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BUDGETING IN THE CONGRESS: REFLECTIONS ON

HOW THE BUDGET PROCESS FUNCTIONS

HEARING

BEFORE THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

HEARING HELD IN WASHINGTON, DC, JUNE 22, 2005

Serial No. 109–8

Printed for the use of the Committee on the Budget

(

Available on the Internet: http://www.access.gpo.gov/congress/house/house04.html 

(II)

COMMITTEE ON THE BUDGET 

JIM NUSSLE, Iowa, Chairman 

JIM RYUN, Kansas 

ANDER CRENSHAW, Florida 

ADAM H. PUTNAM, Florida 

ROGER F. WICKER, Mississippi 

KENNY C. HULSHOF, Missouri 

JO BONNER, Alabama 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

THADDEUS G. MCCOTTER, Michigan 

MARIO DIAZ–BALART, Florida 

JEB HENSARLING, Texas 

ILEANA ROS–LEHTINEN, Florida 

DANIEL E. LUNGREN, California 

PETE SESSIONS, Texas 

PAUL RYAN, Wisconsin 

MICHAEL K. SIMPSON, Idaho 

JEB BRADLEY, New Hampshire 

PATRICK T. MCHENRY, North Carolina 

CONNIE MACK, Florida 

K. MICHAEL CONAWAY, Texas 

CHRIS CHOCOLA, Indiana 

JOHN M. SPRATT, JR., South Carolina, 

Ranking Minority Member 

DENNIS MOORE, Kansas 

RICHARD E. NEAL, Massachusetts 

ROSA L. DELAURO, Connecticut 

CHET EDWARDS, Texas 

HAROLD E. FORD, JR., Tennessee 

LOIS CAPPS, California 

BRIAN BAIRD, Washington 

JIM COOPER, Tennessee 

ARTUR DAVIS, Alabama 

WILLIAM J. JEFFERSON, Louisiana 

THOMAS H. ALLEN, Maine 

ED CASE, Hawaii 

CYNTHIA MCKINNEY, Georgia 

HENRY CUELLAR, Texas 

ALLYSON Y. SCHWARTZ, Pennsylvania 

RON KIND, Wisconsin 

PROFESSIONAL STAFF

JAMES T. BATES, Chief of Staff 

THOMAS S. KAHN, Minority Staff Director and Chief Counsel 

(III)

C O N T E N T S

Page 

Hearing held in Washington, DC, June 22, 2005 ................................................. 1

Statement of: 

Prepared Statement of Hon. Bill Frenzel, guest scholar, Brookings Institution, and former Member of Congress ..................................................... 5

Allen Schick, Ph.D., Professor, University of Maryland ............................... 11

Richard Kogan, Senior Fellow, Center on Budget and Policy Priorities ...... 20

Prepared statement of: 

Mr. Frenzel ....................................................................................................... 7

Mr. Schick ......................................................................................................... 15

Mr. Kogan ......................................................................................................... 25

(1)

BUDGETING IN CONGRESS: REFLECTIONS ON 

HOW THE BUDGET PROCESS FUNCTIONS 

WEDNESDAY, JUNE 22, 2005

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON THE BUDGET, 

Washington, DC. 

The committee met, pursuant to call, at 10:01 A.M., in room 210, 

Cannon House Office Building, Hon. Jim Nussle (chairman of the 

committee), presiding. 

Members present: Representatives Nussle, Crenshaw, Putnam, 

Diaz-Balert, Hensarling, Simpson, Bradley, Spratt, Moore, Edwards, Baird, Cooper, Allen, Case, Cuellar, and Kind. 

Chairman NUSSLE. Good morning and welcome, everyone, to today’s hearing on the congressional budget process. 

Some of you may feel like this is Groundhog Day—it is. We welcome back those true warriors in the effort to reform the budget 

process and am pleased that we have several experts to participate 

in today’s hearing. 

First, former Congressman and former ranking member of this 

committee back when the Republicans were in the minority, Bill 

Frenzel from Minnesota. Who was well-known in his time here for 

his expertise in a wide range of issues and particularly for his 

knowledge of the budget process in terms of history and context as 

well as policy and even the practical politics of what has to happen. 

Bill, welcome back. 

We also have Professor Allen Schick, who was actually involved 

in the development of the Congressional Budget Act and has since 

written some of the most perceptive analysis on the history and 

context of the congressional budget process that you can find. 

Finally, Richard Kogan, who is well-known as a fierce partisan 

but also very capable and expert in the budget process and for his 

commitment to the integrity of that process. We welcome him back 

as one of the most knowledgeable individuals in the field. 

We welcome all of you to the committee. 

Every few years or so, we hear from a handful of experts on the 

congressional budget process and most of these experts will say 

that the process has completely fallen apart or it has lost its usefulness, it is irrelevant, and some might even say it is dead. Of 

course, these declarations tend to be more frequent in those years 

when we have missed the deadlines, run past the speeding limit 

signs, lump several appropriation bills into one big omnibus package, or certainly when one of the Houses of Congress has failed to 

even pass a budget. 

2

In fairness, I don’t think anyone, myself included, would argue 

that the budget process is perfect or it works perfectly through 

every step of the overall process every year. But I do think most 

would agree that, while admittedly in some years more than others, it has served as a critical tool for Congress over the last 30 

years. 

So before we get too far into the myriad discussions I know are 

ongoing on how we might reform the congressional budget process, 

I thought it would be a useful exercise to kind of step back and 

take a comprehensive look at the current process. These include 

various aspects and implications both for policy and in practical operations of the Congress, why we have the process, and why we 

need it in the first place. 

The Budget Act of 1974 for the first time gave Congress an actual process for budgeting rather than a series of piecemeal responses to Presidential spending requests. It empowered Congress 

to set its own priorities which heretofore, prior to the 1974 Budget 

Act, really was not something Congress had determined in its 

macro sense. It empowered Congress to set its priorities, whether 

or not it agreed with the President, and set in motion the policy 

choices that it needed to follow. It gave Congress the means to determine spending by setting a limit on total spending, by directing 

spending to what had been determined as the Nation’s most important priorities, and by the power to enforce the agreed-upon spending limits through points-of-order. 

Of particular consequence this year, the Budget Act gave Congress the means of addressing mandatory spending within the context of an overall budget plan. 

So, in short, the Budget Act empowered Congress to control the 

purse by determining its own priorities, policies, establishing a systematic means to organize its decisions, set policy goals, and combine all of this into one blueprint, the budget. This was done to 

guide Congress throughout one of—not only the coming fiscal year 

but, for that matter, into the future. 

Let us take this year as an example. We have got appropriation 

bills moving through the House at a record pace—it is nice that we 

are setting this so-called record pace; it is too bad that that doesn’t 

happen more often. For the first time since President Reagan was 

in office, we are providing for the most critical priorities first, with 

an actual reduction in many nonsecurity discretionary spending 

programs. 

At the same time, we have got eight different authorizing committees working; talking; and considering having hearings on reform for the actual mandatory spending programs that are looking 

at actual savings and reform proposals. They are working in as 

challenging an area as Medicaid and also looking to strengthen our 

Nation’s defined benefit pension. All of this was laid out in a budget process. 

While in the interest of reform, this did not start there in every 

case. It is the budget that really has given the work of reform a 

much-needed push or calendar, if you will, and set a schedule for 

determining to tackle some of the Federal Government’s biggest 

challenges in the coming years. 

3

This year is far from over, and we have got a lot of difficult work 

ahead. But as far as the budget years go, so far, I would say, so 

good and so much for the claim that the budget process is dead. 

All of that being said, I will be the first to admit that things 

don’t go this smoothly every year; and the year is not over yet. But 

it is particularly important, I think in those years when Congress’s 

priorities might not be as clear or its will as strong, that we need 

a strong, solid budget process to keep us headed in the right direction. 

As I noted a moment ago, there are various discussions going on 

generating enormous ranges of ideas on how the budget process 

could or should be reformed. With suggestions ranging from adding 

a point-of-order here or there or scrapping the whole thing and 

starting over. I would guess that every member of this committee 

has at least one idea that they feel must be included in order for 

the definition to suggest that we have reformed the budget process 

successfully. 

It is no secret that I have my own ideas on the right way of doing 

it, the correct way of proceeding, and I could easily round up a 

group of like-minded witnesses to tell us how great my ideas are. 

But, as I am sure you will gather from our panel today, that is not 

what I did. I genuinely believe that it is in all of our best interests 

to ensure that we not only have a solid grasp of what we have already done, but we also need to keep an open mind about what we 

actually need before we start making decisions on how we should 

change it. 

So I want to stress once again that the purpose of today’s hearing is to really take a comprehensive look at the budget process. 

This is about how we use it to make decisions, not about the decisions themselves. Again, it is about the rules that we go through, 

not how those rules are applied to actual substantive or policy decisions. 

How does it help us determine priorities, set agendas, guide Congress’ work throughout the year? Why do we have it? Why do we 

need it? In a big-picture sort of way, is it working, or why not? I 

think that is the critical, important discussion, in and of itself; and 

it is a much-needed step if we are going to lay the groundwork for 

budget process reform. 

While I have no doubt that members might be tempted to use 

their time to tout their own personal ideas for specific reforms. I 

will ask that members of the committee try and recognize the importance of having this broad 30,000-foot discussion first before we 

turn to some of those specific proposals, and I will try and do that 

as well. 

With that, I would just welcome our panelists and look forward 

to a good discussion for those of us that are interested in this topic 

and turn to my friend, Mr. Spratt, for any comments he would like 

to make. 

Mr. SPRATT. Thank you very much, Mr. Chairman; and thank 

you in particular for calling this hearing and for selecting this 

panel. If we wanted variety and vigor of ideas, depth of experience 

and perspective, we couldn’t have a better panel than the panel before us today. I thank all of you for coming and for presenting us 

with some provocative ideas. 

4

For a good period of time in the 1980s and the 1990s, the whole 

notion of budget process was treated with some disdain. That was 

largely because we invoked the idea often, but we never achieved 

its purported objectives, and that is moving the budget from huge 

deficits into eventual balance. Then, in the 1990s, after adopting 

the Budget Enforcement Act of 1990 and 1991, putting some teeth 

in the budget process, we finally began to move toward success and 

in 1998 achieved what was thought unthinkable just a few years 

before: We actually balanced the budget. In the year 2000, we had 

a surplus of $236 billion. 

We have lost that path, and lots of folks are saying—and, in fact, 

one of the most frequently invoked phrases around this town is, we 

are on an unsustainable course, compiling deficits, stacking debt on 

top of debt with no abatement in the near term and no end in 

sight. 

So we ask ourselves, where is the budget process today? If it 

worked in the 1990s—and in looking back retrospectively it appears to have worked. Even Alan Greenspan sat where you sit and 

said, I was a skeptic in 1990, 1991, and 1993. I thought all of this 

was a diversion, sort of a red herring away from the substantive 

subject of what do you cut and where do you raise taxes. But he 

said, looking back, I realize that this was a significant part of the 

successes of the 1990s. 

Nevertheless, we have allowed two of the key budget process 

rules that helped us get where we got in the 1990s, the PAYGO 

rule and discretionary caps, go by the way, expire in the year 2002; 

and we have got a situation right now which the American people 

and Members of Congress have an awfully difficult time defending. 

How do we come to grips with a problem so compelling as a deficit 

of $412 billion that shows little sign of abating over the next years? 

That is the primary concern we have got before us now. How do 

we get our hands around the deficit again and do in the first decade of this century what we did in the last decade in the last century of the 1990s? 

There are other functions or offices of the budget that we pay all 

too little attention to. We haven’t perfected that much since 1974. 

For example, disaggregation is a huge problem with respect to policymaking and with respect to fiscal policy in particular. 

One of the purposes of the budget, it seems to me, budget resolution is to try to give us something so we can keep our eye on the 

ball and determine whether or not we are moving toward our objectives. And that is not just a balanced budget but a budget that has 

programmatic allocations that reflect what we think this country 

needs for education, for health care, for defense, for lots of other 

things. We don’t have with the appropriation bills that we pass 

every year that kind of clear picture of where programmatically our 

resources are being put, and the budget ought to serve that function. 

Secondly, we do very, very little analysis of generational burdens. 

I wonder which generation under existing budget policies is bearing 

the burden and to what extent we are shifting forward the burdens 

of programs that we are passing today. Are we investing enough 

or consuming too much? We ask that all too infrequently in the 

budget process. 

5

So one reason for having a budget process is to force us to focus 

upon these issues: programmatic allocations, investment versus 

consumption, defense versus domestic needs. All of these things we 

need to do in some kind of methodical, systematic way; and, above 

all, we need to do it within the bounds of a sensible and prudent 

fiscal policy that doesn’t stack debt on top of debt and leave our 

children with an enormous amount of debt to bear. 

So the topic before us is of compelling importance, and we look 

forward to your testimony and your contribution to what we should 

be doing, what we can be doing to perfect the budget process and 

to move the budget back toward sensible goals. 

Chairman NUSSLE. Welcome to our panelists again. We will 

begin by welcoming to the committee its former member and ranking member of the committee, Bill Frenzel. Welcome back to the 

committee. All of your testimony as written will be placed in the 

record, and you may all three proceed as you wish giving us your 

best counsel and advice. Welcome back. 

STATEMENT OF THE HONORABLE BILL FRENZEL, GUEST 

SCHOLAR, BROOKINGS INSTITUTION, AND FORMER MEMBER OF CONGRESS 

Mr. FRENZEL. Thank you very much, Mr. Chairman. I served in 

the days of quill pens, and technology is baffling, Mr. Chairman. 

Chairman NUSSLE. Those were better days, I think. 

Mr. FRENZEL. And thank you, Mr. Spratt. I will stipulate that 

both of your ideas are wonderful, and that I am for all of them. 

I was here when the Budget Act was adopted. I guess I am one 

of those persons who has always been a skeptic, and I was at the 

time. 

As I look back on it, there was, you know, a variety of intents 

and purposes being laid upon the Congress. As you know, congressional intent is very difficult to determine. Those people who drafted the bills and shepherd them through the Congress had one set 

of intentions. There were plenty of resisters. They had different intentions. There were latecomers with their intentions. Eventually, 

the bills were passed with overwhelming majorities. 

Most of the people that voted for them hoped that they wouldn’t 

ever amount to anything. Those people who drafted the bills hoped 

that they would be able to improve them in the future. But their 

achievement in passing it in the first place I think dwarfs anything 

that has been by those of us who have followed. I think we would 

do them greater honor if we could make more frequent alterations 

in the budget process and try to take the process in the direction 

that at least the drafters intended, whether the rest of the members did or not. 

I think most of you at least know of the history of impoundments 

and the congressional reaction to the impoundments of Presidents 

Johnson and Nixon. Really that is what drove the budget through 

the Congress, although the drafters had much broader ideas than 

simply stopping impoundment. 

The trouble that we got into right in the beginning was that a 

number of the budget philosophers at the time were very nervous 

about a new system. Even those who were most enthusiastic about 

the budget were nervous about a new system that would unsettle 

6

what had gone before. And so, early on, the concept of a baseline 

was conceived. 

As we talk about Congress actually setting priorities, which was 

one of the statements in the committee’s paper, or taking a comprehensive approach, the baseline, of course, drives you to do what 

you did last year. And while the Congress has been able to make 

changes, particularly beginning in 1987 running down military expenditures and then later building them up again, those changes 

come very slowly. The baseline causes old programs to overwhelm 

new ones, and to establish new programs and new priorities becomes exceptionally difficult. 

Congress wanted to regain the priority setting. They were jealous 

of the President’s powers. But what they gained was simply, in my 

judgment, quite a slavish devotion to last year plus colas and demographics. It is never easy to allocate resources. Nobody ever 

wants to raise taxes very much. So, particularly in times of difficulties, it is hard to establish new programs. 

I think Congress has been keenly disappointed from time to time 

that it hasn’t been able to move priorities, but there are always old 

programs, that need to be funded at ever-increasing levels, that 

stand in the way. 

Also mentioned in your paper is this theory of the comprehensive 

approach to the budget. Well, in those days—I think 1974 was the 

last year where discretionaries still exceeded mandatories—we 

didn’t think a lot about entitlement spending. We thought about it, 

but it didn’t seem to be a huge problem. And while taking a comprehensive look at the budget was one of the alleged virtues of the 

budget process, Congress didn’t think about it that way. 

It simply was not very anxious to take on any of the entitlements. They just wanted to watch them sit there. The real battle 

was over discretionaries. As long as the appropriators were able to 

exert enough influence so that their ability to make allocations and 

choices was not reduced very much, they were able to live with the 

budget. 

For me, the main purpose of the budget process and the Budget 

Act is to control spending. That was, I think, among the least of 

the concerns of the Members of Congress who voted for the Act in 

1974. As a matter of fact, you will recall that we were all Keynesians then, and the Congress used the Budget Act to spend more 

money than presidents wanted to spend. 

So controlling of spending was not a big deal. Neither was enforcement. 

Most of the people that I talked to at the time prayed that reconciliation would never be used. Most of the people I talked to did 

not understand what the budget was, and I will have to admit I 

didn’t. 

But having tried reconciliation in 1980 and not having committed 

suicide, the Congress entered into it in 1981 in a big way. The 

other enforcement tools of the caps and PAYGO of 1990, that Congressman Spratt referred to, were great improvements, But now 

they have been allowed to expire, and there is not a lot of enthusiasm to get them renewed. 

It is a fact that Members of Congress would like all these enforcement tools to be renewed—just as soon as each one gets his/

7

her most recent bill passed. Then the enforcement will block other 

Members’ spending and tax cuts. 

There are a lot of tools available, but they need to be kept enshrined in the law. We haven’t done a terribly good job of that. 

I have already mentioned entitlements, but I need to say again 

there is the same reluctance today for Congress to really look at 

them. We just let them slide forward. there is nothing wrong with 

the Budget Act in this regard. We look at them, we wave at them, 

we bless them, cry over them, whatever, but there is certainly no 

congressional will to make many changes. We look them over carefully and decide they are just perfect the way they are. 

The one thing that is mentioned in the committee paper where 

the Budget Act had a much greater effect than anyone believed is 

the idea of setting the congressional agenda. I think the drafters 

of the Budget Act would be aghast at how much the budget dominates the congressional calendar. I am surprised myself. Mostly, we 

pass a budget, break our neck to do that sometimes, and then we 

pass appropriations, and then we rest and go home. It certainly 

dominates everything we do. 

Well, in conclusion, Mr. Chairman, Mr. Spratt, and members of 

the committee, the drafters, in my judgment, talked about all these 

great benefits, and political scientists and economists have found 

many more that the Budget Act can do, but I don’t think that was 

the general purpose in the Congress for passing the Act. However, 

now that you have it and you find that it can do these extra things 

for you, I think it needs to be improved from time to time. 

I have come before you with lots of specific suggestions. They are 

spread all over the record of the last 10 years, and I would simply 

reiterate that I think they are all worthwhile. 

Let us go back to the very beginning. The people who drafted the 

Budget Act knew it was weak. They got as much as they could out 

of the Congress. They hoped to get a lot more, and they hoped their 

successors would get even more. I hope that you, as one set of their 

successors, are a lot more successful than my generation, and that 

you make the changes in these laws that are necessary to put the 

good control mechanisms into law, and leave them there. 

Because there is always this strong incentive for Congress to resist order and discipline, and budgeteers will always be struggling, 

often vainly, to keep what I think is a relatively weak budget system in operation. The urge to spend, the urge to cut taxes, the urge 

to get my program—and if I have to be for yours to get mine, we 

can do that, too—is overpowering; and you are the last line of defense. 

I am delighted that there is still some interest in serving on this 

committee. I hope at least some of you are volunteers. I wish you 

great luck and look forward to your questions. Thank you. 

Chairman NUSSLE. Thank you, Congressman Frenzel. 

[The prepared statement of Bill Frenzel follows:] 

PREPARED STATEMENT OF HON. BILL FRENZEL, GUEST SCHOLAR, BROOKINGS

INSTITUTION, AND FORMER MEMBER OF CONGRESS

Mr. Chairman, and Members of the Committee, I am a Guest Scholar at the 

Brookings Institution, but this testimony is my own and does not represent any position or conclusion of the Brookings Institution. 

8

It is true, Mr. Chairman, that I was a Member of Congress when the Budget and 

Impoundment Act of 1974 was passed. However, I was then a very junior member 

of an oppressed minority, so I cannot take any credit for being a mover and shaker 

in the development of the Act, although I tried to be. In fact, I was an interested 

observer, whose recollections grow ever more dim with each passing year. 

As is true with every enacted bill, congressional intent, like truth, resides in the 

eyes of all the beholders. There are many different interpretations of intent. I will 

try to describe what I thought was intended with reference to the Broad Perspectives laid out in the Committee’s statement of Hearing Purpose. Some of my impressions were gained at the time, and some came in later discussions with members 

who I thought were among the principal drivers in the House, notably Dick Bolling 

for the Democrats and John Rhodes for the Republicans. 

