakley has underscored this very well, as have several of the witnesses, about being sort of penned in for 2 years, that midcourse corrections would be very hard to make to biennial budgeting. I don't have that problem, but I would be curious to know if you think projecting our midcourse corrections is going to be a problem, if you would go into it.
Mr. Hamilton. I don't believe so. I think you are still going to have flexibility in the system. You are still going to have supplementals coming up. Members are still going to be able to assert themselves on all sorts of issues that pop up from time to time, and I am not overly worried about that.
The thing that I just cannot understand about the position of those who oppose the biennial budgeting, who say that it will increase power to the President, is that the system today gives all the power to the President, or a very large share of it, and I think you have got to find -- I agree with them that you need to strengthen the congressional branch in the budgeting process vis-a-vis the President. I agree with that premise, but I think the present system is such that all the chips lie with the President, and I am looking for ways and means, frankly, to give the Congress more leverage, and I think the biennial budget gives us the opportunity to do it. It doesn't guarantee it, because you could not take advantage of the opportunity, but it will give you the opportunity.
Mr. Goss. Well, I am from the perspective as a Member of Congress in today's world I agree with you. It seems we are looking up rather than looking down at the process. Thank you very much.
The Chairman. Mr. Moakley.
Mr. Moakley. Lee, it is nice to see you looking so well.
Just to continue on the long-term look of the Congress, and I agree that our authorization committees are being eroded little by little, but let me ask you about the creation of task forces to do the work of the committees. In this morning's paper Speaker Hastert created a new Republican task force headed by Representative Cox to look into our long-term foreign policy with Russia. Why shouldn't the International Relations Committee be doing that?
I think these are the things that kind of erode our committee process when all of the sudden task forces are put in that preempt the committee's work and come straight to Rules Committee with some kind of a report, and the members of the committee never touch it.
Mr. Hamilton. I think I agree with you, Mr. Moakley. I believe that the creation of these kinds of ad hoc committees undercut the committee process, and the committee process is being undercut in lots of different ways, and I think the task force might be one of them. A task force of that sort says in effect we don't have confidence in the committee to work it out. Now, there may be reasons for that sometimes, but that is -- it does send that message.
The committee system is in jeopardy here. As a chairman of a committee a few years ago, I couldn't have a committee hearing on Monday, I could not have a committee hearing on Tuesday. I could not have a committee hearing on Friday. I could only -- if I tried to set a committee hearing any of those days, I would just -- Members would be outraged. So it means that every committee has to do their job on Wednesday and Thursday, and that is why you end up with 20 appointments on Wednesday and Thursday, and why you can't go into a committee for more than a short period of time.
The Chairman. If the gentleman would yield that point, I would say last Friday we had a hearing here, had a very large turnout, and Congress was not in session today.
Mr. Moakley. This is the exception though.
Mr. Hamilton. He has got more clout than I have.
Ms. Slaughter. We meet at midnight.
The Chairman. And we still have a large turnout.
Mr. Moakley. When you were here, this used to be a day job.
Mr. Hamilton. That is the difference between International Relations and Rules Committee.
Mr. Moakley. Lee, I remember when you were Chairman of the committee, and I was Chairman of this committee, and you came to the this committee many, many times, and you got your bill in, and you got them to the floor on time. What is changed between then and now?
Mr. Hamilton. Well, we get the bill to the Rules Committee and to the floor, and often through the floor, but it would never be enacted into law.
Mr. Moakley. That is -- the Senate is the problem.
Mr. Hamilton. I won't disagree with you there, but the primary piece of legislation of the International Relations Committee has always been the foreign aid bill, and my recollection is it hasn't been enacted into law since 1980 something.
Mr. Moakley. Would that be any better under biennial budgeting?
Mr. Hamilton. I can't say to you absolutely, yes, I think it would be better. It depends on how aggressively the Members would take advantage of the opportunity. I don't look upon biennial budgeting as solving all the problems. We often have in the Congress a predilection to seek a procedural solution to substantive problems, and we all know that you can't do it. I mean, I have spent a lot of my time in Congress on reform of the process, and I believe in that, and I think it is helpful, but I never fool myself to think that it would suddenly make the resolution on these difficult political issues, important policy and political issues, easy. They are tough by definition. Process helps a little bit.
Mr. Moakley. But do you think that because we serve a 2-year term, that long-term oversight is not a very important part of our program?
Mr. Hamilton. Well, I think there are a lot of reasons why oversight is not important. That may be an important one. Oversight is tough work. It is boring.
Mr. Moakley. And it is not glamorous.
Mr. Hamilton. It doesn't get glamorous.
Mr. Moakley. It doesn't get headlines.
Mr. Hamilton. Media is not interested in it. And let us be frank, constituents aren't too interested in it either. So there are a lot of reasons why oversight has declined, and I think you have to try to resist it and to think of ways and means of improving the oversight.
I have now -- I am a part of the executive branch now in the Wilson Center. Half of our budget comes from the Federal Government, and half is private, and I testified yesterday before Mr. Regula's subcommittee for our budget. That was a very routine kind of a hearing. You would be amazed how much work goes into that and how a single question from a member stimulates all kinds of reactions in the Executive branch. You may just fire the question off suddenly and not give an awful lot of thought to it. I know that is not the way you usually do it, but occasionally you do, but it is amazing what that does in the executive branch. Everybody gets shook up when they think the Congress is looking at them, and I think it is a good thing when you do look at them myself.
So I am a strong believer in the necessity of oversight. I think everybody is. Does the biennial budgeting help it or not? You can have a difference of opinion on that, but one of the things I hope, Mr. Chairman, will come out of your hearings will be the commitment on the part of this institution you have got to do a better job of oversight no matter what happens to biennial budgeting. It is an important part of your work.
Mr. Moakley. Well, I think that is -- as I said, the Congressional Research Service said that we spent about one-fifth of our time on budgets. I think many people think it is like 50 percent or 60 percent, but it is one-fifth. If there were some way to direct the Members into oversight, which there isn't because you have just made the case why oversight isn't that glamorous or anything else -- so I am saying we may save time, but what do we do with the time? We will probably have to address more supplemental budgets because it is a biennial budget.
Mr. Hamilton. Well, I think Members are still going to have the opportunity -- are going to find ways to assert themselves, and the supplemental budget would be one if you are in a biennial cycle. But you are not going to be dealing with 13 bills in the second year. Suppose you have two or three supplementals, which I think might be possible. That is not 13, and, therefore, you would free up some time, I believe.
Mr. Moakley. Maybe we should change the committee system and have a committee on oversight, and then the chairman of oversight makes sure there will be some oversight done.
Mr. Hamilton. Well, there have been moves in that direction, you know, to require a subcommittee in each committee to deal with oversight. There are a lot of steps that have been taken in that direction that are helpful. At the end of the day, it depends on the chairman of the committee.
Mr. Moakley. I think you are right.
Mr. Hamilton. The chairman of the committee has to say, okay, this is an important role for this committee, we are going to do it, I am going to do it, the staff is going to do it. Oversight creates a lot of work for the staff, and sometimes they resist.
Mr. Moakley. Thank you. Thank you very much, Lee.
The Chairman. Let me just say in response to that exchange that Speaker Hastert at the beginning of the 106th Congress spent a great deal of time with me on the issue of oversight, and its establishment is a very high priority in this committee. And you recall we did a training session on the question of oversight, and we have in each committee, as you correctly pointed out, encouraged oversight by having a subcommittee to do that. Obviously we need to enhance that in every way we can. That is why you and I have come to the conclusion that moving toward this biennial cycle will play a role in doing that. And also, I have felt strongly that a shift from what has been sort of mixed political oversight to programmatic and policy oversight is a very important thing, and we again have, I believe, made very positive moves in that direction, but clearly more could be done.
Mr. Hamilton. Not all oversight is good. Oversight can be done in such a way that it complicates. But generally speaking, I think Members carried it out very well. I would like to see a lot more emphasis in the training of newer Members that takes place today at the Harvard School and other places on the techniques that are available to a Member for good oversight.
Members come into this institution skilled in many things, communications; they know how to use the media. They are skillful politicians or they wouldn't been here. But I don't think they necessarily come in well-trained and well-schooled in what the techniques available to them are to conduct good oversight through, you know, reports, GAO, the Library of Congress, trips, visits. There are all kinds of techniques that are very, very important, and Members have to take advantage of them.
The Chairman. Thank you.
Mr. Linder.
Mr. Linder. Do you think we travel too little?
Mr. Hamilton. In general, I think I would say yes.
Mr. Linder. And when we do, it has become a political issue, so people are reluctant to take trips, and you learn things on that trip you cannot learn anywhere else.
Mr. Hamilton. Absolutely. I think trips both within the country -- you look -- you have the responsibility for budgeting these things, and you have to remember that the executive branch always has a point of view, and it may not be your point of view, and you don't want to get yourself in a position so that you are dependent upon the executive branch for information solely, and I think trips are a very important aspect of a Member's duty.
In my own case I think I could be criticized for not taking enough trips, although that might sound a little strange to some of my constituents, but -- former constituents.
But the answer to your question is they should travel, but it makes all the difference, John, on how they travel and what they do when they travel. Trips have to be well-organized, they have to be well-staffed. You have to have questions in mind that you want to pursue, and it is part of the oversight function, if it is well done.
Mr. Linder. Should we have been surprised both in the executive branch and the congressional side that they raised the sharp increase in gasoline prices? Nobody saw it, and we should have seen it. My guess is the private sector saw it coming for a long time by looking over the horizon.
Mr. Hamilton. I don't think anybody who follows OPEC should be surprised by it, and I think my answer is we should not have been surprised by OPEC doing that at some point. The difficulty, of course, always is knowing exactly when they would do it, but anybody who follows the OPEC oil ministers knows that they are very sophisticated people, and they know exactly what they are doing.
And look at the increase of revenues created in each of these countries. These countries are now experiencing, John, 50, 60, 100 percent increase in their government revenues because of oil, d so it shouldn't surprise you that they are going to move that way.
Mr. Linder. I do think we are so focused on the day that we didn't see next month. How much of this is woven through everything you have said this morning is the changed function of Washington? When you came here, you brought your family and lived here. People do not do that very often anymore, and so half of this Congress never gets both feet out of the airplane. They have one foot on the ground an one foot on the airplane.
Mr. Hamilton. My view, and I am sure it is a minority view today, is the Members of Congress don't spend enough time in Washington, and they don't spend enough time in doing the nitty-gritty that committee work requires them to do. And I know that kind of runs against the political trends of the day. You are right, when I came to Washington, the popular thing, the normal thing to do was move your family here. You became a resident, in effect, of Washington, and you spent most of your time here. You went back on weekends. I really followed that pattern through my career here, but it reversed, and today it is a political liability to be associated with Washington and to have your family here.
What that has done is it has put pressure on Members to spend less and less time in Washington and less and less attention, therefore, to the hard work of government, including oversight. You want to get here as late as you can, you don't want the votes until Tuesday night, you want to get out of here Thursday night, you want to be in your districts, you want to be with your family, all of which are very understandable reasons, but there are consequences to that that I think people have to examine and look at.
Mr. Linder. Thank you.
The Chairman. Ms. Slaughter.
Ms. Slaughter. Thank you, Mr. Chairman.
Good morning, Lee. It is good to see you again, and I think you and I both spent a lot of time on how to reform the House. We couldn't decide what to do with the Chairs. We had to rotate them, too. We did away with a whole committee, a number of subcommittees. I am not sure it made a whole lot of difference, frankly. We debated whether we needed a Budget Committee or not. We were all concerned, and I still am, with the fact that we don't really have debate time. Everything is structured and timed so that even in a committee, you only have so much time to spend on a point and which may then be left somewhere. And I think all of us have had the experience that you sit in a room with people who listen to you, sort of glaze over waiting for your time to be over, not really paying attention to what it is you are saying.
The oversight that we have had, I think, in Congress for the last 2-1/2 years has mostly been the White House and one investigation after another coming to practically nothing. But my concern with the biennial budget -- and I have an open mind, I really don't know whether that is best or not, I have served my 6 years on the Budget Committee -- is that people I do respect here say that it would be a denigration of power from us and handing over, again, to the executive branch, who would have more to say about the second year and have more control over what we do and basically take our job away.
I was surprised at the statistic that Joe mentioned on how little time we really spend on budget. It seems to me like we spend all of it, budget and appropriations. That starts the beginning of the year, and we go through this dance of legislation, and then the turn is over. We come up to a crunch at the end.
