S. HRG. 114–628 

CONCURRENT RESOLUTION ON THE 

BUDGET FISCAL YEAR 2017 

HEARINGS 

BEFORE THE

COMMITTEE ON THE BUDGET 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

February 3, 2016—SPENDING ON UNAUTHORIZED PROGRAMS 

April 6, 2016—BUDGETING BLIND: THE UNRELIABILITY OF FEDERAL 

FINANCIAL DATA 

April 13, 2016—BUDGETING FOR OUTCOMES TO MAXIMIZE 

TAXPAYER VALUE 

April 20, 2016—TAP DANCING ON THE RAZOR’S EDGE: RESTORING 

STABILITY TO GOVERNMENT OPERATIONS 

April 27, 2016—BETTER BUDGETS, BETTER RESULTS 

September 14, 2016—OVERSIGHT OF THE CONGRESSIONAL BUDGET 

OFFICE 

( 


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CONCURRENT RESOLUTION ON THE BUDGET FISCAL YEAR 2017 


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U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

21–333 2017

S. HRG. 114–628 

CONCURRENT RESOLUTION ON THE 

BUDGET FISCAL YEAR 2017 

HEARINGS 

BEFORE THE

COMMITTEE ON THE BUDGET 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

February 3, 2016—SPENDING ON UNAUTHORIZED PROGRAMS 

April 6, 2016—BUDGETING BLIND: THE UNRELIABILITY OF FEDERAL 

FINANCIAL DATA 

April 13, 2016—BUDGETING FOR OUTCOMES TO MAXIMIZE 

TAXPAYER VALUE 

April 20, 2016—TAP DANCING ON THE RAZOR’S EDGE: RESTORING 

STABILITY TO GOVERNMENT OPERATIONS 

April 27, 2016—BETTER BUDGETS, BETTER RESULTS 

September 14, 2016—OVERSIGHT OF THE CONGRESSIONAL BUDGET 

OFFICE 

( 


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ii 

COMMITTEE ON THE BUDGET 

MICHAEL B. ENZI, Wyoming, Chairman 

CHARLES E. GRASSLEY, Iowa 

JEFF SESSIONS, Alabama 

MIKE CRAPO, Idaho 

LINDSEY O. GRAHAM, South Carolina 

ROB PORTMAN, Ohio 

PATRICK TOOMEY, Pennsylvania 

RON JOHNSON, Wisconsin 

KELLY AYOTTE, New Hampshire 

ROGER F. WICKER, Mississippi 

BOB CORKER, Tennessee 

DAVID A. PERDUE, Georgia 

BERNARD SANDERS, Vermont 

PATTY MURRAY, Washington 

RON WYDEN, Oregon 

DEBBIE STABENOW, Michigan 

SHELDON WHITEHOUSE, Rhode Island 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

TAMMY BALDWIN, Wisconsin 

TIM KAINE, Virginia 

ANGUS S. KING, JR., Maine 

ERIC UELAND, Republican Staff Director 

WARREN GUNNELS, Minority Staff Director 


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CONTENTS 

HEARINGS 

Page 

February 3, 2016—SPENDING ON UNAUTHORIZED PROGRAMS ........ 1 

April 6, 2016—BUDGETING BLIND: THE UNRELIABILTY OF FEDERAL DATA ........................................................................................................ 87 

April 13, 2016—BUDGETING FOR OUTCOMES TO MAXIMIZE TAXPAYER VALUE .................................................................................................. 201 

April 20, 2016—TAP DANCING ON THE RAZOR’S EDGE: RESTORING 

STABILITY TO GOVERNMENT OPERATIONS ........................................ 297 

April 27, 2016—BETTER BUDGETS, BETTER RESULTS .......................... 367 

September 14, 2016—OVERSIGHT OF THE CONGRESSIONAL BUDGET OFFICE ......................................................................................................... 437 

STATEMENTS BY COMMITTEE MEMBERS 

Chairman Enzi .......................................................................... 1, 87, 201, 297, 367, 437 

Senator Whitehouse................................................................................. 6, 206, 301, 383 

Senator Warner .............................................................................................................. 90 

WITNESSES 

Barry Anderson, Former Acting Director, Congressional Budget Office......... 374, 378 

James C. Capretta, Senior Fellow, Ethics and Public Policy Center, American 

Enterprise Institute.......................................................................................... 384, 387 

Stan Collender, Executive Vice President, QORVIS MSLGROUP .................. 396, 398 

Honorable Gene L. Dodaro, Comptroller General of the United States, U.S 

Governmental Accountability Office ................................................................... 92, 95 

Honorable Keith Hall, Ph.D., Director, Congressional Budget Office ... 9, 11, 439, 442 

Kevin A. Hassett, Ph.D., Director of Economic Policy Studies, American Enterprise Institute .............................................................................................. 304, 306 

Phillip G. Joyce, Ph.D., Professor of Public Policy and Senior Associate Dean, 

University of Maryland School of Public Policy............................................. 316, 318 

Honorable Maurice P. McTigue, President of Outreach, Mercatus Center, 

George Mason University. ............................................................................... 235, 237 

Roy T. Meyers, Ph.D. , Professor of Political Science and Affiliated Professor 

of Public Policy, University of Maryland, Baltimore County........................ 260, 264 

Norman J. Ornstein, Ph.D., Research Scholar, American Enterprise Institute..................................................................................................................... 332, 334 

Paul L. Posner, Ph.D., Director of Graduate Public Administration Program, 

and Center on the Public Service, School of Policy, Government and International Affairs, George Mason University........................................ 36, 38, 212, 214 

James A. Thurber, Ph.D., Founder and Director, Center for Congressional 

and Presidential Studies, School of Public Affairs, American University ......................................................................................................................... 54, 56 

Jessica Tollestrup, Specialist on Congress and the Legislative Process, Congressional Research Center ................................................................................. 25, 28 

QUESTIONS AND ANSWERS 

Questions and Answers......................................................... 76, 178, 293, 353, 412, 468 


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SPENDING ON UNAUTHORIZED PROGRAMS 

WEDNESDAY, FEBRUARY 3, 2016 

U.S. SENATE, 

COMMITTEE ON THE BUDGET, 

Washington, D.C. 

The Committee met, pursuant to notice, at 10:00 a.m., in Room 

SD–608, Dirksen Senate Office Building, Hon. Michael B. Enzi, 

Chairman of the Committee, presiding. 

Present: Senators Enzi, Grassley, Ayotte, Perdue, Whitehouse, 

Kaine, and King. 

Staff Present: Eric Ueland, Republican Staff Director; for the Minority: Joshua Smith, Budget Policy Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. I will go ahead and call this hearing to order. 

Good morning, and welcome to all that are here. 

We are here today to talk about what I view as a fundamental 

breakdown in America’s budget process, and it is a breakdown that 

has significant ramifications for not only Government but for our 

Nation. I mentioned a lot last year that we had 260 expired authorizations that we were still spending money on to the tune of $293.5 

billion. I evidently mentioned it enough that we changed that from 

260 down to 256. But we increased the spending from $293 billion 

to $310 billion. We need to be going back and looking at things and 

making sure that we know what we are spending our money on. 

It is essential to start with a premise of good government that 

we should authorize programs and activities before we fund them, 

and as the former Chairman of the Health, Education, Labor, and 

Pensions Committee, I strongly value the process by which programs are authorized and reauthorized. When Congress utilizes an 

authorization, it is creating a Federal solution to a perceived need. 

But over time, needs change, program flaws become apparent, technology evolves. And over time, inevitably Congress creates more 

programs, many of which are duplicative of existing programs, as 

the Comptroller General of the Government Accountability Office 

testified before this Committee last year. 

Congress must reexamine what we are actually funding in order 

to improve or eliminate Government programs not delivering results. By taking a closer look at these programs and activities, we 

would have more funding flexibility to boost important programs 

and priorities. This is also probably the best way to avoid creating 

new programs that duplicate those already being funded. 


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In short, there are a slew of reasons why Congress needs to periodically review and reauthorize the very Federal programs and activities it initiates. But the problem is we are not doing it. 

Most of the big-ticket Federal entitlement programs like Medicare and Medicaid have permanent authorizations. Not surprisingly, they have proven to be particularly difficult to reform. 

On the discretionary side, defense authorization is reauthorized 

annually like clockwork via the National Defense Authorization 

Act. But the majority of nondefense discretionary spending is now 

unauthorized. We have a chart showing that last year, $310 billion 

of the roughly $543 billion in nondefense discretionary appropriations went to unauthorized programs and activities. Why are we 

spending less on the authorized ones than we are on the unauthorized ones? 


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We did not get there overnight. We have another chart using 

data compiled by the Congressional Budget Office showing that 

spending on unauthorized appropriations has been increasing over 

the course of the last three decades. It is a rising tide of unauthorized appropriations. It is also worth noting that most of the current 

$310 billion in unauthorized appropriations is funding programs 

whose authorizations has been expired for a decade or more. In 

fact, we continue to fund some programs whose authorization expired more than 30 years ago. That means we fund these initiatives whether they are accomplishing their goals or not. 


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Appropriations have become increasingly divorced from authorizations, despite the presence of rule regimes in place in both 

chambers of Congress intended to prevent unauthorized appropriations. Senate Rule XVI and House Rule XXI create points of order 

against unauthorized appropriations. But these rules are not comprehensive, they are not self-enforcing, and they are rarely used in 

actual practice. 

Consequently, the reauthorization of discretionary funded programs is itself becoming discretionary with the appropriations process increasingly blind to the authorization status of the various line 

items being funded. Instead of a bilateral system of authorization 

and appropriation with program funding contingent on both, we 

are moving toward a unilateral system. Again, I doubt it is coincidental that duplicative programs are proliferating along with the 

unauthorized appropriations. We are now funding 158 STEM education programs and nearly 700 renewable energy initiatives, according to the Government Accountability Office. 

To be clear, I am not arguing that every program whose authorization is expired does not merit funding. But if appropriations are 

in no way contingent on authorization, we relinquish our responsibility to regularly review and reform programs. It is not enough for 

authorizing committees to act only to avert crises. That essentially 

sets discretionary spending on the same autopilot mode to which 

we have already set the two-thirds of the budget that consists of 

entitlements and other mandatory spending. 

Ultimately, if we are going to cure our chronic overspending 

habit, we need to fix America’s broken budget process, especially 

between the congressional authorization and the appropriation 

process. 

I should mention that these expired expenditures are only where 

they listed a specific expenditure, not such sums or other things. 

We have programs that would run that total up considerably if all 

of those programs were thrown in. I hope we can find the solution 

today. 

Senator Whitehouse. 

OPENING STATEMENT OF SENATOR WHITEHOUSE 

Senator WHITEHOUSE. Thank you very much, Mr. Chairman, and 

thank you, Director Hall, for appearing before us today. I was looking forward to hearing your testimony last month on CBO’s revised 

budget outlook, but the blizzard superseded that hearing. So I will 

make the most of your participation today by focusing a little on 

CBO’s projections in my opening remarks. 

But, first, there is another matter that I would like to address. 

Director Hall is entitled to the benefit of the doubt, and he will 

have it. But a caution light blinks for many of us based on his 

background at the Mercatus Center, which the Washington Post 

described as a ‘‘staunchly anti-regulatory center funded largely by 

Koch Industries, Incorporated.’’ In her recent book ‘‘Dark Money,’’ 

journalist Jane Mayer wrote that Clayton Coppin, a professor at 

George Mason who reviewed Bill Koch’s political activities, concluded Mercatus to be ‘‘a lobbying group disguised as a disinterested academic program.’’ 


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This caution acquires particular force for some of us because of 

the novelty of dynamic scoring and the discretion that CBO has 

been given in this area. Dynamic scoring can be used selectively, 

for instance, to ease the passage of legislation like large corporate 

tax cuts, while ignoring growth or savings that come from investments on the spending side. CBO has a longstanding reputation for 

independence and provides a critical function to Congress. It is important that that not be compromised. I will say no more, and I am 

sure Director Hall understands. 

I now want to turn to the budget outlook. As was widely reported 

last month, CBO projects the budget deficit will grow in 2016 for 

the first time since 2009. In describing a $130 billion jump in its 

2016 deficit calculation, CBO noted, ‘‘That increase is largely attributable to legislation enacted since August, in particular, the 

retroactive extension of a number of provisions that reduce corporate and individual income taxes.’’ 

While I supported the omnibus bill, I believe the tax provisions 

which cost over $800 billion over 10 years, including interest costs, 

should have been paid for like any other spending increases. It is 

somewhat astonishing that Republicans insisted on offsetting the 

costs of $80 billion in sequester relief but supported $800 billion in 

tax spending with no offsets. Tax spending is real spending. As 

former Speaker John Boehner said, ‘‘We need to acknowledge that 

what Washington sometimes calls ‘tax cuts’ are really just poorly 

disguised spending programs that expand the role of Government 

in lives of individuals and employers.’’ 

Reagan economist Martin Feldstein agrees and noted, ‘‘Cutting 

tax expenditures is really the best way to reduce Government 

spending.’’ I would add that tax spending is also a vector for big 

giveaways to special interests. 

In the budget outlook, CBO projects revenue as a share of GDP 

will hover around 18 percent for the next decade. The last time we 

had budget surpluses at the end of the Clinton administration, revenue hit 20 percent of GDP. If we truly believe the deficit threatens 

future prosperity and are truly serious about wanting to tackle it, 

we are going to need to acknowledge that tax spending is part of 

the problem. Much of that tax spending is an Ali Baba’s cave of 

treasure for special interests, and unlike one-time appropriations 

earmarks, special interest tax spending lives on and on and on in 

Ali Baba’s cave. These, too, are permanent authorizations. 

So far, Republicans have been unwilling to give up a single tax 

loophole in the cause of deficit reduction. Not a one. The super 

committee charged with replacing the harmful sequester cuts 

failed, in large part because Republicans refused to close any tax 

loopholes. Each time we have negotiated sequester relief, Democrats try to bring loopholes into the mix, and each time it is refused. 

As the Senate-passed fiscal year 2016 budget resolution noted, 

tax expenditures for 2016 will total about $1.5 trillion. By 2025, tax 

expenditures will rise to over $2.2 trillion. We will spend more 

money on tax expenditures this year than we will spend on all Federal health care programs combined. We will spend, for instance, 

$60 billion this year on the, shall we say, much discussed 


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Obamacare insurance exchange subsidies. But 25 times that 

amount will go out the back door of the Tax Code. 

From the carried interest loophole for hedge fund managers to 

Tax Code subsidies for oil and gas giants, there is plenty of deficit 

reduction to be found in tax provisions designed to take care of 

wealthy and well-connected interests. Any sincere effort to cut the 

deficit must end egregious tax giveaways. 

Turning to the topic of today’s hearing, unauthorized spending is 

a symptom of broader dysfunction in the budget process. When you 

look at how difficult it can be to reauthorize even popular programs 

like the Violence Against Women Act, it is no surprise the Senate 

cannot keep up and that authorizations lapse. 

Given institutional hurdles and partisan obstruction, we should 

consider whether it makes sense to have authorizations sunset or 

whether they should continue until repealed or replaced. 

Finally, as we continue to examine process reforms, Budget Committee members need to have a frank discussion about the relevance of this Committee. In a Senate that requires 60 votes on 

any major legislation, the 60-vote penalty for violating this Committee’s budget is meaningless, both to the Appropriations Committee and to the body. And I think the negligible attendance that 

we see at Budget Committee proceedings is not a signal of the fact 

that we are up on the sixth floor but a signal of the fact that everybody recognizes we really do not count for much any longer. 

Mr. Chairman, I appreciate your leadership in exploring ways to 

improve the budget process and to revive the relevance of what 

should be an important Committee. As you contemplate a new 

budget resolution and budget process reforms, I encourage you to 

continue the spirit of open dialogue and of fostering bipartisan 

ideas, and I thank you. 

Chairman ENZI. Thank you, Senator Whitehouse. 

We know that the authorization process has been for many decades a key facilitator of programmatic oversight and reform. When 

we fund unauthorized programs, we keep the experts who sit on 

the committees of the authorization on the sidelines. We put too 

much of a burden on the shoulders of appropriators. We skip the 

budget. We become the sole arbiters of funding decisions, decisions 

often made under great duress after a fiscal year has already 

begun because the work did not get done timely. Congress should 

not abandon its fundamental responsibility to authorize and reauthorize what it funds. And I look forward to working with you on 

doing something about the budget process, too. 

Our first witness today is Keith Hall, who is the Director of the 

Congressional Budget Office. Some of the data I cited in my opening statement comes from the most recent version of CBO’s annual 

report called ‘‘Unauthorized Appropriations and Expiring Authorizations.’’ CBO is required to issue this report each year under the 

terms of the Congressional Budget Act. Director Hall is the ninth 

CBO Director. He is an economist who formerly served as Commissioner of the Bureau of Labor Statistics, the Chief Economist of the 

White House Council of Economic Advisers and the Department of 

Commerce, and a senior international economist for the International Trade Commission. 


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Dr. Hall, thank you for joining us today to inform our discussion 

on these unauthorized appropriations. Dr. Hall. 

STATEMENT OF THE HONORABLE KEITH HALL, PH.D., 

DIRECTOR, CONGRESSIONAL BUDGET OFFICE 

Mr. HALL. Chairman Enzi, Senator Whitehouse, and members of 

the Committee, thank you for the opportunity to testify about unauthorized appropriations. Since this is a technical subject, I will 

start with some background to make it clear to everyone what I 

will be talking about. 

Legislative practices long differentiated the laws that establish 

Federal entities or programs from laws that fund them. Authorizing legislation is the first component of that practice, and appropriation laws are the second. Specifically, once the authorizations 

for the agency’s programs or activities are in place, annual appropriation laws separately provide funding for them. 

Authorizing legislation can take different forms. It can be organic 

or enabling legislation which broadly authorizes the creation and 

operation of an agency, program, or activity. Such legislation may 

or may not include an authorization of appropriations, which explicitly authorizes the funding for the agency program or activity. 

Authorizations of appropriations can specify the amounts that 

may be appropriated for certain fiscal years or for an unspecified 

period. They can also indicate that the amounts are indefinite, authorizing the appropriation of such sums as may be necessary. If 

an authorization indicates either specific or indefinite amounts, I 

will refer to it as an ‘‘explicit authorization.’’ Such authorizations 

are intended to offer guidance regarding the amount of funds necessary to carry out the authorized activities of an agency. Even 

when an explicit authorization of appropriations has expired, the 

organic legislation usually remains in place. 

With that background, I will now discuss CBO’s analysis of unauthorized appropriations. Each year, we provide the Congress 

with a report titled ‘‘Unauthorized Appropriations and Expiring 

Authorizations,’’ as mandated by the Congressional Budget Impoundment Control Act of 1974. Last month, we published the 

most recent one known as the UAEA report covering fiscal year 

2016. Our UAEA report seeks to identify programs whose explicit 

authorization of appropriations has expired. 

For 2016, we reported that a total of $310 billion, about onequarter of discretionary appropriations in that year, was provided 

for programs and activities whose explicit authorization of appropriations had expired and whose appropriations could be identified. 

More than half of those unauthorized appropriations were provided 

for programs whose explicit authorization expired more than a decade ago. 

I want to make four points about the UAEA reports. 

First, the law requires CBO to prepare an annual report that 

identifies all programs and activities funded during a fiscal year for 

which authorizations of appropriations have not been enacted for 

that year. Our report includes only those programs whose explicit 

authorization of appropriations has expired. CBO cannot identify 

programs or activities that are receiving an appropriation even 


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though they have never had an explicit authorization of appropriations. 

Our report sometimes identifies a program whose explicit authorization of appropriations has expired but not the amount appropriated because the program’s funding is part of a larger appropriation account. Quite a few of those amounts are probably small, and 

some may be part of appropriations listed elsewhere in the report. 

And, finally, even if the authorization of appropriations has expired, our report does not identify whether the organic or enabling 

statute governing a program or activity has expired. A permanent 

law may continue to set the policies and guidelines under which 

such appropriations are to be obligated. Identifying cases where enabling statutes never existed or have expired is not the focus of the 

law’s requirement. To identify such cases among all programs and 

activities of the Federal Government would be virtually impossible. 

To give a concrete sense of what is behind the numbers in our 

report, here are some examples. 

When we issued our last report, the authorization of appropriations for several large agencies or programs had expired. This includes the National Institutes of Health, with appropriations of $31 

billion for 2016; NASA, with appropriations of $19 billion for 2016. 

Even though the authorizations of appropriations for these programs have expired, organic legislation permanently authorizes the 

activities of those agencies. Those laws were most recently modified 

in 2007 for NIH, in 2010 for NASA. 

Some other large appropriations with expired authorizations of appropriations include the following: $27 billion for programs authorized in the Violence Against Women and Department of Justice 

Reauthorization Act of 2005; $26 billion for programs authorized in 

the Foreign Relations Authorization Act fiscal year 2003; and $26 

billion for programs authorized in the Quality Housing and Work 

Responsibility Act of 1998. 

Expiration of authorizations for particular large agencies or large 

programs can significantly affect the changes from one year to the 

next in our report. For example, CBO reported that the total 

amount of unauthorized appropriations in 2008 was $167 billion, 

but has been noticeably larger since then, averaging close to $300 

billion. That increase was attributable in part to the expiration of 

the 2009 authorizations of appropriations for both NIH and the 

programs in the Department of Justice that I just mentioned. 

On average, over the past decade, about one-fourth of total discretionary appropriations were provided for programs and activities 

whose explicit authorizations of appropriations had expired. 

I hope that you find this information helpful, and I am happy to 

answer any questions you have. Thank you again. 

[The prepared statement of Mr. Hall follows:] 


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Chairman ENZI. Thank you. I really appreciate the detail that 

you went into in this report. I think it will be very helpful. But one 

of the difficulties that we have around here is ever going back to 

look at anything we did in the past. We pointed that out with one 

hearing on old regulations, and these are old laws that we do not 

go back and revisit to see what changes need to be done. But I do 

appreciate the work that you and your staff did in this area. I 

think the findings are very illuminating. 

I do want to highlight that the report only hints at the extent 

to which we are losing control over annual spending. As you pointed out, besides the $310 billion, there are funds and activities that 

never received any explicit authorization. 

Now, when Senator Coburn was here, I do not think he let any 

bills go through that did not have an explicit one in there so he 

would know how much was anticipated to be spent on that item. 

So a lot of them that are not expired that have specific sums in 

them are the result of the work that he did. He really did not like 

the words ‘‘such sums’’ or ‘‘funded at levels above authorized limits.’’ 

Is there a better way to measure the degree to which the annual 

appropriations are unchecked by the authorization process? 

Mr. HALL. Well, we write that one of the problems is that we 

have not been able to look at programs that have no organic or enabling authority to exist at all, and getting a comprehensive list of 

those is very difficult. For example, trying to establish the linkages 

between appropriation accounts and authorizing statutes for everything would take really quite a long time. We certainly could work 

with you some to try to improve this report and maybe try to include more of that. I think something like a census is very difficult. 

If you sort of think about it, if we take every program that has an 

appropriation, in a sense we are trying to prove a negative. We are 

trying to establish that there is no authorizing language. So we 

have to go through all the laws to try to establish that nothing exists and then to do that for every appropriation. 

So the perfect is probably impossible, but we certainly could do 

more to make this a better report. 

Chairman ENZI. Well, another thing we discovered through the 

process is it was 260 expired authorization laws, but I think it was 

over 1,200 programs, because each authorization, again, to expedite 

being able to get through the whole process, I think we combine 

them a lot. And that also allows us to hide some of the things. 

I am always looking for suggestions on how we can get Congress 

to go back and take a look at what we have done before. And we 

talk about such big numbers around here. I used to be a mayor, 

and on the city council, I know it took us longer to approve a shovel 

than it did street construction, and that is because everybody understood what a shovel was and how there are several different 

kinds of shovels, but they did not know much about street construction. So the street construction went right through, and the 

shovel took a long time. I suspect that is one of the problems with 

some of these things. 

Now, your report inventories programs and activities that are explicitly authorized to receive annual appropriations for a duration 

of time. The time periods lapse, yet the funds continue to flow. 


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As a student of the political economy, do you find it troubling 

that the majority of the Government’s nondefense discretionary 

spending funds programs and activities with lapsed authorizations? 

Should we just approve programs and let Appropriations decide all 

the priorities? Any suggestions? 

Mr. HALL. Well, to say as a citizen, I think the country would 

be well served if Government activities of all kinds—discretionary 

spending, mandatory programs, and provisions of the Tax Code— 

were reviewed from time to time to make sure that they are being 

implemented effectively and to determine whether changes are necessary. I think going through a regular process of reauthorizing 

discretionary programs would certainly be one component of such 

a process, a useful component. 

Chairman ENZI. Thank you. We are going to be looking at the 

process a lot more this year, as Senator Whitehouse suggested, and 

as we have held some other hearings. I will yield back the balance 

of my time. Since Senator Whitehouse is not here, I will go to Senator Perdue. 

Senator PERDUE. Well, thank you, Mr. Chairman. And—— 

Chairman ENZI. Excuse me. Senator—— 

Senator WHITEHOUSE. No, no. Go ahead. Go ahead. 

Senator PERDUE. No, please. Go ahead. I will yield to the Ranking Member. 

Senator WHITEHOUSE. Well, that is kind of you. 

I would like to go back to the point that I ended my remarks 

with about trying to sort of revive the relevance of the Committee 

and that as a larger issue around it, which is reviving the transparency of our spending. 

When we are in crisis mode and our budgets are being worked 

out between the Speaker, the Majority Leader, and the President, 

then there is zero transparency in that. And I know from my perspective as a still somewhat junior Senator that trying to get the 

things you want to have a hearing in that conversation is virtually 

impossible. It is about as untransparent as you can, and things 

come in basically based on favoritism, clout, influence. I mean, it 

is kind of the worst of all possible worlds that we create for ourselves when there is not a proper process and there is just a crisis 

negotiation at the end. 

Second best behind that is having the Appropriations Committees work through all their stuff and then have no proper floor 

work on what the appropriators propose to us, so that gets jammed 

down the rest of the body’s throat, which is great for the appropriators but not so great for the body. And we have basically been 

gravitating back and forth between those two models virtually for 

as long as I have been here in the Senate. 

And throughout all of that, the Budget Committee has been utterly sidelined because every appropriator knows that they are 

going to have to put a deal together that gets 60 votes. They cannot 

go forward until they have 60 votes. And once they know they have 

60 votes, they know that there is nothing—it does not matter about 

our budget resolution. And then everybody else knows that as well. 

So when we do our budget resolution work, this room is empty but 

for the staff of the people who are condemned to be here and go 

through the exercise. And that is, I think, a pretty important signal 


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that nothing important is happening here when nobody shows up 

for it in a town that is immensely curious about the exercise of 

spending and power and so forth. 

So I think that Chairman Enzi has done a really commendable 

service to this Committee by trying to open our aperture to focus 

on what our role is and how we can redefine ourselves. But whether it is entirely overlooking tax spending, having no transparent 

authorization—or very little transparent authorization process that 

is meaningful to the appropriators, and having appropriation run 

on cruise control even where there are no authorizations, it has 

really been a very dramatic collapse of the appropriating and funding function of this body into a very small group of people, and particularly at the crisis period, there is zero transparency. 

I will close with where I started. As somebody who has to try to 

fight to get attention for programs into that process, and it is all— 

you know, you are calling people on the phone saying, ‘‘Can I get 

this in? Can I get this in?’’ And nobody knows what my motivations 

are, nobody knows what the other side of the argument is. I mean, 

the process completely stinks once it is in crisis mode. And so I 

hope that you, Mr. Hall, can help lead us along with the Chairman, 

and I think there is going to be a lot of support for it on our side, 

to have a conversation about how we can use this Committee to facilitate a broader and more transparent process for funding this 

enormous enterprise of the United States Government, both on the 

spending spending side and on the tax spending side. 

Mr. HALL. Well, we are certainly happy to help in any way we 

can, and we are perfectly willing and we are—— 

Senator WHITEHOUSE. Do you concur generally with the points 

that I made about the lack of transparency and the lack of effective—the lack of transparency on the spending side and the lack 

of impact or import to our budgeting effort? 

Mr. HALL. Well, we constantly have some issues in our work 

where we are trying to be helpful and offer advice to committees 

in a confidential way. But then when things become public, a bill 

or a proposal becomes public, we have a very important transparency practice where we try to create a level playing field and 

make our estimates public. 

Senator WHITEHOUSE. Yes. 

Mr. HALL. And we send it to both sides, and hopefully that—— 

Senator WHITEHOUSE. I think at this point your most valuable 

function, given the general lack of impact that this Committee has 

or import of this Committee, is that information-providing function. 

And I think the transparency of that information and the reliability 

of CBO information has a very healthy effect throughout our process. But once you get past information into actually doing something, that is where I think it is down to either the four guys in 

the room during the crisis or the appropriators and particularly the 

cardinals in their appropriations process for an omnibus. 

Mr. HALL. Well, we certainly keep trying to do our best to create 

transparency in what we do and help further, if you like. 

Senator WHITEHOUSE. Yes, I appreciate that. 

Chairman ENZI. Senator Grassley was here at the sound of the 

gavel, so we will go to him, and then Senator Perdue and then Senator Ayotte. 


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Senator GRASSLEY. First, before I ask questions, let me confess, 

as Chairman of the Judiciary Committee, I see on a list of committees that we are fifth or sixth with about $30 billion of that figure 

of unauthorized. And as Senator Whitehouse and I have worked so 

hard on reauthorizing the Juvenile Justice Reform Act and getting 

that done in our Committee about 6 months ago and still do not 

have it through the Senate, it just seems like it is going to take 

a long time to get work done that ought to be done. 

But with that caveat, it seems to me that appropriators are really the only committees spending time reevaluating lots of these 

programs. So my question to you: Do appropriators evaluate programs at a level equivalent to what an authorizing committee 

should do if the authorizing committee did its job? 

Mr. HALL. Well, for me personally, I do not have enough experience to answer that. One of the things that we hope is that our report is a good starting point. It is imperfect, but it is a good starting point if you want to start looking at this issue of sort of matching authorizations and appropriations. 

Senator GRASSLEY. Another question: Is there an argument here 

for biannual budgeting so that more time can be spent on oversight 

and reauthorization efforts? 

Mr. HALL. Well, I hesitate to offer advice on something like that. 

We certainly would be happy to accommodate whatever type of 

budgeting that you decide. 

Senator GRASSLEY. Let me go to a rhetorical question, if I am 

asking you questions that you cannot give advice on. Our country 

is $19 trillion in debt. The 2016 deficit has been projected to increase that by $544 billion. What message are we sending to the 

American people that with this dire financial situation we cannot 

find the time to evaluate and scrutinize existing programs? If Congress does not do the necessary oversight that reauthorization requires, how can anyone trust that valuable fiscal resources are 

being used for the highest priorities? You surely can speak to that 

point. 

Mr. HALL. Well, sure, and this is where we hope our annual 

budget forecast is useful, because the exercise of looking at what 

the budget is going to look like, say, over the next 10 years under 

current law and what sort of deficits that we are going to have I 

think is a useful thing. It is a useful thing to remind people that 

this is an issue. And something that CBO has said for a long time 

is that this is on a trend that is not sustainable. At some point the 

debt is going to get to a level where there are going to be real problems. It may not happen soon, but it is going to happen at some 

point unless there is some change. 

Senator GRASSLEY. Since you have studied this issue that comes 

up with the $310 billion figure of programs unauthorized, and you 

have to look at the entire Federal budget programs of $3.6 trillion, 

I guess, would you categorize the $310 billion as essentially lowhanging fruit that we ought to be able to deal with? Or do you 

think it is more complicated than that? 

Mr. HALL. Well, it is low-hanging fruit in the sense that we know 

about it. You know, one of the real difficulties here is this idea of 

trying to match the authorizations and the appropriations because 

there is just so much law and there are so many things in the FedVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 E:\HR\OC\A333.XXX A333

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eral budget. But these are things that hopefully this is useful to 

give you some idea of where there are issues and you can deal with 

these. We may not be able to give you a real feel for the overall 

size of the problem because this is not a comprehensive report. But 

it does give you a starting point, I think. 

Senator GRASSLEY. Mr. Chairman, thank you, and I will yield 

back my time. 

Chairman ENZI. Thank you. 

Senator Perdue. 

Senator PERDUE. Well, Mr. Chairman, thank you for holding this 

hearing, and, Dr. Hall, thank you for being here again. You know 

that—I said this the last time you were here—I am a big fan of 

your work. Thank you for all you are doing to enlighten us about 

our crisis. 

But I disagree on one thing, and I will come back to my point, 

and then I have a couple questions. I do not think this is going to 

hit us soon. I think it is here right now. And the bellwether of that 

is what happened in December. Just a quarter point increase in 

our Fed fund rate will indirectly lead to a potentially increase in 

our Federal interest of almost $50 billion. So the question I have 

is, you know, what happens if interest rates go back to our 50-year 

average of just 5 percent? We have all seen interest rates much 

higher than that, but we have lived in an arbitrarily flat interest 

world in the last 7 years. It is just not forecastable. We cannot assume that going forward. 

So we know that interest rates are going up. We know that our 

interest expense is going up. And yet we sit in an environment 

where last year we saw our Federal expenditures at $3.7 trillion, 

up from—just in 2000 in constant dollars it was $2.4 trillion. And 

you might say, well, we are spending more on military. Only $100 

billion of that increase was military. The rest of it is growth in 

mandatory expense. 

So we have got a situation today where it almost feels to me 

like—and God help me, I have been here a long time. I finally 

found something that Senator Whitehouse and I agree on, and I absolutely agree that the process is broken. The 1974 act has only 

worked four times in 40 years. It has not worked. It is not working. 

It will never work. And I feel like sometimes we are sitting around 

here talking about the layout of the chairs on the Titanic. There 

is no question we have got redundant agencies, no question we 

have agencies that have not been authorized. But the system of 

budgeting, authorization, and appropriation by definition was 

never going to work. It is not working, and so we have got to 

change that fundamental process. 

Having said that, we saw a report from the Comptroller General 

of the GAO recently talking about redundant agencies. Have you 

worked and can you work with the GAO to help us better understand the priorities and maybe the overlap between those unauthorized agencies and the redundant agencies that have been identified? 

Mr. HALL. Sure, we are happy to contribute however we can. 

Senator PERDUE. Okay, because I think, you know, the question 

is: How big of a Federal Government do we need? If we have redundant agencies, there is an opportunity. We talk about tax exVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 E:\HR\OC\A333.XXX A333

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penditures, but we raised $3.2 trillion last year in Federal revenue. 

That is the largest ever. And I do not disagree that there are issues 

around deductions and so forth where we have corporate welfare 

issues and that sort of thing that are affecting our ability to deal 

with this. But, honestly, until we get at this authorization process 

leading into an appropriation process that, frankly, is not working—it did not work last year; it led into an omnibus, just like it 

has in prior years—that increases our spending. Your own report 

shows that we are adding some $8.5 trillion to the debt over the 

next decade, if I read the report correctly. 

What should we be doing in terms of prioritizing our approach? 

You do the measurement for us, but you also can model and look 

at things. Where is the low-hanging fruit in terms of going after 

this absolute crisis that we have today? 

Mr. HALL. Well, one of the things we do certainly in the outlook 

is we want to give you some idea of what the problem is, you know, 

sort of what trend we are on. It is certainly sort of not our role to 

sort of recommend things, but we did produce—and we did produce 

near the end of last year a number of budget options to give you 

some idea of the different things that you can do to improve the 

deficit situation, some idea of what sort of impact it would have. 

So it is sort of a listing of things you can look at, tools that you 

have at your disposal. I think that is really worth looking at and 

getting a feel for what sort of options you have going forward. 

Senator PERDUE. Well, do you work with GAO at all to model 

some of their recommendations and ideas? 

Mr. HALL. We do interact with GAO a bit. I do not know that 

we interact a lot on things. 

Senator PERDUE. Well, Mr. Chairman, I just—I mean, I absolutely applaud what you are doing here in terms of looking at this 

authorization issue. And I know that we are moving down a road 

that is really a bipartisan effort. I agree with Senator Whitehouse. 

I mean, this is not about partisan politics. This is about a crisis 

that is threatening our very ability to defend our Nation. And it 

puts in jeopardy the very safety net programs that we all want. Social Security and Medicare, as we all know, absolutely their trust 

funds go to zero in 15 years. And yet we have not—I have been 

here a year. We have not had any salient conversations about how 

to save Social Security and Medicare. And those are the two things, 

as I look at your report, that are just exploding away from us in 

the next 10 years. And if you go out 10 more years, it really gets 

to the point of being unmanageable. I contend that it is already unmanageable, and I look forward to further hearings like this and 

to actually move toward getting results. 

I will just end with this. There are four words that I have not 

heard up here in one year that I used to hear every day in business, and that is, ‘‘We cannot afford it.’’ We all do it in our personal 

homes. We do it in our personal lives. We teach our children to do 

it. And yet we run a Federal Government where we absolutely do 

not consider that. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

In our method of alternating, Senator Kaine will be next, then 

Senator Ayotte. 


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Senator KAINE. Mr. Chairman, I would defer to Senator Ayotte 

to be next since I just walked in and am collecting my thoughts, 

unless she wants me to go first. 

Senator AYOTTE. Thank you so much. I really appreciate it. 

Senator KAINE. Okay. 

Senator AYOTTE. Thank you, Senator Kaine. 

Chairman ENZI. Very nice of you. Thank you. 

Senator AYOTTE. Thank you, Chairman. 

You know, I am going to suggest something that is a heresy 

around here, actually, and I have suggested it before. But I serve 

on the Armed Services Committee, and every year we do a defense 

authorization. It is very bipartisan. We spend a tremendous 

amount of time going through each of the programs, each of the 

weapons systems, the pay and compensation for our troops, and we 

have consistently voted a bipartisan bill out and then got it to the 

Senate floor every year. 

But here is what happens. Then the Appropriations Committee 

takes it up, and they spend lots of money on things that were never 

authorized, were never supported, and we spent a ton of time working on it. So I have suggested this before—this always gets me in 

trouble, but I do not see how the dual system of authorizing and 

appropriating actually benefits effectively spending Federal dollars, 

because if the authorizing committees had to take responsibility for 

actually how the money went out the door, and they are specializing in these areas, I actually think there would be much more 

regular routine authorizations, there would be more oversight, because the two are totally disconnected. It is unbelievable. We do a 

whole hearing on a program that is absolutely—I remember this. 

I was new in here. It was called—I dubbed it ‘‘the missile to nowhere.’’ 

No results, no money, we were pouring billions of dollars in 

something that we are not going to get a result on, and then it just 

gets slipped back in. We were unanimous in the defense committee 

after having, you know, lots of work done on it, and then it just 

gets slipped back in. 

So I guess you—one of the things that you identified in this report, as you were just testifying, it was hard for you to match the 

appropriations with the authorizations because we have this dual 

process. So I know that you probably cannot render an opinion on 

this, but I just want to say that as we look at fundamental reform 

around here, I know this is a very controversial thing to say, but 

this dual process is not doing a service to the American people in 

terms of oversight. Would you agree with me, though, you did have 

difficulty matching up the appropriations and the authorizations 

because the two almost—one is from Venus and one is from Mars? 

Mr. HALL. Well, yeah, that is right. And to some degree, we are 

picking the low-hanging fruit, to be honest. 

What we did not include is actually much harder to get a hold 

of. 

Senator AYOTTE. Right. So now that I have gotten myself in a lot 

of trouble here, I want to also talk about the GAO piece—because 

I think this is really very important—that Senator Perdue talked 

about because this is something that I have been focusing on. I 

have a bill with Senator Manchin called the ‘‘Duplication Eliminate 


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Act,’’ which would actually force the executive branch and the Congress to take up what the GAO is doing. Basically, the GAO since 

2011 has issued an annual report on ways to reduce duplication, 

overlap, fragmentation in Federal Government. In their first five 

reports, GAO has identified about 500 opportunities to reduce duplication, overlap, and fragmentation, but yet only 29 percent of 

GAO’s recommendations have even been touched upon or addressed in any way. And they add up to a lot of money. Just as 

an example, addressing just one of GAO’s recommendations on 

Medicare payment policy would have saved an estimated $3.2 billion to $5.1 billion from 2010 to 2012. 

So to Senator Perdue’s question, how do we get to this issue of 

actually taking up the work that you have done in CBO, aligning 

it with the work that GAO has done, and really actually getting to 

the work of implementing the GAO policies and having greater 

oversight and hopefully greater authorization work? 

Mr. HALL. Well, certainly we have a role in sort of evaluating 

proposals on how to do some things like this, and we are happy to 

help, and we are happy to do our usual sort of evaluation of things 

like that. We do not work too directly in GAO on this particular 

issue, but we certainly can help in the solution. 

Senator AYOTTE. Well, I think it would be helpful if there was 

some alignment there, just because they have done a lot of good 

work. We need to get off our butts and take up more of their work, 

but also if CBO could also incorporate that work of ways we could 

save money and working together, I think it would be helpful to 

really getting us to focus on this more. And I hope that we do, because as we look at a lot of programs that not only have not been 

authorized, they have not been evaluated in years. There have not 

been any metrics or measures. There are lots of agencies doing the 

same thing. And it seems to me that this is an issue that is very 

bipartisan that we should be more effectively addressing. 

Thank you. 

Chairman ENZI. Very good. Thank you. 

Senator WHITEHOUSE. Chairman, may I seek recognition at the 

conclusion of Senator Kaine’s questioning of the witness in order to 

respond to Senator Ayotte’s thoughts? 

Chairman ENZI. Sure. 