SETTING PRIORITIES

The conditions under which the Budget Act arose were dominated by the Congress’ desire to overcome the Presidents’ use of the implied power of Impoundment. 

Presidents Johnson and Nixon had made heavy use of impoundment, and members 

were enraged that money for their transportation projects had been stopped, especially to be used in carrying out military actions that many opposed. 

That feeling set the tone for much of the discussion about ‘‘Congress’ need to set 

its own priorities’’. The frequent battle cry was that Congress, possessor of the constitutional Power of the Purse, needed to reestablish its primary role in setting national priorities. Congress had an appealing rationale for battle it knew it could win 

against a weakened President. 

Parenthetically, I will add here that Congress has made little use of the Budget 

for priority setting. Part of the reason was that a number of early Budget philosophers, prominently Senator Ed Muskie, insisted on using baselines tied to existing 

programs, plus COLAs, plus demographic changes. Once the baseline theory was set 

in concrete, it became almost impossible for new programs to compete with old ones. 

Presidents could occasionally push through new initiatives, often with the help of 

friendly Congressional majorities. Congress could modify them, but it could seldom 

inaugurate new programs of its own. The old programs, escalated, claimed all the 

resources. Particularly in times of fiscal difficulties (most of the time), there were 

simply no funds for worthy new programs and projects. As long as the budget is 

tied to the baseline, it will be hard for the Congress to alter priorities, and impossible to budget for outcomes. 

If Congress really wants to play in the priorities game, it has to find a way to 

liberate itself from baselines, and from the continuing domination of old programs. 

If you can’t change the baseline, you can’t change priorities. Congress has been reluctant to change either one. 

COMPREHENSIVE APPROACH TO BUDGET

In the early 1970s, there was a growing realization inside and outside of Congress, that, unlike the Executive Branch, Congress had no way to develop an overall 

Budget plan. Congressional spending was merely the cumulative result of individual 

pieces of legislation, each passed without much reference to any of the others. It was 

already obvious then that there was no framework for Congress to establish a general fiscal policy. 

Many people in Congress who commented on the Act through its development 

made mention of the need for a comprehensive approach to the Budget. How could 

Congress set priorities rationally unless all spending could be reviewed at once? But 

most of them were thinking about spending in a different way than we do today. 

1974 was the last year in which Discretionary Spending was greater than Mandatory Spending plus Interest. Most people who mentioned the ‘‘comprehensive approach’’ were thinking of discretionary spending, rather than mandatory. 

Then, as now, appropriators were suspicious of the process, and believed that they 

could provide whatever comprehensive approach might be needed themselves. They 

insisted that the Budget Act not shift their traditional control of allocations to others, especially the Budget Committee. Appropriators were strong then, and they prevailed, but they are even stronger now because directed spending on ‘‘earmarked’’ 

projects has become the rule rather than the exception. 

However, appropriators may look at this question differently now. They may have 

a different set of incentives. Their traditional bailiwick, discretionary spending, has 

grown (too fast in my opinion), but much less swiftly than mandatories. When Entitlement and Interest are combined, nearly 2/3 of spending is mandatory now, and 

it has become the growth engine for spending. The appropriators’ 1/3 of spending 

is getting squeezed further each year. The comprehensive approach to Budgeting 

9

might be a bit more attractive to them now, as a potential tool to protect their discretionary spending. They have few other defenses against the rapidly rising 

mandatories which are consuming resources formerly dedicated to discretionaries. 

Certainly, for Budget observers, insulated from jurisdictional disputes within the 

Congress, the huge, impending deficits are a powerful argument in favor of the need 

to look at everything before making judgments on anything. 

CONTROLLING SPENDING

In 1974, Republicans were especially concerned about controlling spending and 

eliminating deficits (that was then). The country had endured only 4 years of deficits, and deficits did not extend into the future ‘‘as far as the eye could see’’. But, 

wailing about deficits and spending has always been an important minority function, and Republicans were in the minority at that time. 

Democrats were less interested in this aspect of Budget Process. We were ‘‘all 

Keynesians’’ then, after all, and the majority was much more interested in stimulation, and, to a lesser extent, priorities, and than in control. In fact, in its early 

years, the Budget Act was used by the Democratic majority to increase spending 

above that requested by Republican Presidents. House Budget Committee members 

used to insist on putting new projects by name into Budget Resolutions, or at least 

into the Committee language that accompanied the Resolutions. Those attempts did 

not always survive the scrutiny of the gimlet-eyed appropriators, but they were a 

hallmark of the Committee in the 1970s. 

Over the years, Congresses have wrestled with the notion of using the Budget to 

control spending and deficits (which to me is supposed to be the real purpose of the 

whole exercise), but the struggles seldom came to any good conclusion. We can all 

toll the litany of failed attempts, but I won’t do it here. For now, let it suffice to 

note that, in my judgment, the only control features that were other than sporadically successful, were the discrete caps and the PAYGO features of the BEA 1990, 

and an occasional Reconciliation Bill. 

There are many other suggestions for control, some of which may be effective that 

may be effective, but this Committee well how tough it is to amend the Budget Act, 

so we may never experience them. For my part, I am convinced that if the Budget 

Act, or the Budget process, cannot help Congress control spending and deficits, its 

other functions are probably not worth the time, effort and money that we are currently investing in it. 

Nevertheless, I am aware of the fact that the Budget Act’s ‘‘Framers’’ were very 

careful to see that the Act did not seek a specific policy outcome regarding the deficit. Their intent, I believe, was to assert the role of Congress in setting fiscal policy 

and priorities rather than to dictate what the policy should be. I believe that they 

either overestimated Congress’ fiscal sobriety, or underestimated its fiscal inebriation. Either way the Act was too permissive. Had it been written at the end of the 

1980s, in a period of despair after 20 years of deficits, it might have contained a 

heavy anti-deficit thrust. 

In 1974, I said on the floor of the House that the Act ‘‘Won’t guarantee a balanced 

Budget, even though it makes balanced Budgets more attainable’’. I got the first 

part right, and the second, wrong. 

ENFORCEMENT

Few elements are more basic to Budget systems than enforcement. Under the 

Budget Act, Congress has tried, in several different ways to enforce its Budget, but 

the results of the enforcement mechanisms used, described charitably, have been 

mixed. 

In 1974, many important Members of Congress expected that the Reconciliation 

Process might never be used. Most hoped it would not. In 1980, Congress tried it 

for the first time, and survived. So the process was not an unknown when it was 

employed in 1981 with reasonable effectiveness to impose spending reductions suggested by President Reagan. Naturally, the Congress, authorizers, taxers, and appropriators alike, hated the experience. 

Not the least of the complaints was that the Congress was obliged to use its own 

process to enact, not its own priorities, but those of the President. And that, of 

course, happened again in the 1993 with the Clinton Economic Agenda, and in 2001 

with the Bush Tax Cuts. On the latter two occasions, the Congressional majority 

was of the same Party as the President, so complaints were noticeably fewer. 

The experiments with Gramm-Rudman-Hollings sequesters were exciting, but 

there was precious little enforcement. Whenever a sequester threatened, the Congress found a way to dodge the bullet. I suspect that this will always be true beVerDate 0ct 09 2002 15:43 Aug 19, 2005 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6621 F:\DOCS\HEARINGS\109TH\109-8\HBU173.000 HBUD1 PsN: DICK
10

cause ultimately Congress cannot, and usually will not, be bound. Stated another 

way, Congress can’t even keep it promises to itself. 

Even the Spending Caps and Pay-Go systems can ultimately be defeated, waived, 

ignored or allowed to expire each time Congress finds, as it inevitably does, that 

spending needs are compelling, or tax cuts are irresistible. My notion here is that 

Congress should build as many of these enforcement mechanisms as possible into 

the Budget process, with the hope that some of them may help sometime, but with 

understanding that all together they will seldom be helpful in controlling spending, 

or in enforcing Budgeteers’ dreams. 

ENTITLEMENTS

Entitlements were large and growing in the early 1970s, but Congress did not see 

them as a problem. The Budget Act did provide a regular opportunity for Congress 

to review the growing entitlement programs, but few people in 1974 harbored any 

inclinations about making changes or even doing any real oversight. Later Congresses had similar feelings. Today entitlement review has seems even less appealing. 

The ‘‘third rails’’ of Social Security and Medicare have proved highly resistant to 

oversight and change. Congress was willing to make many small adjustments to reduce Medicare expenses in the 1980s, but none of them were important in the cosmic scheme of things. The big changes have all been increases. 

Without the Budget Act, there is no way to make Congress address the Entitlement programs unless the country runs out of money. But there is no immediate 

prospect that Congress will use the Budget Process to take a serious look at the two 

big entitlements, or any other ones, either now or in the near future. 

Review of entitlements ought to be mandated. Sunsets would help. But, whatever 

the rules, there is little reason to believe that Congress would want, or dare, to take 

them on. The Budget Act gave Congress a way to tackle them, but Congress would 

prefer not to do so until and unless the bankruptcy conditions of Social Security 

in1982 and 1983 are reproduced. 

CONGRESSIONAL AGENDA

I would be very surprised if the people who worked on the Budget Act of 1974 

had any idea that it would so dominate the Congressional agenda. Setting that 

agenda and work plan is one thing the Budget Act has accomplished. There have 

been some years in which the Congress works on little else but the Budget and the 

Appropriations Bills that flow from it. When no Budget is passed, Congress just 

gulps and then revs up the spending machine. 

Much of the criticism of the Budget process is that it has overwhelmed the legislative process. To me that is a positive development. The budget provides coherence 

and order to the process. The legislative process needed some order and discipline. 

Prior to 1974, each committee worked on whatever it felt like working on, unless 

the majority leadership could persuade it to handle pressing issues. The result was 

not exactly whimsical, but neither was it in any sense orderly. 

Today, committees may feel that they would like to get out from under the Budget, but at least there is some system and plan than governs their actions. I don’t 

believe that this was expected in 1974, but it is the one way in which the Act has 

had a real effect on the Congress. 

CONCLUSION

In general, I have to celebrate the courage and success of the ‘‘framers’’ of the 

Budget Act. They were visionaries who wanted a stronger law, but produced the 

best one possible in the environment that existed in 1974. They were astonishingly 

successful, given the conditions prevailing at the time. 

The Act was passed by a majority of Members of both Parties, many or most of 

whom hoped that it represented the least change that could then be accepted. They 

were right. It did not, and could not, produce the results that outside observers expected from a Budget process. 

The ‘‘framers’’ knew it was not enough, but they hoped it could be developed 

through later years. It is the fault of those of us who followed that the Act has not 

been improved significantly. Like all organizations, the change-resistant Congress 

avoids risk and stays with processes and jurisdictions it knows, and likes. 

Of the things we would like the Budget to do—restore Congressional control, set 

priorities, control spending, enforce limits, address entitlements, and set the Congressional agenda—only the last has been realized. To achieve the other purposes 

of Budgeting, substantial changes must be made in the Budget Act. But even more 

11

fundamental changes must be made in the attitude of Congress about its willingness to submit to fiscal discipline.

To set priorities—The majority must be willing to lead, and Congress must be 

willing to take risks. The baseline does not have to be scrapped, but major alterations will be needed from time to time. 

To control spending, and enforce Budget limits—Control and enforcement mechanisms are available. Congress has to enshrine them in law, and use them. 

To review entitlements—The Congress could do it anytime, but without a forcing 

event, like bankruptcy or sunset, It probably won’t get done.

Budgeteers have tried for years to do all these things, but every year conventional 

Congressional wisdom easily defeats what seem to me to be desirable changes. It 

will take strong, dedicated, optimistic Budgeteers to stay the course and, ultimately, 

carry the day. I hope there are some left.

Chairman NUSSLE. Professor Schick, welcome back to the committee. We are pleased to receive your testimony. 

STATEMENT OF ALLEN SCHICK, PH.D., PROFESSOR, 

UNIVERSITY OF MARYLAND 

Mr. SCHICK. Thank you very much, Mr. Chairman. I am pleased 

to be here because I was a midwife at the creation of the process 

30 years ago. Like other midwives, what you care about mostly is 

a successful delivery; and you don’t pay much attention to how the 

baby grows up and what it turns out to be. 

But, at creation, what Congress did was to establish a process 

which is like a Rorschach. It can be whatever you want it to be, 

because it does not prescribe any particular budgetary outcome. It 

is an enabling process. The process does every year what Congress 

wants it to do. 

As a consequence of this decision in 1974, the process has turned 

out differently in virtually every year, not only substantively in 

terms of spending, deficits, and revenues, but also in terms of how 

the budget resolutions move through Congress. It changes with 

shifts in the political and economic winds. It moves this way, that 

way, and that is literally what the Budget Act of 1974 prescribed: 

Let the process be what Congress makes of it. 

Now that itself is very hard, because Congress is beholden and 

sensitive to the American people; and our voters are conflicted—

some people would say schizophrenic—on the budget. They want 

smaller government, and they also want bigger programs. The 

budget process, unlike appropriations, unlike revenue bills, has to 

square these contradictions in public opinion; and it is not easy to 

do so. Doing so requires a majority in Congress to pass the budget 

resolution. That has always been the burden of the majority party, 

at least in this Chamber. In the House, the minority party has 

been the loyal and sometimes not-so-loyal opposition to the budget 

resolution; and the majority party has had to twist arms, provide 

sweeteners, promises, and whatever else it takes to enable the 

budget resolution to make it through. 

In some years the budget resolution literally has been the driving 

force in Congress, forming, shaping, defining, and confining the legislative agenda; in other years it has done virtually nothing. Some 

years, it has made all the difference; in other years, none at all. 

Some years, you wouldn’t notice if the budget resolution has not 

passed. 

The difference between the years in which the budget resolution 

has made all the difference and the years in which it has made 

12

none has almost always been defined by reconciliation. When there 

are no reconciliation instructions, the budget resolution merely rubber-stamps what would happen anyway. When there is reconciliation, the resolution has the opportunity to define what Congress 

does in that year. 

The process has gone through four distinct phases over the last 

30 years. 

The first, launching phase, was between 1975 to 1980. Congress 

had reconciliation, but it was an entirely different process than was 

used subsequently. It was a limited process confined to appropriations enacted that year, in that session—it did not work as initially 

intended. 

The problem in this inaugural stage of congressional budgeting 

was what to do about revenue and spending under existing law? 

That was the key problem. Regardless what the budget resolution 

specified, if legislative committees which have jurisdiction over existing law did nothing, then legislative inaction always prevailed 

over budgetary action. In other words, the budget resolution specified the amount of revenues and spending, but what mattered really was what existing law dictated. 

Congress in this first stage from 1975 to 1980 lacked a means 

of changing existing law. That led to reorienting the reconciliation 

process from that year’s appropriations to existing law, thereby 

opening the second stage of the congressional budget process that 

lasted from 1980 to 1990. During this period, reconciliation appeared almost every year in the budget resolution. In some years, 

as Mr. Frenzel indicated, such as 1981, reconciliation had a truly 

significant impact. In other years, reconciliation made only slight 

changes in existing law. But in most of the years of that decade 

there were reconciliation instructions, there was a reconciliation 

bill, and that was an empowering feature for the budget committees and the budget process. 

The third stage occurred during the 1990s, when Congress actually changed the charter of congressional budgeting. In contrast to 

the original concept, which was that Congress could do whatever 

it wanted, whatever the majority voted, the Budget Enforcement 

Act of 1990 tied the hands of Congress through discretionary 

spending caps and PAYGO rules. The budget process was turned 

into a means of implementing the pre-made decisions of the Budget 

Enforcement Act of 1990. That was the period, as Mr. Spratt indicated, that the budget process turned deficits into surpluses. 

Once the surplus arrived, Congress changed its behavior, not 

only Congress but the President certainly as well. The BEA (Bureau of Economic Analysis) rules remained the same; they lasted 

until 2002, but enforcement of those rules withered with the arrival of budget surpluses. Both Congress and the President found 

means—such as emergency legislation, advanced appropriations, 

and other tricks of the trade, to spend more and tax less, while pretending to live within the rules. 

The final current stage, began in 2001 with disabling and then 

expiration of the BEA rules and use of reconciliation almost entirely exclusively for revenue legislation and, as the committee 

members know, for cutting rather than increasing revenues. 

So these are the four stages of the budget process. 

13

Looking back at them, we can draw half dozen conclusions about 

what the process has accomplished; my bottom line is the budget 

process has changed Congress more than it has changed budgetary 

outcomes. 

First, it has contributed to elevated partisanship and conflict. I 

am not going to claim that the budget process is the sole reason 

for this escalation of conflict. Polarization in Congress between the 

two parties has many causes. But clearly the fact that Members 

are voting on the budget aggregates, especially the surplus or deficit, and are voting on whether to cut the deficit by trimming 

spending or by boosting taxes, has fueled political strife. These are 

great divides between the parties. They are things that Democrats 

and Republicans fight about, in contrast to line items, which are 

things you deal with in appropriation bills. 

Notice the different voting patterns on appropriations and budget 

resolutions. Budget resolutions squeak through with few votes to 

spare, with the minority voting against and the majority hoping 

that it does not have too many defections. In contrast, many appropriations bills pass by lopsided majority. There is something in an 

appropriation bill for just about everyone. 

Since my task today is not to make any specific recommendations, I am not going to recommend that we turn the budget resolutions into a vehicle for earmarks. But if you did, Congress would 

pass different budget resolutions that would have both parties’ fingerprints on the final version and might even pass by a vote of 410 

to 19, something like that, everybody would regard the budget 

process as a success. 

Second, the budget process has led to an enlarged role of party 

leaders. Again, there are other factors at play, but the role of party 

leaders in this Chamber and in the Senate is far greater on substantive matters, on actual revenue and spending decisions today 

than it was three decades ago. 

At the start of the process 30 years ago party leaders concentrated on counting and corralling the votes. Today, they cut 

some of the major deals, and dictate some of the major terms of the 

budget resolution. We have had in this committee and in others as 

well a transfer of legislative power from committees and their 

chairs to party leaders. 

Third, echoing what Mr. Frenzel said: In some sessions, budgetrelated measures have crowded out other legislation. The great losers in the budget process have been authorizing legislation and 

their committees. The volume of free-standing authorizing legislation has significantly dropped over the last 30 years. In some years, 

one can count on the fingers of a hand the major pieces of authorizing legislation that have made it through Congress. There are 

factors other than the budget resolution which account for this 

trend; the most important is recourse to omnibus legislation, including omnibus reconciliation bills. 

Fourth, House/Senate differences have become more pronounced, 

particularly in recent years, and these have been the main factor 

in some years that Congress has failed to complete action on a 

budget resolution. On many matters, the House and Senate are 

pulling in different directions. Maybe I should phrase it a little differently. The majority party of the House and Senate are pulling 

14

in different directions, and that has complicated passage of a budget resolution. 

Fifth, in some years, scoring has swallowed up the budget process. It would not be an overstatement to say that congressional 

budgeting has turned mostly into a scoring exercise, and that has 

elevated the importance of baselines. It The Congressional Budget 

Office, CBO, has become the high priest, so to speak, of the scoring 

process. It has created a cottage industry on Capitol Hill and in the 

K Street corridor on how you structure legislation to get the score 

that you want. Provisions are phased in or then sunseted, backloaded, or front-loaded so that CBO produces the score that you 

want. This practice is highly damaging, I believe, to the legitimacy 

of congressional budget process. I don’t have a solution for it, but 

basically we have empowered the scorers of the process, rather 

than the makers of policy. 

That leads to my next point, which is that baselines are not neutral ways of counting budgetary matters. They have exerted a 

strong influence on budgetary outcomes. Mr. Frenzel noted in his 

statement that the baseline has reinforced the innate 

incrementalism in the process and made it more difficult to change 

programs. I believe that baselines have had an even stronger influence; they have made it more difficult to cut spending. It is as simple as that. 

The Medicaid issue in this year’s budget resolution illustrates 

how baselines affect budget decisions. Suppose the headlines in the 

papers would have read that over the next 5 years, annual Medicaid spending will rise by more than $100 billion. Cutting it would 

have been much easier. As a matter of fact, the governors have 

come up with a plan to cut more than the $10 billion than the 

budget resolution specified. But because the baseline builds in 

spending increases, it is exceedingly difficult to cut $10 billion. As 

you know, the task is much more complicated in the Senate than 

in this Chamber. The construction of the baseline may be neutral, 

but use of the baseline is rarely neutral in congressional budget 

outcomes. 

Because of the prominence of scoring, even in years that the 

budget process has languished in Congress, CBO has flourished. 

CBO and the budget process were created in the same law, but 

CBO is always high on the pedestal. I described it a little while ago 

as the high priest of congressional budgeting. It does the score 

keeping; it maintains the baseline. CBO has performed these tasks 

with integrity, with professionalism, but it is wrong in denying that 

it is a player in the process. 