I would be curious to know, because, as I pointed out, a lot of people that I respect a great deal believe it is not a good idea, your point of view, because I certainly respect you as well. If you could just give me a sort of concise, round-up why you think that would be a better thing for Congress.
One other reform we talked about, too, Lee, while I digress a moment, the fact that we are not in Washington enough. You remember we discussed whether we should work on a monthly basis. We looked at all the months that we worked here, and with the exception of June, we had these long holiday periods, times when we are in the District, and we were looking as to whether we ought to have a schedule which was 3 weeks working in Washington, a week in the district, and we would have a 5-day workweek here, and then we would know exactly where we were. We would know how we could schedule. We would know what we could do when we got to the district. I think it did give you more of a sense that your job was here as well as the time you spent back in the district.
I think Congressman Linder is exactly right. I am back and forth to Rochester three times a week -- not that much. I can't afford it, USAir is costing too much, but it does seem to me we barely get here, and I don't have time for my ear infection to clear up before we get back on the plane.
I guess in the 14 years I have been here, a large part of it has been how can we make this better, and we certainly do talk it to death, but we don't seem to, I don't think, arrive at very much that makes an inordinate amount of difference here in how the place is run.
Mr. Hamilton. Several reactions. First of all, US Airways needs your business, Louise. They are having a struggle.
Ms. Slaughter. My district, though, is subsidizing all the low-cost fares. We get tired of that.
Mr. Hamilton. I saw where the Majority Leader in the Senate said the other day that two-thirds of the time of the Congress is on the budget. So he -- I am sure he is speaking largely from a Senate perspective, but that is a very large amount of time.
Well, you asked me about the question of power. First of all, I think it is the right question, and I understand that reasonable people can come to different conclusions on it and in supporting biennial budgeting. In part I support it because if we seize the opportunity in the Congress, I think we would regain some power vis-a-vis the executive.
What I am impressed, Louise, about the present process is the dominance of the President in the budget process today. When a President sends up to the budget, some of these experts sitting around here will know better than I, but my guess is that a President's budget is basically 90 or 95 percent enacted every year. He has always all the chips. Moreover, when you get into the negotiation process, which creates a lot of headlines around this city every year, the President has the power because of the veto, because of the difficulty of the Congress coming together. He has the upper hand in budget negotiations, and he almost always -- not always -- he has to make some compromise, but he almost always gets his way.
Well, so I am impressed that the present system puts terrific power in the President, and the Congress' power is marginal. We like to talk about the power of the purse, but to be very blunt about it, the power of the Congress on the budget is marginal, in my view. Not unimportant. If you shift a billion dollars here and a billion there on a certain programs, it can be very important, but overall in the total.
There isn't anything in the biennial budget system that cedes additional power to the President. I think what you are really talking about in biennial budgeting is giving the Congress the opportunity to exercise more clout through effective oversight, through long-range thinking, than they now have. I don't think biennial budgeting is going to end congressional control, and I don't think it is going to guarantee improved oversight. I just think it gives you the opportunity, it gives you the time, and the question is how are you going to use that time? Are you going to use it effectively? And if you do use it effectively, I think you would modestly gain more power than you now have, modestly, nothing dramatic. You and I know the procedural changes, they are not going to change the world. They are going to impact on the margins.
You asked me to kind of sum up. I believe I would say under the present system you have too little oversight. I think you have too much power in the executive branch today. I think too much time of the Congress is spent on the budget. I think too many people approach policy problems here strictly as a matter of budget and not on other aspects as well. I think there is too little long-term thinking. I think the authorization committees where most of your expertise should lie have been reduced in power, and the appropriators have enormously gained power.
It is no accident that Members coming into the Congress today want to get on appropriations committee or Ways and Means. When I first came to the Congress, they wanted to get on Education an Labor because that was where the action was. So it has's just shifted completely, and I don't think that is altogether healthy.
And on the scheduling, that 3-week/1-week business, I don't think I really have much of a judgment about that. I know that has been kicked around a long time. My principal point would be that I think the Congress needs to spend more time in Washington. You cannot have a hearing delving into OPEC policies and doing a serious job of it and forcing an administration to articulate their policy on OPEC if you are only here for a couple of days and you can't get your Members to focus on anything because they have got 20 meetings scheduled. And people have to understand the consequences of that kind of scheduling.
Ms. Slaughter. I don't know what the answer is to that schedule. I have got six people probably waiting for me right now.
Thank you, Lee. It is good to see you.
Mr. Hamilton. Nice to see you again, Louise.
The Chairman. We will excuse you if you would like to go.
Ms. Slaughter. I will be back.
The Chairman. Mr. Hastings.
Mr. Hastings. Thank you, Mr. Chairman.
A couple of things. You spent a bit of your time there on not enough time for long-term or strategic planning. I can assure you from the west coast, in my 6-hour experience of going back and forth across the country one way, I spend a lot of time in my mind strategically thinking, and you get back here and don't have time to do what you are talking about.
A couple of things I have picked up in the testimony and the remarks by witnesses and Members here is that there seems to be two major areas of concern: the role of the authorizers, which probably is, I would agree, not going to be solved by a biennial budget; but the other one is the supplemental. Mr. Obey testified earlier and at length, and as you know, Mr. Obey is one who has a great deal of affection, I guess is the proper word, for this institution, and he was suggesting that the supplemental process will be dragged out in such a way that it will slow this whole process down. My answer to that was once you get through the initial biennial budget, then you have a budget in place, and if you don't pass the supplemental, the government still runs, which I think is the positive from that standpoint.
But I would like you to elaborate more than what you did in response to Mr. Moakley's observation about the supplemental on how you see the supplementals would work once the biennial budget is adopted.
And one other issue, too, that was brought up, because the biennial budget has every possibility of being pushed probably back into the second year, that is just being the politics of it, you kick it ahead, kick it ahead until who knows. Respond, if you would, to those observations.
Mr. Hamilton. Well, I think Mr. Obey probably is correct when he says that there will be more pressure for some supplementals, but what would impress me is that Members are going to find a way to assert themselves, and if they feel restricted, they will take advantage of the supplemental or insist on another supplemental.
But you are talking here about a few supplementals versus 13 appropriations bills, and passing two or three supplemental bills will be time-consuming, but there are always going to be issues arising. There are emergency issues or issues that Members want to bring forward, and they are going to do it on supplemental. I think that is appropriate. I don't think there is anything wrong with that. But you would, I believe, have much less intrusion by the budget if you had biennial budgeting than if you had to pass 13 appropriations bills every year. I guess that is the principal point.
Now, if they do what you suggested and punted the budget into the next year, that would be a serious mistake, and so the Congress would have to discipline itself to get the budget done in the first year if you are going to have the advantages, if there are advantages to biennial budgeting, in the second year.
I might just take off from your question and say that I am appalled with the omnibus bills. The omnibus bills are an abomination in the process, if not in substance. And we have become -- you have become, I guess I should say, now far too dependent upon the omnibus bills. They are popular because they hand a lot of power to very few Members, and I think in terms of good process they really violate every concept of good legislative process.
I used to -- I know you have had the experience many times. When we would get these omnibus bills at 2 o'clock in the morning, they would be 3- or 4,000 pages long and be asking you to vote on them at 10:00 in the morning, and all you have is the raw legislative language in front of you which doesn't tell you anything about the content of the bill. And it is just an outrageous process, and I think a lot more exploration needs to be done why it is done so much in the Congress. I think I know some of them, but not all of them. It is the process. It is just outrageous.
Mr. Hastings. It appears to me, too, that going through this and discussing this, the issue of the other body has been brought up, and I would -- in fact, you alluded to it earlier that the Senate is part of the problem. I suppose that is the wisdom of our Founding Fathers to have this conflict of the legislative branch, but ironically it appears that there seems to be more acceptance at least in the Senate than in the House for a biennial budget. That is my reading of this, and that seems to be very, very positive. Thank you very much.
The Chairman. Thank you very much, Lee. Let me just conclude with a couple of comments and then a question that I would like to raise with you.
First of all, in -- I will say that I got 250 cosponsors on the legislation calling for biennial budgeting. Do you know when I obtained those cosponsorships? Often at 2 o'clock in the morning when we were sitting downstairs. So I want you to know that provided a little impetus for people to come on board. It was in the waning hours of the first session of the 106th Congress, and in the last calendar year actually over 40 percent of the roll call votes we had downstairs were on budget-related issues themselves. So we clearly have spent a great deal of time on it.
I would like to -- I have been asked by the staff to go through on a question on a proposal that we had in our joint committee 7 years ago, and I would just like to go through that, and included in the recommendations was a proposal that the Budget Committee use the off-year session for long-term studies and to hold hearings and receive testimony from committees and jurisdictions regarding problem areas an the result of their oversight activities. The Budget Committee would then issue to the Speaker under this proposal by January 1 of each odd-numbered year a report identifying the key issues facing the Congress for the next biennium, and I am just wondering if you can expand on the thinking behind that proposal, if you recall it particularly, on its impact on the ability of the committees of the House to focus on long-term concerns which we have been talking about here this morning as well as the issue of programmatic oversight.
Mr. Hamilton. I am pleased to be reminded of that recommendation, but I think the thought behind it was the same thing I was trying to express, perhaps not so well, earlier about the need to develop mechanisms to get the Congress to think long term. What prompted that recommendation was the very thing that prompted my observations here; that is, Federal Government and Congress just doesn't do enough of it. If you agree with that, most people I think do agree with it, then you ask yourself what kind of mechanisms you put into place to require it, and that is what we are trying to do with that proposal with respect to long-term studies and a report, making the committees focus on the long-term needs. I thought then and I think now that it is good for both.
Incidentally, I was glad to be reminded that I cast the deciding vote for the biennial budgeting. I am glad to be reminded of that.
The Chairman. I remember going down there through that in the brand new HC-5. We were going through that. Tom Mann spent a lot of time there, and some of the other people in the room -- I remember we had a very, very interesting debate because I remember David Obey was a member of our committee then, so it was a rigorous one. Let me express again --
Mr. Moakley. Mr. Chairman, before I --
The Chairman. Mr. Moakley.
Mr. Moakley. I just want to put in the record the Congressional Research Service shows that the House only spent one-fifth of the time. I know there has been a lot of figures thrown around.
Mr. Hamilton. There are different ways to measure it.
Mr. Moakley. Okay. I am sure there are. And also as far as you say that there wasn't enough time for appropriations bills, authorization bills, there were only three appropriation bills that took more time on the floor than the authorization bill, foreign aid bill, out of our committee. So, I mean, we do have time to spend on authorization.
Mr. Hamilton. We can't get them enacted into law.
Mr. Moakley. That is not our fault, thank you, and I don't think a biennial budget is going to help that either. Do you?
Mr. Hamilton. I think it gives you the opportunity to help it, Joe. Does it do it? Does it guarantee it? No, it doesn't.
Mr. Moakley. Thank you very much.
The Chairman. Let me just say that no one here has claimed at all that going to the biennial budget in the appropriations cycle will, in fact, be a panacea to all the ailments or the kind of challenges we have here in this institution, but with so many very thoughtful people having spent so many years at this, as an alternative -- and the success we have seen in States and other areas -- is something worth considering.
And following Mr. Moakley's directive, I would like to say that we are going to continue to be deliberative and thoughtful and open to a wide range of views on it, and as such I would like to request of you that you be available to respond to written questions that we might be providing.
Mr. Hamilton. Mr. Chairman, may I just say that Mr. Moakley's last point in his opening statement about a phased-in approach should be looked at very hard.
The Chairman. We discussed that at length with Jack Lew the other day in the testimony that he provided here.
So will you respond to our written questions?
Mr. Hamilton. I would be happy to do the best I can.
The Chairman. Thank you very much. Appreciate it.
[The information follows:]
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The Chairman. We are going to go to a panel now, which will consist of Tom Mann, the W. Averell Harriman Senior Fellow in American Governance at the Brookings Institution; Professor Phil Joyce at the George Washington University Department of Public Administration; Professor Charles Whalen of Cornell University; and Professor Roy Meyers of the University of Maryland.
So if the four of you would come forward, and we look forward to your testimony, and I will say that without objection, the prepared remarks that you have will appear in the record in their entirety, and if you would like to provide a summary for the committee, you have all witnessed this discussion we have had, when there was obviously a larger membership here, so any thoughts you have in response to the exchanges we have had would certainly be welcome, too.
It is nice to see you, Mr. Mann. Welcome to the committee. I don't know if you have been here since I have chaired the place. Have you?