Senator WHITEHOUSE. Thank you. 

Chairman ENZI. Senator Kaine. 

Senator KAINE. Thank you, Mr. Chairman, and thank you, Director Hall. It is good to have you with us. 

The change in the CBO’s outlook from August to January have 

been significant based on your recent report. Some of this change 

is driven by economic trends, but a dramatic amount of the change, 

especially as it relates to the deficit, was driven by legislative 

changes at year-end. And if you look at this kind of on a percentage 

basis and affecting the deficit by our calculation, the bill that we 

passed in December was the fifth largest deficit-increasing bill 

since 1986. 

The amount of debate that we had about that bill was interesting. There were minimal spending increases which were largely, 

though not completely, paid for. But there was a tax extender package of tax expenditures that was not paid for at all. And so the patVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 E:\HR\OC\A333.XXX A333

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tern that I think is interesting—the title of this hearing is ‘‘Spending on Unauthorized Programs’’’—is that we have developed sort of 

an internal rule that we have got to pay for spending, but we do 

not have to pay for tax cuts. And I think that is problematic. 

I agree with the goal that we should be analyzing and reviewing 

and reauthorizing spending. I agree with that. Before the 1950s, 

the norm was not to reauthorize spending, put spending in the 

budget and it just stayed there. There were not the sunsets and the 

reauthorization periods. But after the 1950s, we moved into at 

least the notion of reauthorization. Whether we did it or not, at 

least that was set up as a norm. But I do not think in the Tax Code 

we have yet developed an expectation that tax cuts, tax policies be 

reauthorized as well. 

Eighty percent of the deficit effect of the act we passed at yearend 2015 was on the tax expenditure side, not on the spending 

side. Eighty percent of the deficit effect. So I want to ask you, Director Hall, would it be fair—is there sort of good for the goose, 

good for the gander? If we are going to be in the reauthorizing 

business and the reanalysis business, shouldn’t we treat a tax expenditure in the same way we treat a program expenditure and 

have a normal practice of reanalyzing and reauthorizing all of 

them? 

Mr. HALL. Well, we try to stay out of offering advice on things 

like that. 

Senator KAINE. You cannot blame me for trying, though. 

Mr. HALL. Right. But I appreciate the notion, and, you know, we 

do have a little information on the tax expenditure, information 

from the Joint Committee on Taxation in our report to give you 

some idea of how that changes from year to year. 

Senator KAINE. But, you know, is there any reason why from 

your standpoint, kind of a budget office standpoint, should we treat 

tax expenditures completely differently than program expenditures? Or shouldn’t, you know, we be in the business, if we are 

going to be reanalyzing and reauthorizing, of looking at all of it? 

Mr. HALL. Well, again, I hesitate to offer advice. 

Senator KAINE. How about separate from the advice, is there an 

economic difference or a budgetary difference between a program 

expenditure and a tax expenditure that would warrant the need to, 

you know, continually reauthorize and reexamine program expenditure but not do that on the tax expenditure side? 

Mr. HALL. Well, certainly one of the points that we make and we 

have made for a long time on the outlook and all our budget forecasting is that, given the current trend towards increasing deficits, 

we need to either raise revenues, lower spending, or both. And 

something pretty significant needs to be done to stop the trend that 

we are on, and it needs to be something that is not small. It needs 

to be things that are large. 

Senator KAINE. I am going to associate myself with the ‘‘or both’’ 

category. I do not think you can deal with a balance sheet if you 

just put, you know, a blindfold on one eye and say, ‘‘I am just going 

to look at one-half of the balance sheet.’’ You just cannot do it. You 

cannot look at either half of the balance sheet in exclusion and deal 

with the challenges that we have. But I think we have kind of gotten into a pattern where we are just looking at one-half of the balVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00029 Fmt 6633 Sfmt 6602 E:\HR\OC\A333.XXX A333

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ance sheet. And so, you know, looking at the CBO’s report about 

the deficit effect of the December action and digging into it further 

and finding that 80 percent of the deficit was driven by the tax expenditure side, not by the program spending side, I found that 

pretty sobering. And I think in terms of, you know, the kind of reform—I hope the Budget Committee can use this year where we 

did a 2-year budget to really be about some reforms, and I think 

a reform in this area would be very, very valuable. 

With that, thank you, Director Hall, and thank you, Mr. Chair. 

Chairman ENZI. Senator Whitehouse. 

Senator WHITEHOUSE. Thank you, Chairman. I thought that Senator Ayotte’s point was a particularly good one, and as I was thinking about it, it struck me, to my earlier point, that a budget point 

of order against an appropriations bill that blows through the 

budget that this Committee has gotten passed is a useless effort 

because it gets overcome by a 60-vote vote. And if the appropriators 

have lined up 60 votes, which they have now because everything 

has to pass by 60, then there is a null effect of the point of order 

that the budget has been broken. 

I suspect that the same is true of a point of order that they are 

appropriating authorized funds, and so I think there are colleagues 

of ours, particularly those who serve on the Appropriations Committee, who would object pretty violently to the proposal that the 

Appropriations Committee is no longer useful and we should have 

appropriations done at the authorizing level. Even if that were the 

right thing to do, it would be hard to convince some of our colleagues of it. 

But I do think that if we were to think about how we reimposed 

a penalty beyond the 60-vote margin—because the other thing that 

has happened in all of this is that the person who gets the 67-vote 

penalty is the President of the United States, because we would 

have to come up with 67 votes to overcome a veto. 

So when we cannot control it amongst ourselves because the appropriators control 60 votes and budgets authorizing, nobody else 

matters, the one person who then matters is the President. And 

that creates an enormous transfer of power from Congress to the 

Presidency. So particularly for those who decry the power of this 

particular President, we have actually really loaded him up with 

huge amounts of power by having the one—he being the one place 

where we have to get to 67, the one person who can be a check on 

appropriators. 

So it is a conversation I think we need to continue to have in this 

Committee, but I do think this question of there being, in effect, 

no penalty for violating authorizations and no penalty for violating 

budgets is a problem. And it is part of this process that has taken 

our spending and put it into a very dark hole. And the longer we 

wait and the bigger a crisis, the smaller number of people in the 

hole and the darker it is, and the more who knows what gets 

stuffed into the deal. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you, and this is the prime time to be 

talking about this. Right now what we are doing is defining that 

there is a problem, and we will get into some solutions, and the solutions could take effect at the beginning of next year, because 


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none of us know what next year is going to be like. And so I think 

it will lead to us all being reasonable. That is my hope. 

On the programs, it is possible to do something about them. 

When I was Chairman of the Health, Education, Labor, and Pensions Committee, I discovered that we had 119 preschool programs—they were all named after some Senator—and there was a 

lot of duplication. So Senator Kennedy and I were able to get that 

down to 69. Since that time, we have been able to get it down to 

45. And there are always proposals for additional preschool programs because there is evidence that they do good work. 

Senator WHITEHOUSE. Does it help, Mr. Chairman, when the 

Senator who it is named after retires? 

Chairman ENZI. They still come to see you. [Laughter.] 

What helps is if you can get them to go take a look at what has 

happened with their program and find out that instead of an education program, it is a babysitting program. That is an important 

program, too, but it is a different expense. So we need to do some 

things. 

Thank you, Dr. Hall, for your help today and particularly for 

your great document, which I hope we can make good use of to 

make some great changes for Government. 

So while we are setting up the next panel, I will introduce the 

witnesses that will be appearing. 

We have Jessica Tollestrup, who joins us from the Congressional 

Research Service, CRS, which is the research arm of this Congress. 

Ms. Tollestrup is an analyst on Congress and the Legislative Process for CRS. She has authored several recent papers concerning the 

history of the authorization and the appropriations processes and 

the internal rules the Congress has created to police its own funding of unauthorized appropriations. 

Paul Posner is a professor of public policy at the George Mason 

University, where he founded and directs the Center on Public 

Service. Dr. Posner is a recognized Federal budget policy expert. 

He formerly served as the Director for Budget Issues in the Accounting and Information Management Division of the Government 

Accountability Office. 

And James Thurber is the University Distinguished Professor of 

Government and founder and director of the Center for Congressional and Presidential Studies at American University here in 

Washington, D.C. I should note that Dr. Thurber has served in this 

body at the staff level, including as a legislative assistant for the 

late Senator Hubert Humphrey. 

So if we can have you take your places at the table there, and 

we will begin with Ms. Tollestrup. Did I get the name right? 

Ms. TOLLESTRUP. Yes. 

Chairman ENZI. Thank you. 

STATEMENT OF JESSICA TOLLESTRUP, SPECIALIST ON CONGRESS AND THE LEGISLATIVE PROCESS, CONGRESSIONAL 

RESEARCH SERVICE 

Ms. TOLLESTRUP. Mr. Chairman, Ranking Member, and members 

of the Committee, my name is Jessica Tollestrup, and I am a CRS 

Specialist on Congress and the Legislative Process. Thank you for 

inviting me to speak with you. 


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I would like to start by briefly stating four main points from my 

written testimony that I will expand on in my remarks today. 

First, authorizations of appropriations are a tool that the authorizing committees have developed in recent decades to engage in legislative oversight and better influence appropriations decisionmaking. 

Second, those authorizations of appropriations may lapse for a 

number of reasons that are not directly related to whether that 

purpose should continue to receive funding. 

Third, the prohibition on unauthorized appropriations in Senate 

rules applies only to floor amendments. It does not apply to reported appropriations bills or committee amendments. 

Fourth, addressing expired authorizations through consequences 

that are felt in the appropriations process has inherent challenges, 

but so, too, does approaching this issue as part of the authorization 

process. 

I also want to start by clarifying that there are two types of authorizations: 

First, there are authorizations that establish the authority for 

Federal Government activities. Those authorizations provide a sufficient basis for Congress to later fund those activities. 

Second, such authorizations are also occasionally accompanied by 

another type of provision, an explicit authorization of appropriations. If this second type of provision lapses, the legal requirement 

that the Federal Government undertake the activity is generally 

still in effect. However, appropriations for those activities would 

usually be regarded under congressional rules—but not for legal or 

constitutional purposes—as being unauthorized. 

Now for my first point. The purpose and form of authorizations 

has changed in a number of important ways over the past 100 

years. During the 19th and early 20th centuries, authorizing laws 

generally provided broad grants of authority on a permanent basis 

and usually did not include specific amounts to be appropriated. 

After the 1920s, the authorizing committees began to alter these 

practices and increasingly included two components in authorizing 

laws: the authority for the activity and also language that essentially recommended a funding level for that activity through an explicit authorization of appropriations. 

Later, those committees began to conduct reviews and periodically enact revisions to certain authorizations. While the timing of 

these revisions often coincided with the need to reauthorize appropriations, these revisions also provided an occasion to conduct legislative oversight and make needed programmatic changes. 

While the proportion of agencies and programs that were subject 

to periodic reauthorization expanded significantly during the mid20th century, variation has continued an approach in practice. 

Many agencies and programs are still authorized on a permanent 

basis, and others have experienced different reauthorization schedules at different times. Also, in an increasing number of instances, 

periodic authorizations of appropriations have lapsed or not been 

renewed in a timely manner. This occurs for a variety of potential 

reasons. 

For example, a lapsed authorization of appropriations could indicate that the authorizing committee has decided that no proVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00032 Fmt 6633 Sfmt 6602 E:\HR\OC\A333.XXX A333

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grammatic changes are needed at this time. Another possibility is 

that Congress has not yet achieved consensus as to what changes 

should be made. This presents a challenge when Congress attempts 

to assess the meaning of expired authorizations of appropriations, 

especially when the primary procedural avenue to address them is 

part of the appropriations process. 

Although both House and Senate rules prohibit unauthorized appropriations, these rules are primarily enforced for floor amendments. While this procedural mechanism has the potential to encourage the timely enactment of reauthorizations, one challenge is 

that addressing expired authorizations themselves is not within the 

control of the Appropriations Committees. 

In addition, this framework can effectively set up a choice between delayed appropriations and funding unauthorized programs. 

As a result, this mechanism’s effectiveness is limited when appropriations are unauthorized for reasons that are not directly related 

to whether that purpose should be funded. 

Attempting to address this issue through the authorization process is also challenging. There are no congressional rules that govern the form of authorizations, and the responsibility for authorizations is divided among a number of committees. 

In addition, a committee may choose its approach to an authorization based on a number of factors, including its assessment of 

the current needs of the program, historical practices, and the legislative environment. 

On the one hand, this lack of chamber rules gives committees the 

flexibility to structure each authorization to meet their particular 

needs. On the other hand, this flexibility makes addressing expired 

authorizations on a widespread basis more difficult. 

Thank you, and I would ask that the full text of my prepared 

statement be submitted for the record. 

[The prepared statement of Ms. Tollestrup follows:] 


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Chairman ENZI. It will be. Thank you. 

Dr. Posner. 

STATEMENT OF PAUL L. POSNER, PH.D., DIRECTOR OF GRADUATE PUBLIC ADMINISTRATION PROGRAM, AND CENTER ON 

THE PUBLIC SERVICE, SCHOOL OF POLICY, GOVERNMENT 

AND INTERNATIONAL AFFAIRS, GEORGE MASON UNIVERSITY 

Mr. POSNER. Thank you, Mr. Chairman and Senator Whitehouse. 

I appreciate your hearing today. I think this is a very important 

issue, and it is something that usually is not the primary topic on 

the evening news, but oversight is important. And it is important 

to institutionalize it more than we are doing. 

There is no question that the budget process is broken. There is 

a consensus on that. I am co-chairing a National Budgeting Roundtable with Stuart Butler, Maya MacGuineas, and people like Alice 

Rivlin and Rudy Penner and other long experts in the budget process, and we all have agreed on one thing: that the budget process 

has largely failed to meet the broad vision that was created in 

1974. And among those things was the fact that budgeting would 

be more than just setting a top-line number for appropriators, that 

the budget process would provide Congress with a vehicle to take 

a holistic look at the budget and rank relative priorities across 

competing claims. As one Budget Director said, the point of budgeting is not to go after weak claimants but to go after weak claims. 

And the budget process is a vehicle to potentially do that. 

We have seen—and I do not need to repeat—how the budget 

process itself has disintegrated in the face of gridlock and polarization. There are tremendous limits on the kinds of tradeoffs that can 

happen across these walls we have created between discretionary, 

mandatory, tax expenditures and the like. And Congress does not 

have the vehicle to take a holistic look, a comprehensive look at 

broad areas of policymaking, whether it is low-income housing, 

higher education assistance, drug policy, or food safety. 

So I think this is an important issue, and I am glad you brought 

it up and raised it to the level of a hearing. And I agree that unauthorized programs are an issue, and they are symptomatic of the 

same fragmentation and gridlock that has afflicted the broader 

budget process. I think it really inhibits the Congress’ capacity to 

budget and ability to budget. 

Ideally, you would like to have oversight of broad programs from 

many perspectives. The appropriations have one that is focused on 

finance and line items in some cases. The program experts are in 

the authorizing committees, and you need to have them weigh in 

periodically. If they are not, I think it is a limit to our process. And 

as I will say in a minute, the Budget Committees are the one Committee that has been largely missing in action in the oversight 

project, and I am going to suggest an opportunity there for the 

Budget Committees themselves. 

As much as we all will decry the kind of lapsing reauthorizations 

and the like, fixing the problem is another issue itself. As was said 

earlier, the authorization process is highly decentralized. The reasons for lapsed reauthorizations have something to do with gridlock 

and something to do with a lot of other idiosyncratic effects. DeVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00042 Fmt 6633 Sfmt 6602 E:\HR\OC\A333.XXX A333

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signing one-size-fits-all reforms are difficult in this environment, 

and it requires, I think, possibly the adoption of somewhat of a 

pilot process where this Committee perhaps works with authorizers 

and appropriators on a policy area to phase in a new set of incentives to encourage authorizers to come more to the table on this. 

We can talk about that later, but I think that may be the way to 

go here. 

Most importantly, the notion of program-by-program authorization, while it is something we all can agree on, is really not in sync 

with how the Federal Government impacts broad outcomes. Basically, the actions of individual programs are really not as important as the actions of groups of programs combined, what I call 

‘‘portfolios of programs.’’ So if we look at higher education or we 

look at food safety or we look at low-income housing, we can examine in depth down to the level of the lowest provider the impact of 

each program. But to really get a sense of what impact the Federal 

Government is doing, you have to look at them together in some 

way. You have to look at what I call the ‘‘portfolio of Federal programs,’’ not only the spending side, not only mandatories and 

discretionaries, but tax expenditures. 

In low-income housing, for example, the low-income housing tax 

credit is the largest Federal spending program in housing, and yet 

it is completely off the table in all of the things that the agencies 

do. HUD takes no ownership of it, for example, and, frankly, neither does the IRS. 

The Budget Committees were set up to look holistically through 

a series of budget functions and subfunctions that you use to craft 

the budget resolution, but then they are completely forgotten. I am 

suggesting in the testimony that we need to resurrect that. I have 

illustrated how that can work in higher education where we could 

take a holistic look across tax and spending, and look at the 

synergies and the disconnects between the programs across the 

board. This Committee has an opportunity to be the steward of 

that process, recognizing that is not the easy thing to do, as Senator Whitehouse said. This Committee does not have the power and 

the leverage. I think we really need to rethink the role of this Committee and the composition of this Committee, and if we are going 

to have this Committee fulfill what I consider its oversight role to 

be the steward of the cross-cutting programs of Government, we 

need to think about this Committee becoming more of a leadership 

committee and stocking it with the key leaders of the various committees. This Committee then would be in a position to drive policy 

change and oversight in a real meaningful way. 

[The prepared statement of Mr. Posner follows:] 


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Chairman ENZI. Thank you. 

Dr. Thurber. 

STATEMENT OF JAMES A. THURBER, PH.D., UNIVERSITY DISTINGUISHED PROFESSOR OF GOVERNMENT, FOUNDER AND 

DIRECTOR, CENTER FOR CONGRESSIONAL AND PRESIDENTIAL STUDIES, SCHOOL OF PUBLIC AFFAIRS, AMERICAN 

UNIVERSITY 

Mr. THURBER. Thank you for having me here today, Mr. Chair 

and members of the Committee. This is the first hearing that I 

know of on unauthorized appropriations. There have been hearings 

on process reform to try to improve the budget process, but this is 

very narrow and important. 

The discussion today is really about how to improve the process 

to a great extent, and let me remind you very briefly from the legislative history what the goals were of the original act. I was working for Senator Hubert H. Humphrey in 1974, and I also worked 

for the temporary Select Committee to study the Senate Committee 

System (Stevenson-Brock Committee) that reorganized the Senate 

committee system in 1976. The Committee considered combining 

the authorization and appropriations committees. It was not very 

popular, but we had a hearing on proposal which was very controversial and received no support. 

Let me remind you the goals in the Budget Act. The Act stated 

that Congress would complete appropriations, tax policy, and budget decisions in a timely and transparent fashion, to control budget 

deficits and debt, to limit growth of Federal spending; to improve 

ways priorities get set among different types of spending, defense 

and domestic; to set congressional fiscal policy; to improve the information and knowledge of the budget decisions, (creating CBO, 

which has worked); to establish a procedure to overcome Presidential impoundments, (which has worked); and to compete more 

effectively with the President and executive branch over the Federal budget. I think that the process has not met those goals in almost everything but impoundments and CBO. 

Unauthorized appropriations, the topic of the hearing, in my 

opinion are a symptom of political polarization and gridlock in Congress. Changing the process will not change the will of the members nor the extreme polarization in Congress and in the Electorate. 

The number of unauthorized programs that are funded and the 

amount of spending on them has gone up directly as polarization 

has increased. My new book called ‘‘American Gridlock’’ from Cambridge University Press, published last December, reveals that in 

1974 about a third of the House and the Senate voted together. 

That was the common ground for governing. It is now down to 4 

percent. If you change the rules in the Budget and Appropriations 

process, you are not going to change the incentive for Members to 

be polarized on the left and on the right. 

What are the solutions to polarization and the inability of Congress to pass authorizations and appropriations in a timely fashion? 

One is it takes time and special leadership in committees and on 

the floor to build consensus. We have seen that with the Defense 


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Authorization Act. We have seen it most recently with Senator 

Alexander and Senator Murray on The Every Student Succeeds Act 

of 2015. We have seen it with the Toxic Substance and Chemical 

Act that was recently passed. We have seen it with the ‘‘doc fix.’’ 

We have seen it with the transportation bill. We have seen it with 

the cyber information sharing bill. We have seen it with the funding of DHS. 

These legislative successes take people who are willing to work 

in a bipartisan way in Committees. This Committee—and I wrote 

an article about it—at the very beginning was an incubator of comity and civility with Senators Muskie and Bellmon. For 5 years, 

they worked together closely and did a much better job than the 

House of Representatives, which was highly politicized. This Committee could do that again. Party leaders are structuring debate in 

recent years that promote rather than deter partisanship. As a result, the chambers are more partisan and deadlocked than at any 

time since 1860. We have a way to measure that in terms of Senators voting together in 1860, prior to the Civil War and now. 

About 4 percent of Senators voted together in 1860 and 2015. They 

were polarized then and now. 

We need to improve lawmaking through legislative procedural reforms, return to the regular order—you have heard this often— 

have more deliberation, more transparency, limit restrictive rules, 

decision making and improve protection of the minority. Crisis 

drives out deliberation—that is a problem. 

Congress also needs to return to the real post enactment conference committees that are transparent to the public and fair to 

the parties. 

Also, there are too many committees and committee assignments. 

I looked at the number of Committee assignment by members of 

this Committee. On average, you all have four to five committee assignments. It is difficult to keep up with the work of all those committees and resultant subcommittees. There is duplication in committee jurisdictions. There is fragmentation. There needs to be a 

realignment of jurisdiction and reduction in the number of committees so you can all work more effectively. 

This is summarized in my statement. We need to require members of both chambers to spend more time doing their job, less time 

going back to town meetings, hustling after campaign funds. Senator Tom Daschle recently said he thinks Members of the Senate 

spend more time fundraising than they do working in Congress. I 

call for other reforms in my testimony that will help the Senate do 

its job of authorizing and appropriating in a timely fashion. Congress needs to get back to work, to do rigorous oversight, timely authorizations, and thoughtful deliberation. The American people will 

be a little more supportive of the institution if these are done. You 

are in the cellar in terms of people thinking you are doing a good 

or outstanding job. It has been that way for years. I think one way 

to gain support from the public is to go back to the work of the 

Senate in a bipartisan way—it does not mean that you have to 

agree on everything—and move legislation in timely manner. 

Thank you. I ask that my testimony be put into the record. 

[The prepared statement of Mr. Thurber follows:] 


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Chairman ENZI. For all three of you, your entire testimony will 

be in there. We will also try and do hopefully a good job of summarizing it and getting that out to the Senators. And also the hearing 

stays open at the completion so that people can submit questions 

that we hope that you will also answer in a timely manner. People 

have until tomorrow night to get their additional questions in. 

We will start the questioning then. I will start with Dr. Posner. 

Representative David Price testified before this Committee recently 

that the most careful and effective oversight Congress conducts is 

through the annual appropriations process. But I wonder if the annual appropriations process should be the sole arena for regular 

programmatic oversight. As a former Director of the Government 

Accountability Office, the legislative branch’s watchdog agency that 

conducts audits and program review of Federal agencies, do you believe Congress is abandoning its oversight responsibilities in not reauthorizing its funds each year? 

Mr. POSNER. Yes, I think you need more than one committee to 

be involved, and appropriators do a remarkable job with a huge set 

of issues. They have a certain orientation. They are operating 

against a fixed target. 

They focus quite a bit on the line items and the specific personnel and positions and the like. I think authorizers are the program experts, and they have kind of the ability and the vantage 

point of focusing on the broader outcomes that we are expecting in 

these programs. They can look at evaluations and the like, and 

they do not have to do it every year for the most part, although 

some of them do it annually, as was said before. 

So I think you need both perspectives to be applied in this process. If they conflict, I do not think that is unhealthy necessarily. 

Chairman ENZI. Thank you. I mentioned in my opening statement that the Government Accountability Office has identified a 

frightening amount of program duplication across the executive 

branch, with multiple agencies essentially running parallel program operations like the STEM education program. I am concerned 

that instead of going back to review what we are spending money 

on, we are busy creating new programs. We get more credit for new 

programs and new money, and the new programs may be replicating activities done by the existing ones. 

In each and every funded program, if each had to be reauthorized in order to receive appropriations, would we see less program 

duplication? 

Mr. POSNER. Well, I think the best way to handle that is to start 

moving toward what I have called the ‘‘portfolio review,’’ taking 

groups of related programs and looking at them together and 

bouncing them off against one another. We have 17 food safety programs. What is the relative cost effectiveness of the different ones? 

Are there economies of scale that we can use to move to a unified 

approach like we see in many other nations, for example? You 

know, we have programs in housing that are scattered across the 

tax and spending codes that sometimes work at cross-purposes. 

For higher education, you cannot really understand the impact 

that higher education has on students, parents, and universities by 

looking at each program separately. You have to look at how they 

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sidies, for example, work at cross-purposes. You become eligible for 

one, you become ineligible for another. 

And so I think only these more holistic reviews can really connect with the American people and their expectations for what 

Government should deliver. They do not have the time to, nor 

should they have to, parse out and unpack the byzantine program 

structure we have. We should be looking at the broader interface 

that Government has with them and have an oversight process 

that can get that done. 

Chairman ENZI. Thank you. That reminded me that when we 

were doing those preschool programs, the big problem we ran into 

is that a bunch of them were not under our jurisdiction, which is 

why we could not eliminate duplication there. Our structure, as Dr. 

Thurber mentioned, is sometimes confusing and ineffective. 

Ms. Tollestrup, in your testimony you describe the provisions in 

the Senate rules and House rules designed to curb unauthorized 

authorizations. These provisions have not been very useful in stemming the rising tide of unauthorized appropriations. We adopt hundreds of billions of dollars, as we have mentioned. Do you know 

how often these points of order have actually been invoked? And 

how could these points of order be given more teeth? 

Ms. TOLLESTRUP. Senator, it is important to point out that Senate rules that prohibit unauthorized appropriations only apply to 

floor amendments, so only when those floor amendments are under 

consideration can such points of order be raised. The most recent 

instance that I am aware of was during the consideration of the fiscal year 2007 Department of Defense appropriations bill. 

It is difficult to say what the length of time between this example and now means. It is possible that the rules are, in fact, deterring unauthorized appropriations from being offered as floor 

amendments, and so there were no other opportunities to raise 

points of order. It is also possible that there were opportunities, but 

those points of order were not, in fact, raised at that time. 

In terms of options, CRS does not take a position on whether 

Rule XVI should be changed or what those changes should be. That 

is for Congress to decide. But if you were to look at amending Rule 

XVI so that it would potentially apply in more circumstances, having it apply to more than just individual amendments, such as committee amendments or bill text, or requiring that an authorization 

be enacted into law in order to for it to count for the purposes of 

the rule would both be possibilities. 

Chairman ENZI. Thank you. My time has expired. I will come 

back with some more questions in a bit, and I will go to Senator 

Whitehouse. 

Senator WHITEHOUSE. Thank you very much, Chairman. Let me 

stay with Ms. Tollestrup for a minute, and let me focus on the Senate, because I will start from the proposition that the rules in the 

House do not matter because whatever bill comes out, comes out 

with a rule that the Speaker’s Rules Committee has put into play 

and that trumps everything else. But on the Senate side, we do not 

have that, the majority does not have that power. It is one of the 

blessings, I think, over here. 

But as I understand your testimony, you are saying that if an expenditure is baked into an appropriations measure as it comes out 


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of the Appropriations Committee, there is no rule that would provide a point of order with respect to an unauthorized expenditure 

that is in that bill. It would have to be a floor amendment for there 

to be a procedure of any kind to challenge it. 

Ms. TOLLESTRUP. That is correct. The prohibition on unauthorized appropriations only applies to individual floor amendments, so 

both the Appropriations Committee might offer a committee 

amendment containing an unauthorized appropriation, and unauthorized appropriations in the base bill text also are not subject to 

that prohibition. 

Senator WHITEHOUSE. So if you are on an authorizing committee 

and the appropriators put funding towards a program either whose 

authorization has expired or they just invent it, there was never 

an authorization in the first place, as long as your first shot at it 

is on the Senate floor and as long as the Appropriations Committee 

got it into the measure that comes to the floor so it is not coming 

to the floor as an amendment, you are stuck, there is nothing that 

an authorizing committee person can do other than make noise, 

there is no rule? 

Ms. TOLLESTRUP. So while there is no point of order that could 

be raised, that is correct, offering an amendment to take out the 

appropriation that is unauthorized would still remain an option. 

Senator WHITEHOUSE. Yes, but then you would need 60 votes 

going your way, and it would not be there if they did not have 60 

votes going their way. So good luck with that. 

That is not a practical option from my view on the floor. 

Dr. Posner, I was fascinated with your idea about changing the 

composition of this Committee a little bit. It may make sense to try 

to have the Finance Chair and Ranking and the Approps Chair and 

Ranking here so that they are a little bit more bought into this. 

I would hate to have it be all other folks because I think that Senator King’s perspective—he is here—has been phenomenal. And as 

a former Governor, he has dealt with a lot of this and the fact that 

he is not senior enough to be in that little group, and I am sitting 

in what would be Senator Sanders’ seat, and God knows he has got 

a perspective that has been noteworthy here in the Committee. So 

I would hate to see it turn into a pure leadership device, but leadership representation would be a very interesting idea. 

I would also note that in other committees, bipartisanship can be 

a prerequisite for certain things, like a quorum, and because of 

that you cannot even get a subpoena out of a committee without 

bipartisanship. And yet we can get the entire budget of the United 

States out of this Committee without bipartisanship. So there is 

another angle that we could be looking at, that it is simply not in 

order for the Committee to produce a budget unless it has bipartisan support of some kind. 

To your point about portfolios, we are not going to be able to 

jump in and do this without having tested the waters a little bit. 

It would be rash to do that and problematic. Is there an area that 

you would recommend to us as a particularly promising one for us 

to take a look at running the portfolio analysis that you described 

that would be small enough for us to actually bite it off and give 

it a whirl and that would potentially yield the opportunity for some 

significant reforms and consolidation of tax and spending policies? 


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Mr. POSNER. That is a good question. With the caveat there are 

no areas of low-hanging fruit in the budget, as you know, I think 

there are areas which lend themselves—higher education is one 

that I illustrated in my testimony, $110 billion of Federal subsidy, 

35 in the Tax Code, 70 through spending, through grants and loans 

and the guarantees and the like, as well as research and development. 

I think one of the things that would be essential, of course, is 

forming a partnership with the authorizers. It makes some sense 

to think about the authorization schedules as they are, as thinking 

about how this might work as a prelude to the next authorization. 

This Committee has actually taken some small steps in this direction. With Chairman Domenici, the Committee worked back in 

2000 to create four task forces of the Senate Budget Committee to 

focus on broader policy areas. One was education that Senator 

Frist chaired. Another was foreign assistance. They took the entire 

150 account, as they say downtown, the subfunction on international assistance, and did some broad oversight hearings on that 

function. I think Senator Sarbanes was involved with that. We had 

one on Social Security and one on another area. And several of 

them were productive of potential legislation, including the education one in particular. 

So it is not a sure thing. It was the first time they tried this. It 

was during a time of surplus when, you know, the fiscal demands 

on the Committee were not as great and they could start to, you 

know, spread their wings. 

I was hopeful that this might start getting the ball rolling, but 

it did not. But, nonetheless, there are ways that that could happen. 

I am struck when I look at legislatures—— 

Senator WHITEHOUSE. My time, Dr. Posner, has well expired, so 

let me—if you want to follow on with a written response for the 

record, I would be very interested in what your thoughts are. 

Mr. POSNER. Sure. 

Senator WHITEHOUSE. And that will give you a chance to deliberate even more. Thank you. 

Chairman ENZI. Senator Perdue. 

Senator PERDUE. Dr. Thurber, I have one word to describe my 

emotion in response to your testimony this morning, and that is, 

‘‘Hallelujah.’’ I have been here just 1 year, but I have not heard 

anybody else come up here and talk about one of the fundamental 

problems of this body. And you have today, and I want to echo 

that. 

Our Committee structure is just never going to work. It is not 

conducive with good stewardship of these issues. There are a lot of 

reasons why. I have gone back to 1946, looked at 1976, all the 

things in between in terms of how we got here. But when one Senator—and look at this Committee. I would argue that this topic 

right here addresses indirectly the number one crisis our country 

faces. It really does. These are all well-meaning men and women 

here on both sides of the aisle. And here we sit, because they are 

at another Committee at this very moment that they deemed was 

as important today. I have three myself at 10 o’clock, we all do, 10 

o’clock this morning. This cannot continue. It does not work. It will 

never work. 


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The second thing, Dr. Posner, I know you have written several 

things, and I look forward to hopefully working with you and some 

of your organization about how to change this process. But I have 

a quick question, and that is, when you look at a budget—and I 

know Senator Kaine and Senator King and others have Governor 

experience, I come from business, where you look at the entire 

budget. And yet we spend $3.7 trillion as a Federal Government, 

but we deal with $1.1 trillion in this Committee. That is the first 

issue. 

So the question I have is: How do you respond to my observation 

that, hey, wait a minute, why aren’t we talking about all of it? My 

argument is heretofore when there were trust funds for Medicare 

and Social Security, I get it because they take care of themselves. 

Now they are not taking care of themselves, and we have line 

items on our budget that are supplementing both of those entities. 

So I would argue that gives us purview to bring all of the above 

spending into this Committee. 

The second question that ties in with that—and I would love to 

hear your thoughts on this. First of all, the current process, I said 

with the other panel, it is set up for failure. Number one, it is a 

budget resolution. As Senator Whitehouse has said, the majority 

can cram down the throat of the minority any budget they want. 

And it is a political statement. We all know that. Even last year, 

this budget we produced was mostly a political statement. We 

crammed it down the throat of the minority. It did not get one vote. 

And then we go to authorization, and we find out, well, okay, some 

of those can get authorized, some cannot. But we get the appropriation, and now we really see the problem. 

We can appropriate in the Committee, but the minority leadership has no incentive, Republican or Democrat, to ever let one of 

those appropriation bills get to the floor of the Senate. Why? Because the minority can drive an omnibus formula where they will 

get most of what they want. And guess what happens as a part of 

that process? We all spend more. Now, whether we think it is justified or not, that is the equation. It will never work. I have been 

sitting here for a year. I have been looking at for 3 years trying 

to figure out how well-intentioned and talented people end up 

spending money like we are spending, and now I get it. It is the 

process. 

I applaud the Chairman and the Ranking Member, and I know 

Senator Whitehouse and Senator King have spoken out on this, 

among others. But I would love to get your thoughts about what 

keeps us from bringing all that in. And then is it not time that we 

throw the 1974 act out and take a start at this from a clean page 

perspective? I would like to get you and Dr. Thurber on that as 

well. 

Mr. POSNER. I think it is an important question because we now 

focus on 30 percent of the total. 

Senator PERDUE. Exactly. 

Mr. POSNER. And we need to have regular ways to bring them 

all together, which is why I suggested this portfolio approach. You 

would bring the whole thing together regardless of the character. 

Senator PERDUE. That would include mandatory—— 


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Mr. POSNER. Exactly. Mandatory and discretionary and tax expenditures. Part of this process is that this Committee legislates 

the whole, sometimes there is tension with the specific committees. 

For instance, it is very tempting to articulate symbolic 302(a)s that 

are completely incapable of ever being implemented. And I think 

that is why having a leadership presence on this Committee might 

help temper that process. Bringing more players into the process 

of formulating the whole might help the budget be more realistic 

and more grounded. 

In our National Budget Roundtable, we have some questions that 

we are starting to look at about how you budget for entitlements. 

Can we bring them into play more regularly? You do not put a cap 

and do them every year, but can there be meaningful targets that 

are adjusted every 5 years with some points of order around it? 

Senator PERDUE. Dr. Thurber. 

Mr. THURBER. A couple of comments. One, on an earlier comment 

that you made about the committee system, I want to remind you 

that there are 109 committees and subcommittees dealing with 

homeland security; there are 58 dealing with energy and environment. One of the toughest things that you can do is to realign jurisdictions. It is like playing Monopoly, and the Chair of Appropriations and Finance have Boardwalk and Park Place. No one wants 

to give up jurisdiction. Jurisdiction is power and power is a very 

difficult thing to give up. Committee reform needs to be done on 

a regular basis because of program duplication. Multiple overlapping jurisdictions is a major source of conflict and dysfuntion on 

the Hill. And it is not the executive branch’s fault. It is the growth 

in the number of committees and subcommittees. 

Senator PERDUE. But therein lies the dysfunction in the Federal 

Government, in my mind. I understand the balance of powers between the branches, but we see the rise of the regulatory side right 

now that does not have that encumbrance. They are much more 

productive in producing rules that have a dramatic impact on our 

lives, whereas we get stumped here trying to fight through this 

maze to get any change. I am sorry to interrupt, but—— 

Mr. THURBER. Congressional gridlock shifts power to the executive branch. 

Senator PERDUE. That is what we have done. That is what Senator Whitehouse said, and I agree. 

Mr. THURBER. Putting leadership, Ways and Means and Appropriations, on this Committee, as they do in the House is a good 

idea. It is a good idea to have that representation on this Committee to help bring senators together before you go forward with 

a concurrent budget resolution. 

Senator PERDUE. Thank you. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

Senator King. 

Senator KING. Thank you, Mr. Chairman. I want to thank you 

for calling this hearing because I think we have really had some 

provocative and important testimony. 

Dr. Thurber, before we get into the substance of budget, I was 

fascinated by your research about partisanship and partisan divide 

going back to 1860. I would like to request that you, as much as 


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possible, correlate that to the esteem in which the institution is 

held. It would be very interesting to line those up. I suspect you 

would see that there is a direct correlation between partisanship 

and low esteem. 

Mr. THURBER. If I might answer immediately? 

Senator KING. Sure. 

Mr. THURBER. I do not want to push my book that just came out, 

‘‘American Gridlock,’’ but in it we show a relationship there between support as measured by Gallup and others and the amount 

of polarization. I blame the polarization on both parties. There is 

nobody in the middle anymore. 

Senator KING. If you did not push your book, you would be the 

first witness in a congressional committee not to do so. I welcome 

that. 

The issue, it is not 30 percent, David. It is more like 20 percent, 

because tax expenditures are part of this, too. My numbers are 1.1 

on discretionary, about 2.6 on mandatory, 1.4 on tax expenditures. 

Tax expenditures are the granddaddy of all unauthorized programs. They are authorized once. The efficacy is never tested. The 

need is never tested. The relevance is never tested. And they are 

there forever, and we extended a bunch of them forever just this 

past December without regard to its impact on the long-term budget. The tax expenditures now exceed the actual tax revenues. So if 

we are going to talk about this, Mr. Chairman, I think we need to 

talk about the whole budget, I think it is $5.1 trillion. My mother 

used to have a wonderful saying. She said, ‘‘You are straining at 

gnats and swallowing camels.’’ And by focusing all our attention on 

the funding for Head Start or whether or not to buy an aircraft carrier, we are missing a much, much larger picture. 

Mr. Posner, I thought your idea about reviewing programs as a 

group is very insightful and important. But the question is—and it 

gets back to the discussion we have been having—who does it? Is 

it this Committee? Is it the authorizing committees? Is it the Appropriations Committee? 

Maybe we ought to have a new committee called ‘‘Oversight’’ 

whose sole responsibility it is to do that. It would not be a very 

glamorous one. But your thoughts on—you know, I think your insight is accurate, but who does it? 

Mr. POSNER. That is, obviously, the big question. I think this 

Committee could do it. This is why I suggested this be anchored 

as a leadership committee because then it would be easier to orchestrate. I think it also could become a joint committee in its initiative, possibly, and it would have to be something the leadership 

would have to bless, and it would have to be something that would 

be a high priority even with the President to support it. 

So I think there are several different avenues for that, but this 

Committee was intended to take a look at the broad missions of 

Government through the budget function, 19 of them. And there 

are 96 subfunctions, and they cut across all the programs, not including tax expenditures. That is the way the resolution was supposed to be allocated, and those figures are nice and analytic, tidy 

little sums in the resolution, but they are never used you the Congress to budget or manage or oversee. 


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What I am saying is let us give life to those concepts because 

they are sorely needed as Government has grown and become more 

fragmented. And, obviously, the question is raised: Which committee does that? And I think it probably has to be several working 

together in some way. But, I think this Committee needs to lead 

it. 

Senator KING. Mr. Thurber, do you have thoughts on that? 

Mr. THURBER. Yes. Under the rules of the House and the Senate, 

when committees go forward to get funding, they are supposed to 

produce an oversight calendar, and that should be one of the criteria for funding committees. Leadership could be involved to make 

sure that committees are working together in their oversight on 

that calendar. It is very hard to enforce. It really is not being enforced. One possibility is to have two or more committees coordinate their oversight calendars. They could plan Joint Oversight to 

improve deliberation and lawmaking. And if they cooperated, they 

could get an appropriation for their committee. 

Senator KING. I think you made a very important point, and I 

have talked about this at home in Maine about how to overcome 

this partisanship. A lot of it comes down to people. It is no coincidence that Lamar Alexander and Patty Murray were the Chair and 

Ranking Member of that Education Committee that got the major 

education bill through. I believe that a lot of it is the individuals 

that are in the seats and whether they are inclined to try to work 

things out. The Chairman of this Committee has had that same 

kind of experience. 