Finally, the budget process has strengthened the President’s capacity to influence congressional decisions. I recall the scene on the 

floor of the House in 1973 and 1974 where Members of Congress 

described the new process as a declaration of budgetary independence from the President. Things have not worked out that way. The 

budget process has given the President a cordon sanitaire to move 

his priorities and his programs through Congress. That has largely 

been done through the reconciliation process. Most reconciliation 

bills reflect the demands of the President on Congress. 

In one way, reconciliation itself has been a powerful tool of Congress, in one other way a weak or inadequate tool. It is weak in 

15

that reconciliation is almost entirely a means of changing the financing of programs, but not substantive policy. 

Let us take Medicare, which has been the most reconciled program over the last 20 years. There have been thousands of changes 

to Medicare enacted in reconciliation bills. Almost all have been financing changes, such as adjustments to the premiums under part 

B, and adjustments of payments to providers. But with the exception perhaps of 1997, when home care was significantly changed 

under the reconciliation legislation, the programmatic structure of 

Medicare has remained intact. 

Now there is a reason why reconciliation cannot itself change 

programs, and that is because its time frame is too abbreviated. 

The typical reconciliation instructions give committees only a few 

weeks to recommend legislation that meets the require ‘‘score.’’ So 

the inevitable incentive of committees rescoring to reconciliation is 

to find financing changes that satisfy the reconciliation instructions. Committees don’t have the leisure, the incentive, or the opportunity to take a hard, deeper look at the program and decide 

how it should be restructured. 

That is not necessarily a criticism of reconciliation. Because if 

reconciliation were able to drive those deeper changes, then indeed 

it would shape not only the agenda of Congress but its legislative 

output as well, and I think that would be an undesirable concentration of legislative power and activity in a single process. 

So here we have it, Mr. Chairman. Congress has been living with 

the process for 30 years. Thirty years ago, the question was, will 

it survive? Today, the question is, is it worth surviving? 

Thank you. 

Chairman NUSSLE. Thank you, Professor Schick. 

[The prepared statement of Allen Schick follows:] 

PREPARED STATEMENT OF ALLEN SCHICK, PH.D., PROFESSOR, UNIVERSITY OF

MARYLAND

Mr. Chairman, it is a pleasure to testify at these hearings and to provide historical perspective and reflections on the evolution of the congressional budget process 

during the past 30 years. Having been a midwife at the creation of the Budget Committees, I recall the heady optimism of the early years of the new process, and have 

witnessed the ups and downs of congressional budgeting over the years. In fact, the 

concluding chapter of one of my books was initially labeled ‘‘The Manic-Depressive 

Budget Process’’. Of course, the editor objected that people are manic-depressive, not 

processes. My reply was, ‘‘You obviously haven’t observed congressional budgeting.’’

Congressional budgeting is a somewhat different process every year because fiscal 

and political conditions vary from 1 year to the next. One year, fiscal austerity is 

the dominant sentiment, another it is to finance the unmet needs of the American 

people. One year, Congress and the President have the same budget priorities, the 

next they diverge. The outward shell of the process—a concurrent resolution on the 

budget—has persisted through three decades, but the way Congress uses its budget 

tools has changed. Looking back at the history of this Committee, one can identify 

four distinct phases of congressional budgeting. The first stage inaugurated the 

process and established budgeting as an ongoing responsibility of Congress. The second added reconciliation and targeted deficit reduction as the number one priority. 

The third saw congressional budgeting enveloped in preset rules, the Gramm-Rudman-Hollings laws of 1985 and 1987, and the Budget Enforcement Act of 1990. The 

current state sees congressional budgeting principally as a vehicle for reconciliation 

and for adjusting annual spending limits. Each state has left imprints on congressional budgeting; today’s process is an amalgam of developments over the past three 

decades. 

(1) Getting Started (1987-80). The first stage was characterized by the building 

of new budget institutions and the adoption of budget resolutions as an expression 

of congressional independence from the President and its responsibility for budget 

16

policy. The new process did not dictate any particular budget outcome. It did not 

require Congress to balance the budget, nor did it prescribe revenue or spending levels. It permitted Congress to take any action a majority wanted, provided it acted 

within the framework of the budget process. The architects of the Congressional 

Budget Act assumed that a responsible Congress would require the Federal Government to operate within its means. But this aspiration was dashed by the economic 

adversities which coincided with the launch of congressional budgeting. 

Party line voting emerged early in the House. The very first budget resolution it 

produced (for fiscal 1976) squeaked through 200-196. The majority party carried the 

full burden of corralling enough votes to get the resolution through, with almost all 

minority Members voting against adoption. majority party leaders intervened to assure passage, but their main role was to persuade recalcitrant Members to back the 

process, even if their main role was to persuade recalcitrant Members to back the 

process, even if they didn’t approve of the policies expressed in the budget resolution. This was not an easy chore, for adopting the resolution meant that the majority party—the Democrats in those days—had to vote for chronic budget deficits. 

They had to do so at least two times a year because the original Budget Act provided for both a Spring resolution before appropriations were considered and a Fall 

resolution, after appropriations bills were enacted. 

During the early years, the Senate took a bipartisan approach, with Democrats 

and Republicans joining ranks to support the nascent Budget Committee. This show 

of support enabled the Senate Budget Committee to challenge other committees 

when they disregarded the policies set in the budget resolution. Yet the new process 

had one fundamental weakness: it did not regulate the revenues or spending generated by existing laws, even when these amounts varied from the levels specified 

in the budget resolution. Legislative committees frequently thwarted the budget 

process by doing nothing. Legislative inaction triumphed over budget action. 

(2) Budgeting with Reconciliation (1980-90). In 1980, Congress responded to this 

problem by redeploying the reconciliation process. As envisioned in the Budget Act, 

reconciliation was to come into play in tandem with the Fall budget resolution. It 

would adjust amounts in appropriations and other measures that were at variance 

with the levels set in the budget resolution. Because of its narrow scope, reconciliation was limited to 20 hours of floor time in the Senate. This form of reconciliation 

proved unworkable, for it was impractical for Congress to roll back expenditures 

that it had approved only weeks earlier in appropriations bills. 

Congress transformed reconciliation in 1980 by attaching it to the first rather 

than the second resolution, and thereby reoriented it from dealing with that years’ 

legislation to dealing with revenue and spending under existing law. The budget 

resolution came to be regarded as a key instrument in combating high budget deficits. Congressional independence receded in importance, and the President gained 

a powerful tool for influencing legislative action. In 1981, Ronald Reagan adroitly 

used reconciliation to reshape Federal tax and spending policies. 

Reconciliation boosted the budget process, but it alarmed many other legislative 

committees which were concerned that it would empower the Budget Committees 

to dictate what they did. The chairs of almost all House committees voiced their opposition to reconciliation in an open letter to the Speaker. Over time, however, many 

committees came to view reconciliation as a vehicle for legislation that could not be 

passed in free-standing bills. The Senate responded to this tendency by adopting the 

Byrd Rule, which limits the types of provisions in reconciliation bills. It is a complex 

rule that Senate conferees often use to their advantage in resolving differences in 

reconciliation bills passed by the two chambers. 

Shifting reconciliation to the first budget resolution rendered it useless for Congress to adopt a second resolution, and this measure was discarded in amendments 

to the Budget Act. Reconciliation (and other factors) spurred Congress to lengthen 

the time horizon of the resolution. Initially set at only 1 year, the time frame was 

stretched to 3 years, then five, and after several adjustments to 10 years. This time 

frame has become the standard used by CBO in constructing baseline budget projections. 

Reconciliation probably contributed to political polarization in Congress, especially 

in the Senate which previously has bipartisan cooperation on budget resolutions. 

Reconciliation was used to make major changes in revenue and spending policies, 

matters on which the two parties often disagree. One should note, however, that polarization has been fed by multiple factors, and that it probably would have occurred 

even if Congress had not broadened its budget process. 

(3) Budget Enforcement (1990-2000). The discretionary caps and PAYGO rules enacted in 1990 substituted fixed constraints for congressional discretion. In contrast 

to the original design, which empowered Congress to adopt any budget policy supported by majorities in the House and Senate, the BEA rules restricted Congress’ 

17

power to appropriate and legislate changes in revenue or mandatory spending legislation. With key elements of budget policy fixed in law, the budget resolution came 

to be regarded as a means of facilitating passage of reconciliation bills. In some 

years, the budget resolution was crammed with ‘‘sense’’ of the House of Senate 

statements that had political value, but did not influence legislative action. 

During this period, the budget process was the most important action taken by 

Congress in some years, and among the least important in others. In some years, 

it made all the difference, in others none whatsoever. The budget resolution drove 

the legislative agenda when it contained reconciliation instructions; it merely rubber 

stamped what would have happened even if Congress did not adopt a resolution. 

Through reconciliation, the resolution reshaped budget policy in 1990, 1993, and 

1997. (President Clinton vetoed a 1995 reconciliation bill passed by Congress.) There 

was no reconciliation bill in 1998 and, for the first time since the budget process 

was introduced, Congress failed to adopt a budget resolution. 

Both BEA and reconciliation require Congress to score the budgetary impact of 

legislative actions. In some years, scoring has been the dominant feature of congressional budgeting, impelling committees and Members to configure legislation so as 

to get favorable scores. Some observers believe that scoring has diminished attention to the substantive implications of budget policy; others are concerned that 

budgetary legerdemain has impaired the credibility of the process. Scoring determines the fate of legislation and has made much of budgeting into an arcane exercise. Generations from now, the Medicare ‘‘donut’’ will be a testament to the power 

of the scorekeepers. 

(4) Budgeting for tax cuts (2001- ). Since 2001, the foremost purpose of congressional budgeting has been to facilitate enactment of tax cuts through the reconciliation process. With expiration of BEA, the House or the Senate have used the resolution to cap discretionary spending or to impose some form of PAYGO. 

Differences between the House and Senate have become more prominent in recent 

years, and partisan fissures have deepened. In some years, the two chambers have 

been unable to resolve differences in conference, and have gone their separate ways 

by adopting ‘‘deeming’’ resolutions in lieu of a regular resolution. This device has 

preserved the budget process, but it is a poor substitute for the real thing. The more 

they rely on deeming resolutions, the less incentive the House and Senate have to 

hammer out budget policy that is endorsed by both chambers. There may no loss 

of enforcement when each chamber goes it alone, but there is a loss of legitimacy. 

Over the years, party leaders have become dominant players in congressional 

budgeting. The majority leadership has the burden of producing sufficient votes to 

pass the resolution. The House Budget Committee is beholden to the leadership and 

has less margin for independence than its Senate counterpart. In the House, Party 

leaders cut key deals and dictate many of the terms that produce the votes needed 

for passage. This pattern has spread to other areas of legislative activity, and has 

as much to do with the contemporary structure of the House as with characteristics 

of the budget process. 

WHAT THE BUDGET PROCESS HAS (AND HAS NOT) ACCOMPLISHED

A fair assessment of the budget process must take account of both the objectives 

of the 1974 Act and the transformation of the U.S. economy and Congress that 

began just about the time that the process was launched. Evidently, the process did 

not put an end to deficit spending, nor did it halt the rise in mandatory entitlements. Using these outcomes as measures of budgetary success or failure would be 

unfair because the budget process cannot do what Congress does not want it to do, 

and Congress itself cannot do what voters do not want. Beset by conflicts in Congress and contradictions in public opinion, budgeting has muddled through under 

an implicit contract that the necessary votes will be forthcoming to pass the resolution provided that ongoing programs are preserved. When the needed votes appear 

lacking, the resolution is sweetened by accommodating additional spending. In several recent years, this implicit contract has broken down, because of conflict between the House and Senate or within the ranks of the majority party. 

In budgeting, Congress must navigate through the minefields of public opinion, 

trying to reconcile the inconsistent demands of voters who want both smaller government and bigger programs. The task is easier when the economy is buoyant and 

revenues are trending upward. When these favorable conditions are absent, Congress usually prefers to spare contested programs, even if the result is a bigger deficit. With these overall conclusions as background, let us consider three inter-connected questions: (1) What has been the impact of the budget process on budget outcomes? (2) What has been the impact on the conduct of budgeting, including relations between Congress and the President? (3) What has been the impact on ConVerDate 0ct 09 2002 15:43 Aug 19, 2005 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 F:\DOCS\HEARINGS\109TH\109-8\HBU173.000 HBUD1 PsN: DICK
18

gress, including relations between the House and Senate, the role of party Leaders, 

the overall level of conflict within Congress, and relations between the Budget Committees and other committees? 

Budget Outcomes. The Budget Act empowered Congress to take a comprehensive 

view of Federal revenue and spending; it did so by requiring the House and Senate 

to explicitly vote on total revenue, total spending, the public debt, and the surplus 

or deficit. Before the Budget Act, the totals were merely the arithmetic sums of past 

and current decisions. The totals were not voted, nor were they explicitly taken into 

account when the House or Senate acted on revenue and spending measures. 

Budget totals are an amalgam of old and new decisions. At times, Congress has 

effectively used the budget process to drive policy changes in revenue or spending 

through the House and Senate. In general, the policy changes voted in the budget 

resolution have been more dramatic on the revenue side of the ledger than on expenditures. Major changes in revenue were triggered by the budget resolution in 

1981, 1990, 1993, 2001, and 2004. Smaller changes were driven through Congress 

in half a dozen other years. Some of the changes have boosted revenues, others have 

cut them. While the substantive merits of tax legislative are almost always maters 

that divide the two parties, there can be no doubt that the budget process has facilitated major shifts in revenue policy that might have been more difficult to enact 

if Congress had lacked this device. 

The spending side of the budget has exhibited much more stability. Congress has 

been no more successful than the President in curbing incrementalism in Federal 

spending. Both discretionary and direct spending exhibit incremental tendencies, 

but it is useful to distinguish them in assessing Congress’ control of the purse. 

Through the budget process, Congress has effectively decided the annual amount of 

increase in discretionary appropriations. Aided by BEA rules during the 1990s, the 

budget resolution limited the increase to the amount allowed by the spending caps. 

It is instructive, however, that with the arrival of budget surpluses in 1998, Congress changed its behavior, even though the BEA rules remained on the books for 

another 4 years. Congress, on its own initiative or prodded by the President, accommodated more spending in the budget resolution than BEA provided, using the 

emergency escape route and other bookkeeping devices to stay within the rules 

while breaching them. Budget rules and the budget process made a difference, but 

only when they were reinforced by political will in the executive and legislative 

branches. 

Discretionary spending has been effectively regulated through section 302 allocations to the Appropriations Committee, each of which subdivides available amounts 

among its subcommittees. There is no comparable process for direct spending, almost all of which is accounted by mandatory entitlements which are controlled by 

statutory formulas and eligibility rules. The fundamental difference between the two 

types of spending is that discretionary expenditure requires annual appropriations 

while mandatory expenditures, including increases above the previous year’s level, 

occur even if Congress does nothing. 

As noted earlier, Congress reoriented reconciliation in 1980 to deal with this problem. But while reconciliation has been deployed frequently to change the amount 

spent on particular entitlements, especially Medicare and Medicaid, it has rarely 

been used to change the structure of programs. Most reconciliation-driven changes 

have been financial adjustments, such as increases in Part B Medicare premiums 

and decreases in payments to providers. Reconciliation’s time frame—typically a few 

weeks between adoption of the budget resolution and committee recommendations—

does not allow a serious review of complex programs. 

Entitlements are a significantly larger share of total Federal spending today than 

they were 30 years ago. Most budget projections show their share rising over the 

next 30 years if current law remains intact. PAYGO has been a reasonably effective 

means of regulating new or expanded entitlements; it has had no effect on the incessant rise in spending under existing law. There is a fundamental reason for this, 

which goes beyond the machinery of budgeting to relations between government and 

citizens. Most entitlements are a voluntary surrender of budget control by the executive branch and Congress in order than citizens have strong, credible commitments 

from government that they will receive promised financial assistance when they are 

old, disabled, ill, unemployed, and so on. This tradeoff tells us that in the political 

coin of the United States, protecting the financial security of American households 

is deemed more valuable than upholding budget control. Because this is a political 

‘‘contract’’, it can be undone only when Congress and the President have the political will to change its terms. 

Congress has had occasional success in dealing with deficits, but the evidence is 

that the shortfall must be quite large before it acts. Deficit spending has been the 

norm in 26 of the Budget Act’s 30 years, and it is likely to be the outcome for quite 

19

a few more years. The ill-fated Gramm-Rudman-Hollings laws taught us that Congress cannot control the deficit unless it takes effective steps to regulate revenue 

and expenditures. But Gramm-Rudman-Hollings was not a fair test of deficit control 

because it was not coupled with revenue and spending controls. This may be the 

most effective formula for taming big deficits. 

Not all budget deficits are alike. Some occur when the economy is weak, others 

when it is strong. Some shortfalls are truly small and have no measurable impact 

on financial markets, others are quite large and expose the United States to serious 

financial risks. The fact that the current bout of deficit spending has occurred at 

a time of low (and sometimes declining) interest rates has made it difficult to get 

political leaders to see it as a problem. Moreover, a body of economic literature argues that deficits matter less than marginal tax rates, and that it would be preferable to have a smaller government with a bigger deficit than a bigger government 

with a small deficit. With analysts and political leaders divided on this issue, and 

Americans not yet regarding deficits as urgent, Congress has not paid attention. 

The Conduct of Budgeting. The budget resolution is more than a mere ‘‘sense of 

the Congress’’ resolution, but less than a full-blown budget. Nothing has to stop if 

Congress fails to complete action on the resolution. When it is adopted, as has happened in all but a few years, the budget resolution guides section 302 allocations 

and reconciliation. President Bush has proposed that the budget resolution be enacted as a joint (rather than concurrent) resolution. If adopted, this change would 

make the President a formal partner in Congress’ budget process. The present role 

of the President is informal and political, and arises out of the fact that he can veto 

appropriations and reconciliations bills, as well as other budget-related measures 

passed by Congress. The President already exerts considerable influence on congressional budgeting, and in some years he is the dominant player. The exuberant hopes 

of 1974 that the budget resolution would be a declaration of congressional independence from the White House have been dashed by the realities of American politics. 

Yet, even as a political partner, the President does not get all that he wants. The 

budget resolution impelled Congress to make significant changes in the tax cuts enacted in 2001 and 2004 and in the Medicare expansions enacted in 2003. Formalizing the President’s budget role through a joint resolution is likely to have collateral effects that go well beyond relations between the two branches. One should 

not be surprised if a joint budget resolution were to become a vehicle for other legislation, or if conflict between the two branches would block final passage. 

Congress now has much more budgetary information than it had prior to the 1974 

Act. CBO has become an authoritative, independent source of data and analysis for 

Congress, and scoring has given Congress timely estimates on budget impacts before 

it acts. In budgeting, ignorance is not bliss, but information does not by itself 

change what Congress does. Yet there are instances where the supply of new types 

of budget information has almost certainly changed legislative behavior. Foremost 

is the baseline methodology used by COB to project the revenue, spending or deficit 

impact of pending or completed legislative actions. This is not the place for assessing the baseline’s importance as Congress’ measuring rod, but there can be no doubt 

that the baseline has not been a neutral device. Even though the underlying methodology may be neutral, the uses to which baselines are put are not. 

Timing is a critical element in budgeting, if only because the process recurs each 

year. In some years, long delays in finalizing the budget resolution have allegedly 

held up action on other measures. These delays are often due to conflict within Congress and difficulty faced by the Budget Committees and party leaders in securing 

the votes needed for passage. Inertia has also taken a toll, as have political decisions to defer contentious issues until late in the session. This year’s accelerated 

schedule shows that the House can operate within the prescribed budget calendar. 

Impacts on Congress. The budget process has changed Congress more than Congress has changed the way it budgets. The budget process has contributed to elevated conflict in Congress, while boosting (as already discussed) the role of Party 

Leaders. It also has complicated relations between the Budget Committees and 

other congressional committees. 

Congressional budgeting frames the legislative agenda for each session, compelling leaders to set aside blocks of time for the budget resolution and any ensuing 

reconciliation bill, the various appropriations bills, revenue measures, and other 

budget-related legislation. Nowadays, Congress produces many fewer free-standing 

public laws than it once did. Elevated conflict is the main culprit, but the time demands of congressional budgeting also have crowded out much authorizing legislation. In the contemporary Congress, it may be easier to pass an omnibus bill that 

sprawls over more than a thousand Statute pages and covers dozens of topics, than 

to obtain approval of a bill that pertains to only one subject. 