Mr. Mann. One time, not enough, but happy to be back.
The Chairman. Okay. Thank you very much. Were we talking about the same thing?
Mr. Mann. No. As I recall we were talking about the ethics.
The Chairman. Oh, right, right. I remember that. Thank you very much. It is nice to see you.
STATEMENTS OF THOMAS E. MANN, W. AVERELL HARRIMAN SENIOR FELLOW IN AMERICAN GOVERNANCE AT THE BROOKINGS INSTITUTION; PHILIP G. JOYCE, PROFESSOR, GEORGE WASHINGTON UNIVERSITY DEPARTMENT OF PUBLIC ADMINISTRATION; CHARLES J. WHALEN, PROFESSOR, CORNELL UNIVERSITY; AND ROY T. MEYERS, PROFESSOR, UNIVERSITY OF MARYLAND
STATEMENT OF THOMAS E. MANN
Mr. Mann. Well, thank you, Mr. Chairman. I have had the good fortune of working with you over the years. I have enormous respect and appreciation for the seriousness with which you try to improve this institution, and also to defend it as a critical part of our constitutional system. So I want to be clear about that.
Let me tell you I feel very uncomfortable because first I testified before you, and I find myself bracketed by two former Members, Lee Hamilton and Bill Frenzel, who are some of the classiest people ever to serve you.
The Chairman. We don't want to leave out Leon Panetta.
Mr. Mann. And Leon will be here later, at least the disembodied voice of Leon.
You know, they are wise people. You are wise people. Reasonable people can disagree on this.
The Chairman. That was Jefferson's line.
Mr. Mann. Yes, and what a source. I mean, I acknowledge there are uncertain consequences to biennial budgeting that my take may be absolutely wrong and yours and others' take may be much closer to the reality, and if you go ahead with this, I urge you to do it, as you said, deliberatively and in a way in which you don't freeze yourself into a process that ends up backfiring on you.
In a sense I feel like Bill Murray in Ground Hog Day. I wake up each day, and there I am saying, why is it that biennial budgeting isn't a good idea? Mr. Chairman, let me summarize it this way, because I listened very carefully to the last set of comments. Lee said something in passing. He said, there is always a temptation around here to find procedural solutions to substantive problems. That is because sometimes it is easier to fashion a procedural change than it is to solve a substantive problem. I would frame it slightly differently. I would say there is always a temptation, understandable one, to find apolitical solutions to political problems.
The realty is the fiscalization of policy debate in this body over the last 20 years has little to do with process and everything to do with the broader context of budgets and politics, and my -- sort of my feeling is that today. And you said it yourself, it was the end of the session at 2:00 a.m. in the morning when you got all those cosponsors.
There is such frustration with the year-end train wrecks and the political gamesmanship that is going on at the end of the year on appropriations matters that you figure, well, we can have half as many if we go to a 2-year budget process. I mean, that is understandable. But you have to understand that if those train wrecks and if that gamesmanship is being driven by broad political forces, narrow margins in the House and the Senate, divided party government, difficult decisions that have to be made, genuine differences that exist, mobilization of interest groups, if all of those things are true, you are going to find vehicles to have those fights, whether you have a 2-year budget cycle or not, and that is my concern.
One of the things that you have to be careful about is not building up public hopes that you really are going to take care of some; don't worry, we won't have these political problems anymore because we fixed it.
Now, I know you are focusing on the more traditional administrative rationale for this, and there are presumably experts -- I have read some of the testimony -- others who will appear, that will make a sort of strong case for it. It is a debatable proposition as to whether those very desirable outcomes, like more long-term planning and sort of freeing up time for oversight, avoiding duplication, will flow from this kind of change. For a whole host of reasons that are listed in my testimony, I am skeptical. I just -- I would like to believe it would happen, but I guess I don't believe it will happen.
And in particular and you had a very interesting exchange on congressional oversight. I would say, first of all, there is's some pretty good oversight that goes on on a regular basis in the Congress. You are a little too self-critical. There are pockets of the House in subcommittees of authorizing committees and on appropriating committee where Members with serious policy interests and concerns about how programs are being implemented are asking tough questions and getting good answers, and that should continue.
What it takes is either the serious interest of Members or the political motivation, and it is best if you have both, and then you really get oversight, but I don't think freeing time is really the issue. That extra time, if any is freed, and I am skeptical of that, could easily be filled with more time fund-raising or spending more time with lobbyists or doing other things. There are lots of possibles, and Members are adults. They have to make choices about what is important to them, and you have to count on them. You do serious deliberation and oversight. Other cans do it if they are willing to set that as a high priority. So that is my broader concern.
Finally, the point I would simply make is this is a case where we can really learn something from other countries. Alan Schick has really studied the experience abroad. No other major democracy has moved to a 2-year budget cycle. They all have annual appropriations, Schick reports, but all of them have figured out ways of providing a longer time horizon, of multiyear budgets, of flexibility for programs with which it will work, that are relatively noncontroversial, that have the opportunity to plan in advance. And what I would urge you to do is move into this gingerly, take some predictable noncontroversial programs, do some 2-year budgeting with them in appropriating, do some evaluations, and then see if it isn't worth expanding them from there.
Finally, one of your biggest political institutional problems is indeed the other body, working with the Senate, and it has been bicameral strains that have caused more problems than annual appropriating and budgeting. And there are no procedural fixes for that, but I think you could do something about it. Thank you.
The Chairman. Thank you for offering your healthy skepticism as opposed to a corrosive cynicism.
[The statement of Mr. Mann follows:]
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The Chairman. Professor Joyce.
STATEMENT OF PHILIP G. JOYCE
Mr. Joyce. Thank you, Mr. Chairman. I would like to submit my entire testimony for the record.
The Chairman. Without objection, it will be included in the record.
Mr. Joyce. First, let me say I am very sympathetic to the frustrations that lead supporters of biennial budgeting to advance this reform. If you look at the Congress, you can hardly avoid concluding that the budget process is time-consuming, that deadlines are missed, and that -- at least the kind of oversight that I think you called policy and program oversight -- that there needs to be perhaps a lot more of that. I think if you defined oversight more broadly to include what I might call gotcha oversight, you might have a sort of different conclusion, but I think the kind of oversight where you look at programs from the ground up, sort of examine how they are working, I think it really would be a benefit to do more of that.
And I am also sympathetic to the plight of the executive branch, which must believe that it is engaged in nonstop budgeting as well, and some of the advantages certainly that people suggest from biennial budgeting are benefits to executive branch agencies. I think that was one of the things that led Vice President Gore's National Performance Review, at the same time that the joint committee recommended biennial budgeting, to make that same recommendation.
But much as I would like to, I do not necessarily conclude that biennial budgeting is the cure for these ills, and I want to expand on this by noting at least some reservations I have about what I think are the two major parts of this reform. The first is biennial budget resolutions and the second, biennial appropriation.
On budget resolutions I think the budget resolution over history has done what it was intended to do. It has allowed the Congress to compete with the President in the setting of overall fiscal policy. I think reconciliation, perhaps, has been a particularly useful part of the process because I think it can be credited for making it easier for the government to get from debt to surplus.
But I have two reservations even, in a world where we have surpluses, about biennial budget resolutions. The first, that I think you have heard about before and I know you will be hearing about later, so I won't expand on it here, is simply the difficulty of doing longer-term budget projections. I think the CBO and OMB track records provide ample evidence of the difficulty in doing budget projections even for one fiscal year into the future.
The second is that I think a biennial budget resolution would increase the chance that policy would not only lag behind those budget projections, but also lag behind the desires of the electorate. Things can change very quickly in terms of the political situation, whether the electorate wants a tax cut or not a tax cut, et cetera. That is often translated into what the budget resolution comes up with. Doing it 2 years at a time might increase the probability that you were lagging behind that judgment of the electorate.
The second part of biennial budgeting really has to do with biennial appropriations, and I think that on the congressional side the argument for biennial appropriations hinges on the possibility that less frequent budgeting will lead to more time being devoted to other matters, as you have heard, particularly oversight. Myself, when I think about this, I think the argument for increased oversight is actually easier to make in the Senate than it is in the House, and the reason for that is because in the Senate there are a lot many more Senators that serve on a lot more committees. As you know, in the House, Members who serve on the Appropriations Committee by and large do not have assignments on other committees. And so I don't think it is as clear, at least at the committee level, that the time that Members are spending on appropriations is necessarily being taken away from the opportunity to do oversight.
In order for the twin benefits that are offered of less budgeting and more oversight to materialize at all, I think you have to be convinced of two things. The first is that the biennial process will not become a de facto annual process, and the second is that if the biennial process is effective, more time available will actually equate to more oversight, and I am also skeptical on both of these arguments.
In the first case, I think the uncertainties associated with budgeting for a $2 trillion enterprise would call the sustainability of a biennial appropriations process into question, and I am particularly concerned because I know this committee is worried about fiscal control. I am particularly concerned about not only leading to more and larger supplementals because it is going to eat up time, but because that might result in less fiscal discipline. These kinds of "must pass" supplementals have a tendency to become legislative Christmas trees, and I think we need to at least worry about that a little bit, and that may be particularly true as Mr. Obey, I know, noted in the Senate, where there is not as tough a germaneness rule.
Of the other possibility, the possibility that there will be more policy and program oversight, I believe as supporters of biennial budgeting do that an increase in oversight would help the Congress to better discharge its responsibilities, particularly because of legislation like the Government Performance and Results Act, which I think is already paying dividends. I do not believe, however, that the primary impediment to better oversight is lack of time. As Mr. Hamilton pointed out, I thought very well, oversight is hard, it is not sexy, it doesn't pay a lot of electoral rewards. So I am skeptical that simply making more time available for oversight will make more oversight happen.
So in conclusion, I did want to note that in my testimony -- I won't go over these in the interest of time -- in my testimony I did offer some technical suggestions and raised some technical issues that I think you should think about if you want to move ahead and enact this reform, but I would join Mr. Mann and others in encouraging you to proceed cautiously, as you did with the Line Item Veto Act, perhaps by delaying implementation, implementing slowly or providing some sunset provision that would enable you to evaluate the full implications of this change prior to making it a permanent part of the budget process.
I thank you very much for your attention.
The Chairman. Thank you very much. We appreciate it.
[The statement of Mr. Joyce follows:]
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The Chairman. Professor Whalen.
STATEMENT OF CHARLES J. WHALEN
Mr. Whalen. Thank you, Mr. Chairman. I am pleased to be here to discuss this issue with you this morning. The starting point for my remarks is the understanding that many Members of Congress feel the current budget and appropriations process leaves both the executive and the legislative branches with inadequate time to devote to oversight, program management and evaluation, along with other nonbudget matters.
An academic study published in 1989 indicates that biennial budgeting within the Defense Department did indeed allow more time for the agency to work on nonbudget matters, including planning for future program evaluations and problem-solving. Studies examining the State-level biennial budgeting experience also find that biennial budgeting is less costly and less time-consuming than annual budgeting, even after annual adjustments are taken into consideration.
There is no guarantee that a streamlined Federal budget process would improve government fiscal management and oversight, but we do know that the just-mentioned study the Defense Department experienced suggests there is potential for significant savings in terms of both efficiency and cost savings. State-level studies meanwhile find that biennial budgeting States give greater attention to oversight, management and planning, Connecticut's experience being a notable exception, as Representative Moakley has indicated today. Moreover in these States there is widespread belief that this heightened attention to nonbudget issues improves government performance.
While some have expressed concern that biennial budgeting will lead to increased budget requests, future agency padding, two published studies, one issued in 1994 and another released in 1984, do not find evidence of this at the State level.
Finally, I agree with Dr. Alice Rivlin, former head of both the CBO and the OMB, who has testified in the past that minimizing unexpected changes in U.S. fiscal policy can be beneficial to States, government contractors and program recipients, indeed to nearly all individuals and organizations affected by government policies.
Under biennial budgeting, stability and certainty would also be increased when policy changes could be made, because such changes have the opportunity to be imposed gradually and without the automatic revisiting of those changes. Of course, some see an annual revisiting of appropriations as an essential congressional tool. While I agree that it is of value to have this annual appropriations tool, I believe annual appropriations and frustrations over the lack of time for oversight may be two sides of the same coin. If that is the case, then the ultimate question for Congress is which does it value more, the flexibility of annual appropriations or an opportunity, as has been said earlier today, for increased attention to oversight and other issues that are neglected under the current process.
The Chairman. Thank you very much.
[The statement of Mr. Whalen follows:]
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The Chairman. Professor Meyers.
