The Subcommittee on Legislative & Budget Process
Hearing
on
"Assessing the effectiveness of the current budget process and consider new reform and enforcement proposals"
PART I
TIME: 1:00 PM
ROOM: H-313 The Capitol
WITNESSES
Panel 1: The Family Budget Protection Act
- Hon. Jeb Hensarling (R-TX), Member of Congress
- Hon. Paul Ryan (R-WI), Member of Congress
- Hon. Chris Chocola (R-IN), Member of Congress
Panel 2: Enforcing Fiscal Promises Act
- Charles Stenholm (D-TX), Member of Congress
- Hon. Baron Hill (D-IN), Member of Congress
Panel 3: The Deficit Control Act of 2004
- Hon. Mark Kirk (R-IL), Member of Congress
Panel 4: The Macroeconomic Budgeting Act of 2004
- Hon. Doc Hastings (R-WA), Member of Congress
- Hon. Michael Castle (R-DE), Member of Congress
Panel 5:
- Hon. Josh Bolten, Director, Office of Management and Budget
PART II
TIME: 11:00 AM
ROOM: H-313 The Capitol
WITNESSES
Panel 1:
- Hon. Douglas Holtz-Eakin, Director Congressional Budget Office
Panel 2:
- Hon. David M. Walker, Comptroller General of the United States General Accounting Office
Panel 3:
- John Berthoud, Ph.D., President, National Taxpayers Union
- Stanley E. Collender, General Manager, Financial Dynamics Business Communications
- Richard E. May, Legislative Consultant, Brownstein Hyatt & Farber
OVERVIEW
The Subcommittee on Legislative and Budget Process of the Committee on Rules is holding an oversight hearing on proposed changes to the Congressional Budget Act on Tuesday, March 23rd, 2004 beginning at 11:00 a.m. in H-312, the Capitol.
At this hearing, the Subcommittee will hear from the Director of the Congressional Budget Office, Douglas Holtz-Eakin and the Comptroller General of the United States David M. Walker to comment on the effectiveness of the budget process. They will also comment on the proposals put forth by Members of Congress to increase the effectiveness of the budget process and strengthen enforcement provisions to advance congressional intent and goals. Several reform proposals have been introduced or are being developed. In addition, the Subcommittee will hear from one additional panel of budget experts.
Some proposals seek to replace the current procedure and timetables, some seek to improve parts of the current process, while others merely suggest minor changes and leave the current process virtually untouched. This hearing will provide the Committee the opportunity to review and better understand current proposals as part of an open dialogue surrounding the congressional budget process.
BACKGROUND
This year marks the thirty-year anniversary of the Congressional Budget Act, formally known as the Congressional and Impoundment Control Act of 1974 (P.L. 93-344, 88 Stat. 297). The Congressional Budget Act established the statutory basis for a congressional budget process and provides for the annual adoption of a concurrent resolution on the budget as a mechanism to guide and enforce congressional budgetary decision-making.
Every year the budget resolution becomes a focal point of debate as it reflects Congressional concerns about federal spending priorities. Although the basic framework for congressional budgeting has remained relatively stable in recent years, there has been a recurring examination of the budget process by Members of Congress, Presidents, and budget experts to determine if it works to meet the changing demands of government.
The Budget Act of 1974 put into place concepts and principles that were visionary in their reach and that still have value today. The Act declares it is "essential to assure effective congressional control over the budgetary process; to provide for the congressional determination each year of the appropriate level of federal revenues and expenditures; to provide a system of impoundment control; to establish national budget priorities; and to provide for the furnishing of information by the executive branch in a manner that will assist the Congress in discharging its duties."
The 1974 Budget Act was designed to give Congress the tools it needs to develop budget priorities independent of the Executive Branch. Many experts currently believe that the budget process is broken. Among the chief criticisms of the existing budget process are its complexity, the lack of accountability for the fiscal decisions it fosters, the low level of public confidence it inspires, the excessive amounts of time dedicated to debating specific policy issues, and the weakness of the existing enforcement mechanisms.
The effort to reform the congressional budget process is certainly not new. Since the inception of the Congressional Budget Act, proposals for modification to the procedures governing the consideration by the Congress of the nation's spending and revenue plans have been plentiful. In previous Congresses, modifications to the budget process have generally occurred as part of reconciliation legislation, or as changes to House rules on the opening day of a new Congress. Additionally, the House has, from time to time, considered high profile single-issue changes to the process; most notable in recent years were the Line Item Veto Act, efforts to enact an automatic continuing resolution mechanism, and the Comprehensive Budget Process Reform Act.
Congress has made further changes in the budget process by enacting the Balanced Budget and Emergency Deficit Control Act of 1985 (also known as the Gramm-Rudman-Hollings Act), the Budget Enforcement Act of 1990, the Line Item Veto Act in 1996, and the Budget Enforcement Act of 1997, among other laws.
This Congress faces budget process reform proposals on a wide variety of issues: budget enforcement mechanisms (statutory discretionary spending limits and pay-as-you-go requirements), dynamic scoring, biennial budgeting, and aggregate budgeting. In drafting legislation the sponsors of the various proposals in the 108th Congress attempt to address the weaknesses in the system.