20

Members of Congress complain about the budgetization of legislative debate; that 

is, defining issues and producing measures in terms of their budget impacts rather 

than their substantive objectives. This complaint may be overstated, but there is little doubt, as I previously suggested, that scoring determines the fate of much legislation. Sometimes, it appears, the score is the only thing that matters, as Members 

and lobbyists vie to get a score that will facilitate passage. By now, insiders are well 

versed in the tricks of the trade, how to adroitly use sunsets (or phase-ins and 

phase-outs) to generate a favorable score, how to show tax cuts as revenue increases 

by front-loading provisions that add revenue and backloading those that subtract 

revenue. I am not criticizing the way the game is played, but I do wish it did not 

have to be played at all. 

It is not hard to figure out that congressional budgeting fuels friction within the 

House and Senate. In most years, most appropriations bills pass by lopsided margins, while the budget resolution makes it through with few votes to spare. Appropriations bills disaggregate spending issues into line items, the budget resolution 

aggregates them into fiscal totals. Democrats and Republicans, liberals and conservatives who disagree on the aggregates often agree on the line items, either because 

they logroll one another or because they favor the spending item. Democrats and 

Republicans do disagree on whether the budget deficit should be reduced by raising 

taxes or trimming expenditures. They cannot paper over these conflicts by layering 

the budget resolution with earmarks, as they do on appropriations bills. 

Escalation of budgetary conflict affects not only the political parties, but relations 

between the House and Senate as well. In some years, the House and Senate passed 

different resolutions and could not patch over their disagreements in conference. 

The deeming resolution mentioned earlier are an artful device that enables each 

chamber to go its own way. 

CONCLUDING THOUGHTS

The budget process has survived because enough Members want it to and because 

the majority leadership invests it with enough support to pull the resolution 

through. This is not the ideal situation for congressional budgeting, but it will have 

to do until the process is redesigned or Members get more enthusiastic. One should 

not expect a reformed process to function much differently than the current one, 

though adorning it with BEA-type rules can lessen conflict by pre-deciding some key 

issues. A Government that takes in and spends more than $2 trillion every year 

needs a budget process to structure and discipline congressional decisions. Having 

a more tranquil process might help a bit, but with so much at stake each year, one 

should not be surprised if the budget process continues to limp along for another 

three decades.

Chairman NUSSLE. Richard Kogan, welcome back to the committee. How many years did you work here? 

Mr. KOGAN. I was on the majority staff for 16 years and the minority staff for 4 years, for a total of 20. But it was the same staff 

in each case. 

Chairman NUSSLE. Well, welcome back to the committee; and we 

are pleased to receive your testimony. 

STATEMENT OF RICHARD KOGAN, SENIOR FELLOW, CENTER 

ON BUDGET AND POLICY PRIORITIES 

Mr. KOGAN. Mr. Chairman, I am very glad to be home. Mr. 

Chairman, Mr. Spratt, it is very nice to see you again. As I said 

to Tom Kahn when I submitted this testimony, I have material in 

here that is bound to annoy virtually everybody, proving my fierce 

bipartisanship. 

I would also like to start with two disclaimers. The first is that, 

while I work for the Center on Budget and Policy Priorities, these 

views are my own and not necessarily those of the Center; and the 

second is that Allen Schick and I did not collaborate on any of our 

testimony but nonetheless reached somewhat similar conclusions. 

21

I would also like to say that I have ignored the request not to 

make recommendations, but I suppose you knew that about me before I was invited. 

I have three main points that I would like to make in my testimony. 

First, the congressional budget process was originally designed to 

make Congress an equal partner with the President when it comes 

to budgeting; and unless you think that presidents are too weak 

and Congress is too powerful, I encourage you to resist the many 

budget process proposals that would strengthen the President and 

weaken Congress. 

Second, the Congressional Budget Act has, probably unexpectedly, allowed presidents to get away with budgets that are incomplete or irresponsible or both. President Bush is especially guilty 

of this lack of leadership, but every recent President has designed 

partially phony budgets and then passed the buck to Congress, 

dumped it in your lap. 

Third, no budget process can force the President and Congress to 

enact deficit reduction. Rather than trying to do that, it is far better to design specific deficit reduction plans—increases in taxes, 

cuts in programs—and then use the budget process to enforce compliance with those plans, to prevent backsliding after those plans 

are implemented. 

OK, I am going to elaborate on these three points. So let me start 

with the first one, the relationship between the President and the 

Congress. 

When the Budget Act was enacted in 1974, its intent was to announce that the President’s budget was not the only game in town; 

Congress could devise and adhere to its own budget plan. Given 

this history and intent, it seems strange to me and probably inappropriate for Members of Congress to deliberately design reform 

plans that would weaken the Congress vis-a-vis the President. 

I am just going to mention a number of ideas that have been suggested in recent years that would have that effect; and if you want 

know more about them, I describe them in my written testimony. 

One that would do this would be an automatic continuing resolution. Another would be a joint budget resolution. A third, in a more 

obscure way, would be the appropriations lockbox. Fourth would be 

biennial budgeting. Fifth would be any combination of line-item vetoes, enhanced rescission, or restrictions on omnibus legislation. All 

of these ideas would strengthen the President and weaken Congress; and my normal question to any of you, regardless of party, 

is why would you want to do that? 

But let us move on to my second point, which could be an answer 

to the question of why you might want to do that. 

My second point is really a question. Has the Congressional 

Budget Act allowed the President to run and hide? History demonstrates that it is very hard to achieve any major deficit reduction 

without Presidential leadership. Congress can’t do it on its own 

when the President is sitting there and saying, ‘‘Oh, I am sorry, I 

am planning to veto your major budget plans for the year.’’ Currently, President Bush is in a state of official denial about deficits, 

and perhaps self-denial as well. 

22

Let me turn your attention to a table which is on page 3 of my 

testimony. This table is taken directly from this year’s Presidential 

budget, but it was in an obscure document that perhaps the President didn’t notice. It shows OMB’s (Office of Management and 

Budget) long-range extrapolations of the President’s own policies. 

And it shows that under those policies the debt held by the public 

would rise from its current level of about 39 percent of GDP to 

more than 100 percent of GDP in 2050 and around 250 percent of 

GDP by 2075. 

Of course, this can’t happen. We won’t allow the United States 

to become basically held by creditors. What this table means is that 

the President’s policies do not lead to an era of surpluses. If things 

are improving temporarily, and they are, it is a temporary improvement while we are still surrounded by a sea of large deficits. 

OK, given this OMB projection, there is an obvious need for longterm change in the fundamental structure of the budget. It seems 

to me that both tax increases and program cuts, programs that are 

dear to the hearts of Democrats and maybe Republicans, and tax 

increases, which are unpopular everywhere, are necessary. There 

won’t be any deficit reduction unless President Bush stops denying 

this reality and starts to scale back both his own spending priorities and his own tax cuts. 

Given the difficulty of deficit reduction, a willingness to negotiate 

directly with the leaders of both parties is probably necessary. This 

is, I think, a fiercely bipartisan statement. 

Well, how does this discussion I have just had of exploding deficits relate to the congressional budget process? In my mind, one 

unintended consequence of congressional budgeting is that by repositioning the budgetary spotlight away from the President and onto 

Congress with the creation Congressional Budget Act and annual 

budget resolutions, the Budget Act has allowed the President—any 

President, all Presidents—to get away with increasingly irresponsible budgeting. 

You have just heard me criticize President Bush pretty heavily 

for his incomplete and disingenuous budget. But President Reagan 

had his ‘‘magic asterisks,’’ unspecified cuts to be proposed at a later 

time. The first President Bush had his ‘‘flexible freeze’’ and ‘‘black 

box,’’ which are two other phrases for unspecified future spending 

cuts. President Clinton frequently employed mechanical formulas 

with respect to his outyear appropriations numbers, which allowed 

him to deny that there was any policy content to those numbers 

while in effect saying, ‘‘Here are future spending cuts which will 

be specified later,’’ the same thing that President Bush and Reagan 

had done before him. And they have gotten away with it because 

the budgetary spotlight has not been focused entirely on the President and the press has not spent its time examining every nuance 

of the President’s budget or every failure of the President’s budget 

but has immediately turned its attention to Congress; what will 

Congress do next? 

To my mind, this ability of the President to avoid the toughest 

decisions has been an unfortunate side effect. I think the Budget 

Act should come with a warning on the bottle that says ‘‘side effects may include loss of Presidential leadership. If this condition 

persists for more than 4 years * * *’’

23

Well, anyhow, the diagnosis poses an obvious question: Has the 

improvement in congressional budgeting been great enough to justify this bad side effect? My answer on balance is very mixed. On 

Mondays, Wednesdays, and Fridays I say, no, history suggests that 

good public policy is not the necessary result of the Congressional 

Budget Act. So, therefore, I am not so sure that there is really an 

improvement in congressional budgeting to counteract the loss of 

Presidential leadership. 

The Budget Act has given a determined majority more tools to 

get its way on budgetary matters. It has allowed more coherent 

budget plans to be concocted and enacted. The Budget Act has 

helped strengthen the leadership and weaken all other committees. 

The Budget Act has helped diminish the role of individual members as citizen legislators and diminish the role of committees as 

repositories of acknowledged expertise. So one result is that Congress, both the House and the Senate, are a giant step further from 

being the deliberative legislative bodies that they were to some extent before, and a giant step closer to being parliaments, in which 

their main role is to ratify decisions made by party leaders. 

Among the other side effects, the Budget Act has helped foster 

partisanship. So to put this simply, the Budget Act makes it easier 

to implement budgets, whether responsible or irresponsible. It has 

given the leadership and this committee stronger tools, which is 

like giving the military bigger and smarter bombs. The real question is whether it has made any of us wiser in the use of those 

tools, and my answer is: Not necessarily. 

OK, so as I see it, when Congress makes budgetary mistakes, as 

it did in 1981, 2000, and 2003, the Budget Act facilitates bigger 

and costlier mistakes than would otherwise be the case. So let me 

make a modest proposal. I noted in my first point that many budget process ideas would weaken Congress and strengthen the President. I concluded in my second point that the Budget Act has two 

unfortunate side effects: increased Presidential poltroonery and increased congressional partisanship, without necessarily producing 

better budget outcomes. 

My suggestion, therefore, is to take these points to their logical 

conclusion and repeal Title 3 of the Budget Act, put yourself out 

of existence, leave CBO in place, and go back to this system that 

existed from 1790 to 1974, where the President was the player; and 

most particularly from 1933 to 1974, where the President’s budget 

was the budget. 

Having said that, I think it is very unlikely that this committee 

will decide to put itself out of existence; and, to be honest, my 

heart says I don’t really mean what I just said. I served too long 

here. My heart is really with you, despite the fact that I can’t convince myself that the outcomes are necessarily any better than 

they would be without you. 

So, therefore, I am backed into my third position; and my third 

position has to do with the third point I made before, which is that 

the budget process cannot force Congress and the President to do 

what they are unwilling to do but can enforce budget agreements 

once those agreements are made. 

Here again, history is a useful education. Congress enacted 

Gramm-Rudman-Hollings, which was a doomsday machine deVerDate 0ct 09 2002 15:43 Aug 19, 2005 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6602 F:\DOCS\HEARINGS\109TH\109-8\HBU173.000 HBUD1 PsN: DICK
24

signed to say, ‘‘Here are the disasters that will happen to you, 

automatic sequestration of very popular programs—veterans education, farm price supports, Medicare and so on—if you don’t enact 

a deficit reduction plan. It is up to you to negotiate one.’’

Did this work? Did this make President Reagan come to the 

Democratic leadership in the House of Representatives and the Republican leadership in the Senate and negotiate major deficit reduction plans? No, it did not. What happened instead is that OMB 

engaged in official lying about budget projections to make it look 

as though they were intending to meet the targets, and, in fact, the 

budgetary targets under Gramm-Rudman-Hollings were missed by 

huge amounts, first by tens of billions of dollars a year, then by 

hundreds of billions per year. 

Once official lying of that magnitude became so great that people 

couldn’t swallow it, they simply set aside Gramm-Rudman. The 

system didn’t work. You can’t make people raise taxes and cut 

spending if they don’t want to. And you can’t make them agree 

with people that they really disagree with on philosophical and 

substantive grounds if they don’t want to. 

So, therefore, I would suggest that other attempts to do that, 

particularly attempts like the draconian entitlement cap that is in 

H.R. 2290 and would force approximately $2 trillion worth of entitlement cuts over the next 10 years, 20, or 30 times the cuts in the 

congressional budget that was agreed to this year on in the President’s budget, that is not going to work. Actually, from my point 

of view, I think my conclusion that it can’t possibly work is good 

news because if it did work, I would hate the results. 

Saying that that sort of entitlement cap can’t possibly work leads 

me to conclude that we are left with a prescription that says, at 

the very least, ‘‘Change the congressional budget process so that it 

does no harm.’’ In this regard I would go back to the PAYGO rules 

that were established in 1990, which say basically, stop cutting 

taxes, stop increasing entitlements. Don’t do that without paying 

for their full costs. 

This suggestion has been debated enough times in recent years 

and it doesn’t need elaboration, but a second related suggestion to 

it, a sort of a smaller version of it, is to stop using the reconciliation process—which is a fast-track process. This is the only sort 

of legislation that cannot be filibustered in the Senate, and which, 

broadly speaking, is not subject to open amendment in the Senate—stop using reconciliation to make the deficit worse. Limit reconciliation to its original use from 1980 through approximately 

1997, when the net effect of each reconciliation bill was to make 

deficits smaller rather than larger; not tax cuts and entitlement increases in reconciliation, but the opposite. And that, I think, is a 

change that is completely consistent with the original thinking behind the Budget Act, though not necessarily the words in the Budget Act. 

I might add that I have heard that some people say that PAYGO 

rules or reconciliation restrictions of this sort don’t need to be applied to revenues because tax cuts pay for themselves. This isn’t 

true. There is a table on the back page of my testimony that compares various different business cycles since World War II on. The 

business cycle of the 1990s had economic growth that averaged 2 

25

percent of GDP per person per year. The business cycle of the 

1980s had economic growth that averaged 2 percent per year per 

person; the same, even though one was a business cycle in which 

there were large tax cuts at the beginning, and the other was a 

business cycle in which there were large tax increases at the beginning. Since the tax cuts or increases did not affect economic growth 

one way or the other over the entirety of cycle (though they will 

have had Keynesian short-term effects) the conclusion is that there 

isn’t really much long-term feedback effect from revenue changes, 

and that, therefore, tax cuts lose revenues and tax increases gain 

revenues. 

This can be seen more directly by looking at the growth of revenues in the 1990s and comparing it to the growth of revenues in 

the 1980s. Specifically income tax receipts grew at an average of 

4.2 percent per year per person in the 1990s and .2 percent per 

year per person in the 1980s. Tax cuts lose revenues. This is the 

conclusion that the ‘‘starve the beast’’ crowd reached. After all, 

there is no point in cutting taxes to put the Government on a starvation diet if it doesn’t succeed in starving Government. This is 

where Grover Norquist is completely correct. Tax cuts lose revenues. (If he were wrong, he would probably favor tax cuts anyway, 

though for other reasons.) 

This concludes my testimony. To summarize, because my heart 

is with Congress and not with the President, I really don’t want 

you to weaken yourself for the sake of strengthening him. I really 

don’t want you to put yourself out of business or do all of those 

other little changes that would have the effect of hamstringing you 

and your ability to deal with the President. And despite the unfortunate side effects of the Congressional Budget Act—Presidential 

evasion and increased partisanship—I would keep the existing system. I would merely weaken its ability, your ability, to use the 

budget process to make the budget situation worse than it already 

is. 

Chairman NUSSLE. Thank you. 

[The prepared statement of Richard Kogan follows:] 

PREPARED STATEMENT OF RICHARD KOGAN, SENIOR FELLOW, CENTER ON BUDGET

AND POLICY PRIORITIES

Mr. Chairman, Congressman Spratt, I am very pleased to be invited home. In my 

testimony today, I’d like to make three points about the congressional budget process and pending proposals to alter it. 

First, the congressional budget process was originally designed to make Congress 

an equal partner with the President. Unless you think Presidents are too weak and 

Congress too powerful, you should resist the many proposals that would weaken 

Congress and strengthen the presidency. 

Second, the Congressional Budget Act has, perhaps unexpectedly, allowed Presidents to get away with budgets that are incomplete, irresponsible, or both. President 

Bush is especially guilty of this lack of leadership, but every recent President has 

designed partially phony budgets and then passed the buck to Congress. 

Third, no budget process can force the President and Congress to enact deficit reduction. It is far better to design specific deficit reduction plans—specific program 

cuts and specific tax increases—and then use the budget process to enforce those 

enacted plans. 

I will now briefly elaborate on these three points. 

CONGRESS AND THE PRESIDENT

To begin with, the congressional budget process was designed to alter the relationship between the President and Congress. When the Congressional Budget Act was 

26

enacted in 1974, its intent was to announce that the President’s budget was not the 

only game in town; Congress could devise and adhere to its own budget plan. When 

I first arrived in Washington, the phrase ‘‘over budget’’ meant that Congress was 

considering legislation that cost more than the President had requested. The congressional budget process has changed the meaning of that phrase; now, ‘‘over budget’’ usually means ‘‘more costly than the congressional plan.’’

Given this history, it seems strange indeed, and probably inappropriate, for Members of Congress to deliberately design ‘‘reform’’ plans that would weaken Congress 

vis a vis the President. Let me list some pending proposals that would weaken Congress and strengthen the President. 

• An automatic ‘‘continuing resolution,’’ which would automatically extend the 

current level of appropriations into the next fiscal year if new appropriations bills 

were not enacted by October first. Such a proposal would make it far easier for a 

President to justify vetoing an appropriations bill whenever he prefers the status 

quo to the increases or cuts approved by Congress. 

• A ‘‘joint’’ budget resolution, which would give the President the authority to 

veto the congressional budget resolution. After a veto, the President’s budget would 

be the only benchmark left standing. This proposal would work especially badly 

when different parties control the two branches of government. 

• An appropriations ‘‘lockbox.’’ Under a lockbox proposal, a transient majority, 

through its vote on an appropriations amendment, can reduce for the entire year 

the amount allocated under a Congressional budget plan to the Appropriations Committee. This violates the first rule of politics: a deal is a deal. If the lockbox procedure were implemented, members of the Appropriations Committee would have far 

less reason to support any budget plan; budget gridlock would be more likely; again, 

the President’s budget would be the only benchmark left standing. 

• Biennial budgeting. The annual appropriations process is the one sure way that 

Congress can get the attention of the executive branch and push it to respond to 

specific Congressional concerns. Nothing awakens a cabinet secretary as rapidly and 

effectively as a threat to cut his staff. 

• Line-item vetoes, enhanced rescissions, and restrictions on omnibus legislation. 

The President has the power to veto legislation if he does not agree with some aspect of it. Congress, in counterbalance, has the power to package legislation, which 

increases the likelihood that the President will sign legislation that contains a few 

policies that Congress desires but he does not. Line-item vetoes, enhanced rescissions, and restriction on omnibus legislation would each weaken the effectiveness 

of congressional packaging. 

HAS THE CONGRESSIONAL BUDGET ACT ALLOWED PRESIDENTS TO RUN AND HIDE?

History demonstrates that that it is very hard to achieve any major deficit reduction without Presidential leadership. Currently, President Bush is in a state of official denial, and perhaps self-denial as well. A little-known analysis contained in the 

President’s own budget document reveals that under his own policies, the current 

shrinking of the deficit will be temporary. Table 13-2, on page 209 of OMB’s Analytical Perspectives, shows that unsustainable and unmanageably large deficits will reappear—deficits that will cause the burden of debt service to consume an ever-increasing share of national income. (See table on page 3.) Specifically, OMB projects 

that under the administration’s policies, the debt will grow from its current level 

of 39% of GDP to more than 100% of GDP by 2050 and about 250% of GDP by 2075. 

Of course, this cannot happen; tax increases, spending cuts, or both will have to be 

enacted before we reach national bankruptcy. 

And yet the figures in this OMB table present too rosy a picture, if that is possible. OMB’s extrapolations are based on the President’s budget, which a) completely omits the costs of Iraq, Afghanistan, and the international war on terror, b) 

includes no costs in any year for relief from the Alternative Minimum Tax, and c) 

presumes that the role of domestic appropriations in the economy can be reduced 

over the next 5 years to a level that has not been seen since before the New Deal. 

These domestic cuts are so embarrassing that OMB programmed its computers to 

‘‘white out’’ the program-by-program funding levels—though not the grand totals—

for every year after the current year. 

In my view, there will not be any major deficit reduction legislation unless President Bush stops denying reality and decides to scale back both his spending priorities and his tax cuts. Given the difficulty of deficit reduction, a willingness to negotiate directly with the leaders of both parties is probably necessary.