STATEMENT OF ROY T. MEYERS
Mr. Meyers. Thank you very much for the invitation. I would just like to read a few snippets of my testimony and particularly focus on the concerns that were raised during Mr. Hamilton's period about oversight and strategic planning.
Twelve years ago I wrote a very long paper about this topic when I was working at the Congressional Budget Office for Senate Governmental Affairs, and although I used the on the one hand/on the other hand" typical approach of CBO, it was a pretty negative report. Twelve years later I would have to say that my thinking has evolved a bit, and I am a bit more supportive of the idea, although there are, I think, still some problems. In fact, I would argue that a simple biennial budgeting bill is insufficiently ambitious, and I will get to some points about that in a few minutes.
The ways in which I think the budget process has changed significantly and that are relevant to this bill are two. First of all, back in the 1980s, there was still a fair amount of concern in Congress that biennial budgeting would prevent the Congress from reacting quickly to an unanticipated recession, and, of course, opponents of biennial budgeting said that that was a drawback. I think now, though, that it would be kind of held that this would be a good thing about biennial budgeting if it would deter Congress from being tempted to displace the Federal Reserve's role in reacting to a recession. That would be a mark for biennial budgeting, and particularly because there is a lot of evidence from economists that discretionary countercyclical fiscal policy does not work. In the case of an unanticipated national security crisis, I think it is unlikely that a biennial budget would prevent the Congress from reacting. So I am not worried about that.
The second way in which I think budgeting has changed since the late 1980s is that throughout the 1990s, the Congress and the President have engaged in negotiations that produced several significant multiyear budget agreements, and in that sense I think the multiyear budget agreements have been a mixture of good and bad. They have been good because they recognize the political necessity and economic necessity for a fiscal glide path that you couldn't balance the budget in a year. But you may remember, I would expect, with probably negative feelings what happened in 1995 and 1996 when you were having this long debate about whether 7 years or 9 years was an appropriate period, and it turned out that both the President and Congress were wrong. Luckily, things have been much better than we expected in economic terms. However that did not guarantee the political lasting nature of the agreement.
I think the reality here is that there is, if you will, a timing balance for our political cycle, and it is the 2-year electoral cycle for the House, and the comprehensive budget agreements don't last much longer than that. So in that sense it would make sense to move from a 5- or 7- or 9-year agreement to a period that would be the more natural one of 2 years.
Now, ways in which I think this bill is insufficiently ambitious. I would suggest that you need to go back to H.R. 853 and take some pars of H.R. 853 and append it to this, because I don't think biennial budgeting will work without them. And I understand that H.R. 853 is a comprehensive bill. That is a difficult bill to pass in any Congress, but nevertheless, one segment of it, the limitations on emergency supplementals, I think would be a reasonable answer to the concerns that many people have raised that the even year would turn into a Christmas tree supplemental, endless series of supplementals. So I would suggest that you take at least that part of H.R. 853 and append it to this.
I, in addition, believe that a joint budget resolution makes a lot of sense, although I would admit that there is nothing to guarantee that a Congressman and a President could agree on a joint resolution if that was the intended process.
I think it is quite unlikely that Congress could go it alone and try to adopt a 2-year budget resolution with the threat of a Presidential blame process that we have all become familiar with when Congress already has a great deal of difficulty adopting a 1-year budget resolution.
Now, to finish up with some discussion of oversight and planning. As someone who studies the budget a great deal, I have spent a little while in the past weeks looking over the President's budget proposals, and, in fact, there is an interesting disjuncture between the first half of this budget and the second half. The first half of this budget might be called 1,001 initiatives, policy initiatives, and the second half of the budget is a review by budget function, that is, national defense, international relations and so on, of the performance goals that were adopted by the agencies in response to the Government Performance and Results Act, and there is apparently little connection between the performance planning process and the President's budget initiatives.
I think there is a similar problem in the Congress, and it relates in particular to the committee structure that you have been discussing. In fact, I would suggest that Congress is unlikely to do more strategic planning and quality oversight unless the Congress returns to the kinds of proposals Mr. Dreier was making in 1994 and 1995 about committee organization; in fact, go far beyond that and seriously consider again the idea of combining the appropriations and authorizing committees. I know that is an issue that Tom Mann has studied in the past.
The final issue I would like to raise is what kind of incentives are necessary for Members of Congress to do better oversight. I don't think it is a problem of time. I think it is a problem of what makes the job of the Congressmen more attractive. Obviously Members of Congress need to be reelected, and they spend a great deal of time trying to gain earmarks for their districts, and from the agency perspective, particularly in the GPRA context, those kinds of earmarks are often perceived as being inefficient and ineffective. Whether that is true or not, I suppose, could be a matter of debate as it has been a matter of debate in the Republican Presidential primary in the past few months. I happen to agree with Senator McCain's point of view, but I might be wrong.
But the reality is that if Members of Congress spend so much time on trying to earmark provisions in the bill, they are obviously going to have much less time doing the kind of measured oversight and review of performance plans that GPRA intends. So biennial budgeting or not, I think, is not the issue. Rather, that if the Congress were to increase the amount of time available for oversight, there would, in addition, need a commitment within the Congress that the kind of oversight that the sponsors of biennial budgeting say that is desired is widely held among Members.
Thank you very much
Mr. Linder. [Presiding.] Thank you.
[The statement of Mr. Meyers follows:]
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Mr. Linder. I just have a couple of questions. I apologize for having to run out, but we have a bunch of students on the steps waiting to have a picture taken. You can't inconvenience the photographer.
You mention the sunset provision in your testimony. My experience with sunset provisions is that they never work. When an agency becomes -- it comes time to be sunsetted, you have a focused group of people directly affected who are going to overwhelm you with the yeses, but the population at large doesn't even know it is happening, and you are not going to have -- in terms of reauthorizing, you are not going to have any negatives. Can you tell me anyplace where it has worked?
Mr. Joyce. What I was thinking about was not a sunset provision, for example, authorizations, but a sunset provision for the biennial budgeting process itself; the idea that before you would decide to put what could potentially be a radical change into the permanent process -- and once you have enacted a piece of legislation, it becomes harder to enact a new piece of legislation to make it go away than it would to put a sunset on it -- and then make you sort of ratify it at a later point in time. And I was suggesting that if you want to go ahead, and there are concerns that have been raised, it might be a way of pilot-testing the idea of having biennial budgeting.
On the question of sunsets for individual programs, I cannot give you any examples where that has necessarily worked, because I think that you know at any point in time, whether a program has sunset or not, the question you have to ask is what can political forces bring to bear at the time when that program was available for sunset, which is the same way of saying, who cares about this program being continued, and whatever political forces are out there that care about it being continued are going to rise up at that particular point in time.
Mr. Linder. The cosmetologists when they are bored become sunsetted, all of the sudden find all of their relatives to write, and the average American doesn't have any idea what they are talking about. They don't respond. So it is always overwhelming, and the political pressures have a continuance in all that.
Mr. Mann. But in this case who are the interests affected; who are the constituents? You are absolutely right for most public programs, but here we are talking about a new procedure to use within the legislative and executive branches, and I think what we are saying is we don't know honestly what the consequences would be.
Our preference would be that if you are determined to move ahead, first you do it with some particular programs that have stability and predictability and bipartisan support and see how it works, but if you insist on going forward with the whole process, think of it as a pilot and say, you will do it for one budget cycle, two budget cycles, and then review and see whether you want to stick with that or move back. I think in that case you wouldn't have the same political dynamics of people holding onto an existing system.
Mr. Linder. Reference was made to your comments previously about combining authorizing and appropriations committees, which my State essentially does, and I think State government is different than Federal Government with respect to the kinds of issues you deal with. I would like to hear your comments on that.
Mr. Mann. Yes, yes. It is one of those principles that sounds great, but when you really get down to it, it ends up being very problematic. The reality is different kind of considerations are properly brought to bear by authorizing and appropriating committees. There is a reason for them being separate entities. The problem today is that a lot of authorizers feel they have been squeezed out by the budget process, by demands from the reconciliation process, by appropriations. But the solution, I think, is not to combine, but to figure out ways of creating opportunities and room for authorizing committees to operate.
I would feel, however, that a 2-year budget cycle wouldn't have much of a bearing on that. I mean, the House's great comparative advantage is the capacity for a division of labor and specialization, and authorizers don't need to hold back in a year because there is appropriations that year. I think we need more leadership and creative efforts on the authorizing committees, not a structural combination of the two types of committees.
Mr. Meyers. Obviously the main barrier to doing it is senior rights on committees and connections between individual Members' constituent groups and so on, and so in that sense it is, except in an extremely unlikely event.
Mr. Linder. Are you hinting that maybe the asphalt interests aren't interested in the transportation bill?
Mr. Meyers. Actually, I was going to bring up transportation in a minute.
So in that sense I think it is probably a theoretical issue, but I think it is one at least this committee needs to have on its plate.
I would disagree with Tom in the following sense: I don't think the authorizing committees and appropriations committees do many different things right now. Point one, look at the annual authorization for defense and the annual appropriation for defense, and tell me the differences. There aren't too many. Do the same thing for the transportation appropriation and what comes out of Mr. Shuster's committee. I think there a lot of parallels between the two activities. Even though, of course, there are multiyear authorizations for the different transportation modes, the reality is it is an annual dog fight between the two committees. I think it is by and large dysfunctional for the committees.
If I could just make one parallel, one comparison, I spent a little time in Mexico City in January working with the Chamber of Deputies down there. As you might know, Mexico is finally making a transition toward a multiparty competitive democracy and towards movement away from a Presidential state where the legislature there apparently is going to have a little more authority, particularly in the practical sense. Although the Mexican Constitution gives the legislature the authority to pass the budget, in reality they have had no impact on it at all, and, of course, they are starting from scratch in that they do not have a stable, powerful committee structure, and to that extent it is beneficial for them to try and think about how they are going to design their committee structure and compete effectively for President. I think they have a better chance in the next 10 years of doing so than does the Congress, if the Congress continues to believe that it is well-served by the existing, overly complex committee structure.
Mr. Linder. One more question. You said this is being insufficiently bold.
Mr. Meyers. Ambitious.
Mr. Linder. Did I miss your recommendation how we could be more ambitious?
Mr. Meyers. Well, I thought committee structures was probably a little overly ambitious, but I think going back to parts of H.R. 853 and trying to address some of the complaints that people have made about biennial budgeting, by incorporating parts of that bill into a biennial budgeting bill or combining the two would make sense, and I would not suggest that you take up all of that bill. For example, I think the automatic continuing resolution is a very bad idea for a variety of reasons.
Mr. Linder. May I ask each of you to be willing to respond to written inquiries? Thank you.
[The information follows:]
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Mr. Linder. The committee is going to be in recess just long enough to vote. Please take your seat. Welcome. I will vote and be right back.
[Recess.]
The Chairman. [Presiding.] Let me welcome our second panel and just say that it is a great pleasure to see our distinguished former colleague Bill Frenzel, who is with the Committee for a Responsible Federal Budget. And I had the privilege of recalling that he sent a letter to me in the mid-1980s when he and I were the only two Members of the House to vote against every single appropriation bill. I wanted to save that letter. I don't know exactly where it is, but I think I may have saved it someplace. And 7 years ago when I was proceeding with the work on the Joint Committee on the Organization of Congress, when we were working on biennial budgeting, I had the privilege of working closely with Mr. Frenzel on passage of a very important public policy question, which has been a great success. That is the North American Free Trade Agreement.
So I welcome him here; and Robert Bixby, the executive director of the Concord Coalition; and Jim Horney of the Center on Budget and Policy Priorities.
The Chairman. So, Mr. Frenzel, if you would proceed.
STATEMENTS OF BILL FRENZEL, COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET; ROBERT L. BIXBY, EXECUTIVE DIRECTOR, CONCORD COALITION; AND JIM HORNEY, CENTER ON BUDGET AND POLICY PRIORITIES, ACCOMPANIED BY CAROL COX WAIT
STATEMENT OF BILL FRENZEL
Mr. Frenzel. Thank you very much, Mr. Chairman, Congressman Linder. I am accompanied by Carol Cox Wait, who is the director of the committee responsible for budget. I chair that committee with former Congressman Tim Penny. The committee is a bipartisan nonprofit educational institution that focuses on the Federal budget and related matters mostly from a process standpoint. The committee is completing a project with financial support from the "Big-5" accounting firms, in which we have invited experts inside and outside the government to review the process with us. We are completing a report which we expect to have finished before the end of the month, which we will be glad to share with the committee and with other interested people.