Mr. THURBER. I agree with that. I hate to go back to ancient history when budget chair Muskie and ranking member Bellmon got 

along very well, but it is a good example. They were former Governors, by the way, that knew how to put budgets together, which 

helped in bipartisan collaboration. Their cooperation and their personalities really launched the Budget Impoundment Control Act of 

1974. The budget process was successful during their tenure as a 

result of their leadership. 

Senator KING. I think you and I may have served together. I was 

on the staff here from 1973 to 1975. 

Mr. THURBER. Yes. 

Senator King. It is quite an experience to come back 40 years 

later as a Senator, having seen the differences. 

Again, Mr. Chairman, thank you. I think this is so important, 

and we have got to continue to talk about this. And we also have 

to continue to talk about why is it, even in good times—we are in 

relatively good times now. Why is it that we cannot balance the 

budget? But we cannot balance it entirely on that 22 percent of the 

budget. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

You pushed your button. Did you want to make another—— 

Senator WHITEHOUSE. No. I was just going to blame Senator 

King for how bad things have turned since 1975 when he left. 

[Laughter.] 

Everything just went straight downhill. But luckily he is back 

now to help straighten this out. 

Senator PERDUE. Mr. Chairman. 


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Chairman ENZI. Senator Perdue. 

Senator PERDUE. Would you indulge me with one last question 

before we—— 

Chairman ENZI. Sure. 

Senator PERDUE. I apologize. I would love to get all your responses to no matter what the process is, there are de dates and 

accountability, but there is no accountability here. If we do not do 

a budget by April 15th, if we do not fund the Government and pass 

all the appropriations by September 30th, there are too many easy 

release valves. You can do a CR. You can do an omnibus, minibus, 

all these combinations. Only four times in the last 4 years have we 

really operated this thing responsibly. So I know the process is 

wrong. But even within that, there is no consequence for nonperformance. 

Have you guys looked at—and there are best practices around. 

I mean, States do this all the time. Many States have a balanced 

budget law. They have control of this. They get their budgets done. 

And, by the way, most of them do it in 45 days or less. My question 

is: Have any of you looked at the types of consequences that other 

entities like this use to enforce performance? 

Mr. POSNER. I can start that off. The States have something that 

we do not. They have aggressive bond markets that vigilantly oversee them. The constitutional requirements aside for balanced budgets, they have aggressive bond markets. 

Senator PERDUE. We have the Federal Reserve. 

Mr. POSNER. Well, we have generous bond markets at this point. 

So from that standpoint—and the States do, in fairness, as we see 

in Illinois now and other States, extend deadlines when they cannot reach agreement as well. But I think the overall constraints 

bearing on States or other countries which I have studied are far 

more impressive to policymakers than they are to our policymakers 

at this point. 

Senator PERDUE. Well, some of those States—Illinois is not one 

of them—actually have a balanced budget law. 

Mr. POSNER. Yeah. 

Senator PERDUE. So that really is sort of an end consequence 

that you—it is a law, and you have got to adhere to it. 

Mr. POSNER. Yeah, yeah, enforced by the bond markets. Right. 

Mr. THURBER. Let me say that since the 1974 budget act was 

passed and fully implemented in 1976, we have changed the budget 

process every few years. So you have asked, Are there mechanisms 

to force people to make decisions? Well, we tried with the original 

act, with Gramm-Rudman-Hollings I and Gramm-Rudman-Hollings 

II, and then we tried with the 2011 act where if you did not act 

in time (the super committee did not deliver in a certain amount 

of time) budgeting and appropriations became an automatic ‘‘meataxe’’ approach through sequestration. 

If you do not change the will of the members to cooperate—your 

reforms will not have a major impact. That means you have to go 

back to the way people are elected. The polarization of the American voters, the polarization of the media, the polarization of interest groups, the polarization of State legislatures as well as this 

body undermine bipartisanship and cooperation, necessary for the 

congress to function. I do not see any immediate magical ways to 


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change that polarization and gridlock. If you cannot do that, then 

instituting a new Budget and Appropriation process may not work. 

Senator PERDUE. You may have just gotten outside the scope of 

this Committee just a bit. 

Mr. THURBER. I did. 

Chairman ENZI. Nothing is outside the scope of this Committee. 

[Laughter.] 

Mr. THURBER. I apologize for that, Senator. 

Senator PERDUE. No, no. You are fine. 

Ms. TOLLESTRUP. So while I am not able to speak today to balanced budget and those kinds of requirements that exist in different entities, I can talk a little bit about what mechanisms Congress does have to encourage timely legislative review when it 

comes to how the laws are put together. 

The focus of this hearing has been expired authorizations of appropriations, and those provisions expiring can provide an occasion 

for legislative review and for new laws to be enacted. But if those 

provisions expire, they do not themselves terminate the program. 

They simply terminate the authorization of appropriations. 

There are other kinds of provisions in laws that can expire and 

also provide occasion for legislative review. For instance, mandatory or revenue-related provisions, authorities for user fees, those 

are the sorts of things that encourage legislative review when it 

comes to laws like surface transportation, the farm bill, programs 

like that. 

Essential authorities also can expire, including authorities that 

relate to how a program will function. For instance, certain investigative authorities under the PATRIOT Act expire on a certain calendar, and that encourages legislative review on that schedule. 

And then also Congress does have the option of sunsetting a program and having a sunset built into the law. So as is the case with 

the Export-Import Bank, with terrorism risk insurance, there are 

different ways that Congress has approached trying to sunset programs on a schedule in the past. 

Senator PERDUE. Yes, I am less concerned about the programs. 

I know that was a focus, and that is a great answer. I really am 

asking the question that, you know, if we cannot fund the budget 

by the deadline, I mean, what consequences are there? And we 

found too many release valves that give us a way out of the box, 

and the release valve is more spending. And that is the reality that 

we have got. 

Mr. Chairman, I am sorry. I have overstayed my time. Thank 

you. 

Chairman ENZI. Well, I want to thank the witnesses. I have got 

to go back through pages and pages of notes that I have made as 

a result of what you have suggested. I think there are a lot of good 

suggestions there, and I have asked Senator Whitehouse to share 

with me any inspirations that he has. 

The one comment that I made was that we require the President 

to give us his budget by a specific time. In my 20 years here, the 

only use that I have seen for that is for one party to beat up on 

the President’s budget and the other party to proclaim the intelligence of that budget. And the budget format is not even in the 

same format that we use, so what he gives us is not usable. I am 


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hoping that it is usable from a management standpoint, from an 

administrative standpoint, but somehow the two of us, the two bodies, need to get together on making that more effective one way or 

another. 

The oversight process I think creates some problems because it 

usually results in taking money away, and we are much more excited about giving money away than stealing money. The consequences are considerably different. 

So thanks for all of your suggestions and for your outstanding 

testimony, and we will be trying to—we will be getting some more 

information out to members of the Committee that were not here. 

Thank you. Excellent panel. The hearing is adjourned. 

[Whereupon, at 11:47 a.m., the Committee was adjourned.] 


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BUDGETING BLIND: THE UNRELIABILITY OF 

FEDERAL FINANCIAL DATA 

WEDNESDAY, APRIL 6, 2016 

U.S. SENATE, COMMITTEE ON THE BUDGET, Washington, D.C. 

The Committee met, pursuant to notice, at 10:30 a.m., in Room 

SD–608, Dirksen Senate Office Building, Hon. Michael B. Enzi, 

Chairman of the Committee, presiding. 

Present: Senators Enzi, Grassley, Crapo, Johnson, Ayotte, 

Wicker, Perdue, Warner, Kaine, and King. 

Staff Present: Eric Ueland, Republican Staff Director; Peter Warren, Senior Budget Analyst and Director of Oversight; for the Minority: Joshua Smith, Budget Policy Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. Good morning, and since we are here, I will go 

ahead and call this hearing to order. 

Today we are going to begin a series of hearings that will discuss 

budget process reform in what I anticipate will be a positive, productive, and bipartisan manner. I think this is one of the few times 

that we can do that. It is an opening once every 4 years, and the 

reason it is an opening every 4 years is right now we do not know 

who the majority is going to be next year; we do not know who the 

President is going to be next year. So I anticipate that both sides 

can work in a very reasonable way to make a process that will be 

better than what we have had before. 

So we begin today with an assessment of the Government’s overall financial condition. The lens through which we will assess that 

condition is the Government Accountability Office’s recent audit of 

the Federal Government’s financial books. 

As you know, I believe the congressional budget process is fundamentally broken. Only one budget resolution has been adopted 

by Congress in the past 6 years, and only nine budgets have been 

adopted in the past 18 years. Even when we do adopt a budget, it 

often fails to become a governing document. The broken budget 

process has contributed to spiraling levels of overspending and 

debt. But it is important to understand that the budget process is 

just one part of a broader cycle of Federal financial management. 

The cycle is shown on the slide that you can see on the screen. 

As you can see, this continuous cycle proceeds from budgeting 

through budget execution to accounting and on to auditing. All the 

elements are interrelated. Judging from testimony we will hear 

today from the Government Accountability Office, the budget procVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00093 Fmt 6601 Sfmt 6601 E:\HR\OC\A333.XXX A333

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ess is not the only part of this cycle that is broken. The government-wide financial statements that GAO audits tell us what came 

into the Government’s coffers and what went out, what the Government owns and what it owes, and if the operations are financially 

sustainable. 


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But can we trust the information in the financial statements? 

GAO’s audit calls into question the reliability of the underlying financial data. The sketchiness is such that GAO remains unable to 

even issue an audit opinion on the Government’s books. If a publicly owned company on the stock market received such a disclaimer, investors would run away from it. But we cannot run 

away from a Government in which we are all stakeholders. This is 

an enterprise in which we and our children are all invested. 

It would be disastrous for a publicly owned company to be unable 

to prove to auditors that it had a handle on how much inventory 

was held in its own warehouses, what condition its property was 

in, or the extent to which it is on the hook for potential liabilities. 

But these are exactly the sort of weaknesses GAO found in the 

Federal Government books. The situation has implications for 

budgeteers because it means we may not have the most reliable 

data when we embark on the budgeting stage of the financial management cycle. 

This is how GAO puts it in its report: ‘‘To make difficult decisions to address the Federal Government’s fiscal challenges, Congress, the administration, and Federal managers must have ready 

access to reliable and complete financial and performance information. Our report underscores that much work remains to improve 

Federal financial management, and these improvements are urgently needed.’’ 

The tendency in Congress is to focus on all the wonderful things 

that new spending and new programs might accomplish. There is 

not enough interest in looking at what happens with the money we 

are already spending. That is where the audits come in. Every 

budget should be informed by knowledge about what happened 

with the money that already went out the door. To wisely allocate 

new resources, we need to be using reliable information about what 

we bought, what we own, where we stand. and the sustainability 

of the current policies. 

Ultimately, I hope this hearing will encourage better stewardship 

by the financial managers within the executive branch. As Congress works to fix its broken budget, it is clear the administration 

has its own work to do in getting its financial house in order. 

Senator Warner. 

OPENING STATEMENT OF SENATOR WARNER 

Senator WARNER. Well, thank you, Mr. Chairman. Thank you for 

holding this important hearing. 

Comptroller Dodaro, it is great to see you again. I am looking forward to your testimony. 

I think there is some self-selection going on in terms of who 

showed up. We have got your background as an accountant, Mr. 

Chairman, and Senator Grassley’s interest. We have got three 

former business guys who decided to show up this morning. While 

this is not necessarily an area that gets a lot of attention, it is extraordinarily important, and I agree with the Chairman on this. 

We have made some progress. You know, back in 2010, working 

with your offices, we passed GPRA, the first effort to try to modernize the management process, where we looked at trying to isoVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00096 Fmt 6601 Sfmt 6602 E:\HR\OC\A333.XXX A333

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late the actual priorities for agencies, looking at cross-cutting goals 

across agencies, looking at consolidation. 

In 2014—and, again, I appreciate your comments, Mr. Dodaro, 

about the DATA Act, at least a first step. Rob Portman and I and 

Darrell Issa put the DATA Act in place to try to start consolidating 

so we can have that kind of clarity around financial information. 

I do hope this Congress goes ahead and invests the $53 million 

that the President has called for to actually implement it. It does 

not do any good to pass this legislation if we cannot implement its 

processes. 

You know, I think one of the things in your testimony, we are 

talking about both improving Federal finances both in the long 

term and financial management. An issue that many of us share 

a great deal of concern on is, obviously, our national debt, which 

is approaching $19 trillion. A data point I always like to use is at 

interest rates go up, just 100 basis points, 1 percent, that adds 

$120 billion a year in just additional debt service. That is more 

than we spend in Federal DOE and DHS combined. I know the 

Chairman of the Homeland Security Committee is here. 

Another issue I think you pointed out and something that we 

have been working on as well is the unrecognized financial risk 

posed by the ongoing Government conservatorship of Fannie and 

Freddie. This is an area that has not garnered a lot of attention, 

but as we have seen potential for either one of those entities to dip 

back in and ask the taxpayer, again, we have got to—our job is to 

make sure that we resolve those entities. 

I would point out to Treasury and the OMB, I think there are 

challenges with this administration, but the requirement to put in 

place a consolidated financial report has been part of the law since 

1994. And, unfortunately, as your report points out, we still do not 

have good systems in place, particularly around the issue of intergovernmental transfers. So if we cannot follow the money, as the 

Chairman has pointed out, we are not going to be able to do our 

job in terms of oversight. 

In 2012, a GAO report found that the Pentagon alone maintains 

more than 2,200 systems to manage finances, HR, logistics, property, and weapons acquisition. I have run an enterprise before. Obviously, DOD is the largest in the world, but 2,200 separate systems? That is crazy. 

One last comment I want to make in terms of another area that 

I know the Comptroller General has pointed out is around cyber. 

I think this is going to be a growing concern, public and private. 

But our failure at times to actually invest in, improve our legacy 

IT systems, we are now seeing a new vulnerability not only in 

terms of inability for these systems to work, but as we patch upon 

patch upon patch, all we are doing is creating more vulnerabilities 

in terms of this new domain around cyber. 

I would simply point out, finally, that if we are going to make 

sure that we do the kind of oversight and review when we get to 

program integrity, we have got to make sure we fund those initiatives. These return in many cases $8 to $10 in savings for every 

$1 invested, and I worry at times when we go through things like 

sequestration, which makes no regard for good programs or bad 

programs, program integrity initiatives, because they fall within 


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the discretionary bucket, are all subject to those kinds of caps and 

those kinds of cuts. 

So, Mr. Chairman, I am grateful for your focus on this issue. It 

is something I think there is bipartisan consensus on. My hope 

would be we could get more members of the Committee to participate, and I look forward to the proceeding and the testimony of our 

witness. 

Chairman ENZI. Thank you, and thank you for your work on the 

DATA Act. And I thank you and Senator Kaine and Senator Johnson and Senator Perdue and a number of people for talking about 

the need for separating out the capital budget from the normal expenditures and seeing what things we borrow for. 

I am glad we are doing this hearing today because we are used 

to looking at Federal finances through the lens of the budget resolution. This hearing gives us a different perspective. It is not often, 

for instance, that we look at the actual balance sheet of the Federal 

Government. One thing that jumps off the page for me in viewing 

that balance sheet is the growth of Federal banking operations. 

The Government’s largest asset class is its $1.2 trillion loan portfolio. That is 38 percent of everything the Government owns. The 

student loan portfolio alone is nearly $1 trillion, and that is more 

than the combined value of all Federal property, plant, and equipment. 

Our witness today is Gene Dodaro, the Comptroller General of 

the Government Accountability Office. GAO is statutorily responsible for auditing the consolidated government-wide financial statements. He is the eighth Comptroller General of the United States. 

He was confirmed in December of 2010 after serving as Acting 

Comptroller General since March of 2008. He has been with the 

GAO for more than 40 years. He served 9 years as the Chief Operating Officer, the number two leadership position at the agency. 

Prior to that, he headed the GAO’s Accounting and Information 

Management Division, which specialized in financial management, 

computer technology, and budget issues. He testified before this 

Committee last year on the topic of duplicative programs. 

I thank you for joining us again today to discuss GAO’s most recent annual audit of the Government’s books. Mr. Dodaro. 

STATEMENT OF THE HONORABLE GENE L. DODARO, COMPTROLLER GENERAL OF THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. DODARO. Thank you very much, Mr. Chairman, Senator 

Warner, Senators Johnson, Grassley, and Crapo. Good morning to 

all of you. I am very pleased to be here to discuss the audit that 

we perform on the Government’s financial report. 

As has been pointed out in the opening comments, the financial 

report does not get anywhere near the attention that the budget 

does, but it is really needed to provide a total perspective on the 

Government’s financial condition and position. 

First of all, it provides a good insight into the accountability over 

the money that has been spent already and the proper stewardship 

over assets that the Government owns. It provides more insights 

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tainability financial statements have been added, it provides a 

long-term perspective on the Federal Government’s current fiscal 

path, which I think is an important area to focus on, and I will talk 

a little bit about that in my comments this morning. 

There are just four basic points I would like to make in my opening statement. 

Number one, there has been some progress in improving financial management in the Federal Government over the past 20 

years; however, significant problems remain. There are three major 

impediments to our ability to give the Government financial statements an audit opinion. Serious financial management problems at 

DOD, which reportedly has assets that are about 30 percent of the 

total Government assets and about 15 percent of its net costs. 

These are serious, longstanding problems that need to be addressed. 

Secondly, Treasury cannot eliminate, along with the other agencies, the intragovernmental transactions that Senator Warner 

pointed out in his comments among Federal agencies. These are 

hundreds of billions of dollars in transactions, so you really do not 

have good accountability on how the Federal agencies take the appropriations from the Congress agency by agency, but then carry 

out business activities among themselves, and there needs to be a 

proper accounting for that money. 

And, finally, there are problems compiling the financial statements. Most of the individual Federal agencies are able to get unmodified or clean opinions, and that has been a significant improvement since 1996 when the federal government first started 

producing audited financial statements for all the major departments and agencies in the Federal Government. In 1996, only six 

departments and agencies could get unmodified (clean opinions); 

most recently 21 of 24 have been able to do that. But some of the 

big agencies like DOD have been problematic. 

Secondly, the financial report and audit shines light on some significant government-wide financial challenges. Number one is improper payments. Since Congress has required the reporting on the 

estimates of improper payments in 2003, the amount of improper 

payment estimates now exceed $1 trillion. This is a significant 

problem. In the last 3 years alone, the annual figures have grown, 

from $105 billion to $124 billion to $136 billion. It is a pervasive 

problem across Government; 121 different Federal programs and 

22 Federal agencies are reporting improper payments. The most 

significant improper payments are in Medicare and Medicaid, two 

of the fastest growing programs in the Federal Government’s inventory. So this is something that I believe really needs to have attention. 

On the other side of the equation, while we have some money 

going out the door that perhaps should not be going out the door, 

we have a net tax gap of taxes that are owed under the current 

system but not being paid. The latest estimate is $385 billion. So 

there is a significant amount of money under the current laws and 

programs that we do not have proper accountability over and we 

are not properly collecting all the revenues due to the Federal Government. 


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The third major point that I would make is that, while there has 

been some progress in the past few years in reducing the annual 

deficit, the Federal Government remains on a long-term 

unsustainable fiscal path. The debt-to-GDP ratio right now is at 74 

percent. That is the highest it has been since World War II when 

we had a record 106 percent of debt held by the public as a percent 

of gross domestic product. And we are on a path to exceed those 

historical numbers in 15 to 25 years absent fiscal policy changes. 

Key drivers are demographics and rising health care costs, and 

eventually net interest. As net interest accumulates, compound interest works against us when we are borrowing, not for us as it 

would when saving. 

The last point I would make is that the current approach to setting a debt ceiling for the Federal Government in my opinion needs 

to be revised. The concerns about whether the Congress will raise 

the debt ceiling has caused the Treasury markets to take actions. 

Market participants are actually avoiding purchasing Treasurys 

that might mature during the debt ceiling impasse and it is causing liquidity problems in the secondary market, and it is adding to 

the interest that the Federal Government has to pay on the debt. 

Our latest estimate for the 2013 debt ceiling impasse was the Federal Government paid anywhere from $38 to $70 million in additional interest costs just because people were concerned. Some of 

the market participants that we talked to basically said that they 

might take more severe action in the future. 

So we have recommended that Congress change the approach for 

setting the debt ceiling. It could be done as part of the budget resolution process, but it needs to be brought closer to where the actual 

spending decisions are made by the Federal Government. Under 

the current approach, raising the debt ceiling authorizes Treasury 

to borrow money to pay bills that the Congress has already authorized to be paid. It does not control anything with regard to the revenue or spending activities of the Federal Government. 

So I would encourage this Committee, as you consider budget 

process reforms, to include in that discussion alternative ways of 

setting the debt ceiling for the Congress. 

I appreciate the opportunity to discuss GAO’s work on these 

issues, Mr. Chairman, and I would be happy to answer any questions that you and other members of the Committee may have. 

[The prepared statement of Mr. Dodaro follows:] 


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Chairman ENZI. Thank you for your testimony and for the documents that you provide during the year and now. And this is really 

an exciting hearing for an accountant. [Laughter.] 

But we are going to have a little bit of an interruption—well, we 

are going to try to not have an interruption. At 11 o’clock there is 

a vote, so I am going to turn over the chair to Senator Johnson, 

who is the other accountant here, and he can ask his questions 

during the time that I go vote, and then I can relieve him while 

he votes. And as such, I will pass on my questions for the moment 

and allow the Ranking Member to go, and then Senator Johnson 

will follow him as the Chair while I vote. 

Senator WARNER. Well, thank you, Mr. Chairman. 

I want to get right into the nitty-gritty, and, again, Gene, thank 

you for your good work. I want to get a couple questions in on the 

DATA Act. For my colleagues who have not followed all that closely, the DATA Act was an effort to try to make sure that we had 

at least common definitions. You cannot find any kind of level of 

transparency if you do not at least have common definitions about 

what spends are and what transfers are and what is a cost and 

what is not a cost. 

In your January report, you highlighted the need for Treasury 

and OMB to issue more complete and timely guidance to agencies. 

I want to make sure that the agencies are moving forward on this. 

Later today, I will be sending a letter to the heads of 37 agencies 

and departments who submitted DATA Act implementation plans 

to OMB last fall. My goal is to gently noodge them—or maybe not 

so gently noodge them—to make sure that they understand the importance and benefit of financial transparency and to make sure 

they prioritize the implementation of this law. It will require additional resources. Again, I think it is so critical that Congress funds 

the $50 million that is going to be required to set up these new systems. And, again, I would remind my colleagues this was very bipartisan. Senator Portman and Congressman Issa were leaders as 

well on it. 

Your report said that the DATA Act holds ‘‘great promise to improve Government financial management.’’ But in January, you 

said there was a lack of clear guidance from both Treasury and 

OMB on how agencies should report their standardized spending 

data under the DATA Act, and that could hurt agencies’ efforts to 

prepare for the full 2017 implementation. 

Do feel like that report has spurred change? And how do you 

evaluate the status of implementation of this law? 

Mr. DODARO. I believe that OMB and Treasury understand our 

point, but they have yet to issue the guidance that we have called 

for, in two respects: 

One, as you mentioned, concerns the reporting guidance on how 

to report on the data standards. They have issued the data standards, they are out there. But more is needed regarding how agencies should report. Based on our experience in the Recovery Act, 

particular areas of reporting such as place of where the activity 

takes place, the award descriptions, exactly what was done—those 

things need additional guidance. Otherwise, you will get information that will not be helpful. 


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Secondly, the DATA Act, as you know, requires machine-readable, downloadable information, and you need to have technical 

standards to be able to report that. Those technical standards in 

the Schema have not been set yet. Both of these issues are giving 

agencies pause, and they will not be able to finalize their implementation plans. So I am hopeful that the guidance on both these 

issues will be issued as soon as possible and be stabilized. The concern I have is that they not continue to revise things; otherwise, 

the agencies will have a legitimate excuse not to be fully prepared 

to meet the schedule under the DATA Act. 

Senator WARNER. So appropriate guidance, would you say that 

falls into your category as we look at the litany of challenges between now and May of 2017 for full implementation? 

Mr. DODARO. Yes, there—— 

Senator WARNER. Do you want to list some of the other issues? 

Mr. DODARO. Yes. First, there is appropriate guidance. There is 

also a need to have a governance structure for the full cycle of setting and revising data standards. They have set up a temporary 

structure. They issued the initial data standards. But I am very 

concerned about the fact that the act will be implemented in the 

transition of two administrations, and there are huge opportunities 

here for loss of momentum, lack of clarity and guidance, and so I 

am encouraging them to put a permanent data governance structure in place. 

Third, I am disappointed that they continue to defer the definition of ‘‘program’’ and to come up with a program inventory of the 

Federal Government. That has been continually deferred since the 

Government Performance and Results Modernization Act. They 

have said that they will do it under the DATA Act now. They have 

said it will be several years after the DATA Act is implemented before that would be in place. That is going to inhibit the ability to 

link the spending to programs which is one of the major objectives 

of the act. So I am very concerned about that deferral. 

Senator WARNER. And would you also agree, when you pointed 

out in your report close to $1 trillion—that was more on improper 

payments. 

Mr. DODARO. Right. 

Senator WARNER. On the improper—— 

Mr. DODARO. Well, but this would help on improper payments. 

Senator WARNER. This would help on improper payments and 

intergovernmental transfers. 

Mr. DODARO. It provides more transparency and more accountability, and you could do better tracking. The other—— 

Senator WARNER. Let me just get—because my time is about run 

out. On improper payments, any comments you want to make 

about Government integrity programs, which seem to have a pretty 

good record of being able to actually show dollar invested ends up 

resulting in $8 to $10 of savings? 

Mr. DODARO. Yes, there needs to be more invested—probably in 

program integrity efforts, but the agencies really need to do a better job identifying the root causes of the problem. I do not think 

they have really done that much yet. I have asked for additional 

resources for GAO to help in identifying those things as well. But 


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there needs to be more analysis of what is actually causing the 

problems. There are some disputes associated with it. 

But the other point I did not make in my opening comments— 

I will take this opportunity—is that these huge figures that I have 

quoted, over $1 trillion, these estimates are not yet complete. There 

are no estimates for the managed care portion of Medicaid or the 

Temporary Assistance for Needy Families program. Other estimates are not complete or reliable. So this gives you an order of 

magnitude, but I think the problem is even bigger. 

Senator WARNER. Well, I am going to vote at some point and get 

back for a second round. Thank you, Mr. Chairman. 

Senator GRASSLEY. Mr. Chairman, could I have just one minute 

out of order? 

Senator JOHNSON [presiding]. Absolutely. 

Senator GRASSLEY. Because I want to compliment this agency for 

something dealing with the report that they are giving to us on financial management at the Department of Defense. So we passed 

a law, let us say, 6 or 7 years ago that the Defense Department 

services are supposed to be auditable by 2017. So then they start 

with the Marine Corps audit because it is the smallest, and there 

are all sorts of shenanigans going on over a period of 2 or 3 years 

to make sure that they are certified to be auditable. Well, it was— 

I do not know what adjective to use. It was just a fraud. And I 

asked this agency to look into it, and because of their hard work, 

they made the Defense Department withdraw the Marine Corps 

audit until it gets right so it can be audited. So I want to thank 

you for your work of exposing that fraud in the Defense Department. 

Senator JOHNSON. Well, Senator Grassley, I certainly share your 

commendation of the GAO for doing that, but we have to commend 

you as well. I have to commend. You are the one that was a bulldog 

on that, so—— 

Senator GRASSLEY. Well, I gave a speech on it a year ago, but 

nobody reads your speeches. 

Senator JOHNSON. It did always amaze me that, you know, rather than just do the audit, they, you know, went through the process 

of preparing for the audit. And I would say, you know, just cut to 

the chase and get right to the audit. 

Mr. Dodaro, thanks for coming here today. I want to go to the 

exhibit that is actually the balance sheet, and I want to get to the 

sustainability measures. Let us first start out, though, because in 

your testimony you talked about how Treasury cannot eliminate 

transactions, how they are not very good at compiling. 

A question I have asked of Government witnesses now eight 

times—this will be the ninth—has to do with the Social Security 

Trust Fund, which I have not looked at the most recent figure, but 

back the last time I asked, the trust fund had about $2.7, $2.8 trillion of U.S. Government bonds. So that is an asset to the trust 

fund. What is a U.S. Government bond to the Treasury? 

Mr. DODARO. Pardon me? 

Senator JOHNSON. What is the U.S. Government bond to the 

Treasury? It is a liability, correct? 

Mr. DODARO. Right, right. 


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Senator JOHNSON. So if we consolidate the books of the Federal 

Government, you have got a $2.7, $2.8 trillion asset in the trust 

fund, you have got a $2.8 trillion liability in the Treasury. What 

does that net out to? 

Mr. DODARO. Zero. 

Senator JOHNSON. Zero. So the trust fund to the Federal Government has no financial value. Is that a correct statement? 

Mr. DODARO. The only thing—— 

Senator JOHNSON. Your microphone. 

Mr. DODARO. I am sorry. The only thing that gets reported on the 

financial statements is the debt held by the public because the 

trust fund is an intragovernmental transaction. 

Senator JOHNSON. But, again, if the Government is relying on 

the trust fund to fund the Social Security benefits, it is going to 

have to borrow that money again. 

Mr. Dodaro. Yes. 

Senator JOHNSON. The transaction financially nets to zero. So my 

question is: On the sustainability measures, exactly what is this— 

is this an unfunded liability? What is the calculation here? Is this 

coming right out of the Trustees’ reports? 

Mr. DODARO. It is usually in some of the Trustee reports, but 

also alternative assumptions, particularly for Medicare, for example, because even the Trustees do not believe that all the cost containment efforts under Medicare are going to hold over a period of 

time. So there is a difference of about $8.9 trillion between the 

baseline estimates and the alternative estimates for Medicare. 

But basically it is a projection of net present value of expected 

revenues and expenditures for the Federal Government, non-interest expenditures over the period of time, to show what the gap 

would be. And the gap is huge. 

Senator JOHNSON. Right. So, basically, what you have got in So- cial Security, somewhere around $13 trillion net present value, unfunded liability, and in Medicare you have got about $28 trillion. 

Correct? 

Mr. DODARO. Right. That is correct. 

Senator JOHNSON. Do we by any chance have my one-page income statement on the screen? This is something that—and, actually, Senator Warner was a cosponsor, asking CBO to come up with 

kind of a one-page income statement describing the 30-year deficit. 

One of my problems when I came here as a business guy, you 

know, these unfunded liabilities, the public does not really understand net present value, and it just was not particularly relevant. 

So, actually, in discussions with the White House, I decided to describe the problem or define it as a 30-year demographic bubble, 

you know, what is—and I asked colleagues, what is the deficit over 

the next 30 years? 


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Well, CBO actually does calculate this in projections, but they do 

it as a percent of GDP, so we converted these to numbers. And here 

are the stark results in a one-page income statement over 30 years. 

You have got a deficit—in other words, we are going to pay out 

more benefits in Social Security than we take in the payroll tax, 

about $14 trillion, which kind of relates to the $13 trillion unfunded liability. 

Mr. DODARO. Right. 

Senator JOHNSON. In Medicare, it is about $34 trillion. Okay? 

And then the remainder of that—by the way, the deficit over the 

next 30 years projected by CBO is $103 trillion, about $10 trillion 

the first decade, $28 trillion the second, $65 trillion the third. It 

is comprised of $14 trillion in Social Security, $34 trillion in Medicare, and the rest is interest on the debt. 

Mr. DODARO. Right, right. 

Senator JOHNSON. And, again, that is what we are trying to show 

here with the balance sheet, and these numbers are just incomprehensible. 

Mr. DODARO. Right. 

Senator JOHNSON. So how do we convey in a more understandable way what you testified to, that this is completely 

unsustainable? 

Mr. DODARO. Right. We have a graph in our testimony statement. 

Mr. KING. Page 31. 

Mr. DODARO. Page 31, Senator, I believe illustrates the problem. 

Thank you, Senator King. Right on time. These are our simulations 

of the long-term Federal Government’s fiscal path. This shows 

under the baseline simulations that are under current law. This 

also has two important benchmarks: the historical average postWorld War II of how much debt the government held as a percent 

of gross domestic product, 43 percent on average. Right now we are 

at 74 percent. We are very heavily leveraged in debt. 

Under current law—this shows us hitting the historic high, the 

highest in the United States Government’s history of debt held by 

the public as a percent of gross domestic product was 1946, right 

after World War II. We are on mark to hit that in the next 15 to 

25 years. 

The alternative number at the top here assumes that the cost 

controls for Medicare basically do not hold over that period of time 

and health care costs go higher. 

So we believe this illustrates that debt will continue to rise— 

these projections go to 200, 300 percent, and even higher, of debt 

held by the public as a percent of gross domestic product. We are 

going to owe more than our entire economy is producing, and by 

definition, this is not sustainable. 

Senator JOHNSON. Right. Well, again, our total debt is about $19 

trillion. Tack on over the next 30 years $103 trillion. I think that 

is the very definition of unsustainable. 

Mr. DODARO. My basic point, Senator, is that you show it this 

way, you show it OMB’s way in the financial report, you show it 

our way, you show it CBO’s way, it all shows the same. It is 

unsustainable, and it needs to be addressed. 


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Senator JOHNSON. As I am turning it over to Senator Kaine, let 

us just put the 30-year deficit chart up there, which is a little more 

graphic. By decade, I think it is $103 trillion, talking probably net 

asset base of America by comparison, I think it says 116. I do not 

have my contact in. 


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Senator Kaine. 

Senator KAINE. Thank you, Mr. Chair, and thank you, Mr. 

Dodaro. We are really pleased to have you here. It is funny that 

Senator King pointed you to page 31, because I want to ask you 

about page 30 of your testimony in the same area, the same topic, 

really, long-term fiscal challenges, this pretty blunt quote: ‘‘Over 

the long term, at the Federal level, the imbalance between spending and revenue that is built into current law and policy is projected to lead to continued growth of debt held by the public as a 

share of GDP. This situation—in which debt grows faster than 

GDP—means the current Federal fiscal path is unsustainable.’’ 

I am interested in kind of getting your opinion on this issue, because it has puzzled me coming here, having been a mayor and a 

Governor, that we had debt policies in the city of Richmond and in 

the Commonwealth of Virginia. The number was not the issue. So 

I know trillion sounds like, oh, we cannot have a debt of a trillion. 

We never worried about the number, just the total amount of debt. 

What we worried about was two ratios, and the ratios were: debt 

to State GDP; and then also a very important one, which is interest 

payment as a percentage of the annual State budget. Those were 

the two ratios. And in both the city and the State, we managed to 

those ratios, and that is how, when we went up New York and 

talked to the bonding agencies, how are you doing with respect to 

your basic management. So they did not worry about the raw number. They worried about the ratio. 

I have been interested, being on the Committee here, that we do 

not have an agreed-upon ratio. Obviously, if you have a ratio, there 

is plenty of grounds for difference of opinion about how to get 

there. So do you get there for more revenue. Do you get there 

through expense cutting? So there is plenty of play for policy differences, but we had a bipartisan consensus in both bodies about 

what the two ratios would be that we would manage to, and then 

over time we managed to that. 

We had a hearing about a year ago in this Committee that was 

called ‘‘America’s Dangerous Debt,’’ and I asked each of the three 

witnesses, ‘‘What level of debt is dangerous?’’ And none of them 

would give me an opinion. They all just assumed we have dangerous debt, but they would not give an opinion. And I said, ‘‘Well, 

gosh, maybe no wonder that, you know, Congress does not have an 

agreed-upon policy about ratios we will manage to if the experts 

that appear before us will not even give us an opinion.’’ 

Now, you in this paragraph talk about debt to GDP average postWorld War II, 46 percent. Of course, much of the post-World War 

II average was before Medicaid and Medicare, the programs of the 

1960s that we have supported over the years. 

Mr. DODARO. That is correct. 

Senator KAINE. And yet, nevertheless, the historic average can be 

really important. I would be kind of curious as to what would be 

the historic average post the adoption of Medicaid and Medicare. 

That might be more relevant. But we can get into that in a minute. 

Do you think it would be a good idea for Congress to have a debt 

management policy that would be focused on equivalent ratios, 

debt to GDP, and the percentage of income in a given year that we 

are putting to debt service. 


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I always look at the debt service payment as, you know, we are 

paying this sort of for decisions in the past, and it is taking away 

from what we can do in the future. Now, that was definitely the 

case in the city and State where you only used debt for capital expenditures. We did not use debt for operations. So some of debt 

payments is for current operations, but when you pull debt service 

payment out, it is restricting what you can do currently, and I still 

kind of look at it that way. 

Would there be a way, you know, from an economist’s standpoint 

or an accountant’s standpoint, to come up with ratios that would 

be meaningful in a budget like—a Federal budget that has a printing press, that has monetary policy? Or is that a concept that, 

frankly, is more meaningful for a State government and not so 

meaningful for a national budget? 

Mr. DODARO. No, I think it makes a lot of sense for the Federal 

budget, and I would encourage Congress to do this. You know, the 

debt management issues at the Federal level have never really 

been modernized at all. Prior to 1917—and I was not in my job 

then. [Laughter.] 

Senator KAINE. It sometimes feels like it. 

Mr. DODARO. Yes, right. But Congress approved every debt 

issuance, but in 1917, World War I came, and then it became impractical. So the government moved to the current approach of setting a debt limit, but that is way too late. It is after the spending 

decision has already been made. 

Senator KAINE. Yeah, and the debt limit, again, is a raw number, 

and no smart fiscal manager uses a raw number as a check. 

Mr. DODARO. Right, right. 

Senator KAINE. You use a ratio as a check. 

Mr. DODARO. Right, you use the ratios. I think it would have to 

be a policy decision on the ratios. I think you would have to allow 

for exigent circumstances. 

Senator KAINE. Right, time of war. 

Mr. DODARO. Time of war, economic downturns, whatever you 

want to put in there. But you would have something to manage to. 

Right now there are not ratios to manage to from the debt standpoint. We manage on how much spending that we want to have on 

an annual basis, but that really does not deal with the long-term 

circumstances. 

These numbers we have been showing, by the way, do not include any potential expenditures for disasters, for economic 

downturns, for any other emergencies that may come up. And so 

I think it makes eminent sense, and we have looked at some other 

countries. I think Sweden and some of the other countries do set 

limits. They do set debt-to-GDP ratios that they manage to as a 

country. So it makes sense on a national level. 

What we have now does not make sense, so we need to do something different. I think that offers a good alternative. 

Senator KAINE. Well, that is good encouragement. Thank you. 

And I will return it to you, Mr. Chair. 

Chairman ENZI [presiding]. Thank you. And I think Israel probably has that formula, too. I think they have shared that with us. 

Senator Ayotte. 

Senator AYOTTE. Thank you, Chairman. 


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I want to thank you, Mr. Dodaro, for all your important work, 

and I wanted to ask about the improper payment issue because, as 

I look at your report, you say in the report on page 20, ‘‘In fiscal 

year 2015, agencies reported improper payment estimates totaling 

$136.7 billion,’’ and I believe in your testimony you highlighted it 

could be as much as $1 trillion as we look at improper payments. 

Is that true? 

Mr. DODARO. It is over $1 trillion that has been reported since 

2003. 

Senator AYOTTE. Oh, since—okay. 

Mr. DODARO. That is the cumulative amount. The 136, is the latest annual reported amount. 

Senator AYOTTE. Okay. I am glad you clarified that. But I think 

one of the biggest things we could be concerned about—I mean, obviously, that is a huge amount of money, $136 billion. Do you know 

what we could do for that in terms of the defense and the military? 

We are actually giving pink slips to our members in our army right 

now, the threats we are—whatever your issue is in this Congress, 

it seems to me this should be something we would focus on, whatever you think Federal spending should be, and obviously dealing 

with our debt. 

So I wanted to ask you, you said in the report on page 20 that 

essentially this has been a ‘‘significant increase’’ in 2015 of improper payments, over $12 billion, mainly due to an increased error 

rate in Medicaid—from the prior year’s revised estimates. 

So if you could tell me what you think is the source of that driver 

in the increased error rate in Medicaid, but also, I was very interested on the same page you said that 76 percent of our improper 

payments are made up from improper payments for Medicare, Medicaid, and the Earned Income Tax Credit. So what do you think is 

driving the increase in Medicaid, number one? Is it the Affordable 

Care Act and also the fact that there has been all kinds of issues 

in terms of people’s income verification and the inability to determine in some ways, you know, who is eligible and who is not and 

clearly communicate that with taxpayers? That is certainly an 

issue I have addressed in other committees. 

And then also, as I look at Medicare, Medicaid, and the Earner 

Income Tax Credit, what should we be doing? This is a huge, huge 

amount of money. If we just focused on this issue, we could save 

billions of taxpayer dollars. 

Mr. DODARO. Yes, first on Medicaid, what is primarily driving it 

is the amount of changes that have been made in the programs, 

and the States do not have the systems yet put in place to verify 

eligibility and to include changes. Some people move from the exchanges to the Medicaid program and back, and so that is a big 

problem. 

But I would also point out on Medicaid, this improper payment 

rate does not even measure the managed care portion of Medicaid 

in the States. We have encouraged and CMS is going to now audit. 

The only thing they look at now is whether the State is paying the 

Medicaid managed care provider properly, not whether the provider is actually making payments that are consistent with the 

rules and techniques. 


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We have also been trying for a decade to get CMS and they finally have agreed—to take the Social Security numbers off Medicare cards. This prevents identity theft and easy identification. 

Senator AYOTTE. Right. 