27

TABLE 13–2.—LONG–RANGE MODEL RESULTS 

(As a percent of GDP) 

1995 2005 2015 2025 2035 2045 2055 2065 2075

Receipts ..................................... 18.5 16.8 18.5 19.1 19.6 20.2 20.9 21.5 22.0

Outlays: 

Discretionary ..................... 7.4 7.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9

Mandatory: 

Social Security ......... 4.5 4.2 4.4 5.4 6.0 6.0 6.1 6.2 6.4

Medicare ................... 2.1 2.4 3.3 4.6 6.0 7.0 7.9 9.1 10.4

Medicaid ................... 1.2 1.5 1.9 2.1 2.3 2.6 2.8 3.0 3.3

Other ........................ 2.2 2.8 2.0 1.7 1.5 1.3 1.2 1.1 1.0

Subtotal, mandatory ......... 10.1 10.9 11.6 13.8 15.8 16.9 18.0 19.5 21.2

Net Interest ....................... 3.2 1.5 1.9 2.0 3.1 4.8 6.9 9.7 13.3

Total outlays ................. 20.7 20.3 19.4 21.8 24.8 27.6 30.8 35.1 40.4

Surplus or deficit (–) ................. –2.2 –3.5 –0.9 –2.7 –5.2 –7.4 –10.0 –13.6 –18.4

Debt held by the public ............. 49 39 36 38 59 90 130 181 249

How does this discussion of exploding deficits relate to the congressional budget 

process? Well, one unexpected consequence of congressional budgeting is that, by 

repositioning the budgetary spotlight away from the President and onto Congress, 

the Budget Act has allowed Presidents to get away with increasingly irresponsible 

budgeting. You have just heard me criticize President Bush for his incomplete and 

disingenuous budget. But President Reagan had his ‘‘magic asterisk’’—unspecified 

cuts to be proposed at a later time. The first President Bush had his ‘‘flexible freeze’’ 

and his ‘‘Black Box,’’ two other terms for unspecified future spending cuts. President 

Clinton frequently employed mechanical formulas for his outyear appropriations 

numbers, allowing a downward path in total while denying that there was any ‘‘policy content’’ to any particular outyear budget cut. In short, while the Congressional 

Budget Act strengthened the congressional role in budget making, it also made it 

easier for Presidents to avoid the toughest decisions because the press and the public have had their budgetary attention diverted to the congressional spectacle. The 

Budget Act should come with a warning on the bottle: ‘‘Side Effects May Include 

a Loss of Presidential Leadership. If this Condition Persists for More than Four 

Years * * *’’

This diagnosis poses an obvious question: has the improvement in congressional 

budgeting been great enough to justify the bad side effects? My answer is no. History demonstrates that good public policy is not the necessary result of the Congressional Budget Act. Broadly, the Budget Act has given a determined majority more 

tools to get its way on budgetary matters and has allowed more coherent budget 

plans to be concocted and enacted. The Budget Act has helped strengthen the leadership and weaken all committees; the Budget Act has helped diminish the role of 

individual members as citizen legislators and diminish the role of committees as repositories of acknowledged expertise. One result is that Congress—both the House 

and the Senate—are a giant step further from being deliberative legislative bodies 

and a giant step closer to being parliaments, whose main role is to ratify decisions 

made by its party leadership. Among other side effects, the Budget Act has helped 

foster partisanship, but without the useful British assumption that the minority is 

by definition loyal. To put this simply, the Budget Act makes it easier to implement 

budgets, whether irresponsible or responsible. When Congress makes mistakes, as 

it did in 1981, 2001, and 2003, the Budget Act facilitates bigger and costlier mistakes. 

So let me make a modest proposal. I noted in my first point that many current 

budget process ideas would weaken Congress and strengthen the President. I concluded in my second point that the Budget Act has had at least two unfortunate 

side effects—increased Presidential poltroonery and increased Congressional partisanship—without producing better budget outcomes. My suggestion, therefore, is 

to take these two points to their logical conclusion: repeal Title 3 of the Congressional Budget Act—abolish the Budget Committees, budget resolutions, allocations, 

reconciliation, and all that, and return to the days in which the President’s budget 

was the budget, and Congress, in committee and on the floor, would act on the various Presidential proposals piecemeal. (I would keep CBO, which seems an unalloyed good.) This proposal would strengthen the President more effectively than the 

many ideas I initially discussed, while getting rid of the unfortunate side-effects of 

the Congressional Budget Act. 

28

However, because I do not expect this Committee to agree to self-immolation, and 

because I have too much residual affection for the constructive role of this Committee can play, in the remainder of my testimony I take a different approach to 

the budget process reform. 

‘‘LIQUID COURAGE’’ VERSUS ‘‘DO NO HARM’’

By 1985, the Congress had had enough of the outsized and permanent structural 

deficits caused by the 1981 Reagan tax cuts combined with the Reagan defense increases. In a fit of desperation, Congress enacted Gramm-–Rudman-Hollings, a 

doomsday machine designed to produce automatic ‘‘sequestration’’ so unpalatable 

that even President Reagan would negotiate tax increases and defense cuts, while 

even a Democratic House would negotiate cuts in Democratic entitlement programs 

such as Social Security, Medicare, and Medicaid. Broadly speaking, GRH was a 

major failure. Serious negotiations did not occur. Instead, OMB and the Congress 

employed wildly unrealistic estimating assumptions and accounting gimmicks to 

pretend they were trying to meet the GRH targets. When the lies and gimmicks 

went beyond the capacity of even the most cynical to swallow, GRH was set aside. 

Once Congress and President Bush (the first) agreed to scrap GRH, they also 

agreed on an ambitious plan of entitlement cuts, defense cuts, and tax increases. 

And they created a new structure to enforce that agreement, a structure of appropriations caps and a PAYGO rule applied to future tax and entitlement legislation. 

Two rounds of deficit reduction that were not forced by the process, but whose outcomes were enforced by caps and PAYGO, plus an unfortunate increase in income 

inequality, led to 8 years in a row of improved budget outcomes for the first time 

in US history, and 4 years in a row of balanced budgets. 

The point of this history is to reinforce the conclusion that no budget process can 

make the President and Congress do the right thing, which is to take major and 

significant unpopular actions in the face of permanent structural deficits. The experience with GRH demonstrated the futility of that idea. The threat of automatic 

across-the-board cuts in popular programs is not enough to get antagonists to the 

bargaining table, because the threat can never be made credible. The more extreme 

the threat, the less credible it is. No matter how it is designed, the budget process 

cannot provide the ‘‘liquid courage’’ needed to make members take hard votes. Easy 

votes and press releases are so much more fun. 

In this context, the entitlement cap included in a recent budget process proposal, 

HR 2290, is simply a worse and more unfair version of GRH, and is at least as likely to fail. That cap would require roughly $2 trillion in entitlement cuts over the 

next 10 years. The cuts would be 20 to 30 times as great as those in the President’s 

recent budget or this year’s congressional budget plan, which are themselves politically troubling. This idea cannot work. 

Nor should it work. Entitlement cuts of even a quarter this magnitude would significantly increase the number of Americans with no health insurance or with 

health insurance that covers only a small fraction of the costs of getting sick. The 

cuts would increase the depth of poverty for many children, elderly persons, working 

families, and persons with disabilities, and drive many others into poverty. It would 

threaten the disability benefits and pensions of veterans, the price stabilization programs for farmers, the unemployment benefits of those who are laid off, and the 

pension and disability benefits for all current and future Federal retirees, civilian 

and military alike. Yet this approach to deficit reduction is completely one-sided: 

neither the entitlement cap nor any other aspect of HR 2290 would do anything to 

scale back the very generous tax cuts I have received, none of which I needed, or 

the far more extravagant tax cuts the very wealthy have benefited from. 

What can work is a less ambitious but fairer budget process agenda, in which the 

rules are changed to diminish the ability of Congress to use the budget process to 

increase the structural deficit. I call this the ‘‘do no harm’’ approach. 

My first and most significant suggestion is to reinstate the two-sided PAYGO rule, 

which would provide a point of order against any legislation that either increases 

entitlement costs or decreases revenues, relative to current law, during the current 

and the budget year, the sum of the current year plus the next 5 years, or the sum 

of the current year plus the next 10 years. This idea has been debated at some 

length recently and so does not need further elaboration, but the idea is still fundamentally meritorious in a time in which all reputable forecasts including those 

by OMB, CBO, and GAO show large, permanent, structural deficits. And despite the 

fact that a PAYGO rule is much less ambitious than, say, and entitlement cap, even 

a PAYGO rule won’t hold unless both parties and both branches want it to. 

I also recommend a less ambitious version of the PAYGO rule. Currently, the 

‘‘Byrd Rule’’ prevents the Senate from using the fast-track reconciliation process to 

29

make the deficit greater in years after the budget window covered by the reconciliation directive. However, the Byrd Rule does not have such a restriction for years 

covered by the reconciliation directive—in those years, the Senate can use this 

mechanism to make the deficit worse. I recommend changing the rule so that reconciliation can only be used to enact legislation that, in net, reduces the deficit. 

That was its original use from fiscal 1980 through fiscal 1999. 

I might add that HR 2290 is precisely wrong with respect to the reconciliation 

process; that bill would amend the Byrd Rule to allow reconciliation bills that permanently increase the deficit. 

I have heard it suggested that PAYGO rules or reconciliation instructions should 

not apply to tax cuts because tax cuts ‘‘pay for themselves.’’ This is utter nonsense. 

I recently examined average economic growth rates and average revenue growth 

rates over the course of the business cycles since World War II. The table below 

shows the results: economic growth during the 1980s, with its very low marginal 

income tax rates for the well off, was no better and no worse than growth during 

the 1990s, during which much higher marginal tax rates were imposed on the well 

off. And since real economic growth was the same during these two periods—an average of 2.0% per year per person—it follows that the tax cuts of the 1980s did essentially nothing to pay for themselves over the long run. 

This can also be seen by looking at the average annual growth rate of revenues, 

and especially income tax revenues, over these periods. The tax increase of 1990 and 

1993 generated substantial increases in revenues, while the tax cuts of 1981 and 

2001 produced unusually low revenues. To put it most simply, tax cuts do not pay 

for themselves; all they do is lose revenues. The ‘‘starve-the-beast’’ crowd understands this perfectly well. After all, if tax cuts paid for themselves, they would in 

no way constitute a starvation diet. This is one fundamental way in which Grover 

Norquist is correct—tax cuts lose revenues. And that is why their cost must be covered within budget constraints such as PAYGO rules.

ECONOMIC GROWTH AND REVENUE GROWTH DURING SELECTED PERIODS 

(All economic and revenue figures are expressed as average annual growth rates, adjusted for inflation and population 

growth, i.e., average real per-person growth rates) 

Fiscal years GDP growth Growth of income tax receipts 

Growth of payroll, excise, estate, & other 

tax receipts 

Growth of total tax receipts 

Growth of total tax 

receipts if capital 

gains are excluded 

1948–1979 2.4% 1.8% 3.1% 2.3% n.a. 

1979–1990 2.0% 0.2% 2.9% 1.3% 1.3%

1990–2000 2.0% 4.2% 1.9% 3.2% 2.9%

2000–2015 2.0% 0.1% 0.8% 0.4% 0.6%

Note: revenue and economic projections through 2015 are from CBO and assume the 2001 and 2003 tax cuts will be extended and AMT

relief will be enacted. 

Chairman NUSSLE. I want to thank our panelists. 

I am going to defer my questions until later, and I would recognize Mr. Hensarling to begin the questions. 

Mr. HENSARLING. Thank you, Mr. Chairman. And in keeping 

with your wishes and trying to keep this at somewhat of a 30,000-

foot-view, I think I would like to start out with what some may 

consider an obvious question, perhaps not so obvious to others, and 

that is what is the purpose of having a budget? I would think for 

most American families and for most businesses it is all about 

making choices about relative priorities and placing a ceiling on 

one’s spending. 

If you accept that definition, presently we spend a lot of time in 

this committee debating 20 budget functions which do not correlate 

to our appropriations bills and are not otherwise enforceable. We 

all recognize that over half of our spending we characterize as 

mandatory and is not captured within our budgeting process. And 

although we have come very, very close as of recent, I am not sure 

the memory of man runneth to the contrary, and us actually meeting the ceiling that we have placed into our budget. 

30

So I really have a twofold question here. No. 1, what should the 

purpose of the Federal budget be? And once you define that, give 

me one or two ideas of what we need to do to meet that definition. 

Congressman, could we start with you? And it is an honor to 

have you back here, sir. 

Mr. FRENZEL. Sure. Thank you very much, sir. 

I think that the purposes and uses of a budget were set forth 

very well in the committee’s paper on the purposes of the hearing, 

which include empowering Congress to control the purse, setting 

priorities, controlling spending, enforcing spending limits, addressing entitlements and providing a congressional agenda and work 

plan. I think all of those are reasons or rather functions of the 

budget and reasons why the Congress should have a budgeting 

process and should improve the ones that it has. 

Every unit, from an individual to a family, to a corporation, association, cooperative, whatever, needs to know what its plans are, 

what its resources are, what its expected outgoes are, et cetera. 

And Congress should be no different from the rest of the world. 

The problem, of course, is that most individuals and families 

don’t have real budgets. They have some idea of what the concept 

is. And Congress, in the Budget Act, has got at least some tools 

that it can use to serve each of those functions. 

In answer to the second question—or maybe the implied second 

question is, what do you do to make it better? I think you have 

heard a lot of suggestions today. In my judgment, the prime need 

has been always to control spending and to enforce whatever limitations you put on spending. And the reason for that is that the 

incentives in Congress are so overwhelmingly in favor of increasing 

the size of government and increasing programs, et cetera. I think 

you have to—I think one of the first things you have to do is control the spending through the device of the mechanisms that at 

least a number of speakers have mentioned today, including Congressman Spratt——

Mr. HENSARLING. If I could follow up on your point about controlling spending, and my apologies to the other two gentlemen, but I 

see that 5 minutes is traveling rather quickly here. But right now 

we have Medicare growing, predicted to grow in the next decade by 

9 percent, Medicaid 7.8, Social Security 51⁄2. We recently received 

some rather sobering projections from the Pension Benefit Guaranty Corporation about unfunded obligations there. Can we have a 

meaningful budget process that does not capture these long-term 

obligations? And shouldn’t the American people be aware of the implications? 

We have seen a recent GAO (Government Accountability Office) 

report that says, I believe, by 2035, if we don’t do something to control these entitlements, that we are going to have to double taxes 

on our children and grandchildren just to balance the budgets. So 

the question is can we have a meaningful budget process reform 

without capturing these long-term obligations? And, Mr. Schick, I 

will give you a chance to answer that question in 3 seconds. 

Mr. SCHICK. Congressman, I think you mentioned only one of the 

purposes of budgeting, which is to make choices. By the way, I disagree with my colleague Mr. Frenzel that every family should have 

a budget. I think that budgets and romance do not mix, and famiVerDate 0ct 09 2002 15:43 Aug 19, 2005 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6602 F:\DOCS\HEARINGS\109TH\109-8\HBU173.000 HBUD1 PsN: DICK
31

lies can be split by budgeting the way Congress is split by it. So 

keep families out of the budget situation. 

But in addition to making choices, a fundamental purpose of 

budgeting in a democracy is to keep commitments, commitments to 

people, to voters, to citizens, to families, to people who are ill, disabled, employed, unemployed, today’s workers, and tomorrow’s pensioners. That is no less a function of budgeting than making 

choices. 

It turns out that these two purposes, keeping commitments and 

making choices, often clash with each other, so you have got to balance the two. But imagine a Congress of the United States in 

which every budget was constructed on a blank piece of paper; it 

had complete freedom to do what it wanted. The result might be 

to have a great Congress and have a lousy Nation. So I think it 

is very important to balance new choices and past commitments. 

Now, what should Congress do? I would go a little further than 

Mr. Kogan, and would not only bring back BEA, combine it with 

Gramm-Rudman-type constraints on deficits. That is, with deficit 

targets; but I would change Gramm-Rudman so it is tied to actual 

rather than to projected deficits; I would keep reconciliation; and 

use it principally to restrain deficits by curtailing expenditures 

and, when needed, boosting revenues. So that what you would end 

up with is a bilateral BEA, which I believe is entirely right, because a process which targets only the revenue or the spending 

side of the budget would be discredited very quickly; it won’t have 

the across-the-board political support necessary to work. 

The ideal then, is a budget process that treats direct spending 

and revenues the same way, has discretionary caps, as well as deficit targets keyed to actual deficits, and reconciliation. 

Chairman NUSSLE. Mr. Spratt. 

Mr. SPRATT. Thank you, Mr. Chairman. And again, to our three 

witnesses, thank you for some excellent and provocative testimony. 

Let me focus on the whole issue of the reconciliation, because 

originally it was the enforcement provision and the resolution, and 

it when was removed, we have been searching ever since for some 

form of enforcement that would keep us to the budgetary outline 

that we had adopted earlier in the fiscal year. 

Richard Kogan, or all of you, do you think that we have perverted the meaning of reconciliation, even as it exists today in a 

more limited form, by allowing it to be used for tax cuts that are—

whose passage through the Senate is facilitated, even though they 

add to the deficit? 

Mr. KOGAN. Mr. Spratt, on balance I do. The technician in me 

likes the idea that reconciliation exists as a way of implementing 

whatever the budget plan is, but my conclusion in looking over the 

last 30 years is that because the Congressional Budget Act 

strengthens Congress’s tools to both do good and do bad, because 

mistakes are now doozies as opposed to smaller mistakes when 

they occasionally occur, it would be the better part of wisdom to 

limit reconciliation to what I think most people thought they were 

talking about in 1980 and 1981 when they were first implementing 

it, limit reconciliation to cutting entitlements below their current 

law projections and raising taxes above their current law projections, at least in net, so that, at a minimum, the reconciliation 

32

process meets the stricture that I talked about at the beginning, 

which is to do no harm. 

To back up a step, in the previous set of questions, one witness 

said that the purpose of congressional budgeting was to restrain 

spending. And I think that is a necessary part of any budget, but 

it is not the sole purpose, because, of course, that leaves totally out 

of the picture the question of whether we have sustainable and 

manageable deficits, whether the deficits are fair to future generations, whether the increase in debt is good for the United States 

and necessary, or whether it is bad and unnecessary, and so on. 

Deficits are not the difference between spending. They are the 

difference between spending and revenues, and so both of these 

pedestals of budgeting need to be looked at, need to be taken equally seriously. Their effects are equally important, and they need to 

be equally constrained, and in this case, in answer to your question, equally constrained through restrictions on what can be done 

in the reconciliation process. 

Mr. SPRATT. Professor Schick, would you agree that the reconciliation rule should be such that within the budgetary time frame, 

there had to be deficit reduction achieved? 

Mr. SCHICK. Mr. Spratt, I would not call the use of reconciliation 

for tax cuts a perversion of the process, because the bare words of 

the Congressional Budget Act clearly allow reconciliation to be 

used in any direction. 

Nevertheless, I strongly agree with the sentiment that you have 

expressed, and that is that the text of the Budget Act be revised 

so as to limit reconciliation to measures that reduce the deficit. 

And I say so for a few reasons. First, I believe fundamental tax reform such as has been enacted in this decade should not rely on 

the expedited process of reconciliation. Secondly, I believe that 

using reconciliation in this way, as Mr. Spratt has suggested, 

would give the House some version of the Byrd rule, a de facto 

Byrd rule. Members of this committee know that the Byrd rule has 

actually empowered the Senate vis-a-vis the House in conference 

on reconciliation bills. The Senate can plead weakness, its hands 

are tied because of the Byrd rule, and therefore the House has to 

recede on disagreements. So I would endorse your proposal that 

reconciliation be reserved for deficit reduction. 

Mr. SPRATT. Mr. Frenzel. 

Mr. FRENZEL. I am going to reserve on that, Congressman. I 

think when you have a rule, you have got to understand it is going 

to work in a couple of ways, sometimes not to your liking. And I 

need to think about that a little longer. 

Mr. SPRATT. Well, let me ask you, if we reinstated the PAYGO 

rule, do you think it should be reinstated in its original form so 

that it applies to tax cuts as well as entitlement increases? 

Mr. FRENZEL. I do. 

Mr. SPRATT. Thank you, sir. 

Now, let me ask you, Richard, Mr. Kogan, you talked about the 

effects of the reconciliation rule on passage of tax cuts through the 

Senate. Namely, it waives—it allows the time for debate to be limited and prevents the proposal from being filibustered. What about 

the House? Why not have a similar rule apply in the House where 

all tax legislation originates? Is there some problem with that? 

33

One problem, of course, is the Rules Committee, and I would like 

all of your ideas as to what we can do to have rules around here 

that are enforceable and invulnerable to being overridden by the 

Rules Committee. But why not have it applicable in the House as 

well? 

Mr. KOGAN. The House and the Senate are so fundamentally different bodies that it is not clear to me that this is a meaningful 

question with respect to the House. You could easily have a rule, 

a PAYGO rule or a rule on reconciliation, with respect to the 

House, but it can just as easily be waived by the rule, the special 

order for consideration of the reconciliation bill, which is waived by 

agreement by majority vote. 