In a nutshell, Mr. Chairman, our committee supports biennial budgeting, but with a few caveats. The first is we support biennial budgeting, appropriations and tax cycles, and we believe that biennial budgeting has to be accompanied by biennial cycles for appropriations and revenue. We would not like to see 2 years of appropriations take place in 1 year and then another year in the following, and so we want to be very careful about that particular point.
We also believe that it is essential that caps be put on discretionary spending, and, of course, we support caps on entitlements as well need to be worked into the process. The difficulty that we perceive here is that under the reconciliation process, you might not get to agreeing to caps until after the 2-year appropriations, many of them have been passed, and the caps will therefore be meaningless.
We have recommended previously to you and others that it would be a good idea to have a budget resolution that needed to be signed by the President, but we have made some suggestions in here as to how you might get the caps into the situation before the appropriations are passed. But a joint budget resolution is one of them, and we leave it up to you as to how to do it, but we believe the caps have been the only effective limitation on spending, and we believe they should be part of whatever kind of a program you go for here.
We also support separate caps for defense and nondefense. We support entitlement caps, which I have mentioned, and we believe that this is an important part of the system when you move the process to a 2-year biennial system.
We again -- very simply, we support the program, but it has to be accompanied by, we believe, these other changings so that it doesn't run away with the process or with the spending responsibilities.
Again, we will have a full report on the budget process within a couple of weeks, and we will be glad to share it with you. We thank you for the opportunity to appear before you.
The Chairman. Thank you very much.
[The statement of Mr. Frenzel follows:]
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The Chairman. Mr. Bixby.
STATEMENT OF ROBERT L. BIXBY
Mr. Bixby. Thank you, Mr. Chairman and members of the committee. I am here representing the Concord Coalition, which is a nationwide, grassroots bipartisan organization dedicated to strengthening the Nation's long-term economic prospects through prudent fiscal policy.
Our organization is cochaired by former Senators Warren Rudman of New Hampshire and Sam Nunn of Georgia. They, along with our approximately 200,000 members, have been working for the past 8 years to build the grassroots constituency for policies that will encourage elected officials to make the tough choices required to balance the Federal budget, keep it balanced on a sustainable basis, and strategically deploy any budget surpluses that develop to help prepare for the fiscal and economic and demographic challenges that will occur as the population becomes sharply older in the coming decades.
I am tempted to just say that I associate myself with the remarks of Mr. Hamilton and shut up, because he said a lot of what I would want to reiterate about the potential benefits of going to a biennial budgeting system. It is easy to forget just 10 years ago the budget was mired in large and growing deficits, and the budget process was appropriately geared towards eliminating those deficits.
I think with the budget caps and, we would reiterate, the committee's endorsement of maintaining budget caps -- with budget caps, with the pay-as-you-go limitation on mandatory spending and revenues, those budget process reforms have helped us to achieve the more favorable fiscal climate that we find ourselves in now.
I think the lesson to be learned from the overall success of the BEA is that budget process reform, while not everything, certainly can be an important tool in helping to achieve strategic long-term goals.
So if you look forward now and say, what is our challenge now, you look forward and see the retirement of the baby boomer generation, overall demographics as people are living longer, the challenges ahead for Social Security, Medicare and Medicaid, it is not entitlement programs -- inevitably we are going to have spend more on those -- but of the aging of the population. So it will put pressure on the discretionary side of the budget. It will put pressure on revenues. That means it is all the more important for you as policy-makers to make wise decisions about committing Federal resources.
The promise of biennial budgeting in that regard is that it hopefully would free up more time for you to take a more long-term view of things and not be bogged down in the annual year-to-year fights over budget resolutions and appropriations bills. While no amount of process reform can substitute for the hard policy choices you face, we do believe that moving to a biennial budget would help shift the emphasis from the immediate and often repetitious battles to the broader questions of strategic planning and oversight and reform.
Let me make a couple of points about the process of biennial budgeting and how it fits in. First of all, if you look at it, it makes sense from the overall view of the cycles of Congress. You are on a 2-year cycle, so it makes sense to come in the first year of the 2-year cycle and adopt a budget resolution that in some ways sets out our priorities, in some ways, I guess, responds to the President's priorities. And that becomes the tool for the sort of the political statement for that Congress. And then hopefully in the second session, you could do the oversight work and make sure to monitor how your plan was working.
It also -- and I would reiterate what Mr. Frenzel said. Frankly, one of the attractions of the Concord Coalition is if you have a biennial cycle, hopefully it would lessen the opportunity for fiscal irresponsibility, we might say. I think if you try to do it 1 year -- the problem with moving to a biennial cycle is, you know, would you get involved in second-year supplementals that would be so large and cumbersome as to defeat the whole purpose, and I think that that is the downside of moving to biennial budgeting, and that would have to be addressed in some way. I mean, I think some sort of procedural mechanism would have to be in place to guard against that. But hopefully in having a 2-year cycle, you would be able to spend more time on oversight.
Now, granted, as Mr. Hamilton and others have said, the work of oversight is painstaking. It is not as immediately rewarding as appropriating. And, you know, I don't know a lot of process reform will guaranteed take place or that it will be any more thorough than it is now, but I think it would provide you the opportunity for that oversight. And, frankly, you have heard from a lot of experts in the three hearings. I would like to suggest in that regard really you are the final experts in that as to whether or not biennial budgeting would free up more time for you. You know what your time constraints are and what your time pressures are. We can only guess. So while I am happy to say from the Concord Coalition's point of view we think it would free up more time, in the ultimate judgment, it is really yours, and if a sufficient number of Members of Congress think it would free up more time, we are prepared to take you at your word.
Let me just conclude the remarks by saying that now that the budget process need not be focused exclusively on deficit reduction, you do have a unique opportunity to do some weeding out, modernization and updating of government programs before the retirement pressures of the baby boomers hit. So we have a narrow window of opportunity here. I think both the GAO and the CBO have recently reminded all of us about the -- not only the fiscal pressures, but the need to do some more extensive government oversight. CBO always has their cookbook of options, which they just came out with last week, and so if biennial budgeting gives you more time to consider those long-term options, the better.
And finally, let me just reiterate that in the process in the second year, the key is making the second year work. The key is beginning to get everything done in the first year, including the reconciliation bill, all the appropriations bills, and having some sort of orderly second year corrections, review.
I don't know whether it is the President who sends up a corrections bill and the Budget Committees deals with it. I think there is an opportunity, though. I don't think biennial budgeting needs to result in a flood of supplementals. I think there is an opportunity perhaps in conjunction with some of the other improvements in the budget process reform that were recommended in H.R. 853, which we supported, to bring the emergency spending loophole under control and to focus maybe on, you know, one big supplemental in the second year. And so it would be an orderly thing and not 13 separate minisupplementals which could easily get out of hand, and then the whole thing would not be worth doing.
The Chairman. Thank you very much.
[The statement of Mr. Bixby follows:]
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The Chairman. Mr. Horney.
STATEMENT OF JIM HORNEY
Mr. Horney. Thank you, Mr. Chairman, Mr. Linder. I appreciate the opportunity to testify before the committee today. The Center on Budget and Policy Priorities is a nonprofit policy institute that works on an array of policy issues with particular interest in matters of fiscal policy, policy impacts on low and moderate income families. Along with my written statement, I would like to submit for the record a paper on biennial budgeting, written by Bob Greenstein, the Executive Director of the Center.
The Chairman. Without objection it will be included in the record.
Mr. Horney. That is a slight revision of the paper that was published last March before I joined the Center. I am in complete agreement with all the points in it, including its conclusion that on balance biennial budgeting, the disadvantages of biennial budgeting are likely to outweigh the advantages, but rather than go through the various arguments made in that paper, many of which have been addressed by other people testifying here today and in your previous hearings, I want to focus on one particular issue of biennial budgeting that I am particularly familiar with, which is the likelihood that the budget projections will change dramatically from the time that Congress begins considering a 2-year budget and the time that the second year of that cycle is actually completed.
For more than 7 years before I joined the Center staff last July I worked at the Congressional Budget Office. At CBO I was in charge of the unit with responsibility for coordinating the baseline budget projections. In that position I could hardly fail to be struck by how dramatically those projections changed from time to time. I was responsible every 6 months or so for trying to explain why the projections of the deficit or surplus had changed substantially in just a few months. I firmly believe that those changes occurred not because CBO wasn't doing its job properly, but because instead that the Federal budget and the United States economy is so large and so complicated and so dynamic that no person or organization will ever be able to project outcomes with any degree of certainty. The very best estimates are going to be off.
For example, just last March CBO -- since last March CBO has increased the estimate of surplus for fiscal Year 2000 by $84 billion. It has increased the estimate of the surplus for 2001 by $105 billion. And lest you think that based on the record of the last few years that budget projections always get better, back in the early nineties as recently as the early nineties we had a long period where the projections continuously were getting worse. For instance, from March 1990 to March 1991 CBO increased its projection of the deficit for fiscal year 1991 by $181 billion and its projection of the deficit for the following year by $238 billion.
Unfortunately some changes are not unique. CBO had a very interesting chapter in the economic and budget outlook they published just this last January in which among other things they analyzed the record of the budget projections over the last 14 years. Basically they took the difference between the projected deficits and the actual outcomes for the 1986 through fiscal year 1999 and took the average of the errors, absolute average of the errors, meaning they didn't take into account whether the estimate was too high or too low because they would average out and they weren't terribly far off. Based on that, looking at the absolute average, the average absolute error over that period for projections of the deficit for the budget year, that is the year that starts on October first and the year the projections were actually made, the average error equaled 1.1 percent of GDP. Based on their current economic forecast, the average error for 2001 average error would be $112 billion.
For the second year the budget the first outyear, the year after the budget year the error is even larger. It is equal to 1.6 percent of GDP, again based on the current estimate that is $170 billion.
So that means that if CBO's current projection for surplus for fiscal year 2002 is as accurate as projections have been on average for the last 14 years, you should expect that the surplus will be either $170 billion higher or $170 billion lower than the $212 billion that CBO has projected for 2002.
It is not intended as a criticism of CBO, particularly since I was at least partially responsible for some of those projections that turned out so wrong. It is simply to indicate that projecting budget outcomes is incredibly uncertain. The best estimates are going to be off by many billions of dollars.
Congress cannot do anything about the uncertainty of the budget estimates but it can decide in structuring a budget process how to deal with that uncertainty, and I think it is reasonable to ask whether locking in a budget plan for 2 years is the appropriate response in the face of such uncertainty.
Members of Congress often argue that the Federal Government should be run more like a business. Businesses today I think you could argue are facing more uncertainty than they ever have. Who for instance could have imagined just a few years ago the challenges and the opportunities that the Internet is presenting for today's businesses. But how are businesses responding to this increase in uncertainty? They are responding by becoming more flexible and responding more rapidly to changes in their environment, not by locking themselves into a plan rigidly and not changing that when they need to.
Can you imagine a CEO today going to his stockholders and saying in the face of the dynamic economy that we are facing right now I think the best thing to do for this company is to lock us into a business plan for 2 years, spend a year trying to decide whether that business plan is working and only then consider significant revisions to that budget plan?
I think there are good reasons why Congress shouldn't update the Federal budget as often as many businesses update their business plans, but I think it is hard for me to believe that it is best for the Congress to respond to changing budget situations and the responding needs of American citizens only every 2 years.
Now of course all of the major biennial budget proposals allow for modifications of the budget instead of a year but if those modifications become routine and you end up spending almost as much time in the second year on revising the budget as the first, you won't get any of the promised benefits, more time for oversight, more thoughtful consideration of long term problems. So you wouldn't get the benefits.
At the same time you are also likely to get budget outcomes that may not be as good because more of the budget decisions would be made in an ad hoc fashion rather than part of a thorough structured analysis of the budget. Frustration in Members of Congress with the budget process is completely understandable. But I am afraid that the biennial budgeting would do nothing to ease that frustration and could in fact lead to budget outcomes that would be less desirable.
Thank you very much.
[The statement of Mr. Horner follows:]
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The Chairman. Thank you very much. We appreciate your testimony and the time that you have put into this. I don't have any particular questions, although I would like to ask all of you again that you accept written questions that will come from the committee. We have one more panel that we are hoping to have considered before we go to our teleconferencing testimony from Mr. Panetta.
Mr. Linder, do you have any questions?
Mr. Linder. Just one. Which reforms, process reforms contributed to -- you commented process reforms were turned around. Which ones?