Mr. DODARO. Congress fortunately passed a law, gave CMS funding, but it may take them, according to their estimates, 2 or 3 

years to have that happen. They are also not analyzing post-payment claims where they go in afterwards and identify problems 

and patterns and share that among the contractors, embedding it 

to try to prevent improper payments from occurring in the first 

place. 

Also, they are allowing providers to enroll but not always determining whether they are legitimate providers by using all potential 

methods to do that. 

Senator AYOTTE. Yeah, they are not using even all the publicly 

available data, are they? 

Mr. DODARO. That is correct. For example, physicians who might 

have had license censures in other States, they are not sharing 

that information properly. 

So we have made lots of recommendations on how this can be improved. The programs that you mentioned there, particularly the 

health care ones, are the fastest growing Federal programs. Unless 

we get on top of this, in my opinion, this problem could potentially 

get worse before it gets better. 

Senator AYOTTE. And it is huge right now. It is unbelievable. The 

other issue is that the right hand often is not talking to the left 

in terms of our ability to share information for eligibility across 

programs within our own Government. Isn’t that still lacking? 

Mr. DODARO. Yes. 

Senator AYOTTE. So, for example, I may be eligible for one Federal program, but not for the other, and we are not sharing that 

information. 

Mr. DODARO. That is correct. And, in fact, we have asked for special legislative authority. There is what is called the ‘‘New Hire 

Database’’ that HHS maintains for child support enforcement, and 

they will not share that information with us, and they will not 

share it with other agencies as well. And that database includes 

some of the most recent wage information. So programs that are 

based on income eligibility could use that information. 

Senator AYOTTE. So you need our legislative authority to do that? 

That is what you need? 

Mr. DODARO. Yes. We believe we have it. The agency believes 

that—— 

Senator AYOTTE. But the agency does not believe you have it? 

Mr. DODARO. Does not believe we have—— 

Senator AYOTTE. So we need to clarify that. 

Mr. DODARO. Yes. 

Senator AYOTTE. Okay. Thank you. 

Mr. DODARO. Yes, that would be very helpful. 

Senator AYOTTE. Thank you very much. 

Chairman ENZI. Thank you. I am sorry that I missed part of this, 

but I will go back and gather information from that. I have been 

trying to get a capital budget since I got here, and we have come 

close a couple of times, but close does not do it in budgeting. The 


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Federal budget process, of course, treats the capital investments 

the same as any other kind of spending. I guess you could call it 

‘‘cash accounting’’ for huge infrastructure. It creates a bias against 

capital spending since its full costs are recognized up front, but the 

benefits are over time. Therefore, some would like to see at least 

an element of capital budgeting injected into the budget process. 

Unlike States and localities, the Federal Government owns only 

a small fraction of its capital investments, and these items are considered Federal capital. On the financial statement GAO reviewed, 

the Government reports owning property, plant, and equipment 

valued at $894 billion. To have an effective capital budget, you 

need to know what you own, its condition, and its deferred maintenance needs. It appears from your audit, though, that we lack reliable information about what the Government owns and what condition it is in. 

Isn’t the unreliability of the Federal property inventory one of 

the reasons GAO did not deliver an unqualified audit opinion? Do 

you agree we need a reliable accounting of what we own and its 

condition so that we can have an effective capital budget for the 

Federal capital? 

Mr. DODARO. Yes, definitely. It was one of the reasons that we 

were unable to give an opinion, largely as a result of the property, 

plant, and equipment, and inventories at the Defense Department. 

The other thing I would point out, Mr. Chairman, is that since 

2003 we have had Federal real property management as a highrisk area across the Federal Government. There is a lot of bad information that is not only in the Defense Department but in the 

civilian agencies about what we own, where it is, what condition 

it is in, and how it is being utilized. And so this remains a highrisk area across the Government, and it needs to be dealt with. 

Chairman ENZI. Thank you. Among other material weaknesses 

with the financial statements, you cite concerns regarding the tax 

collection activities. I quoted earlier, and I will quote again, ‘‘Due 

to the financial system limitations as well as errors in taxpayer accounts, the Federal Government’s records did not always reflect the 

correct amount of taxes owed by the public to the Federal Government. Such errors may cause undue burden and frustration to taxpayers who either have already paid taxes owed or who significantly owe lower amounts.’’ 

Can you talk a little bit about the extent of this problem, how 

the taxpayers’ accounts are impacted, how the situations are resolved? Does the IRS have a process when it attempts to identify 

and correct the errors on its own? 

Mr. DODARO. Basically, they have a process to make assessments. They do not have a subsidiary ledger for every taxpayer 

with exactly what they owe, and that is part of the problem. So in 

order to come up with this, they have to do statistical samples. 

But, basically, if there is an error in a taxpayer account, the burden is on the taxpayer to deal with the IRS to resolve the issue. IRS had to make, in order to get a reliable number, about $9 billion in adjustments to their receivables number. They need to have 

better systems in place, and we have encouraged them and recommended that over the years. But for right now, they do not have 

at the ready accurate information on individual taxpayers to the 


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point that you really need to in order to efficiently and effectively 

manage the system, and it puts an undue burden on the citizens. 

Chairman ENZI. I think in this electronic age that that is something that could be taken care of. Are they on any kind of a track 

to do that? 

Mr. DODARO. They have system plans to do it, but their track 

record has been a little spotty over the years on whether they can 

actually bring those changes to fruition. But we continue to monitor that. I would be happy to provide some additional information 

on that for the record. 


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Chairman ENZI. The financial statements you audited contain 

data concerning the Government’s long-term fiscal sustainability. I 

suspect that Senator Johnson asked some questions about that and 

had a few slides. He is really concentrated on the long term. Your 

reports show that the Federal Government under current law is in 

a $41.5 trillion hole over the next 75 years with regard to Social 

Security and Medicare, with two-thirds of that total relating to 

Medicare. That $41.5 trillion is the present value of the future expenditures in excess of future revenue dedicated to these programs. 

But according to the GAO audit report, the $41.5 trillion may understate the crisis because it is based on uncertain reductions in 

future Medicare cost growth. 

Do the financial statements give an indication how much deeper 

the Government would be in the hole with respect to Medicare if 

the anticipated reductions in cost growth assumed under current 

law are not achieved? Is there any speculation on that? What does 

your report tell us about—— 

Mr. DODARO. Yes, there is disclosure in the financial report about 

an alternative projection that shows, if those Medicare costs are 

not contained over time, what the additional costs would be. It is 

$8.9 trillion. That is on top of the $27 trillion that is already included in the baseline estimate. So it is significant. 

Chairman ENZI. Yes. It is much easier to talk about trillions 

than it is billions. They do not sound like nearly as much. I have 

been trying to get people to relate to a trillion being a thousand 

billion. It sounds like more. 

Mr. DODARO. Right. 

Chairman ENZI. Thank you. 

Senator King is back. Senator King. 

Senator KING. Yes, thank you, Mr. Chairman. 

One of the issues you note in the report is the cost of the debt 

limit process or non-process around here. You estimated it cost between, I think, $38 and $70 billion. 

One of the alternatives to the process that we have now, it seems 

to me, is some variation of what is called the ‘‘Gephardt rule,’’ 

which used to be the case in the House where, if Members of Congress vote for a tax cut or an expenditure that has an effect on the 

debt, the debt limit is automatically extended in order to cover that 

change, because the process we have now allows us to have it both 

ways. We can vote for the expenditure, vote for the tax cut, and 

get all that political credit, and then vote against the debt limit 

and call ourselves conservative. 

Thoughts on improving the debt limit process? 

Mr. DODARO. Yes. One of the issues Senator Kaine discussed that 

I would mention about managing the debt would be to set some potential ratios on debt held by the public as a percent of gross domestic product as a target that you work against. So you can improve the current process, and we have some ways to do that. You 

can link it to the budget resolution process so at the time spending 

and revenue decisions are made by the Congress, there is a recognition that there is a gap and there is going to have to be money 

borrowed, just the way you would in your household budgets. 


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You could allow the executive branch to borrow the money necessary and submit a resolution; the Congress would have to disapprove the borrowing. 

You could allow the administration to borrow whatever is needed 

in order to effectuate decisions that the Congress has made. 

But you could also, in terms of managing the cost of borrowing 

for the Federal Government, set some limits on debt as a percent 

of gross domestic product as a target to work against. 

Senator KING. Or debts in the States. In our State, the number 

we looked at was debt service as a percent of the budget or debt 

service as a percent of GDP. 

Mr. DODARO. Right. You could do that. Senator Kaine mentioned 

that, too. So there are a couple measures that could be used. Other 

countries use those measures. 

Senator KING. Well, in terms of your auditing and trying to make 

sense of the Federal budget, one of the things that strikes a person 

who is sort of new to this process is that there is no capital budget. 

There is no distinction between paying a park ranger and buying 

a building or a 40-year submarine. It seems to me that that would 

be a reform that would clarify the accounting, because we are paying for capital assets the same way we pay for current operations, 

and it obscures the true picture of where we are. 

Some part of this debt is justified as long-term capital investments. The part that is not justified is the debt that we are taking 

on in order to pay operating expenses. Your thoughts on that? 

Mr. DODARO. I think there are definite advantages to the unified 

budget approach that we have in place, and so I would want us to 

maintain that because it gives a total picture on the debt ceiling. 

Senator KING. Right. 

Mr. DODARO. But within that—and we have done some analysis 

of alternatives—there could be an investment component. Now, 

that could include not only capital assets, but the Federal Government also makes a lot of investments in both human resources and 

in other areas where there are economic benefits as opposed to initial outlays to provide services to people. So you could construct 

within a unified Federal budget an investment component that 

would allow for more discrete decisionmaking about the types of 

spending that the Federal Government is going to have and what 

the expected outcome would be and what could be done in order to 

better manage this. 

For example, we have made recommendations that I will provide 

for the record here on how the Federal Buildings fund could be 

used better in order to effectuate these types of decisions. 

Senator KING. Let me interrupt because I am limited on time. 

Your chart on page 31 that shows the projected debt limit, the 

heading is ‘‘Debt Held by the Public.’’ That does not include the Social Security Trust Fund obligation back to the Federal Government. Is that correct? 

Mr. DODARO. Well, it shows the cash flows for revenues going 

back and forth. So, the mechanics of it is that the Treasury securities held by the Trust Fund would have to be redeemed, as they 

have been since 2010 on Social Security, because the outflows are 

more than the payroll taxes coming in. So it would assume—it 

would account for—— 


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Senator KING. That assumes the payment of those debts. 

Mr. DODARO. Yes. Plus it assumes continued payments. 

Senator KING. Do you know what GDP growth assumptions are 

in this? 

Mr. DODARO. I think it is roughly 2 to 3 percent. 

Senator KING. Okay. 

Mr. DODARO. But I will provide the details for the record. 

Senator KING. But I would also point out that there is another 

deficit that is not shown on this chart, which is the infrastructure 

deficit. As a Governor, I used to go and talk to the rating agencies 

about trying to get a lower interest rate, and one of the analysts 

made the point to me that if you are not fixing your infrastructure, 

that is a form of debt just as if it is debt on the books. And if we 

are not maintaining our infrastructure and focusing strictly on 

these numbers, we are missing an even larger number that is part 

of our overall debt burden. 

Mr. DODARO. Yes, that is exactly right, because you are going to 

have to fix it at some point, anyway. 

Also, what is not in here is planning for natural disasters, and 

economic downturns. But in relation to transportation, we have 

had financing the Nation’s transportation infrastructure on our 

high-risk list for many years now because we do not have a means 

of doing it. It could be a component of this investment approach 

that you could have within the budget. 

Senator KING. Mr. Chairman, I am over my time, but one, I 

think this could be a 10-second answer. How much Federal revenue 

is not collected each year under the tax system? 

Mr. DODARO. The latest estimate from IRS—annual figure based on a 2006 analysis is a $385 billion net tax gap between taxes owed 

and taxes collected. We have about an 83-percent voluntary compliance rate right now in our country. 

Senator KING. But I would point out, of the $385 billion, it is 

very close to the total of our current deficit. If we just collected the 

taxes owed, we would almost eliminate the current deficit. 

Mr. DODARO. Well, yes. I mentioned we also have $136 billion in 

improper payments made last year as well, payments that should 

not have been made or that were made in the wrong amount. So, 

it is not going to solve our problems, but it would make it a lot 

easier if we only paid the correct amount and we collected everything that we were supposed to. 

Senator KING. Thank you. 

Thank you, Mr. Chairman. 

Chairman ENZI. Senator Perdue has returned, so he will be next, 

and then Senator Warner and then Senator Johnson. 

Senator PERDUE. Well, thank you, Mr. Chairman. I am not an accountant, but I will agree with you that this is an exciting meeting. 

I did serve on several audit committees of large public corporations, 

so I know how important it is when you are making business decisions to have accurate information, and I applaud you, Mr. Dodaro, 

for what you are doing. I think this is so critical to us as we start 

looking at the process and try to get a long-term strategy to bring 

this debt more under control. 

I agree with Senator Warner and Senator King. We have had 

these conversations before, and this is not a partisan issue. That 


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is the encouraging thing about it. This is not about how you spend 

money or how you cut expenses or whatever. This is about getting 

an accurate reading of what we are doing. 

And so my observation—and I have got a couple of questions I 

would love to get your thoughts on, because it is going to be an ongoing dialogue here. This is not something we are going to have a 

hearing on and then forget about it, because I am absolutely committed, as is the Chairman and other people, you can see that you 

have got people who have been sitting here for 2 hours or over an 

hour and a half now trying to move this thing forward. 

But since the Government Management Reform Act of—it was 22 

years ago, and 20 years ago the first publication of the consolidated 

financial statement, we are sitting here today—and this is not a 

critique on you. It is the systems. You mentioned DOD. We still do 

not have an accurate balance sheet that would stand up to audit. 

Mr. DODARO. Right. 

Senator PERDUE. I find that remarkable. And our goal should be 

to solve that as soon as possible, and I am going to have a question, 

then I want to come back. But I just look at redundant agencies, 

improper payments, and taxes not paid. You know, my math is 

that is $500, $600 billion. You add this up, pretty soon you are 

talking about serious money. Well, I do not know why we do not 

shut the trains down going to the Capitol. I do not know why we 

do not just shut everything else and focus on—this is not about cutting Social Security or doing anything else. This is just prudent, responsible stewardship of taxpayer money. This is not a small thing. 

And I know you know that. You are preacher for that. I am just 

voicing one person’s—and I think I speak for a few other members 

here—support to try to help you get there. 

I am worried about accrual accounting versus cash accounting, 

and therein lies another disparity of almost $100 billion of difference between the GAO estimate of an annual deficit and other 

estimates of the annual deficit. There is no capital budget. I think 

Senator King talked about that, and I agree 100 percent with Senator King that if you do not maintain—it is like deferred maintenance. If you do not spend that money on maintenance every year 

or on infrastructure, that is a future unfunded liability, is the way 

I look at it. And so we do not talk about that as well, but that is 

the second step. DOD, right now DOD is somewhere around $600 billion. People 

say, well, that is just too large to audit. Well, Wal-Mart is not 

much smaller than that. As a matter of fact, it is pretty close to 

being about the same size. Imagine if Mike Duke or any of the 

other leaders down there came to the SEC or the IRS and said, 

‘‘Boys, I am sorry. We are just too big to be audited. We will defer 

next year.’’ I do not think that would work very well. And so I am 

over this ‘‘too large to be audited’’ thing, and so it is time we get 

a real accounting of that. Long-term debt, it is just unsustainable. 

It is the reason we are starting this process. 

So the question I have is: What do we have to do to help you 

break through the impediments to get a consolidated balance sheet 

that can stand up to audit? 

Mr. DODARO. Well, I think there are two other things. You mentioned DOD, but there are three main impediments to us giving an 


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opinion on the consolidated financial statement of the U.S. government. 

Senator PERDUE. But it is much bigger than DOD, though. 

Mr. DODARO. Pardon me? 

Senator PERDUE. It is much bigger than DOD. I mean, they are 

one of the largest culprits, but there are other large agencies as 

well. 

Mr. DODARO. Well, actually, that is the bright spot in this picture. When we first started in 1996, that was the first year that 

all 24 major departments and agencies had to prepare statements 

and have an audit. So we went 200 years of our history without 

an audit. Even though the Federal Government used to not give 

the State and local governments money unless they had an audit, 

but that is a different story. 

Right now, this past year, 21 of the 24 CFO Act departments and 

agencies have been able to get a clean opinion. 

Senator PERDUE. You said that, yes. 

Mr. DODARO. The two, aside from DOD, that did not get a clean 

opinion, HUD and Agriculture, have had clean opinions in the past. 

So they have had some recent problems. The Department of Homeland Security was an outlier for years, but for now, the last 3 

years, they have had an unqualified opinion. So, really, when you 

look at the major departments and agencies, DOD is the one, is the 

only one. 

Senator PERDUE. That is encouraging. 

Mr. DODARO. But they hold about 30 percent of all the Government’s assets and about 15 percent of its net costs. 

The other problems are at the Treasury Department working 

with the agencies where there are hundreds of billions of dollars 

of activity among the Federal agencies that cannot properly be 

eliminated. Right now, because of that, there is a very polite line 

in the statement that says unmatched disbursements and transactions. Basically, it is a plug figure for things that they cannot account for properly to make the statements balance. But it is not accurate, and so that is a big problem. And there are still problems 

in compiling the information from the audited financial statements 

of the agencies with Treasury’s process. So DOD really is the main 

obstacle along with these other processes. 

Now, Treasury has a good plan—— 

Senator PERDUE. Sorry, I am out of time. 

Mr. DODARO. Yes, go ahead. 

Senator PERDUE. But I want to ask you, I understand there is 

a problem. My question is: What can we do to break through the 

impediment to get a balance sheet that will stand up to audit? 

Mr. DODARO. Yes, I think you have to help us hold DOD accountable for making progress. 

Senator PERDUE. They are working on it right now. 

Mr. DODARO. They are working on it, but they are not really fixing the underlying problems. They have a good plan for the first 

time. You know, right now, the last year, in 2015, the only audits 

they had of Army, Navy, and the Air Force were 1 year’s budget 

activities, and they were not able to pass the test of an audit on 

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ments are for a multi-year budget audit. They have not even started on a balance sheet or net cost statement as well. 

The auditors this year made over 900 specific findings and recommendations for things that need to be fixed. That is on top of 

everything GAO and the IGs have said. They have to fix the underlying problems. They do not have necessarily all the talent that 

they need and experienced people. Congress could help there. They 

need to be held accountable for their system investments. They 

continue to make system investments that do not produce better 

systems. But they are not fixing the internal control problems. 

They cannot reconcile their balance between what they say they 

have and what Treasury says that they have. They are not estimating environmental liabilities properly, and they have a huge potential exposure there in addition to the Energy Department. 

So there are fundamental problems. They have anti-deficiency violations. They have had about $1 billion of anti-deficiency violations, where they were spending money that they should not have 

been spending in those areas. So this should be of concern to every 

member of Congress. We could use your support in helping them 

get the resources and the incentives necessary to make the necessary changes. 

Senator PERDUE. Well, thank you, and I look forward to working 

with you on this. 

Thanks, Mr. Chairman. 

Chairman ENZI. Senator Warner. 

Senator WARNER. Thank you, Mr. Chairman. I just want to follow up on, I think, a very good line of questions Senator Perdue 

made. The DATA Act that we passed is not going to solve the 

whole problem, but if you do not even have common definitions, the 

ability to come in and do an audit is basically moot. So, you know, 

the DATA Act was as bipartisan as you can get. If we strangle off 

the $50 million of implementation money, we are not going to make 

sure that this gets done. 

Now, we can argue, you know, should you be able to do it within 

the existing budget lines, but, you know, $50 million compared to 

what we spend normally to actually get a common set of definitions 

and some more financial transparency, you shine a little sunlight 

on this with a common defined definitions, and I think you are 

going to have a lot more pressure. 

So I would urge anybody who wants to join on the letter I am 

sending to all the 37 agencies to say get your plans, make this a 

high priority. GAO has been great at being the watchdog on this, 

but we are going to miss an opportunity here. And as the Comptroller General has said, this is not going to be fully implemented 

under this administration. Let us make sure that it actually continues to be a priority. And I really appreciate, Gene, again, your 

work in helping us at least get through the definitions and some 

more transparency. Two hundred and twenty different financial 

systems just in DOD, that is crazy. 

I think we have got a lot of common agreement here. I think we 

have almost all said capital budgets—Senator Kaine has mentioned 

it. I support it. Former Governors, we ought to see what we can 

do there. I would argue that—and I know Senator Johnson has 

talked about this in even a broader scope than I have at times. You 


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know, we can debate about what was the causation of the deficit 

on an annual basis. It is coming down a little bit. But I think the 

problem is, although it is about to ramp right back up, we should 

at least acknowledge that the total aggregate debt both parties 

have got their hands on. And whether we call it at $18 trillion or 

$19 trillion at this point, you know, this is totally being masked in 

terms of its effect on our economy and the Federal Government operations because of unprecedented low interest rates. The factoid of 

a 1-point increase in interest, $120 billion, yeah, that is a linear 

equation. It is actually a little bit on the low side because the debt 

rolls over. That is a safe estimate from even an accountant’s standpoint. And that, you know, spends us a ton of dough, and we really 

need to look at that and, you know, remind ourselves that, as we 

all applauded ourselves getting out of town at the end of the year, 

to Senator King’s comments about not paying for expenditures we 

put into law, many of them good provisions, $600 billion of permanent tax cuts totally unpaid for wiped out most of the benefits we 

got from sequestration. 

I would love to get some specific examples. We all know around 

improper payments and failure to share information between particularly in the health and welfare side. Give us guidance on how 

we can—Senator Ayotte was talking about this—what legislative 

items we need to do. I know there are HIPAA issues and other privacy concerns. But I really hope you give us some at least lowhanging fruit about sharing that information, not just with you but 

also that we ought to have access to. 

My question is, you know, one of the areas of domain that I think 

is going to get exponentially worse is cyber. And, you know, I have 

got a lot of Federal employees, but the amount of angst and anguish still around the OPM data breach is just enormous. And I 

would like you, Mr. Dodaro, to comment a little bit. You know, 

GAO pointed out this around information security back in February 1997 before cyber became a big issue. You know, I would 

argue a lot of this is because we have got legacy IT systems that 

we never replace, that we simply patch one time after another, 

making more vulnerability. 

I would also commend everybody’s review, there is a group that 

has been stood up called ‘‘18F,’’ kind of a SWAT team of folks that 

came from the Valley that are looking about how you do acquisition 

and development of IT systems the way the private sector does, 

particularly, you know, if you think about the large enterprises— 

Senator Perdue mentioned Wal-Mart. You know, Wal-Mart has got 

as complex of IT systems and purchasing as any entity in the Federal Government. They do not have—they have got some of the 

same vulnerabilities, but they can renew their systems in ways 

that the Government cannot, and we ought to look at that. 

Can you speak for a moment about—my understanding is that 

when you go in and look at information security, you do manual 

audits. You have got kind of qualitative questionnaires. You kind 

of do one-off items. What can we do to help give you more tools 

around the whole information security, cybersecurity area? 

Mr. DODARO. Well, in the last year, Congress passed about four 

different bills on cybersecurity. Here is the fundamental problem, 

though. As you pointed out, we raised this as a government-wide 


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issue. It is the first time we ever said anything across the entire 

Federal Government is high risk and we did it in 1997. We worked 

with the Congress to pass the Federal Information Security Management Act, and recent changes were just made to that act. But 

Congress has to hold the agencies accountable. They do not have 

in place agency-wide information systems that provide the proper 

amount of security, risk assessments, how to mitigate risk, and 

how to provide awareness to their employees. 

A lot of the risks are employees accidentally clicking on links 

that they should not that downloads malware, or they bite on 

phishing expeditions by hackers and give up information. The 

agencies do not have good risk mitigation approaches in all cases— 

or remediation plans for how they are going to fix the problems, 

contingency plans, and also deal with the legacy systems. 

Some of these legacy systems are decades old, and we are producing a report right now. We are working on an audit where we 

are listing the longest, oldest systems in the Federal Government. 

It will be a great surprise to a lot of people in terms of how old 

these systems are. This was before security was brought in, built 

in up front into these systems. Agencies also need continuous diagnostic and monitoring efforts. DHS is giving them some additional 

tools and techniques. They need additional talent in the agencies. 

The personnel classification approaches for cybersecurity analysis 

is not contemporary and up to date in order to make it easy to hire 

some of these people, and they may need some additional authorities. 

But it is a management problem. There are technical issues, but 

it is largely a management problem. 

Senator WARNER. My time is up, but Chairman Johnson did a 

good job in terms of taking some ideas that we had from the intel 

community to give on the dot-gov regime DHS the same ability to 

enforce that NSA has on the dot-mil side. I mean, one of the remarkable things that came out after OPM was a lot of the Federal 

agencies had basically ignored any of the advice from DHS. 

Mr. DODARO. Right, and we had suggested that that be clarified. 

And one point I might make, if I can, Mr. Chairman, on the issue 

about working on a bill on the national hire database to share information, we have been working with Senator Tester and Senator 

Sasse. So if anybody wants to work with them, we would appreciate it. 

Chairman ENZI. Senator Johnson. 

Senator JOHNSON. Thank you, Mr. Chairman. 

You know, part of the problem is GAO does great work, issues 

all these reports. The Inspectors General do great work, issue all 

these reports. OPM had those studies on their information technology systems, how high risk they are, and they just ignored it. 

And that is part of the problem. 

The solutions in terms of management, providing information, 

you know, instituting controls, like Senator Perdue was talking 

about, Wal-Mart has got to have an audit. They have financial systems that work. So these things are available. We are just not accessing them in the Federal Government. That is certainly what 

drives me nuts. 


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Something else that drives me nuts, every time I hear that Congress has the power of the purse, I want to talk to you a little bit 

about that, because that is one of the controls that we have given 

away. 

Last year, 62.3 percent—no, 68.3 percent of the Federal Government expenditure was mandatory. It is not appropriated; it just is 

mandatory. So less than a third of the Federal budget is actually 

appropriated and under some level of control, but even then, we noticed when the Government shut down in October, did you ever do 

any study in terms of exactly how much the Federal Government 

actually shut down when we were supposedly shut down? 

Mr. DODARO. Yes. Yes, we did. 

Senator JOHNSON. So how much actually shut down? 

Mr. DODARO. Well, a good bit of it, but it was not as big of an 

impact as I think people estimated it to be because some agencies 

were reinstated during the shutdown. There were some disruptions 

with grants and contracts and other things. 

Senator JOHNSON. But, again, you have got more than two-thirds 

mandatory that got spent. The Department of Defense, because it 

is essential, that continues to go, the Department of Homeland Security. The agency spending tied to the mandatory, there have been 

decisions that say that is also spent. So, you know, I have always 

thrown out probably less than 10 percent of the Federal Government actually shut down. I know there were some wayside rests in 

Wyoming that they chained off. We shut down the World War II 

Memorial. 

So the bottom line is we do not have that control anymore because we do not have the budget really on budget. We have so 

much off budget. 

Wouldn’t that be also one of those common-sense reforms in 

terms of management to put the Federal budget on budget so that 

everything has to be appropriated every year? 

Mr. DODARO. I would certainly think that that would be a way 

to exercise better control. Offhand, I do not see any downside to 

doing that. I think it would impose greater discipline on some of 

these other programs, but I also think that the Congress should set 

some policies on how much borrowing collectively we should do as 

a Nation and then from there allocate the resources. 

And I agree, even on Medicaid, for example, right now the CMS 

at HHS is approving waiver demonstrations to allow States to experiment. Almost a third of the spending now on Medicaid went 

around the Congress because of that. And these demonstrations 

were supposed to be budget neutral, but they were not when we 

looked at them. 

So I think there is not adequate control by the Congress on a 

great deal of these activities. 

Senator JOHNSON. Have we discussed multiple-year budgeting 

here? I know I was out for votes. I think another excellent idea is 

a 2-, maybe even a 3-year budget. This is such a massive entity. 

Certainly if we bring more things on budget, you need a little bit 

more time to thoughtfully appropriate and then really go back and 

audit and do those types of controls. 


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I did want to get to the tax gap just quickly. Do you have a basic breakdown of that $385 billion tax gap? Where is it all coming 

from? Is it individual? Corporate? 

Mr. DODARO. It is across the board. It is all the taxes, individual, 

corporate, estate taxes, payroll taxes. 

Senator JOHNSON. Do you have a basic breakdown? 

Mr. DODARO. The basic breakdown is that 84 percent of it comes 

from underreporting, and most of the underreporting is in individual income taxes, mostly for self-owned businesses, partnerships, and others. Most of the gap occurs in all taxes where there 

is not withholding at the income source. Generally speaking, where 

you have withholding at the income source, you do not have problems. But in these other areas, you do have problems. Ten percent 

of it comes from people who are properly assessed, but they just do 

not pay. And then about 6 percent of it is from people who do not 

file at all. 

Senator JOHNSON. Okay. A last point, going back to the Department of Defense. You did talk about things like estimates of environmental liability, anti-deficiency, you talked about $1 billion. Do 

you have some sort of sense of the close to $600 billion defense 

budget, how much is actually accounted for and what percent really 

are some of these other issues that end up providing a qualified 

opinion? 

Mr. DODARO. Very little. I mean, the military pensions can pass 

the test of an audit. They have in the past. Some of the smaller 

components, I think the Corps of Engineers and a couple others, 

offhand I would say it is less than 10 percent. 

Senator JOHNSON. That is—— 

Mr. DODARO. That are passing an audit. 

Senator JOHNSON. Okay, so, yeah, it is a massive problem. 

Mr. DODARO. Yeah, it is a big problem. None of the major services have ever been able to pass an audit. So it is not anywhere 

near close to being solved. 

Senator JOHNSON. Among many things, coming from the private 

sector, that I find unbelievable in Government, that certainly ranks 

right up there at the top. Like Senator Perdue was saying, if WalMart can do it, why not the Department of Defense? 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

Do either of you wish another chance here? Senator King. 

Senator KING. Again, following up on the question about unpaid 

taxes, do you have any estimate of what it would cost to collect 

those unpaid taxes? In other words, for $1 of additional enforcement or accounting or whatever in the IRS, what would we collect? 

Mr. DODARO. Well, the IRS has estimates. I think it is $5 for 

every $1 put into an enforcement program. But, we think they 

could do a better job with the resources they currently have and 

how they allocate them. They do not really have good return on investment information about the different enforcement techniques 

that they have, like correspondence audits versus detailed audits. 

We have encouraged them to get better information. 

But here are a number of things we have suggested where Congress could help. One is we think Congress ought to pass legislation to allow IRS to regulate paid tax preparers. A lot of people rely 


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on paid tax preparers. We found problems in limited studies that 

we have done, like we have sent undercover agents to 19 paid tax 

preparers. Only two gave us the right answer. And some of the 

other ones were so far off it would have cost, you know, penalties 

and interest. IRS data show that the paid tax preparers make errors in the earned income tax, which leads to some of the problems 

in improper payment in that program as well. 

We think Congress could give IRS better math authority where 

they could match against administrative records and fix things 

right away without having to do an audit, without having to impose burdens. 

Electronic filing could help as well. We suggest Congress lower 

the threshold of required businesses to provide information electronically to IRS. They could use third-party information a lot more 

effectively to match against the records to collect better tax information. 

So we have a long list of—— 

Senator KING. If you could supply that list for the record, I would 

appreciate it. 

Mr. DODARO. I will do that. 

Senator KING. Thank you. 

I think one of the points—and you have made this in your chart, 

again, going back to page 31, the alternative is health care. Most 

of that upward line is health care. And we can argue about who 

should pay it. In other words, should it be all Medicare? Or should 

it be partially? You know, there are all these proposals. But the 

bottom line is unless we deal with the underlying growth of the 

cost of health care, that is going to eat us up. It is going to eat up 

the whole rest of the budget. If you assume—if you see these numbers going up and you assume we cannot tolerate that level of debt, 

something is going to have to give, which is going to be the discretionary budget at the bottom end. We need to be thinking, as the 

largest consumer of health care in the country—I am sorry, not 

consumer but payor. We need to be thinking about how to get better value for the dollars that we are spending in terms of maybe 

more dollars for prevention and those kinds of things. But health 

care is the big driver here. 

Mr. DODARO. No question about it. Health care, along with the 

demographics. The demographics are accentuating the—you know, 

on average now between 2029 and today, on average, over about 

10,000 people in the United States turn 65 every day. And so that 

steady drumbeat of the retirement of the baby-boom generation, 

combined with health care costs, are really the key drivers, longterm health care, because eventually the demographics will even 

out. 

Senator KING. I noted there were a couple of places in your testimony where you used the word ‘‘talent,’’ ‘‘insufficient talent.’’ And, 

again, it could well be a management problem of allocating talent 

and the personnel in the right and proper way. But in many cases, 

we do not have the people to do the necessary processing and work 

to adequately account or control expenditures or collect revenues. 

Mr. DODARO. Right. 

Senator KING. I think we shortchange this whole process by saying, well, we are going to reduce the size of the Federal GovernVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00172 Fmt 6601 Sfmt 6602 E:\HR\OC\A333.XXX A333

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ment. But in reality, it is costing us money because we do not have 

the personnel to keep up with the demands. 

Mr. DODARO. Yeah, I am very concerned about the Federal workforce. We have had it on our high-risk list since 2001. There are 

critical skill gaps in many different areas—finance, cybersecurity, 

acquisition. You know, we are not getting our dollars on procurement deals properly returned to us. And with the impending retirement of the baby-boom generation, I think it is going to make the 

skill gap even potentially more difficult. 

Now, it presents a good opportunity if the agencies are ready to 

hire people with the necessary skills, because the need has changed 

over time. 

Senator KING. Right. 

Mr. DODARO. We have gone to using more contractors, but we 

have not adjusted to make sure we have the people that can manage and oversee the contractors. We are using more information 

technology, but we are not, you know, adjusted there as well. We 

have imposed requirements for financial audits but do not have the 

people—you know, a lot of people in the Defense Department have 

never been through a set of audited financial statements to know 

how to be able to do this. 

So the workforce is a big concern to me, and I think you are 

going to see potential other Government breakdowns unless there 

is proper attention to this over the next 5 to 10 years in particular. 

Senator KING. Thank you. 

Thank you, Mr. Chairman. 

Chairman ENZI. Senator Perdue. 

Senator PERDUE. I just have one observation and one quick question. Thank you again for your forbearance today. 

My experience with the system question goes back to the 1990s, 

and as a CEO, I have watched this for the last 20 years or so of 

my career, that with the explosive nature of the capability in the 

IT area, you get what you pay for, but at the same time, you can 

do a lot more than people think they can do with existing—and let 

me just give you an example. 

I do not buy for a minute that we have not spent the money— 

or did not have the opportunity to spend the money inside the Federal Government to have world-class control systems. I am sorry, 

but I will give you one example. The State Department—and this 

is not a partisan comment because this goes back through three 

Presidencies. But if you look at the year 2000, we were spending 

about $20 billion a year on State Department only, and that includes USAID, everything. The last few years, we are spending $54 

billion. Now, a lot of that increase happened during the Bush administration, so this is not a partisan comment about the current 

administration. 

You cannot convince me that inside $54 billion that organization 

could not have the absolute best, world-class IT systems available. 

It is not a priority. And that is a question of management throughout—across several Presidencies. That is just an observation. 

Secondly, I would like to get your estimate right now what you 

think our net assets are in the Federal Government, just ballpark. 

I know they are not auditable. But what do you think the net assets are, all in? 


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Mr. DODARO. I think on the financial statements it is about— 

what is it, about $3 trillion? 

GAO STAFF. Net deficit is 20—— 

Mr. DODARO. Not the deficit. The assets. 

Yeah, it is $3 trillion, $3.2 trillion. 

Senator PERDUE. $3 trillion. 

Mr. DODARO. Right. 

Senator PERDUE. And our net liabilities, if you were to take just 

the 30-year amortization of our future unfunded liabilities, what 

would that ballpark number be? I know Senator Johnson has done 

a good bit of work with, I think, CBO. 

Mr. DODARO. Right. 

Senator PERDUE. Maybe even GAO has got some estimates. 

Mr. DODARO. Right. Well, the financial statements show, you 

know, $21 trillion. We have many more liabilities than assets. 

Senator PERDUE. No; I understand. But I am a little confused, 

because if you just look at the Social Security and Medicare liabilities over 30 years, it is much bigger than $21 trillion. 

Mr. DODARO. Yeah. There is a separate statement of social insurance in the financial statements. The amounts for Social Security 

and Medicare are not considered liabilities because the Congress 

can change those processes. But if you add everything—that is why 

we have the statement of social—you know, sustainability over 

time that shows that basically, you know, you have a huge gap, a 

fiscal gap. 

Our simulations show that if you wanted to hold—this is the best 

way I know how to explain the magnitude of this issue. If you 

wanted to hold debt held by the public as a percent of gross domestic product at 74 percent, which it is now, which is much higher 

than the post-World War II—— 

Senator PERDUE. The problem is that what is held by the Government is growing faster than what is held by the public. And so 

I would argue that is kind of a moot point, that is a side—— 

Mr. DODARO. Well, no, but that—the intergovernmental trust 

funds are going down, intergovernmental holdings, because we are 

spending the money out of the Social Security Trust Fund to keep 

it going. 

Senator PERDUE. I understand. 

Mr. DODARO. But if you wanted to just hold that and stay at the 

debt held by the public that we are right now, you would have to 

increase revenues by 35 percent on average every year for the next 

75 years or cut expenses by 26 percent under the current—— 

Senator PERDUE. Right. But this is my—and I will just submit 

this. I think the characterization that $3 trillion in assets and $21 

trillion in liabilities is not the full picture based on what you just 

said, but I do not know whether the number is 100—I have seen 

numbers over $100 trillion, $125 trillion in terms of future unfunded liabilities, and I do not think many people would argue with 

that directionally being correct. 

Mr. DODARO. Right. 

Senator PERDUE. I would then argue that the assets are much bigger than $3 trillion, if you look at what the United States Government actually owns—lands, resources, all that—and I have 

never seen an estimate of what that could be. And, honestly, I 


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think one of the things that is missing here is we talk about this 

from a cash accounting point of view and an income statement 

point of view, and not a balance sheet perspective in terms of dealing with debt. Debt to me has always been a balance sheet issue. 

You fund it and service it through your income statement, but you 

actually deal with it on the balance sheet. 

So this goes back to today’s whole hearing, and I thank you so 

much, Mr. Chairman. You know, I just think we have got to get 

a picture of this. So I would encourage us all to have a much more 

rigorous understanding of what our net assets are and what our— 

pick a year—30-year summary of total liabilities are so we can actually see whether we are insolvent or not. I mean, if it is 3 and 

21, if that were the real number—which I do not think either one 

of those is right—it just highlights how serious this problem is. 

Mr. DODARO. Yeah, well, if you look at the total set of financial 

statements in the audit, those are just the accrual base balance 

sheet. That is why we added the statement of sustainability over 

time. 

Senator PERDUE. Right. 

Mr. DODARO. There you get a clear picture that things are not 

sustainable over a period of time and what the magnitude of the 

fiscal gap is and the structural imbalance between revenues and 

expenditures. 

Senator PERDUE. So if I were to bring you a public corporation that had assets of $3 trillion in liabilities and 21, if those numbers 

were correct—which we have already agreed they are not. But if 

they were and you got an annual loss of revenue on your—or income, profit on your income statement, let us just take today’s 

number of $450 billion. And we know—the Senator is right—that 

these numbers are going up dramatically, projected. The CBO 

projects that we will add another $9 to $10 trillion to the Federal 

debt over the next 10 years. Would you argue that that is in a crisis situation? 

Mr. DODARO. Yes. I have said it is unsustainable. 

Senator PERDUE. I know. 

Mr. DODARO. We are on a fiscal path that is unsustainable, and 

the sooner you take action, the better in terms of allowing people 

to adjust over time and adjustments to the economy over time. I 

mean, I think this is a very serious problem. I have said that for 

a number of years. And it will get more serious as time passes. 

Senator PERDUE. So it is bigger than just the accounting issue, 

and I think you have called that out in this Committee before. 

Mr. DODARO. Right. 

Senator PERDUE. And I applaud you for doing that. 

One last thing. You were the first agency, I think, to really get 

a handle on redundant agencies. A few years ago, you put this 

great report out. Senator Coburn took it and went to work on it, 

and I have not heard a lot of updates on that. But I remember the 

number being as high as somewhere between $300 and $400 billion 

of redundant agencies. 

Has your agency, has the GAO had an update on that in the last 

year or two? 

Mr. DODARO. Yes, we have had annual updates, and we are coming out next week with our sixth report. 


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Senator PERDUE. Okay. That was my question. 

Mr. DODARO. That will be out next week. 

Senator PERDUE. So what is the answer? 

Mr. DODARO. The answer is so far enactment of our recommendations and our last update was about $100 billion that has been 

saved so far or will be saved. But there is more on the table. 

Senator PERDUE. No, I know. That is the question I am asking. 

Mr. DODARO. Yeah. 

Senator PERDUE. So good on you and good on the Federal Gov- ernment to get $100 billion out. 

Mr. DODARO. Right. 

Senator PERDUE. What is remaining? 

Mr. DODARO. Well, there is tens of billions. I mean, it depends 

on what the Congress does. It is at a minimum an additional $70 

billion, and it could be more, likely more. 

Senator PERDUE. Thank you. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. I appreciate everybody’s participation in this. I particularly want to thank Mr. Dodaro for his expert 

testimony. Of course, your full statement will be a part of the 

record, and we hope that you will be open to answering some written questions as well. The questions for the record would be due 

by 6:00 p.m. with a hard copy delivered to the Committee clerk in 

Dirksen 624, if anyone wants to do that. 