As you well know, when the Democrats were in the majority, the 

Rules Committee had two Democrats for every Republican member, 

plus one. And now that it is the other way around, the Republicans 

have two Republicans for every Democratic member plus one. And 

the Rules Committee is picked by the leadership at least in part 

for its loyalty, so that what is going to happen becomes a leadership decision. 

A PAYGO rule, therefore, will only work, only be enforced in the 

House, if it is a rule that the leadership shook hands on. In the 

case of 1990, when the PAYGO rule was first designed and implemented, Mr. Foley was negotiating on behalf of House Democrats. 

He shook hands on that rule, and he used his position in the leadership to continue to enforce it for as long as he was in power. 

But in the House the ethic really is that whatever gets 218 votes 

deserves to pass, and that the majority needs to govern, and that 

the House with its 435 Members, as opposed to the Senate’s 100 

Members, needs to be able to limit debate in some way. So the 

whole notion of the Senate having a special procedure for reconciliation doesn’t really mean anything in the House, where every bill 

is considered under special procedures designed by the Rules Committee. 

Unless we are going to turn the House of Representatives into 

the Senate—which, first of all, if you recommended it, wouldn’t 

happen; and secondly, I don’t think the House of Representatives 

wants to become like the Senate—unless you are going to turn the 

House of Representatives into the Senate, the question about 

whether there should or shouldn’t be a PAYGO rule in the House 

isn’t really an important question. My answer is, ‘‘Yes, of course.’’ 

But the real purpose of espousing a PAYGO rule or a rule in the 

Budget Act that says that reconciliation directives can only be used 

for deficit reduction is to make the Senate, which must follow those 

rules or get 60 votes—to make the Senate be the implementer of 

that type of budget constraint. 

Mr. SPRATT. One final question to the whole panel. You talked 

mainly about budget processes, budget tools that are on the table 

now, have been tried in the past, or at least are frequently discussed and recommended as improvements to our existing process, 

but nothing that really pushes the envelope greatly. I guess we 

have got enough difficulty making the state of the art work. 

But we run the biggest cash budget in the world, the Federal 

Government, and that allows us to ignore the looming liabilities for 

major entitlement programs that, had they been taken seriously in 

34

2001, might have tempered the enthusiasm for the tax cuts that 

were passed then. Do you think we should have some kind of annex 

to the budget, some kind of major mechanism that reminds Congress, brings home to us every year what the accrual liabilities are, 

what the present value of our major liabilities are that need to be 

addressed in the foreseeable future so that we take that into consideration in forming our budget? 

Mr. FRENZEL. I do. If you—to look forward more than a couple 

of years is infinitely dangerous because estimators have great difficulty predicting what is going to happen tomorrow. Nevertheless, 

using a 5- or even a 10-year time frame is not adequate, and there 

ought to be, I think, some kind of system at least to look out into 

those outyears as we do for Social Security and certain other programs, at least so the Congress is aware and there is a record of 

what this is going to do to us. 

I don’t think that you want to restrict what we do today too far 

out because I think that is dangerous, and I am really nervous 

about our estimates. But I think we have to know, to look at programs over the longer term. 

When your party was in the majority, you always gave us outloaded spending programs. When my party was in the majority, we 

give you out-loaded tax cuts. And I guess that is part of the game, 

but in every case we should know what is going—to the best of our 

ability, what is going to happen out in those long outyears. 

Mr. SPRATT. Mr. Schick. Dr. Schick. 

Mr. SCHICK. Yes. The ideas you suggested have merit, present 

value calculations and accruing liabilities and taking a long-term 

perspective. But standing against these is one statistic which I 

think every person in this room recalls, the $5.6 trillion surplus 

which was projected in January 2001. 

When you build long-term projections into budget rules, you have 

an enormous amount of instability in budget outcomes, which are 

sensitive to changes in interest rates, and other assumptions. Basing budget decisions on long-term projections, which swing wildly 

from one year to the next may turn budgeting for rank-and-file 

Members of Congress into a technical exercise, and lead to manipulation of the underlying assumptions in ways that would go far beyond the manipulation which is currently practiced. 

Mr. KOGAN. Mr. Spratt, you asked whether it would be helpful 

to include in the measurement of the budget a long-term picture, 

not just going out 10 years, but going out considerably beyond that, 

perhaps on a present-value basis. And the previous questioner also 

pointed to the long-term problems that we have, and I included in 

my testimony a chart from OMB outlining, I think, in an overly 

rosy way how horrible the long-term problems are. Certainly the 

Comptroller General has been going around to the country almost 

lighting his hair on fire trying to get people to focus on this problem. 

My answer, therefore, is the same as Mr. Frenzel’s. Yes, I think 

it would be useful if CBO not only did periodic, every other year, 

long-term graphs, but also created an annual summary presentvalue measure of the mismatch between revenues and expenditures. Over the long term I estimate it to be something like 5 percent of GDP, even worse than our current deficits, which are 21⁄2

35

to 3 percent of GDP over the mid term, even though things will get 

better temporarily before they get worse again. And my estimate 

is by no means the most pessimistic out there. 

I think having such a long-term figure estimated annually by 

CBO and OMB, and perhaps including that figure as an informational item in the budget resolution, will help people not get carried away by one quarter or 3 years of good news, because the 

looming deficits are not going to go away unless we make major 

changes in both the spending and tax side of the budget. 

Whether one should attach budget procedures to that long-term 

estimate, whether one should try to control legislation based on its 

marginal outyear effects in the far distant future, is a much, much 

harder question, and I am undecided on that. I have spent actually 

a lot of time on that question. I was in a 2-hour meeting yesterday 

discussing exactly that subject. If you do have long-term procedural 

constraint, you must also, however, maintain the short-term procedural constraints: the rules that say that over 1 year do no harm, 

over 5 years do no harm on a cash basis, over 10 years do no harm, 

as well as over a much longer period, do no harm. You should not, 

under any circumstances, abandon the short-term measures and 

constraints and focus solely on a long-term measure. 

Mr. SPRATT. Thank you very much. 

Chairman NUSSLE. Let me ask unanimous consent that all members be allowed to place statements in the record today. Without 

objection, so ordered. 

Mr. Putnam. 

Mr. PUTNAM. Thank you, Mr. Chairman. And thank you for putting together this hearing. 

I want to talk a little bit about the history of the act. In managing the rule on this year’s budget, I had the opportunity afterwards to talk to both Mr. Young and Mr. Obey about it, and their 

comments were very similar to some that you made, Mr. Kogan, 

and essentially, in their view anyway, it worked—the whole process worked better before 1974. And in particular when there was 

a deficit, they were much smaller, and I think your words were, 

‘‘the mistakes were small. Now they are doozies.’’ Why is that? 

What fundamentally changed that caused the errors to be greater? 

Mr. KOGAN. I think, as I said before, one aspect of the Budget 

Act is that it gave the leadership and the Congress, and, in essence, this committee, any determined majority, stronger tools. And 

with stronger tools you can simply make more changes. The older 

practice was a practice in which the President’s budget may have 

been a coherent whole, logically designed hard choices made by the 

President, detailed work done by OMB. Once it reached Congress, 

it was divided into many pieces, and each committee acted independently. That seemed incoherent to political scientists. But I suggest that it actually had a useful conservative effect because a lot 

of uncoordinated committees were going off, each in their own separate way; there was less likely to be a stampede all in one direction or a stampede all in the other direction. 

It is conservative in the same sense that the existence of both the 

House of Representatives and the Senate is a conservative approach to legislating. It makes it harder to pass legislation, any 

legislation. And the existence of the Senate as a nonmajoritarian 

36

body (because they are not representing people, but rather acres) 

also makes it harder to enact legislation, because the House membership will, in essence, represent different interests than the Senate membership will on many occasions. 

And the existence of a functioning legislature versus a President—who also wants to enact things—that may be of opposite parties, a situation that doesn’t exist in a parliamentary system, also 

is a conservative structure. All of these conservative effects make 

it harder to do anything for good or for ill. 

In a country like the United States, which has had basically 200 

years of good luck, except for what we did to ourselves in the Civil 

War, it is probably useful to have an inherently conservative legislative structure that makes it hard to take lots of actions. Here we 

are, the richest and most prosperous country in the world. We have 

got something good going for ourselves. The major mistake would 

be to mess it up. And so that is why I think I am advocating in 

an inherently conservative position, which is that I am not happy 

that the Budget Act has given the leadership stronger tools. 

Beyond that, however, I think that the Budget Act, by fostering 

partisanship, also raised the stakes for accomplishing something. 

Each party felt in Congress as though it had to say, ‘‘Here is our 

budget, we are going to implement it. Boy, let me show you, American public, what we can do for you.’’ And the other party almost 

by definition had to say, ‘‘We disagree. We have a different philosophy.’’ The other party, for the purposes of product differentiation, 

had to stress differences. 

Here is where Congressman Obey, I think, was prescient. It was 

in 1973 and 1974 when the Budget Act was being created that he 

looked at the composition of the House Budget Committee, which 

had been designed by the Joint Study Committee on Budget Control as a permanent committee that would have 15 Members, 5 

from the Ways and Means Committee, 5 from Appropriations, and 

5 from all others. 

Congressman Obey looked at the senior members of Appropriations and Ways and Means and saw that the Democrats were all 

conservative southerners, and Republicans were Republicans, and 

that these two committees had 10 of the 15 slots. Mr. Obey said, 

this is a committee that doesn’t represent, A, my views, and, B, 

what were then the majority views in the House of Representatives, which were northern Democrats and, I might add, liberal Republicans. 

He said, this committee is all wrong. He said, and he said, I 

think, publicly, budgeting is inherently a partisan exercise in which 

the two parties lay out different agendas. We need to remake the 

Budget Committee to reflect that reality. I am willing, he said, to 

go along with the Budget Act only under the following conditions. 

(This is amazing that a Member with 3 years of seniority at that 

point could command such respect, but he really did.) He said, we 

need to make the Budget Committee work as a partisan body, and 

I am going to do it in the following ways. I am going to insist that 

there be a leadership representative on the Budget Committee. I 

am going to insist that the chairman be picked not on the basis of 

seniority, but by each party by vote. I am going to insist that there 

be rotating membership. And I am going to insist that it be a largVerDate 0ct 09 2002 15:43 Aug 19, 2005 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 F:\DOCS\HEARINGS\109TH\109-8\HBU173.000 HBUD1 PsN: DICK
37

er committee; the same number of Ways and Means and Appropriations members, but much larger representation from other 

committees. That was a way to keep, from his point of view, all of 

the most senior conservative Southern Democrats from dominating 

the committee. He got his way on all of these changes, and, therefore, from day one, the Budget Committee in the House of Representatives was a partisan committee. 

Not so in the Senate. In the Senate, when the Budget Committee 

was set up, in the first series of budgets Senator Muskie and Senator Bellmon, the Democratic chairman and the ranking Republican, produced a joint mark which they negotiated between themselves, laid it down before the committees, got their members to 

vote yes, generally almost unanimously, and then got the Senate 

to approve these budgets by 80 votes to 20 votes. 

Ultimately, though, the Obey view of the world held sway, and 

I think that while he is sort of a genius of a political analyst, I 

think the resulting partisanship has been bad for the House of 

Representatives and this institution. 

Mr. PUTNAM. Is it a good or bad idea that we have term limits 

on this committee, for all three witnesses? 

Mr. SCHICK. Let me go back to the previous question and join it 

with this one. Yes, you can make bigger mistakes when you have 

a comprehensive budget process that looks at priorities, aggregates, 

revenue spending, et cetera. In fact, Congress has made big mistakes under the process that allows it so. But I suggest that before 

dismantling this process, Congress should review the two causes of 

the Congressional Budget Act of 1974. One was mentioned by Mr. 

Frenzel, conflict with the President over impoundment. But there 

was a second cause which was equally relevant, and that was a 7-

year war between the appropriations, tax, and authorizing committees in Congress. The three sets of committees fought over who was 

responsible for deficits, and what to do about them. Congress almost broke down over that in terms war. It couldn’t deal with the 

deficits of those days. So the 1974 Budget Act was a treaty within 

Congress about how the various committees—authorizers, appropriators, revenuers—should act on budget matters. 

The second point is I believe that Mr. Kogan’s history is incomplete in the following way: The main objective of Mr. Obey, and the 

DSG, the Democratic Study Group, which produced its own plan, 

was to create a weak House Budget Committee. That is what they 

cared about the most. They wanted a House Budget Committee 

that could not do very much. Look at the DSG reports of 1973 and 

1974, they attacked the proposed Budget Committee as a supercommittee. That was the label that they gave to it. They didn’t care 

whether it was partisan or not partisan. They wanted a committee 

which was so weak that it couldn’t act independently, and they succeeded from 1975 to 1980. That was the first stage I mentioned before. It was only when reconciliation was introduced that this 

Budget Committee had some teeth. 

And since we mentioned Mr. Obey, it would be instructive to look 

at his attitude to reconciliation in 1982 to 1984 and how he wanted 

to change the congressional budget process in response to that development. 

38

So here is the problem for you. Without reconciliation, this committee is weak; as it cannot change existing revenue or standing 

laws which drive budget outcomes. It can merely ratify the status 

quo. Reconciliation is an imperfect process. It does allow you to 

make big mistakes, particularly, and this is important, when the 

President drives you in that direction. 

We are talking today about the role of Congress, but we should 

not leave aside the role of the President. All of us on this panel 

have agreed that the budget process has empowered the President. 

What we are in effect saying is the President’s own preferences 

have greater prospect of being enacted because of the machinery of 

congressional budgeting. If you consider reinstating PAYGO or 

other rules, don’t simply ask what it does to Congress; ask whether 

it sufficiently disciplines and constrains the President so that he 

can behave in a responsible manner. 

To my mind, President Clinton would have been less bold in 

moving Congress toward deficit elimination and also less inventive 

in fudging some of the numbers, as Richard pointed out before, 

without the BEA rules. BEA didn’t simply change the way Congress behaved, it also changed the way the President behaved. 

Given the President’s power vis-a-vis the congressional budget 

process, his role has to be part of the equation. 

Mr. FRENZEL. May I be heard for a moment, Mr. Chairman, on 

that as well? 

Chairman NUSSLE. Yes. 

Mr. FRENZEL. In 1972, that study committee was made up of all 

appropriators of the House and the Senate. And naturally, they 

had—I am sorry, and the taxers as well. That is correct. And it is 

true that the DSG led the charge to weaken what was then the 

Budget Committee. 

The question, however, is do you make the House committee permanent, or leave it the way it is? My first choice is to make all the 

other committees like the budget. And my second choice, since you 

aren’t going to achieve that, is to make the House Budget Committee permanent. 

I have watched an unending chain of chairmen and ranking 

members go into conference and complain that because of the organization in their House, they were inadequately armed to do business with the Senate. I think it would be much better to 

permanentize the Budget Committee. 

Mr. PUTNAM. Just a yes or no so that I am not getting in trouble 

with my Chairman. 

Mr. KOGAN. I hate to give a yes or no because I have two hands. 

But on balance——

Mr. PUTNAM. You took up my other 41⁄2 minutes. I really just 

need a yes or no. 

Mr. KOGAN. I apologize for stealing time. On balance I come 

down where Mr. Frenzel does, because I think the advantages of 

expertise, and also the greater likelihood that there will be some 

give and take between the parties when you have a permanent 

committee as opposed to a rotating membership, outweigh the advantages of rotation, where the leadership can make sure that the 

committee doesn’t stray from accurately representing each caucus. 

39

Mr. SCHICK. I come down in favor of Mr. Frenzel’s second choice, 

which is to strengthen the Budget Committee by making it permanent. I think the first choice would weaken everybody, and I don’t 

see any gain there. 

Chairman NUSSLE. I for one, think we ought to spread the love 

and joy around a little bit more. So, I think not making it permanent would be my choice, just so we could spread the love and joy. 

Don’t you think? 

Mr. Moore. 

Mr. MOORE. Thank you, Mr. Chairman. Thank the gentlemen for 

being here this morning. We have, as you know, a national debt approaching $7.8 trillion. We have had deficits for the past 3 or 4 years of about $400 billion 

range, and—both figures are going the wrong way. They are getting worse instead of better. Interest on our national debt is substantial. I think it ranks, in terms of categories of expenditures in 

our Federal budget, after defense and Health and Human Services. 

PAYGO rules expired in 2002, and yet when we tried to reimplement PAYGO rules, the majority party says yes for spending increases, but no for tax cuts. 

And I have been here since 1999, and I hear it is more fun to 

be in the majority because maybe we could get something to happen then to try to restore fiscal responsibility, because the other 

party talks fiscal responsibility, and we are doing exactly the 

wrong thing, from my perspective. We talk about values a lot here 

in Washington and Congress, and yet it seems to me that the highest Federal cost right now is tax cuts, more than providing adequately for our veterans or for education that we said we value so 

much, and yet we shortchange No Child Left Behind about $9 billion the first year. 

My question to you is, and I think I have heard the answer from 

each of you, but I want to confirm this, do each of you believe that 

PAYGO rules, if they are reimplemented or reinstituted, should be 

on a two-sided basis and not just for new spending? 

Mr. FRENZEL. I do. 

Mr. SCHICK. I certainly do. 

Mr. KOGAN. Yes, I certainly do. 

Mr. MOORE. Would you please all talk to your friends in the majority party and tell them that? And I am not trying to be facetious 

here, but it is very, very frustrating when I—I think these are good 

people. Ninety percent of the people in Congress are really good 

people on both sides of the aisle. And yet I think we have just 

somehow got to come to terms here with the fact that we are putting our country in a very precarious position, and we are passing 

on these tax cuts that we are taking, we are passing on this huge, 

huge debt to our kids and grandkids, which I think is immoral. We 

should not be doing that. To me, fiscal responsibility is a family 

value and should be a national value as well, and we are just doing 

the wrong thing here. 

Any thoughts about what we can do to try to reimplement this 

rule? 

Mr. FRENZEL. I have great sympathy for you. And if there is anybody on the committee I identify with, it is Mr. Spratt, because I 

sat in that seat for a long time and was abused by an aggressive 

40

majority which did what it needed to do, and I was ground under 

the heel, as you are now experiencing. 

All I can say is it is the job of the Minority to be the conscience, 

to make the points that you are making, but if you expect to—that 

somebody’s going to listen to you, I have got to inform you, the 

chaplain has gone ashore. 

Mr. SCHICK. For two reasons I believe that it should be a twosided PAYGO rule. One is a budget rule doesn’t have sufficient legitimacy if it favors one party’s position over the other party’s. A 

budget rule has to be neutral on its face, embraced by both parties, 

and I would say that, sir, even if there were no large budget deficit 

or looming unsustainability in the future. 

The second reason is that I believe the hardest but most important thing, for a majority party to do when it changes the rule is 

to consider how would something work out if it is no longer the majority party at some time in the future. The Democrats, when they 

controlled the House, invented the modern Rules Committee. They 

did not envision that it would ever be used against them. They 

didn’t envision becoming the Minority party. Well, we know how 

things have played out. And the same thing pertains to budget 

rules. The majority party should consider not what is simply in its 

current interest because it is the majority party, but what is in its 

interest in fair and foul weather as well. 

Mr. KOGAN. Yes. For all of the reasons that the previous speakers have said, PAYGO rules should be two-sided. In fact, if you 

made it one-sided, that would not be half a loaf, but rather it actually, in my view, would decrease the likelihood of enactment of 

major deficit reduction. And the reason is that a one-sided PAYGO 

rule, which is really an entitlement cap at current law, means that 

one faction of the House of Representatives would have already received the budget rule that they want, an entitlement cap at current law. They would have no reason to negotiate any further. 

To get real deficit reduction and agreement for unpleasant tax 

increases and unpleasant program cuts, you need to give both sides 

of any negotiation something else that they want. You need to give 

the conservative side an effective entitlement cap in the form of a 

PAYGO rule, and you need to give the other side an effective rule 

against tax cuts that would drain the Treasury. If you already have 

given away part of it, then you are no longer going to have a successful negotiation for deficit reduction. 

Mr. MOORE. Thank you. 

Chairman NUSSLE. Mr. Crenshaw. 

Mr. CRENSHAW. Thank you, Mr. Chairman, and thank you all. 

Let me go back to the process part and ask, Mr. Schick, you mentioned something that was kind of interesting. You know, we think 

of the budget process as making choices, and I think your point 

was that it is also keeping commitments, and those two are kind 

of in conflict. And yet it seems like maybe one of the things, and 

this is in the form of a question—is there something in the budget 

process that kind of forces us to lean more toward keeping commitments? In other words, one of the problems government has is once 

you fund the program, it takes a life of its own. It goes on forever, 

and it seems like we never really address that as much as we—

we cut it a little bit, or we increase it a little bit. We don’t really 

41

say, do we really challenge why we made this commitment in the 

first place? 