Mr. Bixby. Specifically I think the ideas of having caps on discretionary spending and the pay as you go limitation on mandatory programs and revenues certainly helped control.
Mr. Linder. We broke those caps. In fact we have broken the caps every year since Gramm-Rudman I, Gramm-Rudman II, the 1990 agreements.
Mr. Bixby. Technically, the caps aren't broken because of emergency spending, but I certainly agree and have been quite critical of the emergency spending loophole which really didn't get out of hand until the last 2 years. In the mid-1990s the cap -- they had an effect of keeping spending down if they weren't strictly adhered to. The last 2 years I think the caps got unrealistically low, so there are a lot of emergency loopholes, and I think that is one of the keys, and I think Jim and I would agree on this. The key if you are going to do the biennial budgeting is to use realistic assumptions about discretionary spending so that in the second year you don't have to do, you know, outside supplementals.
Mr. Linder. Thank you. Thank you, Mr. Chairman.
Mr. Frenzel. Mr. Chairman, might I comment? You are dead right, we busted caps, we busted Gramm-Rudman. When it didn't work, we made Gramm-Rudman II. We have invented all sorts of things to restrict spending, and they haven't worked, but the thing that has worked best has been the caps beginning with BEA 90. While they may not have done everything you and I would have liked them to do they at least made Congress think a little bit about going over them. Last year they didn't think quite enough I am afraid, but nevertheless I think the caps have some effectiveness and should be part of the system.
Mr. Chairman, in light of a comment on the panel, would you permit Ms. Wait to make a statement, a very short one.
The Chairman. Surely.
Ms. Wait. I just wanted to refer to Mr. Horney's argument that you shouldn't have a biennial budget process because it could interfere with fine-tuning to adjust to changes in economics and budget outcomes. So I would comment and associate myself with Alice Rivlin in this, who has written that budget forecasts, economic forecasts are kind of like weather forecasts. We can look out the window and we know what the weather is like today. We can predict with some certainty what it is going to be tomorrow, and over the long haul we can predict business cycles will occur though we can't predict them with the kind of certainty we would like any more than long range weather forecasts are dependable.
But also as Alice has written, I think it is folly to think that we can or should fine-tune Federal fiscal policy to respond to relatively small changes in the overall economy and in budget outcomes, and as big as $170 billion sounds with swings either way, you are talking about changes at the margin of small percents of GDP that simply don't merit constructive action by Congress to change fiscal policy outcomes, and if biennial budgeting discourages that, we think it would be a very good thing.
Mr. Horney. If I could add just one thing, I agree completely with the point that Congress I don't think is an effective tool of fiscal policy as far as affecting economic cycles. I think the Federal Reserve is much more effective, but I do think that large changes in the projected spending and projected revenues should be taken into consideration in policy, and I can certainly tell you that many Members of Congress feel that way because we got phone calls weekly saying how have things changed since your last projection, so obviously in trying to decide what to do in the budget resolution or on particular programs.
The other thing is these changes occur because revenue projections change and projections of particular programs change. Medicare is a good example. There has been a dramatic change in the rate of spending there. I could question whether the response of Congress was appropriate, but it is certain that many Members of Congress thought that the dramatic slowdown in the rate of spending in Medicare warranted some congressional action./P>
So I may not agree with all of the decisions Congress may make, but I do think it is important to take those things into consideration.
The Chairman. Thank you all very much again. I ask that you accept written questions we will be submitting from the committee, and wonderful to see a former colleague Mr. Frenzel here.
Mr. Frenzel. Thank you, Mr. Chairman. You and your committee's dedication to making the Congress work better is greatly appreciated.
The Chairman. Thank you very much, Bill.
Our last panel consists of Dr. Martin Regalia, the Vice President and Chief Economist of the U.S. chamber of Commerce and Ronald Snell, Economic and Fiscal Division Director From the National Conference of State Legislatures. Gentlemen, it is nice to see you and please feel free to offer a summary.
I say we are dealing with somewhat of a time constraint because we are trying to hook up our video to California where we are going to be hearing from Mr. Panetta, so I hate to impose that kind of limitation on you, but I hope you can extend that. Thank you very much.
STATEMENTS OF DR. MARTIN REGALIA, THE VICE PRESIDENT AND CHIEF ECONOMIST, U.S. CHAMBER OF COMMERCE; AND RONALD SNELL, ECONOMIC AND FISCAL DIVISION DIRECTOR, NATIONAL CONFERENCE OF STATE LEGISLATURES
STATEMENT OF DR. MARTIN REGALIA
Mr. Regalia. Thank you, Mr. Chairman. My name is Martin Regalia. I am the Vice President and Chief Economist for the U.S. chamber of Commerce, and we appreciate the opportunity to testify today, and I ask that my full statement be in the record.
The Chairman. Without objection it will be included.
Mr. Regalia. I will summarize it quickly. The existing congressional budget process is overly time consuming and often unable to produce a budget in a timely fashion. The Chamber believes that the adoption of a biennial budget cycle will streamline the process, allow Congress to develop a workable budget in a timely manner and make more time available for congressional oversight.
The current process is fraught with problems. Deadlines are repeatedly missed. The government regularly fails to enact all individual appropriations bills to fully fund the government by the beginning of the fiscal year. But even the multiple continuing resolutions to keep the government in operation has become a common place event, and this annual quandary does not serve anyone of any party or the American public.
Resources are wasted on repeating the budgetary process each year, immense amounts of time and manpower required for budgetary preparation, review, submission and legislation, and this in turn siphons these valuable and limited resources away from the task of managing and adjusting existing programs to keep pace with today's changing times and from attending to other nonbudgetary matters. The current process leaves too little time for oversight and congressional oversight is vital to maintaining the integrity of our country's fiscal health.
Adoption of a biennial budget system would allow the President and the administration more time for management of Federal programs and the Congress more time for programmatic oversight over the course of the budget cycle. A biennial budget would also promote better long term planning. Budgeting for the longer term would entail greater uncertainties in forecasting of revenues or projecting funding requirements of agencies and programs. However, supplemental appropriations and rescissions can compensate for these shortfalls as well as for the need to adapt to changing economic and programmatic conditions.
In conclusion, I would just say that adoption of a biennial budget is a process that will improve the efficiency and effectiveness of the Federal Government. We urge the Congress and the administration to join together in enacting biennial budget legislation, and we thank you for these hearings.
[The statement of Mr. Regalia follows:]
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The Chairman. Thank you very much, Mr. Regalia. Mr. Snell.
STATEMENT OF RONALD SNELL
Mr. Snell. Mr. Chairman, Mr. Linder, thank you for the opportunity to be here. I am a member of the staff of the National Conference of State Legislatures. One of our primary concerns is the continued vitality of the legislative institution, and we feel that the examination you are making of the budget process in Congress is essential to that vitality. We applaud and thank you for your efforts.
I was asked to comment specifically on what lessons States experience with annual and biennial budgeting might have for your study. You have heard a fair amount of evidence about the structure of biennial budgeting in States, not only today but in previous sessions, and you know that something less than half the States have biennial budgets and something more than half have annual budgets.
My point I think is that the experience of these States leads to no conclusive lessons for your committee. The State budget practices vary greatly amongst themselves. The situations States face in the size of their budgets, the structure of their processes varies not only within a State and from year to year but amongst the States as well.
I will make five points quickly and be happy to answer any questions. I would ask, Mr. Chairman, that my full statement be part of the record.
The Chairman. Without objection.
Mr. Snell. From the perspective of State legislatures, annual and biennial budgeting systems work equally well and that has been demonstrated by surveys done of legislatures over the past 30 years. In response, secondly, to a specific issue raised in this committee, States do not demonstrate that biennial budgeting in and of itself necessarily transfers authority to the executive branch, and I would choose only one example to make that point.
Texas has a biennial budget. It is one of the 10 largest States in population and in budgeting, and it is the legislature with the greatest amount of legislative budget discretion of any of the States. The Texas legislative budget board essentially writes the budget for the State of Texas. It administers the budget. It makes changes in the budget in the off year when the legislature is not in session.
The third point I would make is that biennial budgeting certainly creates the opportunity for long-term planning and for legislative review of agency performance but State experience in taking advantage of that opportunity is definitely mixed. Again, to pick the example of Texas, the Texas legislature is exemplary in its review of State agency performance. But other States, executive branch staff and legislative staff report to us that legislative oversight is, as far as they can tell, no different in biennial States than from annual States.
My fourth point is that it is certainly true that biennial budgeting can create a need for budget revisions and supplemental appropriations in the second year of the biennium, but my observation on that would be this is as true for annual budgeting States as it is for biennial budgeting States, and the occasion arises due not to the process of the budget but extraneous circumstances, the majority of them being the fiscal conditions at the time.
My final point is that from the executive branch perspective biennial budgeting does improve the efficiency of the budgeting process because it reduces the amount of time that has to be spent competitively from year to year in assembling the budget and this is undoubtedly the reason that executive branch officials in both annual and biennial budgeting States highly recommend biennial budgeting. From a legislative perspective it is not so certain that this is a valid statement in its favor.
Thank you, Mr. Chairman. I appreciate the opportunity to be here.
[The statement of Mr. Snell follows:]
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The Chairman. Thank you very much. Thanks to both of you for your testimony. What is the relationship between the fact that the Federal Government has an annual budget and the States and the budget process of the States have.
Mr. Snell. It is not clear that there is any definite relationship. It seems that States tended to shift to annual budgeting in the 1950s and 1960s more because they were shifting to annual sessions than because of the Federal budget schedule. The issue of the Federal budget schedule creates greater issue for States is that our fiscal years do not coincide, but that is an issue that I think States have come to live with.
The Chairman. Thank you. And Mr. Regalia, as obviously the Chamber of Commerce represents many businesses, large and small I know very well, I was wondering if you could elaborate on the point that biennial budgeting increases predictability and stability for those served by Federal programs and those that receive Federal money such as research grants and all this. This is an argument that actually the chairman of the Interior Appropriations Subcommittee Ralph Regula has made at very, very great length, that going to the 2-year cycle will assist in contracting and create a modicum of stability that does not exist today.
Mr. Regalia. Well, I want to think when you look at Federal programs as you look at Federal budgeting in general there is a great difference between the private sector and the public sector and the difference in the intent. I mean what you are really looking at the Federal Government level is providing public service, a public good in a way that is most efficient and most effective. It is not some decision that a business makes on the basis of an investment and a rate of return on that investment. It is an entirely different process that generates it and I think what we are seeing is that if you have Federal programs that understand their outlay schedule and their appropriations over a 2-year cycle, that they don't get the kind of end of year spend out that you see in many programs, that you get a more reasoned approach to providing the service and that you do tend to create some market efficiencies in the first year because the administrators of those programs understand that they have to keep a certain level of service ongoing through the entire 2-year cycle.
So it is a different process than we see in businesses and as a result I don't think the analogy between how businesses balance their books or report their books and the budget of the Federal Government or State entity or even a local entity I don't think is a good comparison.
The Chairman. Mr. Linder.
Mr. Linder. I may be interested in submitting some questions in writing to you on it. Thank you.
Thank you, Mr. Chairman.
The Chairman. Let me just ask before we conclude, Mr. Regalia, we have had testimony clearly stated that biennial budgeting makes more sense from an economic perspective and you as an economist and a businessman might offer some comments on that assertion that someone made.
Mr. Regalia. Well, I think that again when you look at the Federal process and the point of spending at the Federal level is to provide a certain level of public goods, and then it is the financing job to figure out how to get the money and there is really only a very limited place to do that. I mean you either borrow it or you tax it and both of those come out of the private sector. One has a bigger impact on savings, bigger negative impact on savings than does the other. But when you look at trying to impute a certain efficiency to that expenditure process, I think you have to trust the manager of the program to a certain extent, and I think managers do best when they know what level of outlays they are trying to propose, what level of outlays they are trying to mete out to the recipients and kind of what their budget is.
As a manager in both a company and I worked in the private sector and in a trade association, which really doesn't use the same model, I would much prefer to know what it is I am required to produce, what it is I am supposed to be providing and give me my budget and I will figure out the most efficient way to do that and we will also make sure that I don't overspend in the first year. When I know I have got to make the budget stretch for 2 years, you will still have some of the spendout problem in the second year, but you remove it for 1 year and I think that it just provides managers in the programs with a better sense of what their available resources are and what the requirements or what their expectations are as to what they are going to provide, and rather than having to go through kind of a Kabuki dance at the end of every year spend out the money we have and justify what I am going to do next year and if that is the incentive to give them, managers are very good at providing that.