Overview of Budget Enforcement Mechanisms
The budget process is centered on an annual concurrent resolution that sets functional spending priorities for at least the next five fiscal years. Because a concurrent resolution is not a law it is not signed or vetoed by the President-the resolution has no statutory effect; no money can be raised or spent pursuant to it. Revenue and spending amounts set in the budget resolution establish the basis for the enforcement of congressional budget policies through points of order. Given sufficient majorities, the Congress is free to adopt whatever budget levels it chooses, and then to waive them. Failure to adopt a budget resolution does not preclude passage of spending or tax related legislation and in fact Congress has proceeded with annual appropriations bills and tax bills in absence of a budget resolution.
In 1985, the Congress enacted the Balanced Budget and Emergency Deficit Control Act (also known as Gramm-Rudman-Hollings). Gramm-Rudman-Hollings departed from the flexible environment for budgeting established by the 1974 Congressional Budget Act. In enacting Gramm-Rudman-Hollings, policy-makers acknowledged that then existing enforcement provisions were inadequate. They wrote specific deficit targets into law and backed them up with "sequestration" (automatic spending cuts that take effect if the deficit targets were missed).
In 1990, Congress enacted the Budget Enforcement Act (BEA). The BEA shifted the focus away from deficit targets. Instead, it imposed caps on discretionary spending and a pay-as-you-go (PAYGO) requirement designed to keep changes to tax laws and entitlement programs from increasing the deficit (or decreasing surpluses). Under PAYGO any new legislation proposing new direct spending or decreasing revenues for a fiscal year must not result in a net cost for that year. Those restrictions were extended in 1993 and again in 1997; they expired in 2002.
Once Congress and the President adopt enforceable budget mechanisms, balancing the budget is by no means automatic. Overall economic conditions have negative and positive effects on overall deficits. While budget process laws can be tools to assist Congress in meeting its fiscal goals, policy-makers themselves make the biggest contribution toward fiscal restraint. As noted recently by the Congressional Budget Office (CBO), "experience under the BEA-and with the budget process in general-suggests that no procedures to control deficits or impose budgetary restraint will be effective in the absence of an overall political consensus to achieve those goals. Whether or not a budget enforcement framework…is renewed, political agreement on fiscal policy objectives is probably the largest single factor in ensuring that budget enforcement procedures and the budget process function smoothly."
Statutory budget enforcement, including caps on discretionary spending and PAYGO requirements expired at the end of Fiscal Year 2002. Since then, the budget process has reverted to the points of order that enforce levels adopted in the congressional budget resolution. The Senate adopted its version of discretionary caps and PAYGO through Fiscal Year 2005. Those provisions are designed to be consistent with levels set in recent budget resolutions. Because the budget resolution is not binding its enforcement procedures do not have the same muscle as do statutory enforcement measures such as caps and PAYGO.
Overview of Biennial Budgeting
Biennial budgeting is the practice of preparing and adopting budgets for two-year periods. The rationale for biennial budgeting is that it would improve the efficiency of the Congressional budget process. Frustration with the current process is high; it is time-consuming, target dates are often missed, and repetitive decisions are made. The solution to these problems, according to proponents of biennial budgeting, is to prepare one budget instead of two over a two-year period. Having fewer budgets could reduce the delay and repetition that plague the current budget process, and could free time for other activities-in particular, Committee oversight of programs.
Critics of biennial budgeting argue that reducing the number of times that Congress considers budget matters may only raise the stakes and consequently increase the possibility for conflict and increased delay. They maintain that projecting revenues and expenditures for a two year period requires forecasting as much as 30 months in advance (rather than 18 under an annual budget cycle). This would result in less accurate forecasts, and could require Congress to choose between allowing the President greater latitude for making budgetary adjustments in the off-years, or engaging in mid-cycle corrections to a degree that would effectively undercut any reduction in workload or intended improvements in planning.
Overview of Aggregate Budgeting
Proponents of an aggregate budget believe the timetable and structure of the budget process are mechanisms established during the original inception of the Budget Act that have not proven realistic in practice in recent years. Today, Congress spends an inordinate amount of time debating specific policies within functional categories of the budget resolutions rather than focusing on how much the government should spend on the overall programs. An aggregate only budget would only report the overall spending number but would not recommend specific program function spending numbers (programs such as Medicare, Social Security, veteran's health care, and education).
Elimination of the functional categories would allow Congress to focus on the overall amount of spending that should be spent for the fiscal year and not spend large amounts of time debating specific policies that are often debated later in the year. Besides an overall top number-large categories of spending such as defense, homeland security, non-defense non-homeland discretionary and mandatory spending can all be included in this document.
However, while the current budget functions are not binding, the budget functions do provide at least a picture of how much we are spending on specific programs. The functional categories do provide a view of what we do spend money on and there is a sense of inherent priorities within the budget function breakdown. The functional categories also allow Members of Congress to generically debate those priorities by comparing various budget subtitles and how those plans provide a break out among budget functions.