And so I guess that is the question. No. 1, is there anything in 

the process that kind of perpetuates that? But more importantly, 

is there anything that you all can think of that we could put in the 

process that would make it easier or more often we would actually 

challenge existing programs? I guess one way obviously is just—

there is only so much money, so then the appropriators have to go 

figure out how to do it. But is there something, some process, we 

could put in place in terms of budget that would help the budgeteers look at programs, and, as you say, is it a commitment we 

ought to keep on keeping? Because there are probably some that 

we should, some that we shouldn’t, and that in part is like making 

a choice. 

But can you all comment on that just from a process standpoint 

that would really—whether it is mandatory or discretionary, I 

mean, and probably more, and that is another question, maybe, the 

mandatory part. But right now just from a discretionary standpoint, are their process—do you sunset programs, or do you—I 

mean, what are some things we might consider? 

Mr. SCHICK. Well, in my view, the process is overly biased in 

favor of keeping commitments rather than making choices. It is a 

clash between these two that creates good budgets. It is much easier to keep commitments, obviously, than to make new choices. But 

I do believe that there are certain features of the current budget 

practices that strengthen the bias in favor of keeping commitments 

and make it harder to take initiatives that alter the path of spending. 

What I am about to say is going to make no friends at the Congressional Budget Office. The way baselines are now used, puts 

commitments in concrete and makes it harder to change them. 

In contemporary budgeting, the computer that runs the baseline 

gets the credit for spending increases, and Congress gets the blame 

for spending cuts. That is basically the way the baseline operates 

today. Imagine a world of budgeting in which we didn’t have baselines, and the question would be, how much should we increase 

Medicaid? The example I gave earlier, over the next 5 years, should 

we increase it by $20 billion or $40 billion or $100 billion? Congress 

would be making choices. I hope it would also be keeping commitments, but the baseline, the way it is engineered today makes it 

exceedingly difficult for Congress to pay the political price for reopening some commitments, even at the margins. 

In this regard, I believe PAYGO itself was deficient because 

PAYGO actually strengthened existing commitments. PAYGO was 

triggered only with respect to new direct spending, not spending 

under existing law. I believe that if we look at the BEA process 

during the 1990s, the period that PAYGO was in effect, we will not 

find significant inroads made to existing commitments. 

Mr. KOGAN. This is probably the one area on which Mr. Schick 

and I disagree most regularly. I have been disagreeing with him on 

this issue for a few decades and will probably continue to do so as 

long as both of us are kicking. Let us look at it first from a CBO 

perspective and institutional perspective. 

42

To my mind, the fundamental budgetary question, not the public 

policy question, that you, a Member, ask when someone proposes 

some complicated change to Medicare is whether a yes vote would 

be more expensive or less expensive than a no vote. You really 

have to know the sign attached to your vote, and that is by definition a question of existing law. The no vote maintains existing law. 

The yes vote changes law. Does that yes vote make Medicare more 

expensive than it would otherwise be or less expensive than it 

would otherwise be? That is the only possible budgetary question 

that I think you can ask and CBO can answer; well, they can quantify it. 

But if you take Mr. Schick’s view in which—as I interpret it—

the baseline is not a reflection of current law, but a reflection of 

something else, then saying whether a bill will be above or below 

baseline doesn’t tell you whether your yes vote will increase spending above what it would otherwise be or decrease spending below 

what it would otherwise be. 

Likewise, with revenue, a complicated change in the tax law, 

does it lose revenues, or does it gain revenues? You need an estimate. And even if it is unstated, the question has to be relative to 

existing law. And for that reason I think CBO is doing the only 

thing it can possibly do, which is to tell you, when it makes cost 

estimates, whether these bills will make the laws more expensive 

or less expensive than they would otherwise be, because that is 

what we do in Congress, we vote yes or we vote no. I mean, that 

is the simplest way to define a Member of Congress, as a voting 

machine. And that is, therefore, the fundamental budgetary question that needs to be answered. 

Would sunsets help? On balance I am against sunsets. Most, a 

variety of major laws, and particularly the ones that are most expensive and most problematic in the long term, are ones that 

should logically be long-term commitments. It should logically be 

that retirement and pension programs, in which you pay in your 

entire life in the form of payroll taxes or other taxes, and expect 

some sort of insurance and pension and health coverage later, 

should be a commitment. We shouldn’t say that we are going to 

have you pay in for a decade or two decades, but besides that there 

is zero promise that the program will exist in any form whatsoever 

when you retire. It wouldn’t be logical. 

And for the rest of the budget, it really doesn’t matter. Our entire budgetary problem over the course of the coming decades is 

that Social Security, Medicare, and Medicaid will grow faster than 

the revenue base. All other programs in Congress taken together 

will grow slower than the revenue base. There is no long-term 

problem even with the existing current level of deficits were it not 

for Medicare and Medicaid, and to a much lesser extent Social Security, and yet those programs, by their design, should have benefit 

formulas and should be permanent. So the real question is, do we 

examine these three programs adequately? 

Well, I think Mr. Schick answered that question. Medicare is the 

most legislated program that exists. We look at it all the time. The 

President, to his credit, is saying let us look at Social Security, you 

know, at least partly as often as we look at Medicare, though I 

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ing at it is the right thing to do. And this Congress, to its credit, 

is saying we should look at Medicaid. I think Medicaid is underfunded. But on the other hand, given its cost trajectory, unless you 

would do what I would do, which is raise taxes on myself to pay 

for Medicaid, which I would happily do, then you have to start 

looking at Medicaid cost growth and figuring out a way to deal 

with it. This is why I think that sunsets is not a plausible answer, 

but rather real budgeting is the answer. 

Mr. FRENZEL. Mr. Congressman, I think when you question baselines, you raise one of the most important questions in budgeting. 

I said in my earlier remarks that baselines actually freeze in the 

past. They restrict the ability of Congress to set priorities because 

Congress is tied to the priorities of the past. Yes, you give COLA 

(cost-of-living adjustment), demographic gain, the whole business, 

all wrapped up in this. Net result is there is no room for new worthy projects, or there isn’t enough room for those projects. 

The baseline theory was promoted very heavily when the act was 

begun by liberals who believe they needed to keep—using Mr. 

Kogan’s argument that we had good programs that needed to be 

maintained, and we couldn’t, we couldn’t let the Budget Act pull 

the plug on any of them. 

The result is, we have all become slaves to the baseline. I think 

it ought to be amended, ought to be changed by act of Congress, 

and do what you want with it. Give it a 10 percent haircut every 

year. Start there. 

The smartest guy about budgeting that ever came to Washington 

was Jimmy Carter who said we ought to have zero-based budgeting, start at nothing every year and see if you can justify those 

programs. They laughed him out of town 4 years later. 

With respect to the concept of baseline, in 19—I think 67—my 

historians here will check me on this—I think President Johnson 

appointed a thing called a Budget Concepts Commission; and that 

is the last time we have ever had anybody, any commission or really public group, try to talk about budget concepts. 

I think baselines are a great example of what a Budget Concepts 

Commission could do to restore some order to budgeting, and I will 

pass this on to you that this committee ought to inaugurate legislation to create a commission. Because, if it doesn’t, some President 

will come along and do it some time, and then you won’t have any 

membership on the commission. So I hope that we will take some 

action in this regard. 

With your question about sunsets, I would sunset everything. 

And, obviously, that is an overstatement. There are a few things 

that shouldn’t be sunsetted. But we have no way of looking at mandatory spending unless there is a crisis. 

In 1982-1983, we ran out of money for Social Security; and we 

made some necessary changes. Liberals and conservatives got together, made a deal; and we did it. Obviously, it only lasted 25 

years or so, and we are in trouble again, but 25 years isn’t bad. 

Somebody said that Medicare is the most worked-on program in 

Congress. Probably it is. But I can remember 10 years working on 

Medicare and reconciliation, and the changes that were made were 

infinitesimal, marginalia, and had no effect on the program whatVerDate 0ct 09 2002 15:43 Aug 19, 2005 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6602 F:\DOCS\HEARINGS\109TH\109-8\HBU173.000 HBUD1 PsN: DICK
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soever other than in the immediate year saved a couple billion dollars. 

We really need a way to get to look at these programs. Right 

now, it is a catastrophe that will do it to us. Maybe it would not 

be a bad idea to sunset. 

Chairman NUSSLE. We actually tried a concepts commission as 

an amendment a few years ago. We weren’t able to—so we may be 

able to try that again. At least a worthwhile consideration, at least 

I thought it was. 

Mr. FRENZEL. I think it is a good way for Congress to defend 

itself against the appointment of a commission by the President 

where you might not be participating. 

Chairman NUSSLE. Mr. Edwards. 

Mr. EDWARDS. Thank you, Mr. Chairman. 

I have always respected former President Bush. Because in 1990 

he realized that the future, the economy of this country and the 

legacy we left for our grandchildren was more important than a 

campaign promise he made of ‘‘read my lips, no new taxes,’’ and I 

think that bipartisan summit that he brought together in 1990 laid 

the first layer of foundation for eventually having balanced budgets 

later in that decade. 

Let me make a couple of observations why I think we are at that 

place again where we absolutely must have bipartisan cooperation, 

including the President’s leadership, in solving the budget deficit. 

Then I would like to ask each of you whether you think the circumstances are such that we ought to do once again what President Bush and Democrats and Republicans in Congress did in 1990 

with a bipartisan deficit budget summit. 

My first observation is this: We are at an impasse. We have the 

largest deficits, nominal deficits in American history, over a billion 

dollars a day; and if you look at the budget projections, they go on 

out as far as the eye can see. I am convinced it is so serious, if we 

don’t do something fairly soon, we are going to harm our shortterm economy and our grandchildren’s future. 

The second observation: Why are we at this impasse? I think 

there are several reasons: health care costs, the war in Iraq, September 11. No doubt about it. The bottom line is, on one hand, Republicans simply don’t have the political will or ability in Congress 

to cut spending enough to pay for their tax cuts. They could cut 

spending enough today to balance the budget this year without a 

single Democratic vote in the House, but the reality is they can’t 

get the votes to do that, and probably for good reason. The American people wouldn’t accept those values and those kind of draconian cuts. 

Secondly, I think Republicans are afraid if they don’t extend the 

temporary tax cuts Democrats will find a way to spend all that 

extra money. 

The second reason we are in an impasse is that Democrats that 

might be willing, such as Mr. Spratt and myself, be willing to accept some entitlement limits and tough spending cuts won’t do it 

as long as there is no guarantee that those tough spending cuts on 

the elderly and working low-income families and children’s health 

care, those cuts aren’t made at their expense simply to fund a 

45

$220,000-a-year tax cut for somebody that makes $1 million this 

year on dividend income. 

So we are at an impasse. They are in a position, for the reasons 

I mentioned, not to give; and they can’t unilaterally solve the deficit problem. The political consequence would be too draconian. 

Democrats aren’t willing to make sacrifices because we aren’t sure 

that those spending sacrifices wouldn’t just fund more tax cuts for 

the wealthiest. 

So where are we? I think, if we are serious, we ought to agree—

and I would sign a letter today, the chairman of this committee or 

any other Republican member of this committee, saying I would 

support a bipartisan budget summit, including the President, 

Democrats, and Republicans in the House and Senate, designed 

after the 1990 summit. If anyone has a better idea, if my Republican colleagues have a better idea, I would say to you that you 

don’t need a single Democratic vote to solve the deficit problem. 

But I think we are in this problem now together. I won’t focus on 

how we got there, but we are in it together. I think neither party 

can afford the consequences of trying to solve it singularly within 

their own party. 

Let me, having made those observations, ask you your thoughts. 

And, Mr. Frenzel, you may have been very intimately involved in 

that budget summit. Is it time for us to try to replicate the budget 

summit of 1990 on a bipartisan basis, including the President, to 

solve this problem? 

I will make one prediction. If we don’t do this, we will be having 

the same discussions 5 years from now, and the deficit will still be 

over $1 billion a day, and our grandchildren will have paid a terrible price. 

Mr. FRENZEL. Thank you, Congressman. That is a good question. 

I was indeed present at Andrews Air Force Base. That was one of 

the reasons I left Congress, was that unpleasant experience. 

I think any kind of bipartisan work is always something that I 

would endorse; and any calls for bipartisan compromise discussion, 

even a fist fight, are good if we do them together. However, the 

conditions are not the same as they were then. In that time, there 

was a Republican President; and there were Democrat majorities 

in both House and Senate. 

If you had a summit today, you would have a Republican President dancing with his friends, the Republican majorities in both 

House and Senate, and you would endure what I endured at Andrews Air Force Base as the outside oppressed minority, and the 

decisions would be made around you and through you and over 

you. So, you know, the——

Mr. EDWARDS. What are the alternatives? 

Mr. FRENZEL. Negotiations at Andrews were between the President’s people and the Democrat managers in the Congress. Mr. 

Kogan mentioned Tom Foley as being one of them. 

I remember particularly them negotiating the caps between then 

OMB Director Darmon and Senator Byrd, and that was really an 

interesting confrontation. Darmon got his caps, but Byrd sure got 

some high numbers in there before he surrendered. So it is different. I think if you called a meeting now, all you are doing is 

46

meeting three Republican power centers; and it is probably not 

going to do what I think you would like to do. 

Mr. EDWARDS. So the Republicans meeting on a bipartisan budget summit couldn’t agree to find a solution to the problem, which 

is exactly my point. But I appreciate your observations. I recognize 

it is a different situation. 

Mr. SCHICK. Since we talked earlier about keeping commitments—and commitments should be changed in order that the 

budget be on a sustainable course in Congress and the President 

be able to make choices. But every time you want to make a significant change in commitments, you need the fingerprints of both parties on it. Otherwise, you will not succeed. This is a lesson that the 

2005 Social Security episode will remind us of, and is not the first 

time in American history that this has occurred. That is why the 

budget summit of 1990 worked. Each side gave something; each 

side got something. 

At some time in the future we will pay serious attention to deficit reduction but only if we do it in a bipartisan mode. I would not 

preclude bipartisanship even if the majority party controls both 

branches of government. I think it can have an open-door policy, 

an open-mind policy. The bilateralism which we talked about, 

PAYGO rules, would be a good first step to reassure the Democrats 

that they have something to gain through negotiation, not simply 

being in opposition. 

The other point I want to make is that changes can be made in 

the budget process to sensitize us to whether we are on a sustainable fiscal course. In my view, the current fiscal course is not sustainable. 

There are a number of countries where the government actually 

produces—either annually, in the case of Britain; every 5 years, in 

the case of Australia, a fiscal sustainability report. The European 

Commission produces a fiscal sustainability report on every member country every year looking 30 to 50 years downstream. 

Such a report should be modeled after the trustee’s report on 

Medicare, Medicaid, and Social Security. It should be bipartisan. It 

would command public attention: Are we on a sustainable fiscal 

course? So the report won’t tell us what to do about it, but it would 

call attention to the issue. 

Mr. KOGAN. At the risk of being flip, I think that the problem 

is Hollywood and TV cameras in the House and the Senate. I am 

glad you understand where I am going with this. 

Mr. EDWARDS. Sound bites. 

Mr. KOGAN. Yes. And not just sound bites. Hollywood in the form 

of entertainment defines struggle between good and evil, the Jedi 

and the dark side of the force, and so on, as something that is really fun to watch on TV or watch in a movie theater. And I think 

that this tendency reinforces in the American public the tendency 

to view political discussion as our side against their side as though 

it were the Red Sox against the Yankees, for example, as though 

the Yankees really were the evil empire. 

None of that is, of course, true. Compromise is a virtue for its 

own sake. It is a virtue not merely because you can get something 

accomplished that way, because you can get some deficit reduction 

accomplished that way and deficit reduction is needed, but comVerDate 0ct 09 2002 15:43 Aug 19, 2005 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6602 F:\DOCS\HEARINGS\109TH\109-8\HBU173.000 HBUD1 PsN: DICK
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promise is a virtue because it reminds us that we are all Americans and that differences of viewpoint are just differences of viewpoint and are not fights between good and evil, or the righteous 

and the nonrighteous, or people of faith and people of lack of faith, 

or whatever. I think Hollywood is leading us in the wrong direction 

because it is training the American people to want a good fight and 

one side to vanquish the other. 

On top of this, this leads to the natural political theory, which 

this President, despite his words, strongly believes. Which is that 

you should try to make the smallest possible winning coalition because then the spoils can be divided most narrowly among your 

friends and you don’t have to spread some of the spoils among your 

opponents. 

I wish it were otherwise. I think, ultimately, it is up to the 

American public to stop this. It is the American public which nominates and then elects the most rabid partisans. Notwithstanding 

the way I was characterized, I only feel that way when I am getting kicked in the shins. The rest of the time I feel that I really 

would like to sit down with my counterparts on the Republican 

side, close the doors, turn off the TV cameras, work out a deal, and 

then try to sell it. 

Closing the doors and working out a deal and turning off the TV 

cameras is right. This is where Woodrow Wilson was partly wrong 

when he talked about open treaties openly arrived at. Yes, you 

have to know—you shouldn’t have a secret treaty that is never 

known until you are at war. But, short of that, the process of sausage making really should take place within the sausage factory 

and not out in the open as a form of blood sport. 

Mr. EDWARDS. Chairman, thank you. 

If I could just say to you and take 30 seconds, since I have gone 

over time, but it seems to me that one common thread in all their 

comments is that there is an agreement that it is going to require 

ultimately, because of the size of the deficit, bipartisan solutions. 

And then the question would be raised: If I were the Republican 

President and Republican House and Republican Senate leaders, 

why would I want to require Democrats? My answer to that is: It 

would require Democratic input to give some credibility to some of 

the spending cuts so that you are not crucified for making spending 

cuts as you were last year when you offered a 1 percent cut and 

entitlement programs. 

Part of the question is, would Democrats be willing to come to 

the table? I can’t answer that. But I wish somebody in the leadership in either party or both parties would try to make that effort 

to bring us together. 

Thank you, Mr. Chairman. 

Chairman NUSSLE. Mr. Cooper, do you have questions for this 

panel? 

Mr. COOPER. Yes, Mr. Chairman, with your indulgence. Thank 

you. 

Chairman NUSSLE. Mr. Cooper. 

Mr. COOPER. When I look at 435 House Members, 100 Senators, 

I see a daunting prospect for fiscal discipline. Traditionally, the 

President has exercised a veto to curb congressional misbehavior. 

As you well know, this President has never used the veto, the first 

48

president since James Garfield in 1881 never to have used the veto; 

and poor Garfield was only in office for 6 months. We are in the 

fifth year of the Bush presidency. So that sends a pretty powerful 

message to our colleagues here. 

There is another Presidential power that I want to focus on. That 

is the rescission power. As I understand it, under the Impoundment Control Act of 1974, Presidents have had an ability to single 

out congressional spending within an appropriations bill to send a 

message to Congress and, within 45 days, get a vote, a simple up 

or down vote, simple majority vote—in other words, it is filibuster 

proof in the Senate—on the targeted spending item. President Clinton used this power 163 times and in a divided government won 

111 times. President Bush, to my knowledge, has never used this 

power. 

So if you take no vetoes and no rescissions, that sends a pretty 

powerful message to our colleagues here that the usual executive 

branch disciplinary techniques are not likely to be used. 

Now, to give President Bush credit, he has threatened a couple 

vetoes. One is over about $10 billion in a highway bill. Another is 

if we were to repeal the single greatest act of fiscal irresponsibility 

in this age, the Medicare drug bill, $8.1 trillion of unfunded entitlement spending supported by this President. And that is why the 

Cato Institute, among others, has entitled a recent report, ‘‘The 

Grand Old Spending Party—How the Republicans Became the Big 

Spenders.’’ And this is true even if you discount defense spending. 

So my primary focus is this rescission power. Why hasn’t President Bush used it? Would it be a useful tool? Most Presidents like 

to use all the tools in their arsenal. Here the President has willingly foregone at least two of the major tools that he has. And, you 

know, to me, an external restraint is going to be helpful for this 

Congress if we are going to make any budget process work. 

Would any of the panelists care to comment? 

Mr. KOGAN. Mr. Cooper, let me start by talking specifically about 

rescissions. What you described is known as the enhanced rescission process, but it is not in law. Under the Impoundment Control 

Act as it now exists, the President isn’t guaranteed a vote. He can 

send a rescission message to Congress, he can withhold the funds 

for 45 calendar days of continuous session, which tends to run 

about 60 to 90 days, but, after that, if Congress does nothing, then 

he has to release the fund. OK? And so Congress wins by doing 

nothing, which is one of the things that Congress is exceptionally 

talented in doing. And, therefore, that could be one reason that 

President Bush hasn’t felt that it would be a particularly useful 

way to go. 

Mr. COOPER. Are you implying that he is afraid of Congress? 