The Chairman. We certainly found that to be the case for many years. Let me just ask one final question for you, Mr. Snell, and that has to do with the amazing disparity that exists in the appropriations processes State by State. I understand that a third of States have one appropriation bill and yet Arkansas has 500 and there are 10 or 12 States that have one or two measures, and I was wondering if you could elaborate just a little bit on the appropriations processes as they go around the country.
Mr. Snell. Thank you, Mr. Chairman, I think the greatest single difference between the Federal and the State appropriations process is that State governments, State legislatures do not regularly use the authorization process that is so much a part of money management in the Congress. Any authorization process that occurs in State legislatures is at the inception of a program when a program is statutorily created and it isn't repeated after that. What States tend to have is a combined authorization and appropriations process that does not separate them into components. The number of bills is a striking feature, but I think you would see in States that use one omnibus appropriation bill that it is quite similar to the result you get, if you pasted the 500 Arkansas bills end to end that it doesn't mean that the process isn't somehow more fragmented in Arkansas or more consolidated in the State of Texas with the 2000-page appropriations bill.
I say also that the process in States is as a rule a little more centralized than it appears to me to be in Congress in the sense that leadership in State chambers works very closely with the chairs of State appropriations committees to divide available funds and to watch the use of available funds in the course of the process. Much less centralized attention is given to the policy side of the decision making in State legislatures. That is a fragmented matter.
And finally, I would say that legislatures echo the practice in Congress, as I understand that, in that there is a substantial gulf between the work of the policy committees and the work of the fiscal committees of legislatures and that over the past 20, 25 years there has been a steady fiscalization of the policy-making process in State legislatures that is observable. In I think every State that fundamental decision making has moved to the budget or finance or ways and means committees.
The Chairman. Thank you very much. Thank you both very much and again we will have written questions. We hope you will respond to those and we look forward and appreciate your very helpful insight.
Okay. We are now going to go to our final witness coming to us all the way from beautiful Monterey, California. We are happy to welcome my very good friend and former colleague. As I said, he was the Director of Office Management and Budget, Chairman of the Budget Committee, and White House Chief of Staff and has what I think will be a very interesting and helpful perspective. I will tell you, Leon, we have had our colleague Lee Hamilton and three panels precede you on this program and so you are our cleanup batter here, and we look forward to your testimony. If you have prepared remarks, they will appear in their entirety in the record, assuming you have faxed them back here to us, if you haven't already, and we look forward to the statement that you would like to offer us. Thank you.
STATEMENT OF THE HON. LEON PANETTA, DIRECTOR OF THE PANETTA INSTITUTE (via video conference)
Mr. Panetta. Mr. Chairman and members of the Rules Committee, thank you for this opportunity to discuss biennial budgeting. While I regret that I can't be there in person with you, David, I appreciate the opportunity at least to try to do this by video. Since I am here on the Monterey Peninsula I think I have the better part of the deal of location.
As I mentioned to you, in my first term, when I was Congressman for the 16th District in California, I believe it was in the 95th Congress, 1978, I introduced the first biennial budgeting bill in the House of Representatives, and I continued to reintroduce that bill in subsequent years with well over 40 cosponsors. You might be interested to know that the range of cosponsors went from people like Dick Gephardt and Al Gore to David Stockman. So we had a very good cross section of both Democrats and Republicans who supported those original biennial budgeting bills.
I am pleased that now this year, Year 2000, the Committee on Rules and hopefully the House and the Senate are seriously considering this very important reform.
As you may know, there has been a number of studies on various budget reforms over the years. I have participated in a number of hearings both before the Budget Committee as well as the Rules Committee. There were reform task forces that were established that looked at these issues under our former colleagues. Congressman Butler Derrick had, as I recall, one task force. Tony Beilenson headed up another task force, and I guess what I would recommend to your staff is that they take the time to analyze all of that previous good work because I think it will give all of you a better sense of history on this proposal as well as the viewpoints of the Members.
I think it suffices to say as you well know that one Member's reform can be another Member's demise. Reform proposals are often viewed as threats to the status quo and to committee jurisdiction, but when the existing budget process is not working effectively or efficiently I really don't think you have any other alternative but to consider possible improvement. The challenge for your committee is to determine whether those reforms that the Congress considers will truly improve the way you do the business of the people or whether continuing crisis, as you have now in the budget process, is the preferred alternative, and I think that is the choice. You either continue the kind of current crisis operation that you have with regards to the budget or you try to improve the process.
While the biennial budget is not going to resolve all of the budget problems that people confront, I think at the very least it will provide a more rational time frame for responsible budgets. After all, establishing a process for controlling decisions on expenditures and spending is why the budget was put into place in the first instance.
The modern day budget process developed in the cauldron of intrigue and concerns and disputes that eventually produced, as you know, the Congressional Budget and Impoundment Control Act of 1974. The principal goal of that legislation was to restrict the President's ability to impound spending, but it was also obvious to the Congress that it couldn't very well limit the President's ability to try to control spending and not do something to try to limit their own spending habits.
The original authors, people like Dick Boling, John Rhodes, Ed Muskie, tried very hard to bring some order to the Congressional decision making process. They were hamstrung by the imperative of always having to try to protect all existing centers of power, to try to make the new process appear as benign as possible because you have all of these power centers that were concerned about what the budget process would do to them, but the drafters of the Budget Act knew that while it would be a difficult time that they also recognized that Congress had an obligation to the people to try to operate within overall budget constraints.
The first budgets were the result of extensive negotiations. When the Budget Act passed and the first budget, I was around for some of those first budgets, they were the result of long negotiations between the leadership and the key chairmen and they were able to at least work out a negotiated approach to trying to resolve budget differences, but as deficits began to grow and multiply, it was obvious that stronger steps had to be taken in terms of enforcement.
I give you one example, Mr. Chairman. I was chairman at the time under Bob Giaimo when he was chairman of the House Budget Committee. He made me chairman of the Reconciliation Task Force. Reconciliation was the tool that was included in the original Budget Act but was never used mainly because the chairman and the leadership did not want to see any kind of mandatory requirement passed in the form of reconciliation. It wasn't until the early eighties that we used reconciliation for the first time and it proved obviously to be a very important tool in the budget process.
There was a constant dilemma about how do you try to enforce the decisions that are made by the Congress, and what we went through was a period when we engaged in a number of budget summits and negotiations that really reflect a lot of what is in the present budget process today and as a member of the Budget Committee, as chairman of the Budget Committee, I think I participated in almost every budget summit that was held between the Congress and the administration at that time.
To give you a few examples, there was the Balanced Budget and Emergency Deficit Control Act of 1985, basically that was the Gramm-Rudman law, and what that did was it established deficit reduction targets and a process of sequestration which cuts across the board if those targets were not reached. As a matter of fact, we today still have sequestration in place. If certain targets aren't reached the administration can in fact cut across the board.
1987, there was another budget agreement that was negotiated, I was a part of that, between the Congress and the Reagan administration that produced further deficit reduction targets. The 1990 Omnibus Budget and Reconciliation Agreement was a huge agreement, negotiated as you may recall, over a summer. That was between the Congress and the Bush administration, and it established two very important tools of enforcement, discretionary caps and the pay as you go requirement. The 1993 Omnibus Budget Reconciliation Act extended those caps and the pay go requirements as did the 1997 Balanced Budget Act.
So for those that argue that somehow reforms don't make sense or you shouldn't look at them, the reality is that over the 20-year history of the budget process we have tried to make constant changes in reforms to try to improve the process. I have to tell you, that if you looked at the key reforms that were put in place, particularly discretionary caps and the pay-go requirements, there is no question in my mind that were it not for those enforcement tools there would be no balanced budget today because those were the tools that were needed to enforce the targets that were established.
I think whatever you do with regards to 2-year budgets, I would really strongly urge the Congress not to do anything that would impact on discretionary caps and the pay-go requirement. Those are very important tools. Don't get rid of them if you want to maintain budget discipline.
While I would like to emphasize is that reforms alone can't substitute obviously for the substantive decisions that have to be made on budget policies. They can ensure that once those decisions are made they will be effectively carried out. The point is that reforms can make a difference I think to the efficiency and effectiveness of the budget process, if they are carefully designed and implemented.
As you well know, any reform is only as good as the majority vote on the floor of the House. Since any requirement can be waived by the Rules Committee if it is supported by a majority vote, I think for any reform to succeed it must enjoy the broad support of the leadership, key chairmen and ranking members and a strong bipartisan cross section of both parties.
In addition, I don't have to remind you that there are no silver bullets in the budget process. For as long as I can remember there have always been Members that have tried to find that one simple and elusive answer to all of the budget worries that face the Congress. Whether it is a constitutional amendment to balance the budget or a line item veto or the Gramm-Rudman law, the reality is that the budget process is not just simply going to be saved by a single legislative act.
The budget process is a legislative process, and in that reality lies both its strength and its vulnerabilities. Nothing can replace, and I think that that should be emphasized, nothing can replace the fundamental trust between Members. That is essential to making any budget process work effectively.
I had the good fortune to have good Members like Bill Frenzel and Bill Gradison as my ranking members on the Budget Committee. We enjoined and maintained a relationship of trust and confidence that no reform can replace. If somehow you can restore that kind of personal trust in the budget process there isn't a reform that you can enact that will not work, but in the absence of that trust few if any reforms can succeed.
But I am assuming that there will be a better relationship between the parties and the administration, and I believe that the result, biennial budgeting, is one of those reforms that makes very good sense for both the Congress and the executive branch to adopt for the following reasons, and let me just touch on the key points.
First of all, the present budget process is simply not working. It is broken. It is driven by prices. Each year the budget resolution is delayed past the statutory deadline. The resulting delays occur then in the appropriations process. When a budget resolution is finally enacted, the targets often are so unrealistic that the appropriators have to delay the larger and more controversial appropriations bills until late in the fiscal year. The results obviously are continuing resolutions or several continuing resolutions until ultimately a negotiated agreement is worked out between the Congress and the President.
The sad reality is that in a government split by parties crisis has become the key ingredient for forced budget decisions. The result is that more and more decisions are delayed well into the new fiscal year, and spending is already occurring in many programs. Ongoing spending needs rather than a careful evaluation of programs, let me repeat that, ongoing spending needs rather than a careful evaluation of programs is what drives decision making. While it may be too much to expect that a 2-year budget cycle will eliminate all crises, and I am not naive enough to believe that, it will in the very least confine the larger budget battles to one year instead of having them occur every year. And I have to tell you that simply providing that ceasefire, that time, I think is extremely important to providing perhaps a little better stability and a better relationship when it comes to budget negotiations.
Secondly, much better budget planning and management can take place under a 2-year biennial budget. Too many budget decisions by both the Congress and the administration are made on a short-term basis rather than focusing on long-term funding needs, crisis management approach to budgeting forces, ad hoc spending decisions that are based not on the kind of long-term planning that ought to be involved in deciding how we spend taxpayers' dollars. The current process is very inefficient. The task of budgeting consumes a great deal of time and energy that could be better devoted to addressing programmatic issues in the longer term and in a more in-depth perspective. Not only is the Congress constantly in a crunch of making hit and miss budget decisions on programs, the executive branch is caught up in exactly the same problem.
During the months of September and October when Congress and the administration are typically negotiating final appropriations levels for the new year, the agencies and departments of the executive branch are beginning the new fiscal year operating under continuing resolutions while also expending great amounts of time trying to figure out what the spending levels will be for the next fiscal year. The problem is that until final decisions are made on the current spending year, it is impossible to determine what spending levels will be made for the next fiscal year. So both the Congress and the executive branch need the time to more carefully evaluate current programs and plan and manage funding needs for existing programs. Clearly a 2-year budget cycle will provide that needed time.
Currently greater program oversight by both the Congress and the administration, I think the reality is that very few committees, and certainly it was the case when I was in the Congress and it was the case when I was in the administration, not enough time is given to oversight of existing programs that operate within the Federal Government. Only when a scandal breaks out or a GAO audit appears that there is a committee that takes the time to review existing programs, and that is often too late. Most committees will work on new authorizing legislation but give little attention to thousands of programs that are currently in the Federal budget.
The additional year will allow the committee to spend the required time reviewing the effectiveness of the programs that spend somewhere between 1.4 and $1.8 trillion. In addition, the various appropriations subcommittees, while they do their annual reviews of programs under their jurisdiction, and I commend them for that because that is their job, I think they could do an even more careful job on hearings and studies if they had an additional year to review programming.