I would note that one of the things that I have discovered as I 

have been going through this budget process is that the budget and 

the appropriations and the President’s budget and Treasury’s accounting all use different formats. And what I have also found out 

is that that is intentional. It makes it a little harder to follow the 

money. Somehow we have got to solve that. But I want to thank 

you for all of the suggestions that you included in your testimony. 

We will go through those as well. 

Thank you, everybody, for your participation. If you have any 

suggestions on budget reforms, get them to me. We are going to 

have three more hearings this month yet, and then hopefully have 

some kind of a bill that we can hopefully get through in a bipartisan way. As I mentioned before, this is the time to do it, when 

nobody knows who the majority will be or who the President will 

be, so we can all be responsible. 

Thank you. The meeting is adjourned. 

[Whereupon, at 12:04 p.m., the Committee was adjourned.] 


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(201) 

BUDGETING FOR OUTCOMES TO MAXIMIZE 

TAXPAYER VALUE 

WEDNESDAY, APRIL 13, 2016 

U.S. SENATE, COMMITTEE ON THE BUDGET, Washington, D.C. 

The Committee met, pursuant to notice, at 10:31 a.m., in Room 

SD–608, Dirksen Senate Office Building, Hon. Michael B. Enzi, 

Chairman of the Committee, presiding. 

Present: Senators Enzi, Grassley, Crapo, Ayotte, Perdue, Whitehouse, Stabenow, and Kaine. 

Staff Present: Eric Ueland, Republican Staff Director; George 

Everly, Chief Counsel; for the Minority: Joshua Smith, Budget Policy Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. Good morning. I will call to order this hearing. 

It is the second hearing in a series this Committee is holding on 

America’s broken budget process. 

Everyone here already knows what the problems are. Our congressional budgets are no longer governing documents and are increasingly ignored, leaving the country without a long-term plan. 

When we actually do our appropriations bills, they are months late, 

increasing uncertainty for agencies and businesses, and 70 percent 

of the budget is operating on autopay and will eventually bankrupt 

the country if Congress does nothing. 

It is long past time for a serious, constructive conversation about 

how we fix our broken budget process. I am looking forward to 

working together to explore new and innovative approaches to how 

we allocate our Government’s limited resources. 

Last week, we heard from the Comptroller General that the Federal Government cannot even tell us all the assets we own. Congress rarely, if ever, actually looks at what happened to the money 

we have already spent. Instead, we are constantly focused on how 

to spend this year’s new money. 

When Congress spends money on a program, it should also spend 

time understanding how effective that program has been in the 

past and what resources are devoted to that goal with an eye to 

successful outcomes and the highest value for taxpayer dollars. 

Today we will discuss different approaches to budgeting and 

oversight that inject this much needed information into Congress’ 

resource allocation decisions. Unfortunately, our current budget 

process encourages incremental, isolated decisionmaking that focuses on spending rather than results. 


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Our main budget tool is a baseline that locks in current policies. 

This forces an incremental approach to budgeting that results in 

only marginal changes to funding levels. Congress frequently ends 

up debating how much more or less funding a particular program 

should receive compared to the baseline rather than whether the 

funding that program has already received leads to the desired outcome. 

The budget process also lacks a mechanism to prioritize funding 

for policy goals across different Government programs. The Government Accountability Office, GAO, has been warning us for years 

about the growing number of duplicative, overlapping, and fragmented Government programs. Many of the problems highlighted 

by the GAO stem from the fact that our budget decisions are made 

within silos within Federal agencies and congressional committees 

whose jurisdictions overlap. This has led to an unmanageable mess 

of competing programs and bureaucratic inefficiencies. 

Take international food aid, for example. The Federal Government spends billions of dollars each year on programs intended to 

reduce world hunger by providing food commodities and educating 

local and regional farmers in low income countries. Instead of reforming existing programs, the Government creates new ones, more 

of them, increasing inefficiencies, increasing duplication and fragmentation within and across agencies. 

If you look at the chart on the screen, you will see how the Federal Government has approached its goal of reducing world hunger. 

The blue circles show 12 different Federal agencies that work toward this goal. The green circles represent the 16 different Federal 

programs with its own source of funding, all meant to reduce global 

hunger. That is 12 agencies controlling 16 different programs, all 

trying to accomplish the same goal. 


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Oxfam America estimates that 59 cents of every dollar meant for 

food goes to outdated regulations and program inefficiencies, wasting up to $471 million each year. A better budget process would 

have streamlined these programs by focusing on the overall goal, 

thereby cutting waste and achieving better outcomes. 

Another example of duplication and overlap is Federal housing 

assistance. The chart on the screen shows you 20 Federal entities 

that oversee 160 different housing programs and tax preferences 

devoted to promoting homeownership and affordable rental housing. The blue circles represent all the different agencies that are 

devoting resources to this goal. The programs are not included because there are so many of them, we could not fit them on the 

screen. These initiatives cost the Government $170 billion in 2010. 

GAO found that many of these 160 programs overlap and that 

money could be saved by consolidating and streamlining them. 

Agencies could be doing more with less, helping more people to 

purchase their first home or to find their family a better place to 

live. But by acting inefficiently and spreading its resources across 

so many programs, each of which, of course, needs managers and 

assistants and secretaries and so on, the Government is not maximizing the good it intends to do. By changing the way we think 

about budgeting, we can make Government more effective and efficient and better able to serve our constituents. 


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Finally, the budget process does not set goals or ask whether 

Federal funding accomplished what it was supposed to. We budget 

by looking at the inputs for each individual program rather than 

all the resources devoted to achieving a particular goal. So, essentially, Congress does not even have a good way of knowing whether 

the money it previously spent was effective at achieving the policy 

goal. 

This problem has been exacerbated by the growing share of mandatory funding in the budget. Mandatory programs operate on 

autopay without the need for congressional review. So there is absolutely no connection between funding decisions and program performance. Given that this spending often continues in perpetuity, 

there should be a formal mechanism to ensure that taxpayer 

money is being spent wisely. There really ought to be some kind 

of criteria, too, for why we make a program mandatory. One of 

those criteria might be that it has its own source of revenue, such 

as Social Security. 

Our budget process should help us allocate taxpayer resources to 

produce desire policy goals effectively and efficiently. To make 

these decisions, Congress and the agencies need to know at least 

two things: 

First, we must have a detailed accounting of all of the resources 

that are being devoted to a particular policy goal and how those resources interact with each other. In other words, a decision to fund 

a certain program should be informed by all the other programs 

and resources already devoted to that goal. 

Second, decisionmakers need to know whether programs are performing effectively and whether they are achieving the desired outcomes. The program with the best performance should receive more 

funding, and poorly performing programs should receive less or 

maybe none at all. The Government Performance and Results Act, 

as recently amended, provides a good starting point for this analysis, but the information provided under that act needs to be connected to congressional and executive decisionmaking. 

This Committee has an opportunity to fundamentally reexamine 

the way Congress and executive agencies allocate resources. It is 

time for a better budget process, one that maximizes values received from taxpayer dollars. And I look forward to working with 

my colleagues. I think that this is the only time in the next 4 years 

we are going to be able to make the kind of changes that we need 

to make, and that is because at this point in time no one knows 

who the next President is going to be and no one knows who the 

majorities are going to be in Congress. So both sides should be willing to act and to act reasonably, and I look forward to working with 

that, and I look forward to working with my colleagues to explore 

these new ideas on how to make our budget work more effectively 

and efficiently. 

Senator Whitehouse. 

OPENING STATEMENT OF SENATOR WHITEHOUSE 

Senator WHITEHOUSE. Thank you, Chairman Enzi, and I appreciate your comments. I would say that there may be valid reasons 

why some programs are separated out. You used the example of 

housing programs. In Rhode Island, we have a problem of veterans’ 


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homelessness that I think we share around the country. When you 

are dealing with veterans, I think you are probably actually better 

off working with veterans’ organizations and working with veterans’ funding and working with the Veterans Administration. So 

the fact that there is a special program for housing for veterans to 

me is not a sign of weakness, necessarily, and I think as we look 

at this, we need to bear those common-sense distinctions in mind. 

I appreciate very much your attention, Mr. Chairman, to budget 

process reforms, including proposals such as portfolio budgeting, 

which is the focus of today’s hearing. With major policy areas such 

as higher education and oceans and coastal resiliency spanning the 

jurisdictions of multiple Senate committees, the Budget Committee 

may be able to play a valuable role in offering big-picture recommendations to improve outcomes and make Federal investments 

more efficient. I look forward to hearing on that subject from our 

witness panel. 

I know also that the Chairman has been working hard on his 

own proposal to move to a biennial budget process, a reform that 

has long garnered bipartisan interest. While many Democrats, including myself, would be open to a budget resolution that spans 2 

years, I believe there is far less support for shifting to a 2-year appropriations cycle, particularly among appropriators. 

I also want to note that Democrats on this panel would likely oppose any proposals that would put defense appropriations on a different schedule from the bills that fund education, housing, health 

care, veterans’ benefits, and other vital domestic programs. 

I hope this Committee will be able to craft bipartisan biennial 

budgeting legislation that considers these concerns. Given that it 

does not seem our Committee will produce a budget resolution this 

year, we could use this time to evaluate budget reforms that could 

make the process smoother in future years. 

In addition to biennial budgeting, there are a number of other 

proposals I outlined earlier this week in a letter to the Chairman, 

which I would ask unanimous consent to put into the record. 

Chairman ENZI. Without objection. 

[The letter follows:] 


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Senator WHITEHOUSE. This has largely transpired because the 

Senate has moved from being an ordinary majority vote body to 

being an ordinary super majority vote body in which, as Majority 

Leader McConnell has said, if it is important, it needs 60 votes. 

Well, the budget is important, and the appropriations bills are important, and they tend to need 60 votes, which makes the 60-vote 

penalty threshold for violating the budget a complete moot penalty. 

And it disables the effect of this Committee, and that is one reason 

that we always meet here with lots of empty chairs, and everybody 

knows the Committee really does not matter much any longer. 

So here are some suggestions to help us run a little better. 

First, we could tighten up the reconciliation process to ensure 

that this procedural shortcut can only be used to actually reduce 

the deficit. In 2009 testimony before this Budget Committee, the 

late Senator Robert Byrd said, ‘‘The reconciliation process was designed to facilitate legislation to reduce deficits. Instead, the process has been used to enact multi-trillion-dollar tax cuts that led to 

record deficits over the last 8 years.’’ With a short and simple clarification, we can ensure that reconciliation will focus on the deficit. 

We could also review Budget Act points of order to ensure that 

they are working as intended to enforce the budget framework. I 

have seen potential Budget Act points of order hold up non-budgetary legislation over de minimis violations. Budget enforcement 

tools are important, but they should be used to maintain discipline 

on deficit spending, not to hamper legislation generally. 

We could also improve the transparency of the Committee’s 

budget resolution by requiring proposed spending cuts or increases 

in our budget to be assigned to specific committees of jurisdiction, 

or perhaps in some cases even to actual programs. If a budget proposes deep spending cuts, the American people could better understand what that would actually mean. 

Another area that I believe is ripe for bipartisan legislation is the 

debt ceiling. According to GAO, last minute debt ceiling brinkmanship can be costly. The agency estimates that just the threat of default increased borrowing costs during the 2013 impasse by tens of 

millions of dollars. Leader McConnell crafted a thoughtful solution 

to this problem, a temporary version of which allowed President 

Obama to avoid a debt default, subject to a congressional vote of 

disapproval. We could work on a bill to make the McConnell rule 

permanent, perhaps tying it to the deficit numbers in the budget 

resolution. 

Finally, if we are interested in a smoother budget process, we 

could address the foolishness of the annual budget vote-a-rama and 

its pandemonium of late-night voting. Any number of reforms could 

help bring some sanity to the process while still protecting the 

rights of the minority party. 

For instance, each side might be permitted roll call votes on a 

fixed number of amendments, say ten amendments each, with an 

additional five side-by-sides. With a fixed number of votes, floor 

managers might be able to spread them throughout the week, assuring Senate consideration of the budget resolution at a reasonable time and in a reasonable manner. The budget process need not 

every year devolve into partisan pandemonium. 


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These are, of course, just a few reforms we might consider pursuing in what is shaping up to be an unofficial off-year without a 

budget resolution. 

I once again commend Chairman Enzi for his attention to process 

reforms, and I look forward to working with him on bipartisan legislation. 

Chairman ENZI. Thank you, Senator Whitehouse. 

I think we all agree there are some serious problems the way 

Congress exercises its tax and spending powers, and fixing America’s broken budget system needs to require some innovative approaches and tough decisions, and you just named a number of 

them. So I am confident that there are some solutions out there 

that we can work together on. 

Senator WHITEHOUSE. And I am confident that there are others 

as well that other members of the Committee would be happy to 

share. 

Chairman ENZI. And that is what I am hoping will happen, partly as a result of the hearings, and that is why the hearings we are 

having this month will be designed to find out more about what is 

being done and what could be done. And I think we have some 

great people here today that will help us with that. 

We have Dr. Paul Posner, who is the Director of the Graduate 

Public Administration Program for George Mason University and 

leads the university’s Center on Public Service. He is the past 

president of the American Society for Public Administration and is 

a board member for the National Academy of Public Administration. He is also currently co-chair of the National Budget Roundtable. 

Ambassador Maurice McTigue is a vice president of the Mercatus 

Center at George Mason University. He is a former cabinet minister and Member of Parliament in New Zealand. That is one of my 

favorite countries because it is usually abbreviated as ‘‘NZ’’. 

[Laughter.] 

I have some ties that have that on them. 

He pioneered innovative approaches to budgeting that helped reform his country’s public sector. He also served as advisor to the 

Office of Management and Budget during the Clinton and Bush administrations on issues of accountability and transparency and has 

consulted with legislators and Governors in more than 30 States. 

Our third witness is Dr. Roy T. Meyers. He is a professor of political science and public policy at the University of Maryland, Baltimore County. He worked previously for the Congressional Budget 

Office and is currently a fellow at the National Academy of Public 

Administration. 

I thank all of you for joining us today. One of the things that we 

also traditionally do, partly because members have a number of obligations and sometimes are not here, I appreciate the testimony 

that you presented that we can all look over. Sometimes more can 

be absorbed by reading than by listening. We are not known for our 

listening. And at the conclusion of this, I will be announcing that 

they can turn in written questions, which we would appreciate you 

answering as promptly as possible as well. 

So, Professor Posner. 


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STATEMENT OF PAUL L. POSNER, PH.D., DIRECTOR OF GRADUATE PUBLIC ADMINISTRATION PROGRAM, SCHOOL OF 

POLICY, GOVERNMENT, AND INTERNATIONAL AFFAIRS, 

GEORGE MASON UNIVERSITY 

Mr. POSNER. Thank you, Mr. Chairman, Senator Whitehouse, 

Senator Perdue. I am pleased to be here to share my views on the 

way to move to a more strategic way to allocate resources within 

the congressional budget process. You have testified far more eloquently than I can about the broken budget process. What I want 

to do is focus today on what I think is the role the budget process 

can play in changing our focus in budgeting away from the line 

items and the like to a broader view of what is the purpose for 

which we are allocating resources. How could we make those allocations in a way that is more mindful of the outcomes we are trying to achieve? 

Today, for the most part, in the budget process we have a variety 

of programs that are located in different committees, in different 

sectors of the budget. Tax expenditures, spending, regulations, and 

like—all of them are walled off from one another. There is no comprehensive way to compare claims in areas like food safety, job 

training, and the like where there are so many programs that compete for funding. 

In my statement today, I provide a vision for beginning to deliver 

on what was the original promise in the 1974 act, which was to try 

to provide a more comprehensive prioritization of limited resources 

for the Nation. I do this knowing that it is going to be very difficult 

for any reform in this Congress, or any Congress, really, to go 

through. But I do this knowing that at some point we are going to 

have to make hard choices again. Perhaps not today but at some 

point in the future, knowing the long-term projections of CBO, 

GAO, and others, we are going to make hard choices, and it is better to have approaches to rationalize those choices on the shelf that 

have been discussed in forums like this rather than to do so in the 

heat of a crisis. 

And basically what I am suggesting is Congress dip its toe in the 

waters of prioritization through what I and my co-author of the 

concept here, Steve Redburn, call ‘‘portfolio budgeting.’’ This is not 

zero-based budgeting where we put everything on the table and try 

to make sense of it all at once. It is not even performance budgeting where everything gets measured. It is more selective and focused, and it kind of embodies the spirit of what David Stockman 

used to say: Budgeting should be about ferreting out weak claims, 

not weak claimants. Compare comparable programs in different 

areas and make the wisest choices based on which programs are 

the most cost-effective way to use resources. 

Essentially what we are doing is what other nations in the 

OECD call ‘‘program review.’’ Almost every nation does it. Australia, New Zealand, Netherlands, Canada do a selective review of 

portions of the budget focused on common goals. In my testimony, 

I talk about higher education and housing as two case studies 

where each area is rife with subsidies from the tax and spending 

side across different committees and programs that have really 

never been pulled together and rationalized to address common 


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issues. And that is the kind of thing that I think the promise of 

portfolio budgeting gives us. 

It is very difficult to look at any program and find that a single 

program encompasses the sum of Federal activities. For almost everything the Federal Government does, there are many different 

programs that are fragmented across the board. And so portfolio 

budgeting gives the opportunity to take a look at those systematically, weed out the ones that are most inefficient, identify programs 

that are contradictory of redundant, and reprioritize. 

One example of that would be the flood insurance programs and 

disaster relief where, on the one hand, we are trying to get people 

to ensure properties for flood; on the other hand, we are being so 

generous, we are letting people occupy hazardous lands that eventually set us up for extraordinary costs in disaster relief. So it is 

a way to kind of take stock of our programs. 

In some ways, the portfolio budgeting process is a way for Congress to seize the high ground from the executive, which frequently 

looks at policy reviews. The program rating tool that the Bush administration used, for example, looked at every program in the 

budget, and they applied a common tool to assessing how well 

those programs were doing. That was a very exhaustive way to do 

this process, but it did not really group programs together against 

common objectives, and that is, I think, what we are talking about 

here. 

It may seem that what we are asking Congress to do here might 

be high-minded but very difficult to do, and certainly it is. But I 

have seen this Committee use task forces before. In 2000, Senator 

Domenici was Chair. There were four task forces that were formed 

to look in-depth, deep dives on areas like the international assistance account or elementary and secondary education. 

I think we can think about that kind of process here again with 

the Budget Committee. To me, the Budget Committee is the perfect 

Committee to look across the different programs and tools at these 

portfolios and do some selective reviews that could then be integrated into the budget process. We might call it a ‘‘performance-related reconciliation process,’’ where we take a savings target and 

we provide it to a task force that is looking at higher education assistance, for example, which we now fund at $130 billion a year. 

And we expect that committee to come up with some improvements 

in the program and policies as well as some dollar savings that 

flow from those improvements. 

That is the kind of process I have in mind. This Committee probably, arguably, should do this in concert with the authorizing committees. Ultimately, it may be important for this Committee to reconceptualize its role as a leadership Committee and stock itself 

with members, from other committees that are leadership committees such as Finance and even some of the authorizing committees, 

to really bring about a holistic approach to this problem. 

Thank you. 

[The prepared statement of Mr. Posner follows:] 


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Chairman ENZI. Thank you. 

Honorable McTigue from New Zealand. 

STATEMENT OF THE HONORABLE MAURICE P. MCTIGUE, VICE 

PRESIDENT FOR OUTREACH, MERCATUS CENTER, GEORGE 

MASON UNIVERSITY; FORMER CABINET MEMBER AND MEMBER OF PARLIAMENT, NEW ZEALAND; AND FORMER ADVISOR TO THE U.S. OFFICE OF MANAGEMENT AND BUDGET 

Mr. MCTIGUE. Good morning, Senator Enzi, and good morning, 

Senator Perdue. And, Senator Enzi, given your name, we may well 

be able to organize for you complimentary citizenship. [Laughter.] 

I am honored to have been asked to testify before you today. The 

subject of this hearing is about the options for changing the budget 

process to produce better outcomes. 

Two important themes immediately come to mind when considering budget process reform, and they are transparency and outcomes. This morning I will comment on three issues relevant to reforming budget processes: first, the effect of process change; budgeting to outcomes; and then overseas experiences. 

Changing budget procedures can significantly change the incentives that members are subjected to as the budget process proceeds. 

Procedural change would be extremely effective if it was to institute a clear linkage between expenditure and outcomes. I applaud 

the passing this week of the new initiative on evidence-based policymaking. This is certainly a step in the right direction where decisions should be based upon evidence rather than on history. 

Process changes will not bring about better budget outcomes on 

their own. Congress needs to make the hard decisions that are 

highlighted by a better budget process. 

Government departments suffer from mission creep, and mission 

creep often is the cause of much duplication. Mission creep is a natural dynamic in organizations, and it leads to them spreading their 

activities outside from their core business. 

With this mission creep, there is no rigorous comparison of the 

activities targeting the same outcome. That means that the budget 

is buying many services focused on the same outcome with varying 

results, varying costs, and probably denying the public an additional benefit that would come from investing in the best of those 

activities. 

A good initiative would be to put a team of the best corporate restructuring specialists in the world into every department with the 

express purpose of returning each department to its core business 

and then shifting the inappropriate activity to where it belongs, or 

if it did not perform better than other activity, to terminate it. This 

is very much what Professor Posner has just recommended to you 

with his concept of portfolio budgeting. 

Reforms within the legislature should restructure the budget accounts and the Budget Committees to align with sectors of the 

economy so that all decisions on a particular outcome are taken in 

the same place. 

There should also be a consequence for not getting the budget 

done. My experiences in parliament and parliaments around the 

world, when you do not get the budget done, there is a new election 

immediately. That certainly means that budgets get done. 


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Speaking to outcomes, in 1993 Congress initiated a powerful reform with the Government Performance and Results Act. The purpose of that law was for governments to make budget decisions 

based on results or outcomes. At the Mercatus Center, we evaluated every one of those reports from the 24 major departments for 

the first 10 years of GPRA, and we ranked them according to the 

quality of their results disclosure. By the end of that period, departments were producing good, actionable information on their effect on public outcomes. The sad fact is that performance information did not become a tool of the appropriation process. The return 

of departments to their core business would greatly aid results accountability. 

Looking at overseas trends, many countries overseas have in recent years tried to define ‘‘fiscally responsible behavior’’ and have 

then legislated to embed that definition in law. The definition differs by country, but the intent is the same in every case, and that 

is, to rein in irresponsible spending and taxing and to make transparent to the people the behavior of their governments. 

In most instances, the reform of these countries separates the 

budget strategy and policy from the budget numbers documents by 

releasing a strategy and policy document some 6 months ahead of 

the budget numbers document, allowing comment on strategy and 

decisions on strategy and policy before the numbers come before 

the legislature. This process, while retaining annual budgeting, 

produces 3- to 4 year out-numbers that are firm so there is greater 

certainty about medium-term spending. 

The most dramatic example right now of the effect of fiscally responsible behavior is in Brazil where the current president is 

under impeachment for having breached the fiscal responsibility 

law of Brazil. Her breach was that she understated the deficit that 

the nation would face. That certainly is bringing a consequence to 

the process. 

The other case of interest is Ireland where their fiscal responsibility law sets up the independent Irish Fiscal Advisory Council. 

The council’s job is to comment publicly on whether the government is acting in a fiscally responsible manner. 

In the case of my own country, New Zealand, after the passage 

of the Fiscal Responsibility Act of 1994, the government went from 

23 years of deficits to 16 years of surpluses. For those countries 

that have tackled the challenge of being accountable for fiscally responsible behavior, there seems to be a change in culture. 

Mr. Chairman and members of the Committee, I applaud the 

work that you are doing, the initiative in attempting to reform 

budget procedures, because the evidence shows that much good can 

come from such an initiative. 

Thank you. 

[The prepared statement of Mr. McTigue follows:] 


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Chairman ENZI. Thank you. 

Dr. Meyers. 

STATEMENT OF ROY T. MEYERS, PH.D., PROFESSOR OF POLITICAL SCIENCE AND AFFILIATED PROFESSOR OF PUBLIC 

POLICY, UNIVERSITY OF MARYLAND, BALTIMORE COUNTY 

Mr. MEYERS. Thank you, Chairman Enzi and the Committee, for 

the invitation to testify and particularly for holding this hearing. 

It is a very important topic. I am just going to summarize my written testimony, but I want to start by agreeing completely with the 

main point in your opening statement, that we need to think about 

how the budget process can help us design, fund, and oversee the 

programs so that they will improve the lives of American citizens. 

So how well is the budget process currently structured to do that 

is the next question, and there are actually some good, positive attributes to the current process. We have the executive budget. We 

have used GPRA to increase the level of performance management 

in the executive branch. You are able to draw on the expertise of 

staff, including CBO and GAO. And, in addition, you are legislators. You go back home, and you listen to your constituents, and 

you can use those experiences to try and understand what their 

goals are and how they evaluate the programs themselves. 

But there is one main barrier to using the process to allocate resources to the programs that you want to fund, and that is the features of the Congressional Budget Act, in particular the segmentation of discretionary and mandatory and tax spending from each 

other. So most of my testimony focuses on that. 

You deal with those situations when you try to enforce the budget process. Last year, for example, you rightly tried to control 

phony savings from CHIMPs. But, on the other hand, when you 

think about it carefully, you want to be able to have a competition 

between discretionary and mandatory spending, and between those 

types of spending and tax spending. So this is why I think the portfolio approach proposed by Redburn and Posner should be adopted, 

and you should experiment with it very seriously over the next couple years. 

But I think that is actually only part of the puzzle, that you also 

have to look at how the Congress is structured to be able to utilize 

those performance reviews if they give you good information about 

which programs should be continued and which should be stopped. 

Imagine, for example, if you received a portfolio review about the 

foreign aid programs or the housing programs that you put on display at the beginning of this session. How would you deal with 

those performance reviews? Could you use a budget resolution to 

tell the committees to rationalize those programs? And I think the 

clear answer is no, the budget resolution process is too weak to be 

employed to force those savings. And for that matter, it should not 

be just about savings. It should be about trying to find programs 

that work so that American citizens’ lives will improve. 

So then the question is: What could be done to improve this process? And I think you are going to have to consider non-incremental 

reforms to really make a big difference. I think biennial budgeting 

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ously, but I think it is going to have relatively little effect unless 

you make some other changes. 

So I am going to propose two non-incremental reforms. First of 

all, though, I want to acknowledge that the problems that we have 

with the budget process are not simply because of the flaws in the 

budget process itself. When you are budgeting, you are making 

very difficult decisions, and you have very big differences on policy 

between the parties, and actually sometimes within the party. 

When there is very little trust between the parties, that is a big 

problem. 

So, that is something you just have to acknowledge, but you also 

need to use the budget process to allow you to express those differences. This is a democratic system, and you need to be able to 

reflect your constituents’ different wishes. 

You can go overboard on that, however. In other words, you can 

continually express their wishes in opposition to each other and 

then not pass bills on time and not eliminate wasteful spending 

and move the money towards more useful spending. 

So what in particular I think you should do is, first of all, have 

a serious conversation about how the Committee structure in Congress could be revised. And, in particular, that would mean collapsing the appropriations and authorizations process so that there 

would be a committee with expertise on each sector of the budget— 

each sector of Government policymaking. In other words, you would 

eliminate the Appropriations Committee, but everybody would be 

an appropriator. All the authorizing committees would be appropriating in their area of expertise for discretionary and mandatory 

spending and also jointly with the Finance Committee on taxes. 

Think about the budget problems that we face now. If you look 

into the medium term, it is the health budget that is the most 

scary, right? There is excess cost growth. That is continuing. And 

we also have very low quality health outcomes in this country compared to how much we spend. 

We could have a better way of dealing with that challenge of 

health spending if we had a Health Committee, a committee that 

had jurisdiction over discretionary and mandatory spending and 

tax expenditures. 

Now, of course, there are massive political difficulties in moving 

to that approach, but on occasion, Senators are brave enough to 

propose it. The last time it was considered really seriously was in 

1993 when Senator Kassebaum, a moderate Republican, put together a proposal, and I think you should return to that bill, look 

at it again, and consider it seriously. In fact, if you do, I think you 

would realize that it has some potential to deal with some of the 

problems you have described in previous hearings, such as expired 

authorizations and regulatory issues, because, for example, that 

Health Committee would have jurisdiction over regulatory policy 

for health, and it could figure out how those regulations relate to 

mandatory and discretionary spending and tax preferences. 

One other point that Senator Kassebaum made back in 1993 was 

to rename your Committee the ‘‘Committee on National Priorities.’’ 

I think you should take that title and you should take that as your 

mission. And when you think about it, sometimes in budgeting we 


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focus far too much on costs without thinking about the outcomes 

of costs or why we are actually spending money. 

In the case of the portfolio approach that Posner and Redburn 

proposed, they realized that the executive branch is far ahead of 

the legislative branch in doing this kind of work, they would give 

a push to the executive branch’s ability to rationalize programs. 

But your job is also to create value for American citizens by accurately assessing conditions in the country and the world and by setting goals for programs that would seek to improve them. 

So I want to give you one example that I think illustrates the 

limitations of what we do now in both the executive branch and the 

legislative branch, and I am glad that Senator Whitehouse is here 

because it relates to climate change. 

The Obama administration, if you look at the priority goals for 

climate change, is focused on reducing the Federal Government’s 

greenhouse emissions. 

We all know that the Obama administration has a much more 

aggressive goal for the whole country to deal with climate disruption. Personally, I think that is a great idea, and I really appreciate 

Senator Whitehouse’s eloquent and persistent advocacy on this 

issue. 

But whatever you think about climate disruption, that should be 

a big issue that you should be considering when you are writing 

a budget. You should not be wasting your time fighting over 

CHIMPs and lots of points of order on the budget. You are the corporate board of America in some sense. You are supposed to be setting policy and overseeing how the executive branch carries it out, 

instead of, for example, debating on the vote-a-rama or creating a 

very long list of reserve funds that we all know are symbolic. 

So if you want to live up to your image as the world’s greatest 

deliberative body, I think you need a better way of identifying the 

goals you have for the country. And I want to give you one example 

of how you could do that. 

I would suggest that you ask the executive branch to compile an 

annual report that you would call ‘‘The State of the Nation.’’ It 

would take data about what conditions are like in this country, and 

then with that report, you could evaluate the claims and promises 

made in the State of the Union speech. 

In fact, some States already do something like this. I am glad 

Senator Kaine is here. Virginia Performs, I would encourage you 

to look at that website. It is an excellent website that describes the 

nature of life in Virginia, where things are getting better, where 

things are getting worse, and it provides useful input to their own 

budget process. 

After that report would be released, I think you should have a 

debate about it. Right now you get views and estimates reports 

from the different committees. You can find them on the Internet, 

but it is not very clear that they are used well. So I think instead 

it would be useful to have a couple weeks of debate prior to the 

consideration of the budget resolution which would be about the 

true state of the Nation. 

And, of course, that debate would highlight your partisan disagreements. Good. But it also might highlight some agreements 

that are the potential base for a budget resolution. 


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For example, President Obama proposed this year a big increase 

in funding for cybersecurity. I have not heard anybody say that is 

a bad idea—or maybe I should rephrase that. I have not heard anybody say that we do not have to worry about cybersecurity. That 

should be the kind of debate that you have before a budget resolution, and then you can think about what policy tools, using discretionary and mandatory spending, and tax spending, could help address the goal of improving cybersecurity problems. 

So I want to conclude by saying that at this stage of the budget 

process, setting priorities across sections of the budget is always 

going to be your most difficult task. You are on the Committee that 

has the hardest job. There is no question about it. And in part because there is not a convenient metric for comparing guns and butter, you have to rely on politics to resolve some of those differences, 

and I think that is a good idea. Voting is a good idea. Lobbying is 

a good idea. Elections are great. Partisanship, ideology, they are all 

necessary to help set the course of the country. But what we have 

now is a bad politics. We are not—let me rephrase that. We do not 

have a structure in Congress to allow you to make the politics as 

helpful as possible to make allocations across the budget. 

So thank you for giving me the opportunity to testify, and I 

would be glad to answer any questions. 

[The prepared statement of Mr. Meyers follows:] 


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Chairman ENZI. Thank you, and, again, thank you for the written testimony that all of you have given. That will be a part of the 

record as well. 

I am going to defer to Senator Whitehouse, and that way Senator 

Perdue can have an opportunity to speak before he has to leave for 

a different committee. 

Senator WHITEHOUSE. Would he like to go now? I am perfectly 

happy to yield. Okay. 

First of all, Dr. Meyers, thank you for the compliment. I appreciate it. I was just asked to resign—or apologize to the fossil fuel 

industry by a witness in another committee—you can hardly imagine which one, I am sure—today, so to have your kind words is sort 

of an offsetting principle. Somewhere in the middle I suppose is the 

truth. 

Your point about cybersecurity I think is significant because one 

of the things that has frustrated the executive branch about dealing with Congress on cybersecurity has been the fact that the cybersecurity issue touches on—I think they used to say to me 38 

committees and subcommittees. How do you possibly mollify 38 

committees and subcommittees as you try to make change? 

So if we are going to go into in some fashion the business of setting budget parameters based around issues, we may find that we 

have a better case to make against rival committees and jurisdictions if we confine ourselves to those issues where the substance 

of the issue is so spread across so many committees that it is very 

hard for anybody to claim that they really have guidance over it. 

I think that concern is one we will have to get into gradually. 

The other point that Chairman Enzi has made is that where 

there are multiple programs, we might be a force for trying to 

bring a little bit of more common-sense regularity to them and 

streamline them. And I think in principle that makes sense, but as 

I said about the veterans, there are circumstances where doing 

things through different agencies actually makes considerable 

sense, and I think that is an example. So we would have to be 

watchful about that, and I would be interested in the comments of 

the witnesses on where they feel that—or by what standards would 

you judge what is a sensible differentiation versus just duplication 

and waste? And are we on the Budget Committee actually the ones 

best suited to do that? 

The last thing I will say—and then I will give the witnesses a 

chance to respond to that point—is that I thought it was very important that the witnesses agreed that you have to look at our 

spending on a more unitary basis, that if you look only at budgeted 

spending and do not look at mandatory spending and do not look 

at tax spending, then you are dealing with only a very small subsection of the problem. And I would say for my purposes the tax 

spending is particularly overlooked, but also a particularly ripe 

area for oversight, because if you are a wily special interest, you 

do not go to Appropriations to fight for an appropriation every 

year. That is sucker’s work. You go to the Tax Code, and you get 

your special interest exception baked in. And once it is in, it is 

there forever, and all you have to do is defend it. And so we now 

have more money going out the back door of the Government revenue house through tax spending than we do going out the front 


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door through regular cash spending. And we really need, I believe, 

to get our arms around that. 

But in my remaining time, I would ask if any of the witnesses 

have any thoughts about that conundrum of how we pick apart on 

Chairman Enzi’s screen which of the 40 programs should or should 

not be. Is that something we have hearings on? What are your 

thoughts on the limitations on just trying to unify all these Federal 

programs? 

Mr. POSNER. I will take that first, I think there are a couple 

things. 

One, ideally it would be good, assuming we do not reach the restructuring that Dr. Meyers talked about, for this to be a concerted 

initiative between the Budget Committees and the authorizers, recognizing that the Budget Committees bring something the authorizers do not. You see the whole picture. You technically have jurisdiction over tax expenditures, regulatory programs, discretionary 

and mandatory programs. I think that is an important thing to 

look at, whether you are looking at higher education, housing, community assistance, economic development assistance, any area that 

really cuts across so many committees. I mean, this is the one 

Committee that can at least lay claim to starting. The other thing 

I think—— 

Senator WHITEHOUSE. Let me cut you off there. 

Mr. POSNER. Yes, go ahead. Sure. 

Senator WHITEHOUSE. Because my time has expired. I am going 

to stay until the end, so we can continue this conversation once all 

the other Senators have had a chance to say their piece. But I do 

not want to cut unduly into Senator Perdue’s time, so let me ask 

you to suspend, and I will yield, and we can follow the conversation 

later at the end of the hearing. 

Senator PERDUE. Well, thank you for that courtesy. I will be 

brief. 

Dr. Posner, you have given testimony before, and I could not 

agree with each of you more. And I want to commend our Ranking 

Member today, Senator Whitehouse. We are on different sides of 

several issues, but on this issue I think we are aligned. I think he 

has offered up some very thoughtful and productive recommendations, and I think this is a process that we have got to start. 

Dr. Meyers, I agree 100 percent with you. We have got to go big 

at this point, given the size of the financial crisis and the irresponsibility we have seen up here over the last 20 years—among both 

parties. This is not a partisan problem. We both created it. 

I have two questions, really. I would like to get you to speak 

more about Senator Kassebaum’s idea back in 1993 about the combination of and the benefits of streamlining this process. One of the 

problems I think we have is that we have a budget resolution now 

that is not a law. It is a resolution. We pass it with 51. So the majority crams it down the throat of the minority. Then we go to an 

authorization process, which is at 60 votes in the Senate, and an 

appropriation that is at 60. So the minority party is always protected and can just do nothing and push us into a non-funding situation at the end of the year. This is structural. I understand that. 

But I know that in 1993 they talked about potentially combining 


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that among—focusing on the policy committees where most of the 

understanding of the day-to-day oversight of these departments. 

The second piece of that is reorganizing that around the outcome 

that you want to achieve. Mr. McTigue, I know you have written 

about that as well. In your experience in New Zealand, you actually achieved that. So would you respond to that? 

Then, also, the constraint around—the Article II constraint that 

we have, where the executive branch here is not a participant, basically, according to the Constitution. When you look at other performing governments, State governments, foreign governments, 

even corporations, you have got one commonality, and that is a 

strong executive participation in the budget and the spending process. We have a limitation constitutionally. Can you guys speak— 

I would love all three of you to speak to that quickly, if you can, 

in the time remaining. And thank you, Senator Whitehouse, for 

your courtesy. 

Senator WHITEHOUSE. My pleasure. 

Mr. MEYERS. So those are very important points, and we do not 

have time to discuss all the fine details of them. But regarding the 

lack of Presidential involvement, that is particularly true at the 

budget resolution stage, and periodically there has been serious 

consideration of the idea of a joint budget resolution, which, in my 

opinion, would not hurt Congress’ Article I power of the purse but, 

rather, just realize that the President is an equal player. Obviously, he has the ability to veto appropriations bills and can set 

limits, just as you can. I would be glad to talk to you more about 

that later. 

The point about Kassebaum’s approach and of the general idea 

of committee restructuring is—there are two, actually, two advantages. One is you would be able to rely on the committees to make 

major decisions. Those committees would be representative of the 

floor from both parties, but they would be the experts. You actually 

have, of course, a great deal of expertise now in the committees, 

but sometimes they are organized in a way that is redundant, 

somewhat similar to the GAO studies that you cite repeatedly. I 

watched your expired authorizations hearing, and I remember Senator Ayotte saying, why are we passing a national defense authorization and a defense appropriations bill that are almost indistinguishable in their content. And since you seem to have a great difficulty coming up with floor time to address big issues, it seems a 

normal idea would be to say let us take a concerted look at the Department of Defense once every year, rather than twice every year. 

If we did it once every year—in other words, that the Armed Services Committee would have a subcommittee on appropriations that 

would deal with the 1-year’s funding; then you would free up time 

on the floor for dealing with other big issues. 

Clearly, what that means is that you are doing away with a committee that has been in existence since right after the Civil War. 

But there are a lot of other things that we had in place during the 

Civil War that are somewhat out of date, and we have modernized 

them. And, yes, people on those Appropriations Committees would 

have to undergo a difficult transition, but they would all be placed 

on committees where they would have significant say over major 

parts of the budget. And then you would be setting the limits and 


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setting the major goals, in, of course, negotiation with those committees. 

Senator PERDUE. I am out of time, so I think we will submit this 

in writing, if you guys—I would love to have a response to that by 

the other witnesses, Mr. Chairman, if you do not mind. Thank you. 

Senator ENZI. Of course, that is twice now that Ambassador 

McTigue has not gotten to speak, so I would give little bit of latitude to give him an opportunity to address either of those before 

we move on to Senator Kaine. 

Mr. MCTIGUE. So, very quickly, Senator Whitehouse, you are absolutely right in that tax spending never gets the same attention 

as normal spending. And part of the reforms in my country abolished all tax spending and put all of that spending on the spending 

side of the budget, so there were no back doors for people to get 

through. It also meant that you are much better able to target particularly social spending at the thing that you needed most. 

And, Senator Perdue, your comment about outcomes and some of 

the experience on outcomes, one of my portfolios was to be the Minister of Employment, and when I became Minister of Employment, 

I inherited 34 programs. And when we audited those programs to 

see how good they were at putting people into work, we found that 

four worked really well and the others were mediocre to total failures. 

So what we did was that we decided that we would terminate 30 

of those programs and concentrate on the 4 because they showed 

the best outcome results. In year one, we got 300 percent more people into work for 40 percent less money. This is not an unusual 

order of magnitude change. 

Now, what we are really talking about there is maximizing the 

public benefit with the money available, and you cannot do that 

unless you line up all of the programs together and check one off 

against the other and say here is the best, that is where we should 

make our major investment. 

Chairman ENZI. Thank you. 

Dr. Posner, did you want to complete—again, if Senator Kaine 

does not mind waiting just a moment. 