Mr. KOGAN. I’m implying that he wouldn’t be successful, in which 

case he would be annoying people without achieving a budgetary 

goal. 

Mr. COOPER. If the President were to single out spending items—

for example, Senator Grassley’s $50 million indoor rain forest in 

the great State of Iowa, that he would not be able to prevail on 

that vote and get a simple majority of Republicans in both Houses, 

and perhaps a lot of Democrats would join in. 

49

Mr. KOGAN. I have two questions. One is, why would the Appropriations Committee in the Senate bring that bill to the floor when 

the members of the Appropriations Committee have to deal with 

Senator Grassley, the chairman of the Senate Finance Committee, 

on all sorts of important issues? Why would they go out of their 

way to antagonize the chairman of the Senate Finance Committee 

over $50 million, which is not even a rounding error with regard 

to the President’s budget? 

The second is, however, that right now the majorities in the 

House and the Senate are small. You can’t really afford to antagonize any of your potential allies, and I think that that possibly may 

be going through the President’s mind. 

If he had bigger majorities in the House and the Senate, then he 

could probably much more easily pick out projects here and projects 

there and programs here and programs there—it is not just 

projects that are subject to rescission—and get away with a temporary, even 1-year annoyance of a Member here and a Member 

there and even a key Member somewhere else. But with small majorities, you have to do everything you can to keep them together 

if you want to govern on a purely partisan basis, which this President does; and therefore he has to swallow stuff that he otherwise 

would not be interested in swallowing. 

Mr. SCHICK. The only time in the last 30 years that rescission 

was effective was in the first year of the Reagan Presidency. 

Throughout the entire history of congressional budgeting, for every 

dollar rescinded by Congress pursuant to Presidential proposal, 

Congress has rescinded $3 or $4 on its own. The evidence is that 

the current rescission power does not arm the President with very 

much, but I do think that the veto power is extraordinarily effective both when it is used and when it is threatened. And if we look 

at the SAPs, the Statements of Administration Policy, where the 

President sets out his position on pending appropriations bills we 

find that the level of veto threats from the current President is far 

lower than those from his predecessors; and I believe Congress 

reads between the lines of these Statements of Administration Policy and concludes, it has nothing to fear, and has license to spend 

what it wants. 

Having said this, I believe the President should have a more active, vigorous veto posture. But, keep in mind what Mr. Kogan said 

earlier, that over the next 30 or so years the entire risk to the 

budget is concentrated in three programs, and those programs are 

not subject either to rescission or to a veto. Those are not effective 

tools for dealing with them. To put the budget on a sustainable 

course, Congress will need additional tools. 

Mr. FRENZEL. I think you have got some wonderful answers from 

these panelists. I have always thought the rescission power was a 

joke and it didn’t give the Congress anything, it left all the power 

with Congress. And I am astounded to hear you say that President 

Clinton used it all those times. He certainly did it quietly, because 

I don’t recall any enormous savings flowing from the——

Mr. COOPER. There were several billion dollars saved. 

Mr. FRENZEL. Well, a billion here and a billion there is important, I think. 

50

But I also agree with Allen on the subject of the veto. Presidents—it is a very powerful weapon. A President should use it occasionally, and I think fiscal sobriety is a great cause for using the 

veto. I wish he would use it much more frequently. 

I think one of the restrictions is that Presidents and their people 

never like to lose. They hate to be seen making a big case and then 

get overridden, and there is probably some natural reluctance, has 

been at least in some of the White Houses I have been familiar 

with. But I think a President has got to lead, and I certainly hope 

the President doesn’t get through his term in Garfield-like style. 

Mr. COOPER. With the Chairman’s indulgence, this is the President who said he had a lot of political capital and he was ready 

to spend it. Are you telling me that, unlike with President Reagan 

who showed real leadership on rescission and other Presidential 

powers, that this President hasn’t been able to find one misguided 

congressional spending project in 5 years that he could perhaps 

muster a simple majority to uphold his rescission of? Surely there 

is something that they could have found to send a message to Congress that they will not tolerate much foolishness. But no such 

message has been sent. 

Mr. FRENZEL. I don’t deny that it is possible that he could have 

found something, but I also wonder about the comparison to President Reagan. I can only remember one veto of his, which was 

promptly overridden. It was a highway bill which this President is 

not threatening to veto. And, you know, veto is a powerful weapon. 

It doesn’t always work, though. And I wish he would do it. I wish 

he would use rescissions. I think the rescission is a cream puff of 

a weapon, and I would rather have him concentrate on this. 

Mr. COOPER. I thank the Chair. 

Chairman NUSSLE. I have rarely had to try and defend a rain 

forest in Iowa, particularly one that wasn’t in my district, but I am 

sure there were probably billions of dollars that went to the Tennessee Valley Authority (TVA) that could have been the subject of 

revisions, rescissions, vetoes or all sorts of things. So I think there 

is probably enough largesse that goes around to all States, I would 

just remind the gentleman. 

This has been a great hearing, and I really appreciate the spirit 

in which you have approached this. You have given I think some 

very objective testimony to the members who were here today and 

were interested in listening. One of the reasons why I didn’t want 

to ask questions to start with, is that I wanted to have a chance 

to listen to all the give and take, and I thought it was fascinating. 

I have four categories of the advice you have given us today. One 

is, the rules should be fair, that is kind of what you have said. I 

realize that may sound overly simplistic, but I think it is fair to 

say that. 

In other words, the rules should fashion an objective decision at 

the end of the day, not a subjective or partisan outcome. I think 

all of you have said that, even though each in your own right and 

in fairness are partisans and should be—I am—we all are. I appreciate the way you are giving us the advice, particularly in the 

PAYGO discussion. We peeled the onion back beyond the should it 

be extended or should it not be extended to the nuances of, if we 

are going to extend it, let us talk about maybe some of the tangenVerDate 0ct 09 2002 15:43 Aug 19, 2005 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6602 F:\DOCS\HEARINGS\109TH\109-8\HBU173.000 HBUD1 PsN: DICK
51

tial issues that could arise as a result. For instance, coming to a 

surplus back in 1990 which was not contemplated, it wasn’t even 

close to contemplated. Which in part precipitated the fact that we 

allowed PAYGO to lapse because the rules to some extent were not 

as relevant during the time of surplus as they were during the 

times of deficit. You could argue that they are, but maybe in a little 

bit different context. 

The bottom line is you have given us some good advice that the 

rules should be objective and not predetermine an outcome, predetermine a tax cut outcome, predetermine a spending increase 

outcome, predetermine a particular partisan substantive outcome, 

and I think that is good. 

The second is that we ought to have good information. Good information, whether it was your baseline, whether it is what CBO 

provides you on a bill-by-bill basis or as we look long term. You 

have given us some great ideas in that regard. 

In particular, I have been frustrated with the—and Professor 

Schick, you in particular gave some great testimony regarding this 

issue, as did Bill Frenzel, from a practical standpoint of how just 

because of a score keeping outcome we fashion a policy decision. 

Or, in order to achieve an arbitrary financial outcome, we make 

what would otherwise be maybe a nonsensical policy decision in the 

final throes of a negotiation of a conference. Let us make it fit; and 

the way to make it fit is to phase it in, apply it here, apply it there. 

But, as a result you make, in some instances, huge mistakes in the 

final determination of policy as a result of the making-it-fit 

quotient. 

The third one that I really liked is the issue and I will give you 

equal time if I am misinterpreting any of these—regardless of the 

rules or regardless of the final substantive outcome of the budget 

process, enforce it is kind of what I heard you say. And this should 

be a role that we do not shrink from. 

The final one is how do you make better choices, and that I think 

is the toughest part. I think that is really what this comes down 

to. And all of our machinations of trying to come up with rules or 

good information, enforcement or whatever, it still does come down 

to throwing everything out, is the Constitution. That is 435 people 

in the House, 100 in the Senate, and the President are trying to 

make choices, pluses and minuses here and there, and policy determinations, because the rules other than the Constitution can all be 

waived, can all be broken, can all be changed, can all be fashioned 

in a way to achieve something that one particular party or partisan 

objective wants to achieve. 

That is the tough part. There is almost no proposal that I have 

come up with or that I have seen that really gets around that final 

category, and that is how do we make better choices? I have heard 

of a lot of reasons why we failed as a Federal Government or as 

a Congress. I have heard everything from C-SPAN, that I actually, 

before the discussion came up, wrote down. I love C-SPAN. If they 

are carrying us, I am not making any disparaging remarks because 

they may change my name under the title or something like that. 

It is a great and fantastic camera on the process. But, as you said, 

it has definitely changed the outcome because we are on cameras. 

52

The other ones I have heard are air conditioning and air travel. 

As soon as air conditioning was created, the fiscal year was expanded, and we were here longer into the summer. And the other 

one is air travel because it allowed us to go home as opposed to 

staying out here and having the conversations and the discourse. 

So now I add to that the Richard Kogan—and that is the budget 

process has now made it more difficult for us. I haven’t heard that 

one before, but I am going to add that to my arsenal of reasons 

why we are melting down. 

But I am not sure I agree on the partisanship. I don’t know, this 

is something I have got to think about. I have been thinking about 

it the entire time: Does the budget actually make it harder for us 

to come together or not? And I guess I am leaning in favor of your 

comments that it actually does. 

I think—Mr. Edwards is no longer here. Otherwise, I would say 

this to him, I think if he and I were locked in a room, 90 percent 

of the discussion would be over in the first 5 minutes. We could 

come to—and I think that is true with Mr. Spratt and with many 

of us, that on any good day, 60, 70, 80 percent of the discussion 

about our budget priorities and choices could probably be made 

fairly quickly. 

All you have to do is watch the votes on the floor, and watch the 

appropriation bills. We put in one of the toughest budgets on discretionary spending in over a generation, and they are passing on 

the floor with flying colors. Yet during the budget discussion there 

was gnashing of teeth and wringing of hands on all sides about 

how the cuts weren’t good enough or the cuts were too much. But 

now they are passing with 380 votes to whoever is left to wave the 

flag against them, it is amazing. Meaning to me that, as I say, 60, 

70, 80 percent of the discussion is done and could be done in a nonpartisan or bipartisan way. It is those last little nuances that are 

the toughest parts. 

I don’t know how you improve that, as I say, that fourth category 

or how you could do it with a Budget Committee. I don’t think getting rid of the committee is the way to go. I know you were giving 

that out as kind of a devil’s advocate or at least to be provocative. 

And it is a fair discussion, because since it has been only in its inception since 1974, it is always fair to review it. 

But I do think you have given us some good suggestions today 

as ways to move forward. I wish I could tell you that I see a path 

toward making the reforms. I tend to agree with you that if it is 

not done in a bipartisan way that it is going to be very difficult to 

sustain them and have any kind of predictability long term. 

I am less worried about the partisanship than I am the turf battles in achieving reform for the budget process, meaning I am more 

concerned about what the Rules Committee’s objectives are or the 

Appropriations Committee or the Ways and Means Committee or 

the other authorizing committees. I am probably more concerned 

about those turf battles—some are partisan, some are bipartisan 

turf battles—as I am the purely Democrat versus Republican turf 

battles that go on around here. At least in my judgment I have 

seen more difficulty in reaching agreement as a result of those kind 

of jurisdictional turfs than I have seen with purely partisan philosophical discussions. 

53

So much of your testimony was—I don’t want to make it sound 

like, therefore, it is irrelevant, but you have repeated yourself often 

today. You have often repeated yourself over the years. As Mr. 

Frenzel has said, this is—to some extent, he has been here and 

done this many times. But we appreciate it, because we do have 

a lot of new members, and we have a lot of good staff. It is good 

to hear that historical perspective. It is good for me, and I have 

heard it probably as much as any member on the committee. So I 

greatly enjoyed and appreciated your testimony today. 

I will give you each a last word of summation if you would like, 

either based on what I have said or any other comments. I guess 

let me ask it in the way of a question. This may be unfair, but 

since you have talked about it so much, I am going to give each 

of you a magic wand. You have got one proposal that you would 

give me as your advice of the one thing we could do. I know it is 

an unfair question, but I am going to ask it anyway because it is 

my prerogative. Kind of the one silver bullet, if you will, of the 

thing you would change. Would it be the baseline? Would it be 

PAYGO and caps? Would it be do away with the committee and 

throw it all out and start over? Is there one proposal that you could 

advise us as kind of the bane or the frustration or the one thing 

that you would hope we would definitely add as part of any proposal as we go forward? 

Let me start with Richard, and we will go across and opposite 

of the way you testified today. 

Mr. KOGAN. Thank you, Mr. Chairman. 

I think I would start with my last proposal, which is to limit reconciliation to achieving deficit reduction. Maybe put a minimum 

deficit reduction target in the Budget Act. You know, a half a percent of GDP or a quarter a percent of GDP by the fifth year or 

something like that and say you don’t do a reconciliation bill unless 

that bill achieves that much deficit reduction. 

Chairman NUSSLE. On that point, since you have made it now 

twice, isn’t that different than—and I don’t mean this as a challenge, I am really not trying to say it that way. Isn’t that a different philosophical position than many Democrats held in the 

1980s where deficit targets were—and maybe they are just different in your mind because you are focusing them on reconciliation. But my understanding is that they are at least similar 

enough that it is kind of a little bit of a change in philosophy from 

the late 1980s? 

Mr. KOGAN. I think it is more a change in philosophy from the 

early 1980s, but I think that is a valid point you make. In the early 

1980s, particularly, some Democratic leaders—I am thinking specifically of Jim Wright—definitely wanted to use the budget process 

to achieve a major expansion of what he called anti-recession public 

works projects during the residual effects of the early 1980s recession. And he also wanted to use the budget process as a way of getting the Appropriations Committee to actually change the priorities 

in appropriations bills. 

When the budget resolution took money from one function and 

put it in another, which is, of course, nonbinding, he said, it may 

be nonbinding, but this is a clear statement of what we want. We 

want more in the Labor-HHS Appropriations bill specifically for 

54

education programs but also for certain other antipoverty programs. And I on behalf of the leadership am going to you, the 

chairman of the Appropriations Committee, and am going to tell 

you you are not doing your job if you just do the appropriations 

bills the way you want to do them. You have to do them the way 

we, in writing the budget resolution, want to do them. 

This wasn’t really a reconciliation process, but thematically it is 

similar to what you are talking about, using the power of the Budget Committee and the budget rules to try to accomplish goals that, 

in this case, both accomplished spending increases. 

In actual fact, in the 1980s, reconciliation itself was only used for 

net spending cuts and net tax increases. So it was only used for 

net deficit reduction. Sometimes the amount of deficit reduction in 

a reconciliation bill was so little that the inherent abuse that a reconciliation bill is to the normal committee process of the House and 

the entire legislative process in the Senate, made it sort of not 

worth it. Reserve reconciliation for real deficit reduction, and then 

do it, is basically my recommendation. 

Chairman NUSSLE. Why is your—and I know you are not a fan 

of President Bush, and that is pretty obvious. But why isn’t the 

thematic deficit target of cutting the deficit in half in 5 years not 

a deficit target? You know the number, I know the number, and 

the American people know the number. The committee is working 

toward that number. Why is that not a deficit target? 

Mr. KOGAN. That is both a very good question and also a very 

clever question. I was talking about deficit reduction, and I defined 

it in my own mind, and probably not explicitly enough in front of 

the committee, relative to a baseline. You heard me make an impassioned statement that, by definition, Congress has to know 

whether its votes are going to make something more expensive or 

less expensive than it would otherwise be. I want Congress to enact 

legislation that would make deficits lower than they would otherwise be. 

Under CBO and OMB projections, the deficit is going to fall in 

half, more than in half all by itself if you do nothing. My view is 

that that is inadequate because that is just a dip before you get 

back to the long-run, overarching, unsupportable difference between our spending commitments and our revenue levels, and that 

we have to go beyond a 50-percent drop in the deficit to help prepare ourselves for the baby boomer retirement. 

It is going beyond that 50-percent drop that I want. I want to 

enact legislation that would raise taxes and cut entitlements so 

that the deficit would fall faster and further. Your budget and the 

President’s budget actually retard the rate at which the deficit 

would otherwise fall. From my perspective, they increase deficits 

because your tax cuts are larger than your entitlement cuts, even 

though the deficit will, after they are enacted, if projections are accurate, probably fall in half over that period. So we were talking 

in some senses past each other. 

Chairman NUSSLE. Professor Schick. 

Mr. SCHICK. Yes. First, let me endorse what Mr. Kogan said and 

offer an explanation. Congress does not need special procedures for 

increasing the deficit, for raising spending, or cutting taxes. The 

House and Senate can always marshal a majority for them. It is 

55

much harder to cut spending or to raise taxes. Therefore, I would 

reserve reconciliation for those purposes and impose a Byrd-type 

rule in the House. I think both Chambers would be advantaged. 

But my silver bullet would be to combine aspects of Gramm-Rudman and BEA, to create a budget envelope or fiscal constraint for 

Congress, and here is why. If these rules are in place, it is easier 

for politicians to make the tough choices. What you don’t want a 

budget process to do is to complicate the life of someone who has 

to stand before voters and make hard decisions. 

Chairman NUSSLE. Something else to blame: I had to do it because of this rule. Even though you know we can change it. That 

is what you are saying, use it as the bad cop. 

Mr. SCHICK. Preset rules which apply both to the President and 

to Congress would make it easier to discipline the deficit. As I said 

earlier, I don’t believe Bill Clinton would have behaved the way he 

did absent those rules. 

Chairman NUSSLE. I am not sure he would have behaved that 

way without a Republican majority, either. 

Mr. SCHICK. One final point, back to reconciliation. I recall that, 

in 1993, Democrats in Congress toyed with the idea of making the 

President’s health care proposal into a reconciliation bill. If they 

had done so, his health reform would have become law. We would 

have it on the books. Of course, health reform did not contribute 

to deficit reduction, but the President would have had a free path 

to employ it in Congress. 

For some reason, the leadership in Congress decided that it was 

wrong to use reconciliation for this purpose. That demonstrated 

that forbearance is the most responsible weapon of a majority 

party. 

Chairman NUSSLE. Mr. Frenzel. 

Mr. FRENZEL. Mr. Chairman, thank you for having us. I suppose 

all of us who have been here before understand you are sort of in 

the process of singing your swan song, and may I say that I certainly have appreciated your work on the Budget Committee. It is 

a miserable, frustrating job and one—when you assume the gavel, 

you only then realize how limited the powers of the Budget Committee chairman are. But you have conducted the office with great 

skill and grace, and I thank you for being willing to do it. 

With respect to your queries, as you went through the list of 

things that you thought you picked out of our discussion, I would 

like to concentrate on the third one, which is enforcing the choices. 

I think it is really important that the Congress, having passed a 

budget, tries to keep its promises to itself. The budget is nothing 

without the enforcement powers, and it is so easy for Congress to 

lay things aside. A simple little phrase like ‘‘notwithstanding any 

other provisions of law’’ sort of unlocks great doors to glory for 

spenders and tax cutters alike. So I hope that that is something 

the committee will concentrate on. 

If I had one thing to do, I might choose what Allen did. But since 

I think ultimately those are going to happen anyway, I would like 

to get back to the thought about the baseline. 

I somehow would like to release the Congress from the power of 

that baseline and put the Congress back in charge of priorities. 

Maybe you just start out by dumping the demographics and the 

56

COLAs and just start with last year, and even that would be a 

huge improvement. Again, marginal but important. So I would suggest that is a way the committee might look at the problem. 

Again, I want to thank you and the members of the committee 

for an enjoyable morning. 

Chairman NUSSLE. I thank our witnesses and the members who 

have participated today. 

Mr. FRENZEL. Oh, and by the way, I should have wished you 

good luck in your next——

Chairman NUSSLE. That is nice of you but completely out of 

order. There is no swan song yet, we have got work to do, and I 

appreciate your advice on this work. 

I have tried to move legislation on reforming the budget process 

a number of years. This year may be no different than that. We 

will hopefully have the opportunity to make an attempt, if nothing 

else. But your ideas and good counsel has been appreciated today 

and will be appreciated in ongoing fashion. We realize—the people 

who are probably left in the room more than any others—how important this process is and how relevant it is to us. I think, in particular, Professor Schick has been so significant to the last 30 years 

of Washington, the Congress, and the Federal Government, and 

sometimes in a good way, sometimes in maybe not quite so positive 

way. But it has certainly been one of the most significant—and if 

you don’t understand it, if you don’t follow it, if you are not a student of it, you may miss some of the relevance of what is happening in Washington at the time. So I appreciate that. 

I think you are exactly right, and it is why this hearing is so important. But it may also be the least glamorous hearing on the Hill, 

but I appreciate the testimony you have provided us today. 

Unless there is anything else to come before the committee, without objection, we will stand adjourned. 

[Whereupon, at 12:50 p.m., the committee was adjourned.]

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