My view right now is both the administration and the Congress have fallen into a pattern each year when it goes through the same act. They present pretty much the same testimony on each program before the Appropriations Committee, same questions are asked, the same favorite programs are funded. And I don't think it would hurt either the members of the committee or those testifying to be subject to greater scrutiny.
The same oversight responsibilities could also be implemented within the executive branch. When I was Director of the Office of Management and Budget, that agency is responsible for reviewing the effectiveness of existing programs, but on a year-to-year basis where you are constantly developing budgets you don't have the time to really do the kinds of in-depth reviews that need to be done with regards to existing programs.
Lastly, improved economic projections I think make 2-year budgets much more realistic. The reality is that the current state of economic and spending projections have improved greatly. We have a pretty good sense of how much is going to be spent over what period of time. As a matter of fact most current budgets usually do 5-year projections or even 10-year projections. While I am not saying that a 10-year projection is that exact, it is to say that a 2-year projection I think is well within the margin of error. You can predict pretty well what a program can expend over a 2-year period, and I think we have got the basis on which to know pretty well what a 2-year budget would look like.
It is important for Congress and the administration again to maintain obviously the right to make necessary adjustments in that off year, but it is also important that revisions are very limited and based on emergency needs. The last thing we want to have happen is to have a huge supplemental covering all 13 appropriations bills appearing every other year. I think that would destroy the 2-year budget process. I recognize there will be a temptation to do that. That is one of the criticisms of going to a 2-year budget, but both the President and the leadership are going to have to ensure that any supplemental is limited to essential revisions and emergencies.
As with all reforms, Mr. Chairman and members of the committee, a biennial budget will take careful work and preparation. Like any reform, biennial budgeting will not work if the process either becomes too inflexible or too open ended. For the process to work, the two branches will have to avoid the extreme and find the proper balance under which the major task of budgeting is carried out every 2 years. That balance will require essential cooperation between the branches.
In addition, I would strongly recommend -- I think my colleague Jack Lew, Director of OMB, suggested this -- that there be an appropriate transition period before the Federal Government and the Congress converts over to biennial budgeting. It has got to be recognized that this reform will constitute a very fundamental change in how the budget process operates, and a conversion to biennial budgeting will have to take into account the magnitude of the change that would be required, both in terms of the need to make necessary conforming changes to the laws as well as in terms of the need for both the Congress and the executive branch to develop and implement new practices for proposing, considering and enacting 2-year budgets.
I think a biennial budget built around a 2-year life of the Congress offers a better way for Congress to commit itself to continuing fiscal discipline and to better planning for the coming years. The bottom line here is the present system is not working, it just isn't. In the very least, this reform will provide the time necessary to move forward towards a more sound, effective and responsible budget.
Is there a risk involved in doing this? Of course there is. But is it a risk worth taking considering the crisis that currently surrounds the budget process, I believe it is, and for those reasons I would therefore urge the committee to support and the Congress to adopt a biennial budget process.
Thank you very much.
[The statement of Mr. Panetta follows:]
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The Chairman. Thank you very much, Leon. That is very helpful and you come before us with an extraordinarily unique perspective obviously having served as chairman of the Budget Committee and as Director of the Office of Management and Budget, and I would like to take advantage of the very unique and important experiences that you have had by just making some comments and then raising a number of questions, and I will just throw a few things out and let you expand on them if you will.
For starters, one of the concerns that has been raised by some of the opponents is that we would see a dramatic increase in the number of supplemental appropriations bill. They believe that would be a problem and I wondered if you might comment on that.
Second, critics have also said -- your most recent experience has been the executive branch level so you are not concerned about the prospect of ceding greater authority to the executive branch. We have had testimony from Lee Hamilton this morning in which he said in fact that he believed the opposite to be the case, that biennial budgeting would enhance our abilities here to have greater authority, but we would appreciate your thoughts on that/P>
And having been at the OMB and having done your work as Budget Committee chairman, there are some who argue that if we were to go to a 2-year cycle that somehow agencies would be less responsive than they are today under the annual cycle that we have/P>
And then another point that you raised I would like you to expand on if you could, and that is the question of the 2-year projections and the fact that you are saying that they are basically within the margin of error, and I wonder if you could possibly elaborate a bit on that/P>
So I think that gives you enough to respond to. I see you taking notes on those things/P>
Mr. Panetta. Thank you. I think the first issue that I recall even in some of these first hearings we had on biennial budgeting was the concern about whether or not there would be additional supplementals that would be offered as a consequence, and clearly there is that danger, unless both the President and the Congress make very certain that supplementals ought not to be presented unless they adhere to what I think are pretty much the present guidelines.
Number one, that it should deal with emergency needs. Obviously if there is a Kosovo or a Persian Gulf or some kind of military contingency, then obviously that would demand a supplemental, and if indeed there are disasters that take place in the country, that too ought to provide a basis for supplemental requests. But I would restrict the supplemental to emergencies and those kinds of needs as opposed to simply using the supplemental as a vehicle to increase spending in other areas.
Now, to get that accomplished, as you know, both the Congress and the President pretty much have to agree as to what those guidelines will be. They can be abused. They can be abused both by the President and by the Congress, but I think if this is going to work there has to be an agreement that you are not suddenly going to have additional supplementals provided. I think there is no need for more than one supplemental being offered in the off year to try to meet any contingencies that are involved, and I would limit -- very frankly, I would limit any supplemental to one proposal in the off year. I don't think there is a need to do more than that.
So there are ways to try to limit that but clearly it is going to take both the President and the Congress agreeing that supplementals have to be limited to emergencies, they have to be limited to urgencies that are deemed to be the case by both the President and the Congress/P>
Secondly, on the greater authority, I have heard also the criticism about ceding greater authority to the executive branch. I don't believe that for a minute because I have to tell you, the one thing that worries the hell out of an agency head is having to appear before the Congress, not just on spending requests because that has turned into kind of, you know, an annual presentation where they go and say pretty much the same testimony, and I have been on both sides of that. You give the same testimony, you present the same facts, you are limited in time and you know that if you basically get through those first few questions you are basically on your way to getting your funding.
What would frighten the hell out of me as an agency head is if I had to go up to Congress in an off year where that committee spends an awful lot of time going through every program under my jurisdiction and begins to question me about how are these programs working, what are they doing, how are they impacting, how much is being spent, how many bureaucrats are involved in the implementation of these programs. That kind of in-depth questioning process scares the hell out of anybody in the executive branch, and I think it would provide greater opportunity for those in Congress to be able to oversee existing spending programs, to oversee each agency and I would say that both, not only the appropriations committees which are pretty expert in terms of dealing with the particular programs under their jurisdiction, but I think the authorizing committees ought to do the same thing very frankly/P>
Authorizing committees -- I was on the Agriculture Committee during the time I was in the Congress. I think we spent very little time looking at the myriad of programs that were established at the Agriculture Department. We were always interested in developing new programs. We were always interested in developing new spending but we spent very little time, very frankly, looking at existing spending programs.
So I would say I do not believe that in any way changes the balance, and if anything, I think it would provide Congress greater leverage in terms of reviewing ongoing spending than you have at the present time because right now this thing is so confined and so price oriented that I would wager to say that there are very few committees or members that really know exactly how these programs are working out in the field.
One of my frustrations as Director of the Office of Management and Budget was to be able to really look at a program in terms of how is it affecting, for example, if it is an education program or a program that involves children, how were the children being impacted by this program, who was involved with it, how was that program being handled, to go into the field and actually look at how the programs work. Very frankly there is too little of that today, and I think more needs to be done in order to really be responsible how the dollars are being used/P>
On the 2-year time frame, the reason I think that -- I think under the 2-year approach agencies, as I have said, would have to be even more responsive to the Congress. Right now, as I said, agencies have to make their presentation in a year and they basically then dance off. If they had to face a year of oversight with regard to the Congress -- now, it does demand that Congress is going to have to therefore focus a lot more on oversight on existing programs and that the committee chairmen are going to have to establish a lineup for that second year in which they literally go through the agencies and through the departments and through the programs and establish, you know, a test of which programs they are going to review.
I think it will make the agencies even more responsive because they will know that it isn't just the same old act before the Appropriations Committee. It is going to be a much more in-depth analysis by the committees that they have to testify before/P>
And lastly, on the 2-year projection, my experience is that -- you know, there was a time when I was first chairman of the Budget Committee when you hear all these projections and try and to figure out what kind of spending would take place in the program over a period of time, was the subject of a lot of conjecture, but I can remember working with both the staff of the CBO and OMB, sitting in a room and beginning to try to bring together those kinds of projections. Now, there are still some areas -- I don't know whether it is still the case -- for example, in defense spending areas or some areas where there hasn't been the concurrence with regards to projected spending as there has been in most other areas, but I would wager to say, you put CBO and OMB in one room, they can pretty much come to agreement on what a projected spending target is going to look like over a 2-year basis and almost any program in the Federal Government, and because of that I would feel very confident in enacting a 2-year budget because you have a very good sense of what can be expended/P>
Incidentally, a 2-year budget would provide, I think, even for the agencies and those departments a little more stability in the way they then fund their programs, because as you know right now on the year-to-year basis, the attitude still in the administration is spend it all as fast as you can because you don't want to wind up at the end of the year looking like you have got a surplus of some kind, and I think a 2-year budget would provide just the opposite incentive. It would make better managers out of people in the Federal Government who have to deal with that over a long period of time and be able to control their assets and be able to control their expenditures over that period of time. It would make a better manager/P>
The Chairman. Thank you, Leon. Let me just pose one final question to you, which you touched on, and see if I could get you to elaborate. When Jack Lew was here, the natural question was raised about the prospect of a new President. We all know that we are going to have a new administration coming next year, and the question of a transition period is obviously out there, and you are a supporter of the idea of a transition period. Jack was uncertain as to exactly what that day -- he said it really couldn't go beyond April in his testimony, but we do want to make sure that if we look at passing this legislation this year, which I am hoping we are going to be able to do -- some have talked about having it not go into effect for the new administration until the next year, certainly not imposing this kind of tough double burden on them as they move into position.
So I wonder if you maybe could elaborate on what you would envisage as the transition period that would be best for dealing with this/P>
Mr. Panetta. Well, I think that when I went from the Congress as chairman of the Budget Committee to Director of OMB I had a pretty good sense of what the challenges would be and what the time frames would be. I don't know that you can assume that that kind of expertise is going to be present necessarily if a new administration comes into place, and a new President is going to want to take the time to kind of look at what the budget process is all about and also to be able to begin to define whatever that President's priorities are going to be, and in addition to that, the Congress is going to have to make the adjustment as well.
So I guess my view would be that you would do well to consider probably not implementing this in the very first year that a new President takes office. I would probably give it at least a year or couple of years to make the transition and then require that a 2-year budget be submitted by the administration, either that next year or the third year for a 2-year period.
Now if you want to be able to, I think for a 2-year budget to work you have got to basically follow the 2-year cycle of the Congress. So it almost means that if you are not going to do it the first year of the new Congress, then you probably ought to transition this in probably either at the beginning of the third year really of a new President. I don't know that you can do it if you try to do it much earlier, although, again, it isn't that complicated, Dave, to be able to do this. It really isn't. If you work on budgets, the ability to then take an annual budget and stretch it out, instead of just 1 year and stretch it out over a 2-year period, you know, from a point of view of the agencies and departments, I think that can be done.
So I guess probably the one way to try to do this responsibly is to provide at least some transition period at the beginning, but I would not extend it too far out because if you do you are going to lose the impetus in passage of the 2-year budget/P>
The Chairman. Well, Leon, let me say thank you very much. We appreciate the perspective that you have offered and the time and effort that you have put into what is very helpful, prepared testimony and your response to the questions.
Let me say that we are going to have some written questions that we would like you to respond to if you would be willing to do that, and also, I will tell you that you look great and you are in a California. I won't be there until tomorrow morning, so I am jealous right now. But I am looking forward to being back in our great State tomorrow/P>
Mr. Panetta. It is great weather and I guess our candidacy was always subject to the question of leaving California/P>
The Chairman. I remember so well that early on in 1981 someone said to Ronald Reagan, well, would you like to move the capital to California, and the response that people like you and I would offer, no, please don't do that because we might get serious opposition in our campaigns if we were to move the capital to California. But let me thank you very much again for your very thoughtful testimony and your fine service to the country/P>
Mr. Panetta. My best to you and the other members of the committee/P>
The Chairman. Thank you very much, Leon, and with that the committee stands adjourned.
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[Whereupon, at 12:35 p.m., the committee was adjourned.]