Mr. POSNER. I would just say in some respects, what the budget 

process was, was an experiment, the 1974 act. Can Congress maintain a shadow committee that does things a holistic way, that has 

as totally different orientation to spending? And I would say right 

now the answer is probably not. And I guess what I am urging in 

this testimony is to test the system, and let us test that proposition. Can the Budget Committees become a catalyst to organize 

Congress in a different way around these reviews? And if not, then 

maybe it is time to think about taking the blueprint out and restructuring the whole thing, which obviously has lots of questions 

and issues. 

But that is the proposition that Congress put forth in the 1974 

act and did some useful things, like creating CBO and ultimately 

reconciliation. But we never really tested whether this Committee 

can do program review and oversight in a holistic way. That is 

what I think we could do. 

Chairman ENZI. Thank you. 

Senator Kaine, thank you for your patience. 


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Senator KAINE. Well, this is very interesting to me, and I have 

got two George Mason faculty members with a connection to Virginia, so I am not going to be rude to them. I am going to be very 

selective—— 

Mr. MEYERS. Uh-oh. [Laughter.] 

Senator KAINE. Let me just say thanks to all the witnesses, two 

George Mason connected, and the Maryland guy mentioned one of 

my gubernatorial initiatives, Virginia Performs. So I am glad to listen for a long time. 

Just on George Mason, my father-in-law, when he was Governor, 

signed the charter to create George Mason as a separate university. 

It had been part of the University of Virginia. And there was a 

ceremony yesterday on the campus to name a quadrangle there 

after my father-in-law, who is now 93. And he was there and very 

proud, so he feels great connection with the university. 

I really appreciate the way the Chair has put sort of reform ideas 

on the table for us to grapple with. I have enjoyed being on this 

Committee as a new Senator because I think, admitting all the 

challenges of the budget process, it is a great Committee to be on 

when you come into the Senate to kind of get a holistic view, a little bit of the big-picture view, and yet the process has problems. 

Yesterday in Foreign Relations, Chairman Corker just kind of 

went off on the budget process, you know, because he is a member 

on Budget as well, and just how disconnected it is when you have 

budget and authorization and appropriation. 

But we have had a couple of, I think, very good discussions here 

about reforms. Biennial budgeting—I would acknowledge that is an 

incremental, not a, you know, dramatic improvement. But I was 

with the National Park Service employees Monday in one of our 

biggest national parks, Shenandoah National Park, and they were 

saying, ‘‘Thanks for the 2-year budget.’’ Even with a 1-year appropriation, a 2-year budget gives some certainty. Once that first-year 

appropriation is done, you kind of understand the range where you 

will be for year two, even though it is not a second-year appropriation. But I thought it was interesting that NPS leadership—and I 

have heard the same thing from military leadership serving on 

Armed Services, ‘‘Thanks for the 2-year budget.’’ Compared to the 

CR or the sequester or the furlough or the no-budget, the idea of 

a 2-year budget, even with 1-year appropriations, is something that 

they appreciate the certainty. And I think it helps us on the private sector side, too. 

I wish we had a debt management product. Nothing is more annoying, I know, to Senators than people who come in and they have 

been mayors and Governors and they think they know how to run 

things. But every city and county and every State has a debt management policy that usually is we do not worry about the debt 

number, the raw number, we worry about ratio of debt to GDP or 

debt service payment to the entire annual outlay in a budget, and 

we do not have an agreed-upon debt management policy. 

In Virginia, and other States, there is an agreed-upon policy. And 

then there is vigorous partisan debate about how to get there. Do 

you cut expenditures? Do you raise revenues? What do you do? You 

end up with all the room for the vigorous argument between the 

parties that you have. But you kind of have a bull’s eye that you 


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are shooting at, and we do not have that at the Federal level, and 

the hearings that we have done here have elucidated that. 

Then, finally, the issue of performance data, which is covered by 

some of your testimony, and, Dr. Meyers, your point, Virginia Performs, we basically just decided when I was Governor to create a 

website that just tracked the key performance measures about 

whether the State was succeeding or not—not State agency missions, you can drill down to get into it, but unemployment rate, you 

know, graduation rate in high school, maternal health, infant mortality. And every measure, we put arrows. You know, it is an up 

arrow if it is getting better. It is a flat arrow if it is not changing. 

It is a down arrow if it is getting worse. That drove a lot of our 

spending decisions. When we had more money to spend, we looked 

at that to decide where to spend. And when we had to cut, sadly, 

we also—and my 4 years was all cutting. We looked a lot at that 

to determine where would we cut, that we were really cutting for 

tomorrow than today. And I think the idea of incorporating more 

performance data and caring about performance as part of budgeting is key. 

On the idea of portfolio budgeting, I am kind of a certainty freak 

because I just think the more certainty we provide, the better off 

everybody is going to do. And I actually think the American economy is pretty strong, but there is still uncertainty, and Congress 

has been one of the great generators of uncertainty, because if it 

is not clear whether we are going to have a budget or a CR, is 

there going to be a shutdown of Government? Is there going to be 

a sequester, partial sequester, full sequester, sequester relief? Are 

we going to furlough employees or not? That not only creates all 

kinds of challenges within the organization, and it takes Pentagon 

planners who should be planning what to do about, you know, a 

North Korean nuclear program and makes them spend time running five budget scenarios instead, but it also creates a lot of angst 

out in the private sector, which is the big part of the economy. 

So talk to me about how portfolio budgeting could enhance the 

certainty effect. I want us to provide more certainty, not less. Talk 

about portfolio budgeting and certainty. 

Mr. POSNER. Well, I think the point is that Congress needs to 

step up to the plate and have a budget resolution and an agreement and appropriations. I mean, that is the bottom line. I think 

portfolio budgeting helps Congress better find ways to express policy preferences without loading it all on to discretionary. The political debate is focused on discretionary as a proxy for the size of 

Government. Well, the size of Government is determined by mandatory spending and how many tax preferences you have in that 

Tax Code, which collectively now equals more than discretionary 

spending. We have $1.6 trillion of tax preferences. The discretionary process just collapses, and we end up with these, you know, 

terrible funding hiatuses. 

So I think if you could think about budgeting like the States do, 

that everything is in play. You reach agreement at the front end 

about some big pieces you are going to go after every year, I think 

that would start to structure the debate better and take some of 

the burden off of the discretionary side. 


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If I can add one more thing about debt, before I came to George 

Mason, I led GAO’s work on the Federal budget for 15 years, and 

we did some studies in New Zealand and places like that and 

looked at a different way to think about debt limit, because we 

thought the debt ceiling is a horrible way to do business. It is an 

after-the-fact thing that is always destined to fail. And New Zealand came up with, I think, a better mousetrap, which is they articulate the debt as a share of GDP as a target, and at least when 

we were there, for a good 10 years, all political parties observed 

that target as kind of a line they would not cross. And I thought 

that was the kind of thing we should be looking toward—because 

that is a prospective target that guides future policy. The Committee for a Responsible Federal Budget issued a report back in 

2010, that included a long-term debt target that we should be striving for as a matter of policy. 

Senator KAINE. Well, if I could—and I am going to ask a question, but just back to the Chair—and I am sure that your city, 

when you were mayor, you had exactly the same thing. Well, you 

had a no-debt policy, if I remember correctly. We had a debt policy. 

We were a double-A city. We were a triple-A State. We want to 

maintain double-A and triple-A, so there were bonding agencies to 

answer to. But we had, you know, basically two measures: debt as 

a percentage of State or local GDP and debt service payment as a 

percentage of the annual budget. 

What is interesting, it was not a mandate. There was not a law 

that says it can never exceed. It was just an agreed-upon framework, this is what we are going to try to have. And if we needed 

to go over it for some reason, well, we better have a real good reason. But we usually did not. But it preserved all kinds of room for 

partisan debate about how to get there. But it is very challenging 

to—and the debt ceiling is so artificial in so many ways, it is looking backward. And it is a raw number, and the raw number means 

nothing. It is the ratios that have economic value, not the raw 

number. I mean, if you say $17 trillion, of course, people go, ‘‘Oh, 

wow, that is incredible.’’ But $17 trillion could be the perfectly appropriate level of debt, depending on the size of the economy. So 

the raw number is meaningless, and yet we use that instead of 

really having a meaningful policy. 

I am going to look at that paper because I would like to see, you 

know, how you might approach that. And we will have plenty of 

room to argue about how to get there, but not even having a target 

to shoot at I think is challenging. 

So good testimony and a good hearing. Thank you, Mr. Chair. 

Chairman ENZI. Thank you. I should correct, we did have debt. 

It was debt for infrastructure. But it had to have a dedicated revenue source before we could enter into that. 

Also, I would mention that I do not do any town hall meetings. 

I only do listening sessions. That means I go to a town, somebody 

introduces me, and we have a microphone, and I do not make any 

comments. People come up to the microphone one at a time and tell 

me what I need to know. And I take notes as they are doing that, 

and if I see something or hear something that I really think is significant, I circle it so it will be a little easier for me to find in my 

notes. And then when the listening session is over, I answer some 


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of the questions that people raise, but they do not get rebuttal at 

that point, and there is not any further testimony that gets to do 

a rebuttal on it either. But I mention some of the ones that I have 

circled as great ideas that I want to haul back to Washington 

again. And I have got to say that that is still the way that I take 

notes, and I cannot believe how many things I have circled today 

because of your testimony and because of your answers to questions that have been posed today. And Senator Whitehouse’s opening speech had a number of things that I circled as well. I think 

there is a lot of common ground for a common country that we 

need to achieve. 

So I do have some questions, and I will start with Ambassador 

McTigue. The Government Performance and Results Act, as it has 

been amended, already requires the agencies to produce data that 

measures programs’ effective in relation to desired outcomes. How 

could we change the process to improve the use of this information? 

Mr. MCTIGUE. The simplest change in my view would be that at 

the time of making the appropriation you added another paragraph 

that described what benefits you would have received from this appropriation a year from now or 2 years from now, and then oversight would look at that number and decide whether or not you did 

well. 

Now, if you missed the targets, it might be that you are buying 

the wrong programs, you are making investments in the wrong 

tools. Or it might be that you just need to put more resource into 

it, but it does give you something that you can actually use and 

you can make progress. 

The second thing that it does is it also tells you some of these 

tools do not do anything to touch the outcome. I will just give you 

a very brief description. 

If somebody is hungry and I feed them, that is a good thing to 

do. And if I feed them tomorrow and the next day and so forth, it 

becomes a less good thing to do because I am not looking at the 

real problem, which is their dependency. Why are they hungry? 

And I have got to address those things that are making them hungry to be able to get a successful conclusion. Maybe they cannot 

read or write. Maybe they do not speak the language. But at the 

same time as feeding them, I should address those things so that 

at some stage I will not need to feed them anymore. 

So that is what outcomes do, in my view. It enables you to actually see whether or not you are using the right tools and you are 

making the right kind of progress. 

Chairman ENZI. As kind of a follow-up to that, sometimes we fall 

into the trap of thinking about this program performance and efficiency as an excuse to cut. But spending more on ineffective programs does not help, and we are perhaps hurting the beneficiaries, 

as you just explained. 

When you implemented the outcome-based budgeting reforms in 

your country, what effect did that have on the benefits that were 

provided? 

Mr. MCTIGUE. It made us do a lot of things differently. So, for 

example—I will use an example that Senator Whitehouse referred 

to before about homelessness. So we used to measure homelessness 

in terms of how much low-cost accommodation we had put together 


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and where we had distributed it and everything like that. But 

when we actually went back and saw what happened to homelessness, we found that the proportion of homeless people was not diminishing. 

So we went back and did what we should have done the first 

time, and that is, research it properly. And when we researched it 

properly, we found that 70 percent of homelessness is caused by 

mental health problems, not the unavailability of accommodation. 

When we addressed that issue, we found that within a year homelessness had dropped by 30 percent and then dropped by another 

15 percent the following year. So that is outcomes telling you that 

you are using the wrong tool, and I think that is incredibly valuable information to have. Otherwise, you are guessing. 

Chairman ENZI. Thank you. I will have some follow-up questions 

with some more detail, but I will do that in writing so you can respond to it. 

Dr. Posner, I have introduced legislation to do a biennial appropriations process. There are several proposals that way. Mine puts 

six appropriations bills each year, but they are for a 2-year period. 

Then the most difficult ones follow an election, and the easiest ones 

are just before an election, thinking that we might be able to get 

through them that way. 

Would moving to a biennial appropriations process make it easier 

for the Budget Committee to work collaboratively when they are 

authorizing and the Appropriations Committee is doing portfolio reviews? What do you think about a biennial appropriations process? 

Even the appropriators like a biennial budget process, and we can 

probably go to that pretty easily. 

Mr. POSNER. Well, let me just say that, obviously there are lots 

of other things at stake. I always used to say, because I was at 

GAO for 30 years, I am an Article I guy, and I get very concerned 

about delegating more power to the Executive. But, nonetheless, I 

think it certainly could accommodate a biennial process with this 

Committee and others doing portfolio reviews during the off cycle, 

say in certain of those appropriations that you are talking about. 

That is the way it worked in Arizona. At GAO we did a study of 

State performance budgeting back 15 years ago. Arizona had just 

moved to biennial budgeting, and the leadership agreed to have 

legislative committees focus oversight on several cross-cutting 

issues in that biennium. One was juvenile justice, juvenile delinquency program, and several others. And that focused the committees doing oversight to a great extent. 

Now, that sounds too neat to be true, certainly may be too neat 

to describe the Congress, but, nonetheless, that is how you might 

draw that one up. 

Having said that, I think the portfolio process could also accommodate itself into an annual appropriations cycle as well, as witnessed by this Committee’s brief use of task forces in 2000. So I 

think it—but certainly I can see how biennial would help promote 

that. 

Chairman ENZI. Thank you. My time has expired. I will go back 

to Senator Whitehouse, and we will do another round here if people 

are interested. 

Senator WHITEHOUSE. Thank you. 


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I guess this is a little bit in the nature of suggestions, but I think 

if we put together some combination of the McConnell rule, which 

spares us the debt ceiling crisis, and a debt target of some kind, 

and some form of consequence, depending on which side you were 

of the debt target, not necessarily a catastrophic consequence—because as soon as you create a catastrophic consequence, you can 

bluff your way through it because people really are not willing to 

pull the trigger on it, and it becomes, like the debt limit, an opportunity for finger pointing rather than an opportunity for work. 

So I think that is an area that if we pulled those things together, 

we might be able to actually create incentives, targets, systems 

that work on an ongoing basis. 

I also think that if we are to start looking at portfolio areas, we 

might want to think about just agreeing amongst ourselves to pick 

an example or two and try it out, see how we do, see what we 

bump into, see whether there are things we learned about what we 

chose that made it a good or bad choice. I think as I said earlier 

about cyber, if something is spread across 38 committees, that may 

be an easier area and more responsible area for us to engage in 

than if it is defense appropriations that is pretty well squared 

down into, you know, basically two committees. 

So I am open to—and I am sure other members would be—trying 

to figure out how we might go about doing that. But that takes me 

back to the question that I left Dr. Posner with, which is what 

guidance—and this would be for all three of you. What guidance 

would you have about where and when, given that we cannot look 

at all the portfolios of the Federal Government, where and when 

should we direct our first efforts if we are going to embark on first 

efforts at this kind of portfolio budgeting theory? And I cut you off 

in mid-question, so let me go back to Dr. Posner. 

Mr. POSNER. Well, one of the areas I have talked about here in 

the Committee before is food safety. We have 15 agencies administering 30 laws. So when there was the salmonella outbreak with 

eggshells affecting 500 million eggs, it turns out that jurisdiction 

over eggshells is split, incredibly, between Agriculture and FDA. So 

FDA monitors the eggshells; Agriculture monitors the young 

chicks. FDA monitors the feed that is given to the young chicks; 

Agriculture monitors the transportation. It is an incredibly Byzantine process and one that our agencies heroically try to deal with. 

Many other nations—and GAO called for a unified food strategy 

agency, as other nations, long have had a unified food strategy program. Most European nations do. That is an example of one, I 

think, where—so one of the hallmarks is agreement on goals. Nobody disagrees that we want the most effective food strategy program we can. 

There are a lot of areas of policy that are like that. Homeland 

Security has 16 homeland security grants—the UASI grant, the 

State homeland security grant, transport security—and, apparently, notwithstanding some previous agreement by the agency, 

Congress has never been able to see its way clear to bring those 

together in some sensible way. 

So I think there are lots of areas that are target rich where there 

is broad agreement that you could take—nothing is low-hanging 


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fruit, of course, but I would think to what extent are the broadly 

shared goals would be a first criterion. 

Senator WHITEHOUSE. Ambassador McTigue. 

Mr. MCTIGUE. Thank you, Senator Whitehouse. Just very briefly, 

another area that might be interesting to look at in terms of a first 

portfolio might be all of those programs that touch the environment 

and look at those and see whether or not the have—some have better outcomes than others or they are even measuring the right kind 

of things. 

Can I just go back to what you were speaking about with regard 

to debt? And it also cross-references to what Senator Kaine had to 

say. 

Senator WHITEHOUSE. I would not mind that, but as my time is 

going, let me turn to Dr. Meyers to answer my question, and then 

we can come back to you if the Chairman will permit that. 

Mr. MCTIGUE. Okay. Certainly. 

Mr. MEYERS. In the paper that Dr. Posner wrote with Steve 

Redburn, they suggested housing and higher education. Well, since 

I am a professor, maybe I would say leave us alone. [Laughter.] 

But my preference actually would be for health because I think 

it is such an important area and it does illustrate some of the challenges with moving across discretionary, mandatory, and tax expenditure. 

But I think it is important to realize that in one sense you already have portfolio reviews at some level—you have authorizations on a multi-year schedule for some areas of the budget—ag, 

transportation, and so on. And those could provide a clue for how 

you might envision moving from an experimental portfolio to a new 

or regular order, which would be for each sector of the budget you 

would have a sunset schedule, and every, say, 4 years or so, you 

would have a reauthorization, and it would be supported by having 

a QXR, as I would call it, a quadrennial review for that sector of 

the budget given to you by the executive branch that would help 

you structure things. 

The other relevant point, I think, is that there are some programs you do want to put on autopilot or at least close to it, like 

Social Security. You want to review that program periodically, not 

every year. And there are other areas where you want to keep the 

agency on a short leash every year. So, in fact, you want diversity 

in terms of the frequency in which you evaluate programs with a 

fine-tooth comb. But you also do want some diversity within each 

sector because, you know, America is a diverse country; we do need 

to reduce overlap and redundancy, but in most areas it is hard for 

me to imagine that there would be a one-size fits-all program that 

would be satisfactory to all Senators and Representatives. 

So, take advantage of our diversity, but figure out a new structure in which you can promote that diversity and get rid of unnecessary overlaps. You can think about what is the need to keep 

some programs on a short leash, evaluating them frequently, and 

then how can you look periodically at those long-term commitments 

that are central to our policy and society, to make sure that they 

do not get out of control. 

Senator WHITEHOUSE. Thank you. 


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Chairman ENZI. Senator Kaine, do you have some more questions? 

Senator KAINE. No. 

Chairman ENZI. Okay. Ambassador McTigue had some additional 

comments, which is the direction I want to go with my next questions, too. 

Mr. MCTIGUE. Okay. The comments from two or three sources 

about how you manage debt and whether or not you should manage debt, well, the worse results come from a process where debt 

is an accident of the decisions made in the budget, and you can see 

that in many countries around the world. 

One of the innovations that I think is very interesting is places 

like the United Kingdom and New Zealand, they take budget strategy and budget policy out of the numbers part of the budget, and 

they issue the documents on that 6 months ahead of the budget. 

And that deals with things like debt policy. So what are going to 

be the targets looking a long way forward? In 2012, New Zealand 

set a debt target of being under 20 percent of GDP by 2020, and 

it will be there. And the United Kingdom set one of having a budget surplus by 2020, and it looks like it will be there. So that strategy being set ahead of the budget numbers I think gives better resolutions. 

The other thing is that those countries also, while they have annual budgeting, they give firm numbers for the out-years. So when 

the British budget comes down, you know what the numbers are 

going to be for the next 4 years as well. So that gives the certainty 

that Senator Kaine was talking about. In New Zealand, you are 3 

years—3 years are firm numbers. You get a projection for 10 years, 

and you get a speculation for 20 years out. 

Now, nobody really gets held to the 20 years ago, but sometimes 

if you look that far ahead, it shows you the consequence of a decision that you have just made when it gathers full momentum, and 

that can have consequences that you did not expect unless you 

have a very long term view looking forward. 

Chairman ENZI. Thank you. Continuing on the ways to handle 

the debt, does anybody have a formula that factors in the cost of 

interest? This is kind of a worry to me because right now at 1 percent we are spending $230 billion a year for our debt, and the norm 

is 5 percent. But if we happen to go to 5 percent, we would be 

spending $50 billion more than we get to make decisions on right 

now, which means no defense, no ag, no commerce, no education, 

no everything that we do—unless, of course, we dip into the mandatory programs. And, of course, we have gone from 30 percent 

mandatory to 70 percent mandatory, and I have even suggested 

maybe we need to go to 100 percent mandatory. Then we would actually have to make some decisions, and people would realize the 

impact of the mandatory things. Or we could go the other way and 

make nothing mandatory. But probably neither of those is going to 

work. 

But does anybody have a factor in—of how the interest would 

work in this debt management formula? 

Mr. MCTIGUE. A very brief comment. Part of the debt management strategy looks not just at the total quantity of the debt, but 

the cost of maintaining that debt and what it will be over time. 


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And that triggers the decisions about how much of it you are going 

to pay down in the medium and the longer term so that you are 

in a position to be able to withstand shocks when they occur. And 

I think most of the world has become very much aware of if you 

are living right on the edge of the cliff and you have something like 

the Great Recession, you have terribly big problems. And getting 

back from the edge of that cliff quickly is a prudent strategy. That 

needs to be part of the budget process, and I do not think there 

are too many discussions about that here in Congress at the moment. 

Mr. MEYERS. In its annual outlook report to you from CBO, that 

information is presented to you. It shows the interest increases 

that would result from one budget path as opposed to the other. So 

that information is available. There are two difficulties: One, comparing the U.S. to New Zealand is that we are too big and rich to 

make debt worrisome to us until it becomes too late. In New Zealand’s case, they made those big changes because they had serious 

problems in their balance of payments. So we have this exorbitant 

privilege, as Barry Eichengreen, the Berkeley economist, calls it. 

But the other issue is; how do you connect that medium-term 

debt target, which I think we all agree is a good idea, to specific 

policy choices that you make? And that question is one reason why 

biennial budgeting or some longer-time perspective is useful. Not 

only does biennial budgeting give certainty, if it is at the appropriation level, to agencies, since you really do not expect their 

needs to go up and down too much from year to year, but it also 

allows you to have a medium-term glide path towards that macro 

policy result that you want. 

But, again, that gets back to the central point of this hearing: 

How can you structure your budget process so that you can sift 

through those programs, get rid of the unneeded ones, and also 

throw money at the ones where there are a lot of promising ways 

of making America’s lives better, that is consistent with your budget targets? This was the challenge that was faced in 1974 when 

Congress passed the initial Congressional Budget Act, and actually, 

there were some good years in that history. You and the President 

made progress during the 1990s. 

So now you are faced with this difficulty. You are absolutely 

right that debt increases are worrisome over the long run, and I 

think a lot of people are looking to you for leadership, to come up 

with new ideas for how we can address that problem more fruitfully than we have in the last decade or so. 

Chairman ENZI. Dr. Posner. 

Mr. POSNER. The Canadians at one point singled out the interest. 

They had a target called ‘‘interest bite,’’ and they were concerned 

because their debt ultimately grew to 100 percent of GDP. And it 

was the interest, of course, that shows up in the annual budget and 

crowds flexibility. 

And so that became a big issue in public policy and whether that 

is something that could be highlighted. 

On Ambassador McTigue’s point, I want to suggest that the main 

point of the budget resolution was to force Congress to go on record 

about something they had not been on record before, which is the 

size of the deficit, the size of the surplus, whatever it is going to 


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be. But that is obviously not the only thing that matters, and I 

think what Dr. McTigue is pointing out here is that thinking more 

about the long-term targets and how they might be reflected in the 

budget resolution is also something that is worthy of your consideration. And, again, in the 2010 report that we did with the Committee for Responsible Federal Budgeting—I think it was called 

‘‘Getting to Black’’—we talked about how the budget resolution 

could be a vehicle for Congress to articulate what its debt target 

as a share of GDP might be. So going beyond just annual deficits, 

which is very limiting, forcing Congress to think more long term 

is part of this prospect. 

Chairman ENZI. Thank you. 

Do you have some other questions you would like to ask? 

Senator WHITEHOUSE. I just wanted to thank you, Mr. Chairman, 

for leading this Committee into this area. I think we have an enormous amount of work to do, and I think we have to be very prudent about what we set before ourselves so as not to be overwhelmed either by jurisdictional concerns from other committees or 

leadership concerns or other such things. But I think the prospect 

of a better-run Committee, a less foolish vote-a-rama, a longer perspective that drives us towards a more responsible management of 

our debt, and some opportunity for being a portfolio reviewer are 

all very useful and valuable things, and I am confident that there 

would be good bipartisan support for working towards those. 

I think you and I probably agree that if we are going to pick 

portfolio areas, they should be less hyper-charged than environment and health care are right now. But maybe the day will come 

when those would be areas we could look at. But I think right now 

we would step into food fights that we do not need to step into. And 

with that, I again thank you very much for your leadership. 

Chairman ENZI. Thank you. Thanks for your participation and 

good suggestions, and I particularly like your suggestion that 

maybe we needed to try one or two areas of portfolio first to show 

that it works. Then we can get into the more controversial ones. 

And I think they can work, too. Neither side is going to get 100 

percent. I have got this 80-percent rule that I have worked under 

where there is usually common ground of about 80 percent. But 

there is 10 percent on each side that we are going to fight to the 

death on, and, unfortunately, the fight to the death winds up with 

the issue dying, not the people—well, fortunately, I guess. [Laughter.] 

But that 10 percent on each side are going to be around. What 

we need to find is that middle ground of the 80 percent, and we 

can get it done. And I think this is an opportunity for us to do 

some major things here. As you know one of the things I have been 

disturbed about for the whole time that I have been here, not just 

recently, is that the President’s budget really is not looked at by 

anybody, but the pages are about that thick. And I know that there 

are 535 copies distributed to the Members of Congress and the Senate. But I think there are several copies that are delivered to the 

staff as well, and anybody else who wants one, although I am wondering if anybody has ever looked through all of those pages. It 

would be real helpful if it were on a disk so it would be searchable, 

but one of the things that was mentioned here today is making us 


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a committee on national priorities and getting an annual report on 

the true state of the Nation. That would really be helpful by a 

President. 

Another suggestion that we have had here is something that goes 

for 4 years. Well, the only thing that we have that goes for 4 years 

is the President, because the House goes for 2 and the Senate goes 

for 6, but the President goes for 4. And the President has a huge 

influence. He is one third of our structure of Government, and so 

when he comes into office, he ought to be presenting us with what 

he wants to get done during that 4-year period. And then we as the 

Budget Committee can set some national priorities and hopefully 

some formulas for what kind of target we are going to have on debt 

and get the committees to work from that standpoint. 

But those are all very major changes, and any change around 

here is difficult. We are supposed to be the inventors of everything, 

and we are really the continuers of everything. 

I was going to ask some questions about unauthorized programs 

because that has been a pet peeve of mine. My first year as the 

Chairman, I discovered we had 260 programs that had expired that 

we were spending $293.5 billion a year on. And I hammered on 

that enough, obviously, that there was some attention paid to it, 

because we have gone from 260 of them down to 256 now. But we 

have increased the spending to $310.4 billion. So our priorities are 

not working out real well. And I will have some more technical 

questions for our people on that. 

I was also intrigued with the comments we had on the reconciliation instructions, and they need to be a bit more effective and not 

just a tool for pushing through the 10 percent that one party or the 

other cannot get done any other way. And we also need to have the 

President involved earlier in the budget process so that we do not 

wait until November to force an issue and disregard what we did— 

well, not totally disregard, but almost totally disregard what we 

did. So we have got to find it to be an effective tool, and we have 

had a lot of good suggestions here today, and hopefully other members of the Committee will submit some questions. But above that, 

I hope they will just read the testimony that you have already presented. It was well put together, and I appreciate all the effort that 

went into that. 

So thank you, and we hope we can call on you again as we develop some of these ideas to see if you think they have got any 

merit or if they ought to be revised some way. 

So thank you very much, everybody. Thanks. 

Senator WHITEHOUSE. Thank you, Chairman. 

Chairman ENZI. The meeting is adjourned. 

[Whereupon, at 12:05 p.m., the Committee was adjourned.] 


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TAP DANCING ON THE RAZOR’S EDGE: RESTORING STABILITY TO GOVERNMENT OPERATIONS 

WEDNESDAY, APRIL 20, 2016 

U.S. SENATE, 

COMMITTEE ON THE BUDGET, 

Washington, D.C. 

The Committee met, pursuant to notice, at 10:30 a.m., in Room 

SD–608, Dirksen Senate Office Building, Hon. Michael B. Enzi, 

Chairman of the Committee, presiding. 

Present: Senators Enzi, Grassley, Crapo, Ayotte, Corker, Perdue, 

Murray, Stabenow, Whitehouse, Baldwin, Kaine, and King. 

Staff Present: Eric Ueland, Republican Staff Director; George 

Everly, Chief Council; for the Minority: Joshua Smith, Budget Policy Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. Good morning, and welcome to our latest hearing in a series that this Committee is holding on America’s broken 

budget process. 

For a country that is exceptional in so many areas, it is simply 

inexcusable that our budget process has devolved to its current 

state. There is growing consensus that our Government needs to 

change the way it makes funding decisions, and this Committee 

and its members have a unique opportunity to lead that effort. 

As we have seen, the current process is designed to fail. It is 

time to make the process fit the problem. Even small changes can 

begin to reform the budget process so that it will have a better 

chance to succeed. Such improvements can in turn help our country 

succeed in addressing runaway federal spending and our exploding 

national debt. 

Budget process reform is not a cure-all. It will not fix all our 

budget problems. But that does not mean we should resign ourselves to muddling through under a budget process that predetermines failure. I would like to work with my colleagues to propose 

fixes that encourage transparency, accountability, and an effective 

and efficient Government. 

Last week, expert witnesses explained that the budget decisionmaking process does make a difference. Fragmented decisionmaking has caused duplication and waste that actually diminishes 

the value of the public services provided to our constituents. Today 

we will hear about other costs resulting from budget dysfunction 


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and, more importantly, explore solutions that might inject stability 

into the process. 

When Congress fails to establish predictable tax and spending 

policies, Federal agencies, State and local governments, private organizations, and constituents all pay the price. Nearly every aspect 

of the current budget process is riddled with uncertainty. 

For example, the annual budget resolution could serve as a longterm planning document that signals to stakeholders how Congress 

will allocate the country’s limited resources. Instead, it currently 

bears little relation to the tax and spend decisions Congress must 

make every year. 

The annual appropriations bills are chronically late and have not 

passed through under regular order in over 20 years. The chart on 

the screen shows how timely the appropriations process has been 

since the Budget Act of 1976 took effect. 

The green bars represent the four times that Congress has completed appropriations on time in the last 40 years. The red bars 

represent progress toward that goal. You notice that zero appropriations bills have been enacted on time in the last 6 years. 


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I commend Leader McConnell’s effort to move the fiscal year 

2017 appropriations bills under regular order this year. But it is 

a challenge working against a system that in its current form 

makes it nearly impossible to accomplish the task. 

There is also significant uncertainty generated by the Government’s future overspending. The Congressional Budget Office says 

the Government’s continued overspending will add $11 trillion, 

which is 11 thousand billion, in additional debt in the next 10 

years as entitlements begin to take over the budget. If that is not 

alarming enough, the annual interest costs on our debt alone will 

total $839 billion per year in just 10 short years, and that is even 

using a very conservative interest rate. 

We simply cannot continue on this course, whether the result is 

huge tax increases, drastic spending cuts, or some combination of 

the two. Somebody is going to pay the price. Without a long-term 

enforceable budget and predictable fiscal policy, Congress is forcing 

this future uncertainty onto public and private organizations that 

are trying to plan for the future. 

The statutory limit on Government debt should be a warning to 

Congress of the irresponsible decisions we are making and the 

country’s growing mountain of debt. But this important tool is completely disconnected from our tax and spending decisions. Instead, 

it occurs well after the fact and serves only to rattle financial markets and increase uncertainty across the economy. 

Whether it is the unenforceable budget, whether it is late appropriations, whether it is growing deficits, whether it is impending 

debt limit showdowns, the uncertainty created by our broken budget process carries severe and indirect costs. Budget dysfunction 

causes wasteful spending, disrupts Government operations and 

planning. It also affects the private sector, reducing productive investment and hiring. 

Effective solutions will reduce flashpoints for crisis politics and 

encourage certainty in the budget process. An effective long-term 

budget would signal future tax and spending levels. It would enforce long-term spending discipline so that the agencies, the businesses, and the constituents can plan accordingly. And it would 

bring the President into the process so that veto and shutdown 

threats are less common. 

Senator Heller recently sent a letter to this Committee asking us 

to consider legislation that would prevent Members of Congress 

from being paid if we fail to adopt a budget resolution and all 12 

appropriations bills on time. He is right to focus on incentives and 

consequences. When Congress or agencies do not act in a fiscally 

productive manner, there ought to be consequences—not necessarily the consequences in the Heller bill, but there ought to be 

consequences. 

At the agency level, Government managers should be held accountable for performance. Of course, that would require stated, 

measurable goals. Inadequate results should trigger increased scrutiny and program review. Real consequences for poor performance 

will improve outcomes for constituents, as we discussed last week. 

A longer appropriations cycle will also reduce uncertainty. If Congress enacted 2 years of funding and appropriations bills, agencies 

could plan for 2 years rather than 1 year, and they could spend less 


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time formulating new budgets and worrying what Congress will do 

in the next fiscal year. And that is without even talking about continuing resolutions that go beyond the beginning of the year when 

they do not know what they are going to be able to spend. 

Members on this Committee have other ideas on how to improve 

certainty and reduce crisis budgeting. For example, Senator 

Portman has introduced legislation that would prevent Government shutdowns by creating an automatic continuing resolution 

that would take effect when no appropriations have been enacted. 

And it would encourage Congress to do its job on time by automatically reducing spending until all full-year appropriations are enacted. 

No change is easy here in Washington, D.C., so fixing a congressional budget process that has been in place for 40 years may seem 

like a Herculean task. But this election year gives us an opportunity to consider proposals that do not favor one party or the 

other. Nobody knows who will be in charge of the Government next 

year, so our solutions can focus on creating a transparent, accountable, reasonable, and predictable budget process. 

Senator Whitehouse. 

OPENING STATEMENT OF SENATOR WHITEHOUSE 

Senator WHITEHOUSE. Thank you very much, Chairman, and 

thank you for your continued focus on how to revive the Budget 

Committee into a meaningful body here in the Senate. I appreciate 

the return of Dr. Hassett and Dr. Joyce and Dr. Ornstein, all of 

whom have been before this Committee before to help guide us 

through this conversation. 

The topic today is budgeting by crisis, and I would suggest that 

budgeting by crisis happens when obstruction becomes the rule, 

and obstruction tends to become the rule when people and politics 

seek to use leverage to gain things that they could not achieve 

through regular order, essentially budget ransomware. 

That problem, which has been our problem for a number of 

years, is compounded by the 60 votes problem, which is that the 

threshold that has to be met if you depart from the budget is 60 

votes. And particularly since Majority Leader McConnell came to 

the leadership of the Republican Party, 60 votes have really been 

the rule in the Senate. So if 60 votes is the rule for anything meaningful in the Senate, then 60 votes is going to be the rule for appropriations in the Senate, and that means you have got your 60 votes 

for your appropriations, so you do not care what the Budget Committee did. You are through the firewall that violation of the budget was intended to create. 

The third point that I will mention is that when the budget is 

disaggregated from the appropriations accounts, it tends to lend 

itself more to theater if you actually had to take a budget and start 

to drill it down and at least show how it would work across the accounts. Obviously, we could not bind the appropriators. But if you 

actually had to walk through the consequences of a proposed budget, I think that would help take some of the theater out of this exercise. 

The last thing I will say is that we are proceeding this year without a budget. The Committee is not going to act on a budget. I 


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think there is a reason for that, which is that we have an overarching agreement. One of the things that happens when you are 

budgeting by crisis is that a little group of people go into a little 

room, and it is the White House and it is the leadership of the Senate and it is the leadership of the House, and they cut some deal, 

and who ever knows what side deals were cut to make that other 

deal possible, and it is not transparent, and this Committee has no 

role in it, and it is not a good way to do business. However, once 

the deal is done, it is the deal, and it does, to a significant degree, 

moot the job of the Budget Committee. 

So we had to listen to Leader McConnell saying that if he were 

in charge, we would be passing a budget every year. The law says 

pass a budget. 

We had to listen to Senator Cornyn saying, ‘‘When Republicans 

regain majority in the Senate, we will pass a budget.’’ 

We had to listen to Senator Grassley saying, ‘‘We have been hitting the Democrats for 3 years that they have not adopted a budget.’’ 

Senator Blunt bemoaned a Senate with no budget. 

Again, Senator Johnson said not passing a budget is a ‘‘national 

scandal,’’ ‘‘hopefully the American people understand what a national scandal this is.’’ 

Senator Portman chided us Senator Democrats for neglecting one 

of our most basic responsibilities. 

Senator Ayotte said we were incredibly foolish, the Senate Democrats, that we did not want to do the basics for our country. 

Senator Toomey said we were failing in our statutory obligation 

and an obligation based on decency to do a budget. 

And Senator Byrd said, ‘‘If Congress cannot pass a budget, then 

we should not be paid.’’ 

So there was a lot of drama when under similar circumstances 

the Democrats did not pass a budget. I am not going to repay the 

favor at this point because I do not think that, frankly, we are 

doing much wrong when we do not pass a budget when we actually 

are operating in a year in which the budget has already been 

agreed to. 

I think what we need to do is to look back at the process by 

which that global budget was agreed to. And very few good things 

happen in Washington in crisis, under pressure, in a room in which 

there is no transparency, and in which the rest of us as Senators, 

at the end of that, it is brought out to us and said, ‘‘Here is the 

deal, up or down vote.’’ And, by the way, there is no down vote 

here. There is no alternative. We are just handed the thing. 

So rather than revile each other over not passing a budget, I 

think the sensible thing to do is to look back at how we make this 

process work. And the only transparent way you get to a budget 

is through this Budget Committee. So if this Budget Committee is 

a nothing, which it more or less is right now, then we are not going 

to have transparency. And the appropriators are going to run the 

show, and they are going to make the decisions. And they will roll 

through any budget because they will have the 60 votes, and that 

is going to be what continues. 

So the Chairman’s focus on this to try to remedy the process behind it I think is commendable and I think puts us in a better posiVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00308 Fmt 6601 Sfmt 6601 E:\HR\OC\A333.XXX A333

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tion than pointing fingers at each other, whether we did or not 

pass a budget in a circumstance in which the budget was already 

agreed to. 

So thank you, Chairman. 

Chairman ENZI. Thank you. And I think one of the challenges for 

this Committee, we have a little card that is here that outlines 

some of the points of order that can be taken against things as they 

come up, which, of course, as you point out, only takes 60 votes to 

overcome it. But my hope is that we can stay with the November 

deal. I think there will be a lot of opportunities to violate that, and 

that is going to be my major task this year—well, that is going to 

be my secondary task because my major task is to come up with 

some reforms that we can agree on that will actually do what you 

said: provide the transparency and make this a very meaningful 

Committee that will help to set some national priorities. 

Senator WHITEHOUSE. And I would note for the record that under 

the Chairman’s leadership there has been considerable bipartisan 

support and interest. We do not have agreement exactly on what, 

but there is certainly significant agreement that something needs 

to be done and that in good faith there is a lot that we can do together. So thank you. 

Chairman ENZI. Well, I think we are progressing toward coming 

up with the solutions and then getting together and seeing what 

we can actually accomplish. 

Senator WHITEHOUSE. Yes, sir. 

Chairman ENZI. The sources of the budget dysfunction are not 

new. Both parties are guilty of adding additional uncertainty, so it 

is ripe for abuse. And the process is not a substitute for good policy, but a functional process would be a constructive venue for us 

to start with. And I am pleased that we have these witnesses today 

to help us a little further along down the road. 

We have Dr. Kevin Hassett, who is the director of economic policy studies at the American Enterprise Institute. He is a senior 

economist on the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia University Business School. He also served as a policy consultant to the U.S. Department of the Treasury during the George 

H.W. Bush and the Bill Clinton administrations. 

Dr. Philip Joyce is the senior associate dean and a professor of 

public policy at the University of Maryland School of Public Policy. 

He has 12 years of experience in public service, including 5 years 

at the Congressional Budget Office. In 2012, he published a report 

entitled, ‘‘The Costs of Budget Uncertainty.’’ 

Our third witness is Norman Ornstein, a resident scholar at the 

American Enterprise Institute. He is also a contributing editor and 

a columnist for National Journal and The Atlantic. 

So I thank you for joining us today to share your expertise on 

this important subject, and, of course, at the conclusion of the day, 

those who are not here and those who are can also submit questions that we hope you will answer. I try to save some of my accounting questions for doing them in writing. 

So thank you for being here. Dr. Hassett. 


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STATEMENT OF KEVIN A. HASSETT, PH.D., DIRECTOR OF ECONOMIC POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE 

Mr. HASSETT. Thank you, Mr. Chairman and Senator Whitehouse and other members of the Committee. It is really an honor 

to be back here. 

I have been working on one aspect of this problem for most of 

my career, and the focus of much of my academic research has 

been trying to quantify policy uncertainty and then investigate 

what the impact of policy uncertainty might be. My testimony, 

which, as I am wont to do, often is much longer than I could possibly discuss in 5 minutes, and so I will summarize the main points 

briefly. 

I think that there has been an explosion recently in academic 

work that has found that policy uncertainty is a big negative for 

the economy, and in my testimony, I discuss some of the evidence 

and also try to make it intuitively appealing so that folks can understand why it happens. 

Uncertainty can basically go up in any setting if the odds of different things happening move towards 50/50. So if it is a 100-percent chance that something is going to happen, it is not that uncertain; if it moves towards 50/50, then it can be very uncertain. 

Uncertainty can go up if the set of things that might happen get 

farther and farther apart, so imagine if, you know, one party wins, 

then the tax rate is going to be really high; if another party wins, 

the tax rate is going to be really low. And the disagreement about 

the tax rate goes up over time so that the tax rates that might happen if there is an election get farther and farther apart. 

Those are the kind of things that can drive up uncertainty, and 

if you watch the political climate in the U.S. and how it has 

evolved over the 17 years that I have been at AEI and a colleague 

of Norm’s, then one of the things that we have seen is that the parties have gone pretty efficiently towards having a 50/50 chance of 

winning quite often. And it seems to me that often their policy positions have grown farther apart. And so that the impact of policy 

uncertainty is something that one should really take seriously. 

In the literature, we find that the heightened policy uncertainty 

that we see is a big, identifiable negative effect on the economy, 

and on page 4 in my testimony, if you have it with you—otherwise, 

I could just walk through it—I show some of the evidence from the 

literature where some University of Chicago and Stanford economists have developed a measure of uncertainty. In my chart, I 

show how the policy uncertainty evolves over the political cycle. It 

tends to peak in a Presidential election year—go figure—and has 

a really big statistically significant negative effect on risk spreads. 

And so if you are a somewhat risky borrower, then it costs you a 

lot more to borrow money, and equity prices tend to go down with 

policy uncertainty is high as well. 

That chart actually helps you understand what policy uncertainty does, how it affects the economy, because suppose that you 

wanted to borrow money to do something at a time when spreads 

are wider, well, then, it is going to cost you more, so you might do 

less of it. But there is another factor in the literature that is equally or maybe more important, and that is that when there is a lot 


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of uncertainty, then people who maybe are deciding to buy a car 

or build a factory tend to want to wait and see. And so if you are 

thinking about whether you are going to expand your business 

right now, you might really be worried about doing it until you see 

what happens in November. And so you could see capital spending 

dropping a lot when political uncertainty is high. 

That is kind of where the effects come through, and I talk about 

that in my testimony. And in the end of that section, I also talk 

about the fiscal cliffs and debt limits. We have got a little bit of 

evidence on those and show that the risk spread effect that we see 

over the Presidential election cycle is actually a little bit magnified 

near big budget showdowns. 

And so this policy uncertainty is something that you could have 

an effect on. If we knew that policy was going to be pretty much 

set going forward and that there were not going to be fiscal cliff 

showdowns, then risk spreads would go down. There would be more 

investment. And it would be less likely that somebody might wait 

to get across a threshold in order to do their investment. 

But if we are in this world where we are having a fiscal cliff 

every other year and policy might swing willy nilly, depending on 

what happens at the election, then you are going to see a lot of 

waiting to see what happens in the next election. And so almost 

every other year, economic activity could be very much suppressed 

because of policy uncertainty. 

In the last part of my testimony, I talk about long-run policy uncertainty, and, again, this circles back to, Mr. Chairman, your main 

point here, which is, What could we do to address policy uncertainty both in the short and the long run? And there is a lot of evidence that if you have a fiscal consolidation—so that right now we 

all know that looking out 40 or 50 years that we are not really 

looking at sustainable fiscal policies. If you have a fiscal consolidation, something that makes long-run policy sustainable, then you 

reduce a lot of long-run uncertainty. Right now you are probably 

not rushing out to invest in a new factory in Greece because you 

do not know how that government is going to work it out. We are 

not Greece yet. But if you look off into the future, then maybe people will start to think about it that way, too. 

The evidence is that if you fix long-run situations, then you do 

not necessarily have the negative effect you might expect from tax 

increases and spending cuts, and I think that the main reason that 

probably happens is that uncertainty, the reduced uncertainty, offsets those effects. 

And so near-term uncertainty tends to be something that is related to fiscal cliffs. Long-term uncertainty is something that is related to big, unsustainable shortfalls. I think that if this Committee could take the lead in addressing both, the economic benefits could be significant. 

Thank you. 

[The prepared statement of Mr. Hassett follows:] 


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Chairman ENZI. Thank you. 

Dr. Joyce. 

STATEMENT OF PHILIP G. JOYCE, PH.D., PROFESSOR OF PUBLIC POLICY AND SENIOR ASSOCIATE DEAN, UNIVERSITY OF 

MARYLAND SCHOOL OF PUBLIC POLICY 

Mr. JOYCE. Thank you, Mr. Chairman, Senator Whitehouse, 

members of the Committee. I first want to congratulate the Committee for deciding to highlight the subject of the apparently invisible, yet insidious, effects that budget uncertainty creates for both 

Federal agencies and recipients of Government funds. My comments are going to be informed by 25 years of participating in and 

watching the budget process, but also, as you noted, Mr. Chairman, 

a report that I wrote in 2012 for the IBM Center on the Business 

of Government. I also would recommend to you some work that 

was done by GAO in 2009 which also documents some of these effects. 

You have already done a very good job of talking about the 

failings of the current budget process, so I will not talk about that. 

But I will say that my main point is that Government shutdowns 

get all the press, but Government by continuing resolution is perhaps more harmful because it is more routine. 

Budgeting is about planning for the future. Any organization, 

whether it is the Federal Government, State and local government, 

or business, needs to have some notion of the funds that it will 

have available and when those funds will be available in order to 

effectively manage. 

My testimony talks about some negative effects on people who 

get money from the Federal Government, but in my oral statement, 

I would like to focus on some of the main consequences for Federal 

management and for the cost of providing services. 

First, budget uncertainty disrupts service delivery. Agencies engage in hiring freezes. That robs high-priority programs of staff because employee turnover does not occur equally throughout an 

agency. Further, there are often furloughs. Furloughs lower morale. 

Lower morale encourages employees who have other options, who 

are the ones that we least want to lose, to leave Government, 

which robs us of some of our best employees. 

Second, CRs freeze priorities in place. Agencies have difficulty responding to new threats and problems and are required to keep 

funding outdated or ineffective programs. 

Third, CRs may require governments to engage in short-term 

contracting as agencies have to often squeeze 12 months of contracting work into perhaps less than half a year. Moreover, it is 

widely believed that many contractors dealing with the Federal 

Government include what I would call a ‘‘risk premium’’ in the rate 

that they charge for contractual services because they cannot negotiate reliable multi-year commitments without some fear of funding 

interruption. 

Fourth, agencies spend a lot of time preparing for potential Government shutdowns and CRs and then complying with them after 

the fact. In my view, this is a complete waste of time. 

Finally, agencies defer investments in either people or physical 

assets, which I think compromises their effectiveness and leads to 


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higher future costs. For example, there have been in the past measurable reductions in training in the Department of Defense because 

they are operating under CRs and do not know how much money 

they are going to have or when they are going to have it. 

What to do then? I would first say that many of the same people 

who decry waste in Government are themselves contributing to 

that waste by failing to provide a predictable funding stream for 

Federal agencies and recipients of Federal funds. When State and 

local governments have funding delays—and we do not have to look 

any further than the States of Illinois and Pennsylvania right now, 

which went most of this fiscal year without a budget—it results in 

lower bond ratings, increased borrowing costs, and likely political 

fallout. There is no evidence that these market signals work in the 

case of the Federal budget process. 

The obvious point then is that the best thing that could be done 

would be to enact appropriations on time. That seems particularly 

unhelpful to stop there, so I have a few recommendations of things 

that might be done if we have to live with continuing resolutions. 

First, I think the Congress should give agencies more flexibility 

in spending. The first way to do this would be by increasing the 

percentage of money that is available on a multi-year or no-year 

basis, which would especially assist those agencies with lots of 

grant and contract funding. I also think the requirements imposed 

on some agencies to have spending plans approved by congressional 

committees are a costly luxury when appropriations are 3 or 6 

months late. 

Second, I would make it harder to pass continuing resolutions 

than it is to pass regular appropriations bills. This may seem like 

an odd recommendation as it increases the probability, at least 

theoretically, of a Government shutdown. My point is that perhaps 

if there was more urgency in enacting appropriations, it would increase the odds of them being enacted sooner. And as I suggested 

earlier, Government by continuing resolution routinely might be 

worse than a Government shutdown. 

Third, if we are to have CRs, I think they should be limited to 

only one or two per year that do not extend past the end of the calendar year. All CRs are not created equal. It matters how many 

there are, and it matters how long agencies have to operate under 

them. Problems created by multiple CRs—and there have been as 

many as 21 in a single year—or CRs last 4 months or 6 months 

are well documented. 

So in the end, funding delays have costs. Those are financial 

costs and costs felt through compromised Government effectiveness. Either way, these are completely self-inflicted wounds, and I 

congratulate the Committee for thinking about what it is that we 

might be able to do to reduce their effects. 

Thank you. 

[The prepared statement of Mr. Joyce follows:] 


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Chairman ENZI. Thank you. 

Dr. Ornstein. 

STATEMENT OF NORMAN J. ORNSTEIN, PH.D., RESEARCH 

SCHOLAR, AMERICAN ENTERPRISE INSTITUTE 

Mr. ORNSTEIN. Thanks so much, Mr. Chairman. It is a real privilege to appear in front of this Committee and with a group of people, some of whom I know quite well, who are always working to 

be a part of the solution and not just a part of the problem. 

As my colleagues have said, this is not simply a failure of process 

and deadlines. There is real damage to the economy and, just as 

important, to effective governance. We take our Federal managers 

basically, and it is like putting bags over their heads and handcuffs 

behind their backs when you cannot even begin to operate knowing 

whether you are going to be shut down or open or whether you are 

going to have money for the next month, much less for the next 

year. 

Now, I come to you as a scholar who has also worked inside the 

Senate on reform issues over many decades with Senators of both 

parties. In fact, 40 years ago, I was a staff director for a committee 

that reorganized the Senate’s committees, one whose formal name 

still makes me cringe: The Senate Select Committee to Study the 

Senate Committee System. [Laughter.] 

And I worked with Adlai Stevenson, with Gaylord Nelson, with 

Barry Goldwater, Bill Brock, Pete Domenici, all absolutely wonderful people. And we had some success. We streamlined the system. 

We reduced the number of committees and assignments and modernized the information systems. But I have to say, as I look 

around the Senate, it is not as if this is now a wonderful, efficient 

body working on all cylinders. And that experience, along with 

some others in the reform world, left me with at least some level 

of skepticism about the limits of reform. And we have talked 

some—and Professor Joyce in his excellent paper and long testimony as well—that, of course, back when we did the Budget Impoundment and Control Act, we changed the fiscal year from July 

1 to October 1 because we were not getting appropriations done on 

time and figured the extra few months would make all the difference. And as you can see from the chart that you put up, Mr. 

Chairman, it did make a difference. It made it worse. Having the 

extra time was not effective in a political process where everything 

would come down to end-game negotiations. So that is a cautionary 

note, at least. 

As Senator Whitehouse said, we could go on about the impact of 

doing or not doing budget resolutions. I am less concerned about 

that right now. But to get to a point now where a broad bipartisan 

budget deal like the one we recently enacted—you recently enacted 

is held hostage in the House by a small ideologically driven faction 

is simply cringe-worthy for anyone who wants to see a functioning 

legislative process making rational decisions. 

So let me talk about a few things that might be done or might 

not be done, and I want to offer one other cautionary note, which 

is looking at the process that created the sequester. This is one 

that was done so that you could have an alternative so horrific that 


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we would never even possibly consider doing it and force action in 

the real world by avoiding catastrophe. 

Well, we have catastrophe right now, and that suggests to me 

that we need to be a little bit careful, and that is why, while I 

agree very much with many of Professor Joyce’s recommendations, 

including especially if we are going to do continuing resolutions 

they ought to have inflation adjustments built into them, things 

that would push for action because the alternative would be horrific are not necessarily going to work. A few recommendations. 

The first, and one I would emphasize most, is we have got to do 

something about the debt ceiling debacle that we keep going 

through over and over again. I was especially disturbed last year 

when CNN reported that Representative Jason Chaffetz, who was 

then running to be Speaker of the House, said in an interview that 

Republicans should be prepared to see a debt default and a Government shutdown in order to pursue their party’s agenda. Playing 

games with a debt ceiling is playing with nuclear weapons, and I 

strongly recommend that you use the McConnell rule, as it was 

called, twice used before, and institutionalize it finally, and let the 

President have responsibility for increasing the debt ceiling and 

have Congress with the ability to disapprove it with a resolution 

that could be vetoed. Take this issue off the table, because we are 

playing with fire with a global economy. 

Now, one other recommendation that I would make is that we 

consider going back—this is the one effective reform that it seemed 

to me worked extraordinarily well in the 1990s and it was pay-asyou-go budgeting. When we had a process where, if you increased 

spending, you had to find an offset with revenues or with other 

spending, it worked, and it worked well. Taking it off the table was 

one of the worst things that Congress has done, and I strongly urge 

you to bring it back. 

And then, finally, let me say the problem we have here has structural elements, but it is not a structural problem. It is a problem 

of the norms of governing that we have right now. And now you 

have a perfect chance with a good, constructive 2-year budget deal. 

I wish that in that small room the ‘‘White House’’ who had been 

there was Senator Whitehouse. But the fact is you have got a good 

deal. And if the House cannot do what it is supposed to do, if the 

Senate moves and stays within the boundaries of that deal, you are 

setting an example, and maybe you can begin to change the norms 

of behavior around here, which is the real problem in our political 

process. 

Thank you. 

[The prepared statement of Mr. Ornstein follows:] 


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Chairman ENZI. Thank you. I thank all three of you for your 

comments and for your written testimony, and your entire written 

testimony will be a part of the record, and I appreciate the items 

that are in there as well. 

Senator Whitehouse and I have agreed to defer on our questions 

so that those of you who showed up can have an opportunity here, 

so we will begin with Senator Corker. 

Senator CORKER. Thank you, Mr. Chairman. I do that a lot on 

the Foreign Relations Committee. And I appreciate, first of all, 

your leadership on focusing on budget reforms, and I appreciate the 

opening comments of Senator Whitehouse, who generally agrees 

that we need to figure out a way to reform the process. And I want 

to thank David Perdue, a new Member of the Senate, for his efforts 

on both sides of the aisle to try to create a process that works, and 

then say that I lobbied to be on this Committee. And after being 

on it, I have to say our budget process is the biggest hoax cast upon 

the American people and Congress that I have ever been a part of. 

And to vote for a budget challenges one’s integrity and certainly 

one’s intellect. 

The fact is we say grace over about 30 percent, 33 percent of the 

spending each year. We put in place assumptions that are never 

going to be reality and have no policies whatsoever to back them 

up. 

So I thank the Chairman for his leadership in changing that because, again, it is a shame that the American people even believe 

there is a budget process that has something to do with fiscal discipline. As a matter of fact, because it is a political document—and 

when Republicans are in charge, we stress Republican priorities, 

and when Democrats are in charge, they stress Democratic priorities—we actually spend more. It actually causes us to spend more. 

So I want to thank all involved for the process. 

Let me just ask the panel, you know, right now the budget is a 

resolution. It is not a law. Not a law. So we are never forced to 

make the difficult decisions that need to be made where both sides 

have to come together. Whoever is in charge just passes a budget 

with no real input from the other side. 

Would the three of you agree that we would be much better off 

if the budget was an actual law that forced the two sides to have 

to get together and make difficult decisions about the future of our 

country? 

Mr. JOYCE. Let me start by saying that I agree that if the budget 

had more teeth, it would be a better thing. My concern about making the budget resolution a law is that we already have enough 

trouble getting the House and the Senate to agree on a budget resolution. If we involved the President, it might just increase the 

chances that you would end up without a budget resolution. 

Senator CORKER. Would it not make sense for everybody on the 

front end to agree to the tough decisions? There is no forcing mechanism right now. None. The fact is we spend money we do not 

have. Angus King and I had dinner once, and he was asking me 

if a tax decrease when you have a deficit is really a tax decrease. 

It is really not. It is a tax increase on future generations. 


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So, in essence, there is no forcing mechanism to force the two 

sides into making tough decisions, and so as long as it is a resolution, it has no real impact. We have budget waivers. 

What is the forcing mechanism? What is the forcing mechanism 

around here to force Congress to deal with the fact that when this 

meeting ends, our Nation is going to be less well off than it was, 

it is going to be a weaker Nation because we do not have the forcing mechanism—or maybe it is courage—to actually address the 

issues that we need to address? Name a forcing mechanism. 

Mr. ORNSTEIN. Well, reconciliation in some ways is the forcing 

mechanism. It is a very, very, very bad one, an imperfect one. But 

I think, you know, the problem, if you make it a forcing mechanism, is that it is then going to be a law that will have to go to 

the President. And that can be vetoed, and you are going to have 

some difficulties. 

And what I would suggest, Senator Corker, is really go back and 

think about the pay-as-you-go mechanism that we had in the 

1990s. Study it and look at it, because that was a forcing mechanism. And it was—if you want to increase spending in one area, 

you are going to have to find an offset. 

Now, it was taken out because the offset included the ability to 

increase revenues to make that offset and not just cut spending in 

another area. But the fact is it brought forcing a discipline to the 

process. 

Senator CORKER. Well, let us talk about that—— 

Mr. ORNSTEIN. There is a way to do it, and not necessarily with 

a budget resolution. 

Senator CORKER. Well, first of all, thank you and I appreciate 

your many contributions in so many areas and the way you have 

worked with our office. Let us talk about PAYGO. So you spend 

money for 1 year on something, and you pay for it over 10. Now, 

is that rational? That is the way PAYGO works. It is a hoax. 

We should be ashamed—ashamed—that the way we deal with 

Americans’ money—but let us go back. Again, PAYGO, is that a 

sane process where we are going to spend $10 billion this year, but 

we will pay for it over 10—by the way, with a bunch of gimmicks. 

But is paying for money you spend in 1 year over 10 a sane way 

of doing business? 

Mr. ORNSTEIN. I am very happy to cut a deal where you pay for 

it the same year that you—— 

Senator CORKER. I could not agree more. I could not agree more. 

Mr. ORNSTEIN. And that would be just fine. So it was imperfect 

the way it was done, but it did bring discipline. 

Senator CORKER. My time is up. I appreciate the testimony. 

Chairman ENZI. Thank you. 

Senator Murray. 

Senator MURRAY. Thank you very much, Chairman Enzi. Thank 

you to Senator Whitehouse for standing in as Ranking Member 

today. 

I also want to thank all of our witnesses who are here today, but 

before I ask my questions, I think it is important to put this hearing in some context. It was not too long ago that Congress was 

pushing our country from one crisis to another, one artificial cliff 

to the next, debt limit scares, threats of across-the-board cuts. And 


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then as we all know, in 2013 a minority of Republicans pushed us 

into that 16-day Government shutdown that hurt the economy, disrupted the Government’s ability to serve families across our country, and made a lot of our constituents doubt that Congress could 

work together to do the job that we were elected to do. 

So I am very proud that after that Government shutdown ended, 

then-House Budget Committee Chairman Paul Ryan and I were 

able to sit down in a conference and work to get our budget process 

back on track. We knew we were not going to be able to solve every 

one of our budget challenges then, and we knew there were some 

deep partisan divides over core budget issues that we were not 

going to bridge right away. But we both agreed we owed it to our 

constituents and to our country to find a way to work together, 

make some compromises, and reach an agreement. And with the 

help of many of our colleagues here on this Committee, now-Speaker Ryan and I reached that 2-year budget deal that prevented another Government shutdown. It restored investments in education 

and health care and research and defense jobs and other middleclass priorities and really showed the people across the country 

that their Congress can work together and get something done. 

Now, after that 2-year budget deal ended, we built on it at the 

end of 2015 with another bipartisan agreement that once again restored the across-the-board cuts and allowed the Appropriations 

Committee to now do their work. So we are in a better place than 

we were just a few years ago, but there are significant challenges 

ahead of us. 

Some members of the Republican Party, especially in the House, 

now want to ignore that bipartisan deal of a few months ago and 

force additional massive cuts that we know will hurt our workers 

and our families and the economy, and there is no so much disagreement between Republicans in the House and Senate, they 

may not even pass a budget this year—I would say despite sending 

many messages when Democrats were in charge about how important it was to pass a budget every year. I just have to say this: ‘‘No 

budget, no pay’’ came from Republicans. Now that you are in 

charge, we do not hear that. But I understand. It is always easier 

to be in the minority than the majority around that. 

But, still, given the dysfunction that we are seeing this year, it 

is not surprising we are here to talk about the budget process as 

if the process is somehow responsible for the Tea Party and the 

Freedom Caucus. 

But a lesson I took from my deal with Speaker Ryan is that we 

need more than process changes to get this budget back on track. 

We need Members of Congress to understand that the only way we 

can work for our constituents is by working across party lines and 

actually trying to get something done. Partisan budgets that make 

those dramatic cuts on paper to appease one side or the other have 

no basis in reality of making sure Government actually works for 

the families we serve, and it is the wrong approach. We need to 

take the lessons from what has worked and work together to put 

families and the economy before politics and partisanship. 

But as we are here today to discuss these process issues, I am 

going to be very focused on making sure we do not make changes 

that actually hurt the ability to invest in non-defense priorities or 


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call on the wealthiest Americans or largest corporations to pay 

their fair share. And I believe that even though our 2-year budget 

deals show how multi-year budgets could work to encourage bipartisan agreements and avoid artificial crises and increase certainty 

in policymaking, we should not set aside the important oversight 

role that Congress does play through the annual appropriations 

process and the ability for Congress to use the power of the purse 

each year to examine and to challenge and to reassess the needs 

of our agencies and our programs. 

So I just have a few seconds left. I am sorry. But I want to just 

start with Dr. Ornstein. What can Congress, and specifically this 

Committee, do to build on the foundation laid down by the MurrayRyan budget deal 2 years ago? 

Mr. ORNSTEIN. I really commend you for that deal, which really 

was an extraordinarily constructive act that you and Speaker Ryan 

did. 

Let me say first the no-budget, no-pay idea is one of the 

stupidest things I have ever heard, even though it actually came 

from Senator Corker’s colleague and my friend, Jim Cooper, first. 

But the idea that you do collective punishment and give enormous 

leverage to the wealthiest Members of Congress who do not care 

if they do not get paid just does not make a lot of sense. 

But it seems to me that what we need in that case is not a structural change so much as it is right now a massive commitment, 

from not just the Senators in this room but everybody else, that 

you are going to take the model there and the model from this new 

deal and you are going to put through appropriations bills on time 

that fit the budget framework and send them as quickly as possible 

over to the House. And then we can put public and other pressure 

on the House to do what it is supposed to do. 

This is a breach of norms as much as anything else. These other 

structural changes, we should be thinking about making them, but 

right now, in the short run, it is that. 

Senator MURRAY. Okay. And I am out of time, and I apologize, 

Mr. Chairman. But I look forward to hearing your responses in 

writing, so thank you. 

Chairman ENZI. I thank you for your comments and took from 

that a suggestion that we do biennial budgeting. 

Senator MURRAY. As I said, I want to be very careful that we 

look at the appropriations process and recognize that the oversight 

work we do each year in Committee and evaluate whether, you 

know, we have got an appropriations bill with a program that, you 

know, should not be funded anymore, we do not lose sight of that 

in a 2-year budget deal, that we have the ability every year to analyze this, Members of Congress, whether something is working, and 

eliminate it or add to it, if we all agree to. 

Chairman ENZI. One of the suggestions we had last week was 

that we become a National Priorities Committee instead of a Budget Committee and concentrate more on that oversight area where 

people are not doing it. 

Senator Perdue. 

Senator PERDUE. Well, Mr. Chairman, you know, in these hearings, I am amazed. I continue to be just absolutely dumbfounded. 


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First of all, I want to congratulate you and Senator Whitehouse. 

There is something going on here that I want to comment on very 

positively, and that is, I sense a sense of bipartisanship in this 

Committee. I look at the members who are here. Most of them who 

are here are generally at these hearings about changing the budget 

process. I want to applaud Senator Murray for her prior work and 

focus on this. And, Senator Whitehouse, God help me, it sounds 

like he and I are agreeing on a lot of things in the last few meetings about how to move forward. [Laughter.] 

Senator WHITEHOUSE. You better go check with your staff. 

Senator PERDUE. Yeah, really. [Laughter.] 

But having said that, I want to make a couple comments. 

First of all, there is $6 trillion not in this economy right now be- cause of our malfeasance—$2 trillion sitting overseas in 

unrepatriated tax; $2 trillion on bank balance sheets—we could 

argue why it is there, but it is there, the largest history; and $2 

trillion on Russell 1000 balance sheets because of the uncertainty 

you gentlemen talk about. 

I am just a dumb business guy, but I can tell you, it is real. I 

would not invest in this environment. And they are not. And that 

is a huge drag on this economy. We have got two Governors sitting 

right across from us, and they both have run great governments 

and in fiscally responsible ways. 

What we are doing right now, we have no planning, no capital 

budget, no balance sheet. We have cash accounting and accrual accounting in different parts of our Government. We have a DOD 

which is the single largest budget, I think, outside of the mandatory expenditures. We cannot even audit it. 

Call Wal-Mart and explain to them it is okay to call he SEC next 

year and, say, ‘‘By the way, we are too large to be audited. We will 

see you next year.’’ It cannot happen, right? 

This is unbelievable. We have a budget process that has only 

worked four times in 40 years. That is not a partisan statement. 

Four times in 40 years. I apologize, Dr. Ornstein. I know you were 

part of that. But honest to God. I have read every word of this a 

couple of times. I cannot see how this could ever work. And it only 

worked four times in 40 years. 

It is time that we do, I believe, a clean-page approach to this. 

This is not about tweaking around the edges. This has a fundamental flaw, and that fundamental flaw is this: We have a budget 

resolution that requires 51 votes. 

Now, I have got to tell you, both sides are guilty of doing this, 

and it is going to continue. It is not going to stop by somebody’s 

good behavior. I think we have to change that from a budget resolution to a budget—so what happens with 51? The majority crams 

down the throat of the minority every year a budget. Then we go 

to authorization. When was the last time, Mr. Chairman, we authorized anything in this Senate? I cannot remember. In 13 years, 

we have not been able to get a State Department reauthorization. 

I know that fact. 

So then we push it to an appropriation. Why would a minority 

ever let the majority cram down an appropriation in its entirety 

when it can wait and get a CR and go into an omnibus conversation that Senator Whitehouse just perfectly described? Why would 


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a minority ever do that? We did not do it when we were in the minority. The Democrats do not do it when they are in the minority. 

Look, Madison did a great job of protecting the minority. He did 

a great job. Here is one problem where we have got to change that, 

in my opinion. And I could not disagree more with the idea that 

there are not severe consequences to the people in this room and 

the people in the United States Senate if we do not fund the Government. This is not a budget process. It is a funding process. 

We get confused here this year thinking we have—I have heard 

leaders of the Senate talk about we are in a budget process because 

of the appropriation process that we are about to start. That is not 

it. Budget authorization appropriation really does not work. It is 

the only institution I can find in the world that basically does those 

three steps in a discrete manner. We have looked. And what I 

think has to happen is that we have got to have severe consequences for not funding the Government in an appropriate 

amount of time. I think the fiscal year does need to be changed. 

I can make a large argument right now that every new Congress 

starts 3 months behind. And we have got an appropriation process 

that takes too long, too much calendar time with the rules of the 

Senate to do 12 individual bills. 

This, gentlemen, I want to submit it to the record. This is what 

we have right now from a Committee structure. It has been 

changed over the years, but we have about 16 authorizing committees that do not authorize, and we have 12 Appropriations Committees over here—and, by the way, there are very few—I cannot see 

but one—well, there is not one. There is not a one-to-one relationship between any funding committee and any authorizing committee. Not one. Now, that is wrong. 

We have got to start somewhere, and I really believe that what 

we have an opportunity to do right now this year, because of what 

the Chairman has said—Senator Murray alluded to it. Senator 

Whitehouse said it a week ago in another hearing, and he repeated 

it today. I think we need to have a nonpartisan conversation about 

a party-neutral process to fund the United States Government. 

I see heads shaking. I know you have tried to do that. But the 

thing that breaks down here is that we want to put issues on it 

like spending caps. I agree, we need to have that debate. We need 

to have things about discretionary spending. I agree 100 percent. 

There are programs we have got to protect. We have got to get 

mandatory into the conversation. How can we call ourselves funding the Government if we do not talk about every dollar that the 

Federal Government spends? 

So these are fundamental guiding principles that I believe we 

can find commonality if we keep the party partisanship out of here. 

And my question to you guys is basically—Dr. Ornstein, I respect 

your work so much. I have read much of it. All of you have great 

pieces of work, great thoughts in here, and have made huge contributions. We need your help. You do not have time to answer this 

question, but I would love to have you respond to this question in 

writing. Give us a one-pager of your priorities of a clean-page approach that could help us—you know we are going to have partisanship here. There is no way to get around that. We are going 

to have a majority; we are going to have a minority. We are going 


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to have all the human frailties. But sooner or later, we have got 

to have a process where we can fund the Government. 

I apologize. I really had some really good questions, but this is 

the one I would love for you to respond to: How would you approach a clean-page approach? I would love to have that for the 

record. Thank you. 

Senator PERDUE. Sorry, Mr. Chairman. Thank you. 

Chairman ENZI. And we will allow you to submit your other 

questions as well or stay around for a second round. 

Senator PERDUE. Thank you, sir. I appreciate it. 

Chairman ENZI. Sure. Thank you. 

Senator King. 

Senator KING. Well, I first want to begin by associating myself 

with Senator Perdue’s comments. I think he has outlined the problem magnificently and dismally. It is not a happy picture. 

I also want to take off on what Senator Corker mentioned. When 

you include tax expenditures, we are really only fighting here 

about one-fourth of the budget. We are spending all of our time on 

really one-fourth of the Federal budget when you include mandatory expenditures and tax expenditures, which most economists 

consider the same as expenditures. And that really makes the process even more sort of puzzling that we are—my mother used to say 

we are straining at gnats and swallowing camels. And that is essentially what we are doing. So that is number one. 

Number two, it seems to me that whatever process we devise has 

to be forward-looking in terms of long-term impacts and long-term 

trends. If you project out current expenditures in the mandatory 

area, it basically squeezes out all of the discretionary budget over 

the next 20 to 30 years, particularly if you maintain a tax cap, 

what amounts to a tax cap. 

PAYGO I think did work, largely, in the 1990s. I do think if it 

is going to be applied, it has got to be applied both ways. It has 

got to apply to both expenditures and tax cuts. Otherwise, you end 

up in the same kind of hole that we are in now. 

On the debt ceiling, I have always thought that there should be 

a kind of automatic debt ceiling extender in spending bills because 

right now we are allowed to have it both ways. We can vote for 

spending bills and brag about the consequences back home and all 

the good spending that we brought home to the local airport or 

sewer plant, and then vote against the debt ceiling and call ourselves fiscal conservatives. If you vote for the expenditures, you 

ought to be at the same time voting for an extension of the debt 

ceiling, because that is what you are doing when you make those 

expenditures. As we all know, the debt ceiling is an easy issue to 

confuse people about. The debt ceiling is to authorize the borrowing 

to pay bills that we have already incurred, that we have already 

spent. So when we do the spending, it seems to me that is when 

we ought to do that, and it would take that nuclear weapon off the 

table and I think improve things significantly. 

Norm Ornstein, you have nodded several times. Do you agree on 

PAYGO, that it has to work both ways? 

Mr. ORNSTEIN. Absolutely. It does not work unless it works in 

every direction. And I agree with Senator Corker that you cannot 

basically manipulate it so that you are spending in 1 year and then 


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you are taking 10 years and stretching it out and using all kinds 

of gimmicks. But it has got to work with taxes as well as it does 

with spending. 

Senator KING. I was amazed when I got here that somehow, 

when you get inside the Beltway, the law of net present value does 

not apply. There is no concept of net present value. A dollar saved 

10 years from now is equal to a dollar spent today, which, of 

course, any businessperson or economist will tell you is absolute 

nonsense. But that is something that we really ought to be talking 

about, is applying net present value concepts to this whole PAYGO 

idea. I think PAYGO ought to be a year-to-year deal. 

Mr. ORNSTEIN. And in an ideal world, you would not even have 

to have a debt ceiling debate or issue. It is absolutely something 

that you build into spending or into—as we actually did for a few 

years with what was called the ‘‘Hoyer rule’’ in the House, where 

it was automatically extended when you did a budget deal, because 

you are making those decisions. 

There are some things that could be done here that would make 

a difference, and I cannot think of anything that would make more 

of a difference than if you devised a PAYGO package that was honest and real and disciplined. And I do not think it is impossible to 

do that. 

Senator KING. And if you did that, you would not be necessarily 

in a balanced budget because it would depend on the baseline you 

started with, but you at least would not be making things worse. 

Then we need to talk about—and I hear no talk about this: How 

do we deal with the $18 trillion debt? I mean, balancing the budget 

would be nice, but we have still got an $18 trillion debt. And somehow we need to start talking about how that is reduced, and I do 

not know whether—I do not know what the mechanism is, but— 

perhaps economic growth is the answer. But we have got to be 

dealing with that problem in addition—I mean, getting the deficit 

to something close to a balance is ceasing to dig the hole. But it 

does not deal with the depth of the hole that we have already dug 

over the last 25 years. 

Thank you, Mr. Chairman. I yield the floor. 

Chairman ENZI. Thank you. 

Senator Kaine. 

Senator KAINE. Thank you, Mr. Chair, and thanks for holding 

this hearing. And to the witnesses, I appreciate your scholarship 

and your insights. And I have got to give a special praise to Dr. 

Joyce. When you have a University of Maryland professor who is 

spending as much time helping Arlington County, Virginia, as you 

do, with the school board and other—I have got to note that, and 

thank you for helping my Commonwealth. 

A story. So last Monday I decided to go and shine a spotlight on 

the National Park Centennial, and I went up to Shenandoah National Park to go on a hike with employees there. And I sat and 

had coffee with them for a while, went on a hike, and then had 

lunch with a bunch of community leaders. When the superintendent of the park stood up, he said, ‘‘Not only is Tim Kaine a 

great friend of the parks’’—and I do a lot of things in the parks. 

He said, ‘‘But, Senator Kaine, thank you for that 2-year budget. 


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Thank you for two 2-year budgets in a row. You have given us 

some certainty that we need.’’ 

We have done two 2-year budgets in a row. Now, they have got 

a lot of warts on them. It was kind of painful getting there. The 

first one only came after a shutdown of the Government, and the 

second one, arguably, required the retirement of a Speaker to get 

done. I am not sure we can count on that every year, on those 

kinds of cataclysms. But we have done two 2-year budgets in a row 

that have provided some certainty, and I am hearing it when I talk 

to the DOD on my Armed Services billet. When I talk to the Park 

Service, our internal folks are saying, ‘‘You have given us some certainty.’’ And when I talk to my outside community, the private sector community, they say, ‘‘Stick with the 2-year budget deal because you have given us some certainty.’’ And it looks like that we 

are kind of on track to stick with the 2-year budget deal. The allocations have been handed out to the various Subcommittees on Appropriations, and it looks like we are going to try to stick with the 

deal, which is great. 

You know, any Governor, mayor, we are kind of certainty fanatics. We want to give people some certainty, and they are not going 

to like everything they see. They are going to argue with us about 

all the line items. But they would rather have a line item that they 

did not like than have a big asterisk or a question mark. 

So I think part of what we need to do on the reform side is we 

are taking baby steps towards certainty, and we still have a lot of 

problems, but let us keep doing that. And I will say to Senator 

Murray’s point—she is gone—that that thank you from the NPS to 

me, they recognized we have done a 2-year budget and it is still 

single-year appropriations. But they are okay with that because 

they kind of get, once the first-year appropriation is done, as long 

as we stick with the budget deal, the second-year appropriation 

will be kind of range of reason, and that gives them enough to be 

able to predict about. So we can make this work. 

Here is a certainty thing I am interested in, and I am curious 

as to your thoughts about this. What is the forcing mechanism? I 

will tell you what the forcing mechanism is when you are a mayor 

or a Governor. I have been both, and I have had the same forcing 

mechanism both times, and it was simple. It was an agreement 

upon a debt management policy. 

The whole notion of debt as just a dollar amount is ridiculous. 

It is ridiculous. And that we have a debt ceiling thing set at a dollar amount, it is economically so unsophisticated. You have a debt 

management policy that is usually around total debt as a percentage of local, State, or national GDP and debt service payment as 

a percentage of the annual outlay. That is how we managed it as 

mayor; that is how we managed it as Governor. 

And the interesting thing was this was a bipartisan consensus. 

It was not a law. It was not a requirement. If we violated it, we 

were going to get downgraded in our bond, so that was sort of the 

umpire we were trying to kind of look at. But we agreed on the policy, and that left so much room for normal partisan debate. There 

is a policy. That is fine. How do you get to the policy? Then the 

Dems would argue we have got to have more revenue. The R’s 


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would argue, no, you have got to cut more. We would come up with 

an answer, but nobody questioned the basic policy. 

So I was quite surprised to get here as a Senator and find that 

there is really no debt management policy. We had a hearing about 

a year ago that the Chairman called, and the title of it was ‘‘America’s Dangerous Debt.’’ And when I asked all three of the witnesses, 

majority and minority, ‘‘Okay, America’s dangerous debt, what 

level of debt is dangerous? You tell me.’’ None of them would even 

give an opinion about what the metric should be to determine the 

line between acceptable and dangerous debt. We do not have a debt 

management policy. 

If you have a policy, you can provide plenty of room to argue, 

partisan or otherwise, about how to get there. But if you do not 

have a policy, it really means there is not a forcing mechanism. We 

would be much better off having a debt management policy expressed as ratios and scrapping the whole debt ceiling thing in 

terms of dollars. Because when we say to the American public we 

have $18 trillion in debt, they are going to freak out because that 

is a big number. But you can imagine the size of an economy where 

that level of debt would not be dangerous. Or you can imagine an 

economy where $1 trillion of debt would be super dangerous. The 

raw number is meaningless, but that is part of the hoax that we 

are perpetrating, we are managing by a meaningless number and 

refusing to develop meaningful measures. 

So I would be curious. States and Feds are different because 

States only use debt for capital, and Feds use, and should, national 

governments use debt for capital plus operations. But I think 

maybe I am just going to ask this for the record because I would 

like your considered thought: Could we have a Federal debt management policy? And in your expert opinion, what would it look 

like? And I am out of time, but I am going to ask that question 

for the record, and I would love to see your answers. 

Senator KAINE. Thank you, Mr. Chair. 

Chairman ENZI. Thank you. What a great bunch of suggestions 

and ideas. I have got a lot to kind of digest through the rest of the 

day and the week as we work toward next week. But I have got 

a few questions, too. 

Dr. Joyce, you mentioned in your testimony that late appropriations produce significant costs, and many of the Members of Congress, both Democrats and Republicans, have suggested moving to 

a 2-year budget cycle to provide certainty and stability in the appropriations process. 

Now, what we have actually talked about is a 2-year budgeting 

process, not a 2-year appropriations process. I want to make that 

distinction. What do you think that a 2 year appropriations cycle 

would do to affect the uncertainty? Do you think that would be a 

possibility based on your previous experience and study? 

Mr. JOYCE. Well, I would say that, you know, as you noted, I was 

at CBO for 5 years, and during the 5 years I was CBO, I probably 

wrote ten testimonies on biennial budgeting. So this is an idea that 

has been around for a while. And I have testified a couple times 

on biennial budgeting since then. 

I would say that on the topic of this hearing, which is certainty, 

there is no question that, as Senator Kaine suggested, knowing 


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what your number is for more than 1 year is something that is beneficial in terms of the management of Federal agencies. I think 

that the question that one has to ask is whether what is a biennial 

appropriations process on paper will end up being an annual process in fact. That is, will there be such big changes in what is theoretically the non-budget year, you know, that it sort of offsets the 

effect of that improvement in certainty. 

In terms of the biennial budget resolution, you know, you have 

to admit that it would be an improvement over what we have now 

because we do not even do a budget resolution every other year. So 

if you really sort of stuck to it, it would be a good thing. 

I do think that while we are in budget disequilibrium, as we are 

now, you have to admit that it would cost you the opportunity 

every other year to use the reconciliation process if you thought 

that is what was necessary in order to try to come up with whatever the big deal was that would bring the budget back into equilibrium. 

Chairman ENZI. Thank you. Of course, one of the suggestions 

was that reconciliation only be used for debt reduction, and the appropriators have all said, ‘‘It would be good to have a biennial 

budget, but do not make us do biennial appropriations.’’ And that 

is because everybody likes to give away money every year, and that 

is a part of the problem. 

Another part of the problem, of course, is if we go to biennial 

budgeting, probably the best time to do it would be right after an 

election. Right before an election, people are all concerned about 

whether they will get reelected if they are really tough on spending 

or taxes or anything. The difficulty with doing it right after an election is that every 4 years it will have just—a President will have 

just been elected who will not have had the Office of Management 

and Budget working for him and so will wind up with a document—it is about 2,500 pages, which I am not sure anybody ever 

looks at—that that President would not have put together. I am 

not even sure whether any President has looked at all of those 

pages that have been put together for him by the Office of Management and Budget. 

Senator WHITEHOUSE. Ever. 

Chairman ENZI. Ever, right. So getting the President into the 

process, one of the things that was suggested was having the President, instead of presenting all the numbers, present what he wants 

to achieve over his 4 years, and instead of budgeting for 10 years, 

budget for 4 years, and see how many of those priorities can be 

worked in there, both additions and subtractions, to get a PAYGO 

over a 4 year period, which would be more beneficial than a 2-year 

period. 

Would either of the other two of you care to comment on any of 

those comments? 

Mr. ORNSTEIN. I wrote a couple of things a few years ago on 2- 

year appropriations and a 2-year budget, partly at the urging of 

Pete Domenici, who was so ardent in this area, and he was such 

a good person that I decided I would do it, but with misgivings, especially about 2-year appropriations. 

I do not think 2-year appropriations ultimately will work because 

they just do not fit into the political needs of members. And you 


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end up with the end games that we always end up with, which is 

why changing the fiscal year, nice as it might be, is not going to 

effectively do very much. And the longer you extend those, the 

more games are going to be played with them, and the more adjustments will be made along the way. 

But having said that, I think what Senator Kaine said is powerful. And I would add, Mr. Chairman, if you do not mind, I really 

think we have to focus on how we can make the Government that 

we have work effectively and efficiently, and there are too many 

members who want to blow the whole damn thing up. And this 

goes beyond giving managers some certainty so that they can plan 

ahead. It also gets to how we are now cutting out every ability for 

people to do continuing education and training. We are cutting 

their pay or freezing it for years at a time. I think we have to have 

an even broader focus. 

Whatever size of Government you want—and we are going to 

have differences, all of us, as all of you will—what we have should 

work well. And there, 2-year planning clearly is a better idea if we 

can make it work somehow. 

Mr. HASSETT. Mr. Chairman, I would like to go back to what 

Senator Kaine said. My view is—and Norm knows this is something that I have been pushing for a while—that the right thing 

to do is to have an argument or a debate about what is the appropriate—what would a reasonable budget look like? What is the appropriate level of Government spending to GDP? What is the appropriate level of taxes to GDP? What is an appropriate trajectory 

for the deficit? And then you would—of course, we would not agree 

about the point estimates for that, but we might agree about a 

range. Like we do not want to have debt to GDP exploding. Maybe 

if it is above X percent of GDP, if it is above 20 percent of GDP, 

the spending, then that is something that I would not like. Or we 

could argue about it. But once we set those parameters, if the 

budget that you pass meets them, then it ought to be that continuing resolutions and debt limits happen automatically. 

I think that that is the way I would construct it, not lean on 

PAYGO, because then you guys could decide what you think is a 

reasonable budget, and then if a budget is passed that is reasonable, then all the things that we are worried about—again, we are 

talking about 2 years as opposed to 1 year, in part because we 

want to avoid the cliffs and the shutdowns and the games of chicken. But if the budget process basically has a debate, an honest debate, lots of hearings about what does a reasonable budget look 

like, and then you guys decide this is a reasonable budget, and if 

we meet those parameters, then we are not going to have those 

shutdowns, then I think that we will have improved the process. 

Chairman ENZI. Thank you. My time has greatly expired. 

Senator Whitehouse. 

Senator WHITEHOUSE. Thank you, Chairman. 

Let me make just a couple of points, and I think what we are 

trying to do is build a record here for us to get together. So if you 

will respond not only to the other questions but to these points, the 

first one with respect to the concern about continuing resolutions, 

if the appropriators are free to appropriate when authorizations either do not exist or are expired, then the CR becomes a very easy 


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thing to manage around. And so what the heck? So appropriations 

discipline should have some pushback into making continuing resolutions less awkward. On the other hand, if you are going to have 

to live by continuing resolution, it is practical to have the appropriators make those adjustments as you continue to bring kind of 

zombie programs over and over again through time. 

I assume you gentlemen know what the size is of the national 

debt. 

[Witnesses nodding heads.] 

Mr. JOYCE. Yes. 

Senator WHITEHOUSE. Give the number. 

Mr. HASSETT. I have got it right here in the chart I just—— 

Senator WHITEHOUSE. Give the number for the record. 

Mr. HASSETT. The debt held by the public as a share of GDP at 

this exact moment is about 78 percent—I am looking at a chart, 

a graph. 

Senator WHITEHOUSE. In dollars? 

Mr. HASSETT. Excuse me? 

Senator WHITEHOUSE. In dollars? In trillions of dollars? 

Mr. HASSETT. Oh, now we are testing me a little. Yeah, so—— 

Senator WHITEHOUSE. I have it as 19—— 

Mr. ORNSTEIN. $18 trillion, I think? It is somewhere around $18 

trillion. 

Senator WHITEHOUSE. Yeah, $18, $19 trillion. Okay. 

Mr. JOYCE. That is the gross debt, yes. 

Senator WHITEHOUSE. That is the gross debt, exactly. 

Now, we budget here on a 10-year budget cycle. How much 

money goes out the back door of the Tax Code through tax spending over a 10-year budget cycle? If you do not know, it is about $20 

trillion, which means that if we could manage our tax spending 

better, we could have a very big mechanism for getting rid of the 

debt. The total national debt is less than goes out the back door 

of the Tax Code every single 10-year budget cycle. 

So part of what we need to do, I think, in budget is make sure 

we are addressing that, because it is way bigger than the traditional expenditure, the non-mandatory expenditures. So I think we 

need to have our budget process look at that side. 

I think we also should consider having our budget process look 

at mandatories, because I do think there are areas in which you 

can address things without having to create enormous rows. And 

I will make one proposal. I recall that if you looked at what CMS 

is obliged to pay per capita State by State and you look at, if my 

recollection serves, Minnesota and Mississippi, they are paying 

twice as much per capita in Mississippi as they do in Minnesota. 

What is going on? Why is it that some States are allowed to run 

programs that are wildly expensive compared to the norm? And 

what could we do to make States look more like Minnesota in 

terms of their per capita expenditure? And maybe if you put a little 

bit of a belt around the mean so that States that were really grievous outliers on the bad side simply did not get that money, that 

would focus the mind of those Governors, those State medical associations, those State hospital associations very considerably into 

how you deliver better care, because I think most people would 

argue that the care in Minnesota is better than the care in MisVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00356 Fmt 6601 Sfmt 6602 E:\HR\OC\A333.XXX A333

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sissippi; and, indeed, that better care is very often associated with 

lower cost as a general principle. 

So there are areas for looking at where you are not just going 

in and saying we are going to have to cut that benefit, we are going 

to have to, you know, do sort of Civil War medicine on the health 

care programs, when, in fact, just the very ability among the States 

shows what the room is for improvement on the part of certain 

States. 

And I will close with this comment, which is that if this Committee does not produce something that is bipartisan, then game 

over. At that point you are just part of the bipartisan fighting here. 

And that has its role, and I understand that. But one of the things 

that we stand a possibility of doing is putting something together 

that has significant bipartisan support in this Committee. And if 

we do, that will be a very significant set of gravity for the Senate 

at large. And that is something I think many of us would like to 

work on. 

So, again, I will close by thanking the Chairman for his leadership into this area. I think it is a very wise and good place to be 

directing our attention in this period of not doing a Budget Committee budget because we do not need to, because we have a budget 

already agreed to. And I look forward to the very terrific witnesses 

contributing in writing their thoughts to what I hope will be a 

meaningful review of how we budget for this great country. 

Thank you, sir. 

Chairman ENZI. Thank you. And you will be pleased to know 

that I just asked CRS for an updated tax expenditure report so we 

would know where they came from, what they do, how much they 

cost. I had a whole series of questions regarding that, to ask them 

to update that. 

Senator WHITEHOUSE. Yes. 

Chairman ENZI. I saw an old list of it, but I have not seen 

any—— 

Senator WHITEHOUSE. And, of course, some of it is, you know, 

pretty good stuff that American families count on, like the home 

mortgage tax deduction. But some of it smells to high heaven and 

was snuck in by lobbyists at midnight and has real—I mean, it is 

the kind of thing that makes people go out and get mad as hell in 

the voting booth. And we should clean it up. It is a swamp. 

Chairman ENZI. So we will not only have to take on the appropriators, we will have to take on the Finance Committee when we 

start to get into taxes, too. 

Senator WHITEHOUSE. That is right. 

Chairman ENZI. I look forward to some meaningful discussions 

with you, and I have some more questions, but I will submit those 

in writing as well, and I am sure there will be others on the Committee. 

Chairman ENZI. There is getting to be more interest in doing 

this, as they think that maybe it is a possibility. We had a lot more 

show up today than we have had in the past. But I have been sharing some of the results of what we have come up with before with 

them. 

So with that, I will adjourn the hearing. People can turn in questions until 5 o’clock today. Thank you. 


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[Whereupon, at 11:48 a.m., the Committee was adjourned.] 


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BETTER BUDGETS, BETTER RESULTS 

WEDNESDAY, APRIL 27, 2016 

U.S. SENATE, COMMITTEE ON THE BUDGET, Washington, D.C. 

The Committee met, pursuant to notice, at 10:32 a.m., in Room 

SD–608, Dirksen Senate Office Building, Hon. Michael B. Enzi, 

Chairman of the Committee, presiding. 

Present: Senators Enzi, Grassley, Crapo, Ayotte, and Whitehouse. 

Staff Present: Eric Ueland, Republican Staff Director; George 

Everly, Chief Counsel; for the Minority: Joshua Smith, Budget Policy Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. Good morning. I will go ahead and call to order 

this meeting of the Senate Budget Committee and welcome everyone to the fourth hearing in a series the Committee is holding to 

fix America’s broken budget process. 

The Democrats are having a caucus, as I understand it, right 

now. I imagine it might have something to do with the appropriations bill that we are doing right now. But as soon as Senator 

Whitehouse shows up, we will have him give his opening statement. But we will go ahead and proceed because we have a noon 

vote today to work in as well. 

Over the hearing arc, we are beginning to see increasing support 

and acknowledgment from both sides of the aisle that our budget 

process is broken, and now is the time to fix it. Instead of the current budget process, which is designed to fail both Congress and 

our constituents, it is time to put forth a budget process that is designed to succeed. Our spending decisions are fragmented across 

multiple committees and Federal agencies. Dysfunctional annual 

appropriations create uncertainty that negatively affects agencies, 

businesses, and individuals. And mandatory spending is literally 

surging out of control, driving future deficits and debt to 

unsustainable levels. 

Congress also fails to review its past spending decisions and results after the funds have been spent. GAO’s Comptroller General 

told us that his agency is unable to properly audit the Government 

because it cannot keep track of all of the assets and because of different definitions between agencies. This means Congress does not 

know whether previous Federal spending has been effective because program performance data is completely disconnected from 


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congressional spending decisions, and good performance is not rewarded and bad performance has no consequences. 

And it is clear from our previous hearings that even if we have 

not yet agreed on a particular path forward, we all agree that 

something must be done. There have been many good ideas presented on how to fix the process. We have heard big, comprehensive ideas that fundamentally change the way Congress and the executive branch of Government allocate resources. And we have 

heard more narrow and targeted ideas that could at least begin to 

improve the current process. 

Today we will hear more reform thoughts from our panel of experts. This hearing is critically important because it focuses on the 

actual budget documents created during the annual budget process. 

The President’s budget submission and the congressional budget 

resolution are supposed to serve as unifying documents that set 

forth serious, comprehensive fiscal plans for the Government. But 

both have become increasingly meaningless as tools to govern and 

bear little relation to the actual tax and spending decisions made 

by Congress. 

The President’s budget is a massive undertaking that consumes 

over 2,600 pages. While some of the information provided is useful, 

many of those pages are full of spin, talking points, and proposals 

that everyone knows are dead on arrival. The document is so huge 

that it limits its usefulness. In many ways, this document has become, through several administrations, a giant press release focused on messaging rather than as a serious plan to address the 

challenges facing the state of our Union. 

The statutes governing the content and structure of the President’s budget result from a patchwork of legislation pieced together 

over the past century. And the current format of the President’s 

budget is largely based on a plan developed in 1912 during the Taft 

administration. The structure of the President’s budget was not 

planned but evolved, and no matter how far it has evolved, one 

thing is clear: This document is not 21st century budgeting. 

The President must have a more constructive role in the budget 

process. If not, his only recourse is to veto large tax and spending 

bills, creating showdowns, shutdowns, and crisis deals negotiated 

behind closed doors, usually after the fiscal year starts. This undermines the fiscal discipline and financial future of our Nation. Involving the President early in the negotiating process will allow 

Congress to develop a clear path forward for budgeting and passing 

over regulation and legislation. 

My concerns are not just with the President’s budget. The congressional budget resolution has also been similarly irrelevant. In 

theory, it should serve as a fiscal blueprint that coordinates revenues and spending and that connects congressional priorities with 

committee legislation. And it is the only tool that Congress has to 

control runaway mandatory spending. 

As you can see in the chart on the screen, this portion of the 

budget has grown to 70 percent and will bankrupt the country if 

nothing is done. It is not working. Seventy percent of Government 

spending is not regularly reviewed by Congress, and that does not 

include expired programs we still fund. In practice, its limits on 

discretionary spending have been superseded by statutory caps, 


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and its limits on mandatory spending are routinely ignored or put 

aside because it only takes 60 votes—the same amount required to 

end debate on legislation. 


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One of Washington’s dirty little secrets is that the amount our 

Government spends in a given year almost never matches the 

amount the budget resolution contains. But even that ‘‘let us pretend’’ process is falling apart. 

In the last 15 fiscal years, Congress failed to pass a budget resolution more than half of the time, as shown in this graphic. Prior 

to 1997, it had never failed to pass a budget. The congressional 

budget should provide predictability and certainty, the limits it establishes should be enforceable, and the tax and spending measures Congress passes should adhere to the budget. 


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The Federal Government’s budget should be a long-term, enforceable plan that provides predictability, transparency, and accountability. Members of this Committee know that our current process 

by design fails to do that. No one can guarantee which party will 

win the Presidency this fall or who will be in the majority. We all 

know that voters have a way of upending expectations. 

So now we have a unique opportunity—and it probably will not 

happen again for another 4 years—to fix America’s broken budget 

process so that it can matter once again. I especially appreciate the 

willingness of my colleagues to engage in a constructive and bipartisan manner on one of the most important and serious challenges 

facing this country. And I have appreciated the ideas from both 

sides of the aisle that have been put forward on this, many of 

which I think can be included in a document. 

So I look forward to a positive and elevated conversation with 

our witnesses today which matches the seriousness of the purpose 

to which we are engaged. 

Since Senator Whitehouse is not here yet, I will go ahead and introduce the witnesses and I thank our witnesses for being here 

today. The tradition in all of the committees, of course, is that people that are not there, and even ones who are there, can submit 

questions up until 5 o’clock today, which we hope you will also respond to. Often what is in writing is more helpful because it is 

more detailed usually than what we cover in the public part of the 

hearing. 

Mr. Barry Anderson has extensive experience dealing with Federal budgeting in the United States Federal Government as a senior career official at the Office of Management and Budget and as 

the Deputy Director and then the Acting Director of the Congressional Budget Office. He was on both sides. He also has experience 

dealing with the budgets of other nations. Mr. Anderson has been 

the head of the Budgeting and Public Expenditures Division in the 

Organization for Economic Cooperation and Development, OECD, 

in Paris. He has also served as a budget adviser at the International Monetary Fund. And, finally, he has served as the Deputy 

Director of the National Governors Association. 

Mr. James C. Capretta is a Mercatus Center Affiliated Scholar, 

a senior fellow at the Ethics and Public Policy Center, and a visiting fellow at the American Enterprise Institute. He has served in 

senior positions in the executive and legislative branches of the 

Federal Government for 16 years. He previously worked at OMB 

and on the staff of the Senate Budget Committee and on the staff 

of the House Ways and Means Committee. 

Our third witness, Mr. Stanley Collender, currently serves as the 

executive vice president of communications at Qorvis. Mr. 

Collender has worked for three Members of the U.S. House of Representatives and on the staff of the House Ways and Means Committee and on the staff of both the House and Senate Budget Committees. As a member of the House Budget Committee staff, he 

served as administrator of the Task Force on State and Local Government. For the Senate Budget Committee, he was responsible for 

analyzing defense spending. He is also the author of ‘‘Capital Gains 

and Games,’’ a blog published by Forbes. 


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So I want to thank all three of you for joining us today to share 

your expertise, and I appreciate the written testimony that you 

have already provided. The entire testimony will be a part of the 

record. 

So, with that, we will go ahead and get the testimony. I will 

begin with Mr. Anderson. 

STATEMENT OF BARRY ANDERSON, FORMER ACTING DIRECTOR, CONGRESSIONAL BUDGET OFFICE, AND FORMER SENIOR CAREER OFFICIAL, OFFICE OF MANAGEMENT AND 

BUDGET 

Mr. ANDERSON. Thank you, Chairman Enzi, and to the members 

of the Committee for the opportunity to appear before you to discuss proposals to reform the President’s and congressional budgets. 

As you have mentioned, Chairman Enzi, I have had a very long 

career in budgeting—30 years at the Federal level at OMB, CBO, 

and GAO; 5 years at the international level at the OECD in Paris; 

5 years at the State level at the National Governors Association; 

and 2 years at what I call the ‘‘supra-national level’’ at the International Monetary Fund. 

Over the years, I have seen budgeting from many perspectives, 

and believe it or not, I think that the foundations of our Federal 

budget system are sound. These foundations include: the separation of powers; the use of obligational (as opposed to cash or accrual) budgeting; generally transparent information on revenues 

(including tax expenditures), on credit programs, on performance 

assessments; even on our elaborate budgetary enforcement mechanisms such as the Anti-Deficiency Act and sequestration. That said, 

there is undoubtedly much room for improvement. 

But my testimony today concerns only one aspect of our Federal 

budgetary system: proposals to reform the President’s budget. I 

have three recommendations focused on changes that would make 

the President’s budget more relevant to the process of setting a 

Federal budget: 

Number one, bring back the Citizen’s Guide to the Federal Budget. The latest President’s budget—the fiscal year 2017 budget—has 

seven different documents totaling over 2,600 pages. ‘‘Spin’’—or the 

political promotion of the President’s proposals—is everywhere. 

Perhaps that is to be expected. It is, after all, the President’s budget proposals. But for many years previous Presidents also submitted a short—30 pages or so—easy-to-read, fundamentally factual description of the Federal Government’s fiscal status that was 

originally called ‘‘The Budget in Brief’’ but in the 1990’s was renamed ‘‘A Citizen’s Guide to the Federal Budget.’’ Sure, it contained a summary of the President’s proposals, but the summary 

was only a few pages, not several hundred. By making the increasingly complex budget easier to understand, the Citizen’s Guide 

helped the public, the press, and politicians frame their views on 

the difficult budgetary decisions that must be made every year. In 

other words, it made the President’s budget more relevant to the 

larger budgetary process. 

The acceptance of a budget’s proposals varies from President to 

President and from year to year, but whatever the reaction to the 

President’s budget, the Citizen’s Guide in the past has helped both 


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the opponents and proponents of the President’s proposals understand the country’s current and projected fiscal status, and by so 

doing the reasons behind the President’s proposals, whether they 

agreed with them or not. Bringing back the Citizen’s Guide is in 

no way a solution to the fundamental political differences that currently divide our country, but a factual presentation that helps the 

public, the press, and politicians understand the President’s proposals as well as the country’s underlying fiscal status can surely 

help bridge our differences and make the President’s budget more 

relevant. 

Number two, emphasize long-term budget projections. The current fiscal status of the United States Government is not the fiscal 

problem of greatest concern. Projections of our fiscal status over 

the long term is. Capital markets, both domestic and international, 

are currently providing the money we need to finance our evergrowing debt at low interest rates, and despite near universal recognition that out deficits and debt will continue to grow, the difficult status of other international borrowers and the level of savings looking for ‘‘safe’’ investments as the world ages mean that we 

can probably continue to finance our growing debt at relatively low 

INT rates in the near future. 

But our population is also aging rapidly, and baby boomers like 

myself are retiring in the thousands every month. These demographic pressures coupled with generous programs for the elderly, 

infrastructure needs, man-made and natural disaster risks, and the 

public’s natural reluctance to support tax increases result in a very 

grim fiscal future indeed. Yet despite the widespread recognition of 

this grim forecast and despite the widespread recognition that certain actions taken today can significantly improve our long-term 

fiscal future, the fiscal year 2017 budget does not provide a discussion of the long-term fiscal budget outlook until well into the 418- 

page Analytical Perspectives document. 

The importance and impact of today’s policies over the long term 

demands that long-term projections be made an integral part of the 

President’s budget. Long-term projections under current policies 

and how those projections might change under the President’s proposals should be displayed and discussed along with short- and medium-term projections. 

Recognizing that the longer the projections, the more uncertainty 

is involved means that it is even more important to be fully transparent about the assumptions behind the projections as well as to 

display the sensitivity analysis about the major factors that influence the projections. Despite these uncertainties, it is far superior 

to display and discuss the potential long-term fiscal impacts of the 

President’s budget proposals than to pretend that they do not exist 

by ignoring them. In sum, the President’s main budget document 

should display and discuss the potential impacts of its policy proposals on its long-term projections in the same manner that it displays and discusses the potential impacts of policy proposals on 

short- and medium term projections, not hide them in some technical document. 

Number three, revise the content and presentation of the President’s budget documents. I have mentioned above that bringing 

back the Citizen’s Guide would help increase the relevance of the 


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President’s budget. And revising the content and presentation of 

the remaining budget documents could also help. Let me mention 

the four main major documents. 

The Main Budget Document, which is about 200 pages. The 

President presents his budget proposals in this document, and it 

should remain the primary place for political arguments supporting 

the President’s proposals. Adding long-term projections to the document and, perhaps, some of the political chapters currently in the 

Analytical Perspectives, which I will mention next, are the only 

changes I would make to this document. 

Next is the Analytical Perspectives Document, which is about 

400 pages. Years ago, this was called ‘‘special analyses,’’ and then 

it was condensed into the Analytical Perspectives document, and it 

was solely a technical document. It should be brought back to that. 

It now has technical presentations on economic assumptions, on 

Federal borrowing and debt, and on tax expenditures. But in the 

last couple of years, presentations that belong in the Main Budget 

document have been added. These include strengthening the Federal workforce and Federal budget exposure to climate risk. Incorporating these political presentations into the Main Budget document—if the President deems them to be important—would cut the 

size of the Analytical Perspectives by roughly a quarter and make 

both documents more focused. 

The third is the Historical Tables, about 400 pages. During my 

long career at OMB, I frequently heard that this was the most useful budget document—a true reference source of valuable data 

available nowhere else. So why is it now available only online? The 

printed version should be restored immediately. 

Lastly is the Appendix Document, about 1,400 pages. This document is prepared primarily for the Appropriations Committees. 

They need it, and OMB and the agencies need to prepare it to 

make sure that the budget numbers are both comprehensive and 

internally consistent, but there is no need to print it for anyone 

other than the Appropriations Committees. 

With respect to these changes, I recommend that a better way 

than putting them in legislation is to use the confirmation process, 

Mr. Chairman, for the OMB Director. Getting the agreement of the 

President’s nominee for OMB Director during the confirmation 

process can provide a personal commitment that members can cite 

if the changes are not made. 

If I can close with one last point, it is time for a new budget concepts commission as former CBO Director Rudy Penner and I wrote 

last January. The basic concepts underlying the U.S. Government’s 

budget are in disarray. Consider that there is no generally accepted 

practice about how to deal with such things as what the budget 

should include, how spending and revenues are defined, or how the 

budget should be displayed to show the economic impact of different kinds of spending. 

The 1967 Report of the President’s Commission on Budget Concepts addressed some of these issues and led to some reforms, such 

as the unified budget. But many issues remain to be resolved, and 

it is time to create a new commission to address some of these, including: 


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The scope of the budget. Some programs are on budget, some 

programs are off budget. Moreover, the way the budget should 

treat Government-sponsored enterprises and other Government-private partnerships needs to be detailed. 

Defining spending and revenues. The distinction between taxes 

and spending has become muddled and needs to be addressed. For 

example, ‘‘tax expenditures’’ and ‘‘offsetting collections’’ should to 

be defined more precisely and their placement in the budget reconsidered. 

Thirdly, the economic impact of different types of spending. A 

new commission needs to recommend better ways of showing the 

impact of such things as Government purchases of securities, trust 

funds, capital investments, and loans or guarantees. 

Although the topic of budget concepts may seem dry and technical to most Americans, and even lawmakers, almost all of these 

issues are important economically and have an important political 

dimension. How the budget is organized and its components defined and represented gives a particular impression about how 

much money the Government raises and spends and what it does 

with the money. So clarifying the way the budget is arranged and 

defining budget terms has important implications. I urge the Committee to work with the President to form a new Budget Concepts 

Commission. 

With that, Mr. Chairman, I would be happy to answer any questions members of the Committee might have. 

[The prepared statement of Mr. Anderson follows:] 


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Chairman ENZI. Thank you. And the Ranking Member is here 

now, so I will call on Senator Whitehouse for his comments. 

OPENING STATEMENT OF SENATOR WHITEHOUSE 

Senator WHITEHOUSE. Thank you, Chairman. Let me again express my appreciation to you for the focus we have here on reforms 

that could improve our budget process and increase the relevance 

of this Committee. The hearings this month have been insightful, 

and I look forward to the rest of today’s panel. 

Setting aside the relative merits or demerits of a President’s annual budget request, let me just take a moment on the document 

itself. 

For as long as I have been a Senator, the President’s budget has 

been a set of volumes, the first and the shortest of which is a summary that presents the President’s policy vision. This is something 

of a political document, and I do not fault Republicans for viewing 

it at this time as dead on arrival. We did the same with the last 

two budgets sent up by President Bush. 

While the first document can be viewed as a political or partisan 

publication, the other volumes include a wealth of information useful to all Members of Congress. These volumes include detailed, 

line-by-line tables of program spending at every agency, analyses 

of select policy issues, and historical tables listing budget information going back to the founding of the Republic. 

At a recent hearing, the Chairman questioned whether anyone 

reads the entirety of the President’s budget request. Probably not, 

but we should view most of the budget request as an annually updated encyclopedia of data on the Federal Government. Appropriators, authorizers, CRS, CBO, researchers, and academics all rely 

on this annually updated data and in many cases use language 

drafted by the administration and included in the budget request 

for appropriations and authorizing bills. 

On the topic of the President’s budget request, let me reiterate 

the dismay of Senate Democrats that the Chairman chose to break 

with tradition and not hold hearings on the President’s fiscal year 

2017 request. Congress may not always like the President’s proposals, but for four decades, since the Budget Act’s first passage, 

this Committee had never before denied the President the courtesy 

of hearing the administration out. Democrats heard out Republicans when we held the majority in the final 2 years of the Bush 

Presidency, and I hope the majority next year will restore this tradition, no matter who is President and no matter which party controls the Senate. It is an unprecedented and disorderly discourtesy. 

Budget rules are only useful if we follow them, and this Committee is only relevant if we want it to be. 

Last week, I had a useful and interesting conversation with the 

Chairman’s friend, former Chairman Kent Conrad, where he described the respect that this Committee enjoyed during his early 

years in the Senate. According to Senator Conrad, it was not the 

rules that were different back then so much as simply that Senators actually took the budget and the budget process seriously, as 

we have not done for some time. 

As we consider budget reform legislation, I would encourage the 

Chairman to bring in former Committee leaders, including SenVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00389 Fmt 6601 Sfmt 6602 E:\HR\OC\A333.XXX A333

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ators Conrad and Gregg, to get their takes on potential reforms. 

This could be in the form of a private meeting with members so 

that the conversation can be more open and less inhibited. I do 

think it would be useful to hear from the Senators who have sat 

in these seats in the past, and I do believe that we do need to make 

reforms in the way this Committee operates, whether it is to simply disable it and let the appropriators take over and the President 

and the leadership, or to turn it over to an ex officio committee of 

the Chairs of Finance and Appropriations and leadership and so 

forth, or whether to actually look at how this Committee works and 

revive it in more or less its current modality. But I do think that 

there are things that can be done, and I look forward to working 

with you. I think the bipartisan agreement in this area is very 

promising, and so thank you for that, Mr. Chairman. 

Chairman ENZI. Well, thank you. 

Senator WHITEHOUSE. I yield back to the witnesses. 

Chairman ENZI. If I were trying to avoid criticism, I would never 

have had held this hearing. I think it is important and can bring 

out a lot of things that have been going on for actually decades. 

And if we cannot make it better, the country is in trouble. And we 

have to make it better together. 

Mr. Capretta. 

STATEMENT OF JAMES C. CAPRETTA, SENIOR FELLOW, ETHICS AND PUBLIC POLICY CENTER, AMERICAN ENTERPRISE 

INSTITUTE 

Mr. CAPRETTA. Thank you, Mr. Chairman and Senator Whitehouse and the other members of the Committee. I am glad to be 

here. Thank you for inviting me to participate. 

In my testimony today, I will discuss three aspects of the current 

process that require attention and reform: the uncontrolled growth 

of mandatory spending, the importance of keeping focus on longterm fiscal policy, and the absence of a process for facilitating legislative and executive agreement on the budget. 

The fundamental problem with the Nation’s finances is the runaway expense of mandatory spending programs. In 1962, the Federal Government spent 4.7 percent of GDP on benefit transfers and 

other automatic spending programs. By 2013, spending on these 

programs had risen to nearly 13 percent of GDP. 

Instead of forcing policymakers to confront this problem, the current budget process shifts financial pressures off of these programs 

and onto other portions of the budget. As entitlement spending programs have gone up rapidly, funding for annually appropriated, 

discretionary accounts has fallen precipitously. 

The next problem is the Nation’s long-term fiscal policy. The Nation’s fiscal position has deteriorated significantly in recent years, 

with large deficits and mounting debt. But the most significant 

threat is not short term but mid- to long term. According to the 

Congressional Budget Office, Federal debt will never again return 

to the post-war norm of below around 50 percent of GDP. Instead, 

the national debt will rise inexorably and exceed 100 percent of 

GDP in 2040. The primary cause, again, is rapidly growing entitlement spending. 


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Policymakers need to keep their eyes on the long run and the 

steps necessary to begin closing the immense gap between expected 

revenue and expected spending. It would be truly unfortunate if 

Congress and the President pursued a short-term fiscal plan without also thinking about what needs to be done over the longer 

term. The result could very well be a temporary reduction in the 

budget deficit that is quickly overwhelmed by long-term trends. 

A related problem is that the executive and legislative branches 

of our Government have parallel budget processes that do not necessarily result in a consensus plan. 

Congress expresses its views, when it does, on the budget in the 

congressional budget resolution. Congressional budget resolutions 

are not laws. Rather, they are concurrent resolutions, which means 

they are relevant only for the Congress. Presidents are in no way 

bound by them. Similarly, the President produces his own budget, 

and the Congress is not bound by it. 

The parallel budgetary processes are a reflection of our constitutional structure. The co-equal branches each have a substantial 

role in the process, but there is no legal requirement that they ever 

come to an agreement. Indeed, with some exceptions, it can be said 

that the Federal Government never truly operates within a budget 

because the legislative and executive branches rarely agree on one. 

A possible, partial antidote for budgetary drift, rising mandatory 

spending, and neglect of the long term might be found with a joint 

budget resolution. 

Unlike a congressional budget resolution, a joint resolution must 

be agreed to by the President and, therefore, is a law. It thus has 

the potential, depending on its design, to facilitate, and perhaps 

even pressure, the legislative and executive branches into coming 

to an agreement. 

There are numerous ways to provide for the consideration of a 

joint budget resolution, but the most straightforward option would 

be to build upon the current process. This can be accomplished by 

amending the current Budget Act rules to allow, at the Congress’ 

discretion, an optional joint budget resolution to be spun off of a 

concurrent resolution, upon the agreement to it by both the House 

and Senate. It would then get sent to the President, and its contents, depending on what is in it, could be binding in certain ways 

on total discretionary spending, allocations for mandatory programs, revenues, deficits, and debt. The President could then either 

approve or veto a joint budget resolution. 

A joint budget resolution covering the full budget would have the 

capacity to adjust the caps on discretionary spending, and I might 

note that this might be a place to start as an interim first step. 

A joint budget resolution could cover the whole panoply of things 

that are in the Federal budget, but it might be useful for the Congress to consider starting with adjustments just to the discretionary caps. At that point, when the Congress passed a congressional budget resolution, it would have the potential of automatically sending a law to the President, legislation to the President, 

adjusting the statutory caps, bringing into sync both the executive 

and legislative approaches to controlling discretionary spending. I 

offer that up as a potential first step. 


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I realize my time is about to run out here, so I am going to jump 

quickly to the long-term budget. 

While a joint budget resolution with sensible enforcement would 

be a significant improvement over the current process, it will not 

by itself solve inattention to the long term. An important first step 

toward addressing that problem would be to get agreement between the legislative and executive branches on how to measure 

the long-term fiscal obligations of the Federal Government. That 

could be done by, first, starting with those known programs, the 

big ones—including Social Security and Medicare, but beyond that, 

the big Federal retirement and health benefit programs—measuring their unfunded liabilities over a period of time and getting 

agreement between the two branches of the Federal Government 

on exactly the methodology for making that calculation. 

Once a common measure is established, it could be used to assess 

legislation in Congress and perhaps also be incorporated into a 

joint budget resolution. For instance, the budget process could be 

amended to require CBO assessments of how significant new budgetary legislation would alter the unfunded liabilities calculation. 

Further, the congressional budget resolution might even allow 

the committees of jurisdiction to be reconciled for reductions in 

these unfunded liabilities, establishing a new way of using an expedited process to begin addressing the Government’s long-term liabilities. 

There are many other complications associated with reforming 

the process in these ways. I will stop now, and I would be happy 

to answer any questions. Thank you. 

[The prepared statement of Mr. Capretta follows:] 


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Chairman ENZI. Thank you. 

Mr. Collender. 

STATEMENT OF STAN COLLENDER, EXECUTIVE VICE 

PRESIDENT, QORVIS MSLGROUP 

Mr. COLLENDER. Thank you, Mr. Chairman, and let me apologize 

in advance for a cough that does not seem to want to leave. So if 

I cough, I am not dying. 

Chairman ENZI. Okay. I think it is the pollen in the air. 

Mr. COLLENDER. As a former intern and staff member of this 

Committee from back when it began more than 40 years ago, and 

as someone who has devoted much of his career to the Federal 

budget, I am, of course, delighted to provide the Committee with 

my views on improving the congressional budget process. But I 

cannot start my testimony with the standard line of commending 

the Committee for holding this hearing. 

How is it possible that the Senate Budget Committee that earlier 

this year flatly refused to invite the Director of the Office of Management and Budget to testify, and in so doing helped render the 

Obama 2017 budget irrelevant, is now holding a hearing to discuss, 

in part, whether the President’s budget is irrelevant and should be 

changed? 

How is it possible that the same Senate Budget Committee that 

so far has refused to develop and vote on a budget resolution for 

the coming year is now holding a hearing to fix the budget process 

it refuses to follow? 

To me, this hearing comes close to supplanting Leo Rosten’s explanation of the word ‘‘chutzpah.’’ Rosten said that chutzpah was 

when a man who is convicted of murdering his parents then begs 

for mercy from the court because he’s an orphan. 

Today this Committee is the fiscal policy equivalent of this man. 

After first preventing the budget process from being implemented 

this year, the Committee is now demanding the process be changed 

so it can implement it. That is chutzpah. 

My response to the big question you are asking—How should the 

congressional budget process be changed?—is simple: Do not do it. 

The changes you make will have little positive impact on Congress’ 

ability and willingness to develop and implement an annual budget. The budget process will be at least as inefficient and as infuriating with the changes you are considering as it is now. 

In fact, Congress does not need a budget process at all. The U.S. 

Constitution gives the House and Senate all the power they need 

to develop, adopt, and implement a budget for the coming year. 

Congress can do whatever its wants right now. The problem is that 

the Senate Budget Committee, the full Senate, and Congress as a 

whole cannot figure out what they want to do. 

So as this year’s almost nonexistent budget debate amply shows, 

nothing happens. The country goes without a budget, without a fiscal policy that except by accident is relevant to the current and 

projected economy, without appropriations, and without many authorizations. Instead, we get shutdowns, threatened defaults, fiscal 

cliffs, and totally ignored deadlines. Instead of tinkering with the 

process, you should be trying to develop an overall consensus about 

what the budget process should do. 


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In fact, every previous congressional budget process was agreed 

to only when that type of consensus existed. In 1974, the Congressional Budget and Impoundment Control Act was adopted because 

there was an overwhelming agreement that Congress needed a 

process. The new process was outcome neutral; it could be used to 

increase or decrease the deficit and debt, and any combination of 

revenue and spending cuts and raises was acceptable. 

Several years later, that outcome-neutral process was changed 

when there was a new consensus that reducing the deficit should 

be the goal. That deficit reduction process was itself revised when 

a consensus developed that Congress should only be held responsible for those parts of the budget within its immediate control. 

That is when we got PAYGO. 

If you develop that missing consensus, it will be easy to design 

an effective budget process. Without it, any changes will be totally 

meaningless, uselessly symbolic, and a cynical hoax. 

My prepared testimony includes comments on four specific budget process changes the Committee has recently mentioned: the need 

for authorizations, making the President sign a budget, doing away 

with the President’s budget, and 2-year budgeting. 

In the time I have left, I would like to discuss just this last idea, 

the plan to do a 2-year budget that supposedly will give Congress 

time to get everything done. 

We have ample, direct precedent for knowing this will not work. 

In 1974, the Congressional Budget and Impoundment Control Act 

changed the start of the fiscal year from July 1 to October 1 to do 

exactly what you now say you want to do: give Congress enough 

time to get all of its work done and avoid continuing resolutions. 

But the only thing that this actually accomplished after the 1974 

act went into place was to create a legislative rush in late September instead of late June. And continuing resolutions are even 

more prevalent now than they were back then. 

My biggest fear, however, is not that the budget work in Congress will expand to fill the amount of time 2 years provides. It is 

that Congress at the same time will change the start of the fiscal 

year to January 1. If that January 1 start is after the election and 

there is a 2-year budget, Congress will never adopt a budget or be 

held accountable for passing one before voters go to the polls. That 

would be contrary to one of the major reasons the congressional 

budget process was established more than four decades ago. And 

it will be a political travesty. 

I urge this Committee to stop any consideration of one-off process 

changes. Instead, focus on developing the consensus that today is 

completely absent from the budget debate. Until you do, hearings 

like this, sadly, will continue to be nothing more than diversions. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Collender follows:] 


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Chairman ENZI. Thank you. I hope this does not just turn out to 

be a diversion. And since it has been raised several times, I did not 

do a hearing on the President’s budget, but so far I have been able 

to prevent a vote on the President’s budget, which the previous 6 

years we have had. And, sadly, the President’s budget total over 

the 6 years got one vote in favor. I thought that was an embarrassment. So like I say, I am trying to prevent the normal charade 

from continuing, and that’s why we’re all here today. 

The idea with this is to wind up with something that helps to 

prioritize and move our country forward. I know that the President 

negotiated a grand budget—we passed a budget the previous year. 

But the President negotiated a grand deal in November, and that 

is different than the budget we agreed to. And so it does emphasize 

the point that the President needs to be involved at some point earlier. 

Of course, this budget that he did present, which was 3 months 

after the grand deal, exceeds the grand deal that he made in November. So that presents a few difficulties of its own, and the discussion of those would probably not be really helpful because we 

are in another process here of trying to figure out how we can set 

some priorities for our country. 

Mr. Capretta, the congressional budget resolution is not signed 

by the President, as you pointed out, and he is not directly involved 

in the budget negotiations, at least not until the need for a grand 

deal. As you pointed out, this leads to disagreement between the 

legislative and the executive branch on the priorities and creates 

crisis negotiations. 

Can you explain a little more how the congressional budget resolution and that spinoff joint budget resolution might provide some 

kind of a long-term framework? 

Mr. CAPRETTA. Well, one could imagine that the—for instance, 

around the total level of discretionary spending, let us assume that 

the congressional budget resolution did allow for a spinoff bill to go 

to the President on the level of total spending in those bills—in the 

resolution that would go to the President and adjust the caps, perhaps for a multi-year period. If that were the case, suddenly the 

congressional budget resolution would take on a lot more importance from the executive branch’s perspective because the caps— 

the bill that would be sent down to the President for signature or 

veto would be real and binding on the executive branch. It would 

not be just something to not take seriously and ignore and maybe 

in many ways, you know, criticize and denounce is not adequate, 

et cetera. And so that would make the congressional budget resolution, at least on that aspect of it, very real and very pertinent, and 

I think would probably in certain circumstances lead to a discussion, negotiation, and give-and-take earlier in the year. 

Now, I would like to say that Mr. Collender’s points about, you 

know, process not preceding policy I think is basically right. I have 

in my written testimony—I was not able to say it in my oral presentation—I do not think process can be a substitute for political 

disagreement. If there is just no agreement between the two parties and the two branches, no process is going to make them agree. 

The only thing that makes them agree is the fact that you have to 

fund the Government at some point, the possibility of a shutdown. 


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And so that is the precipitating event in recent years, and that 

would still be the case even under this. 

There is no reason—you know, the President could always veto 

a joint budget resolution. So there is nothing necessarily in this 

that would make agreement a requirement. 

On the other hand, if you just look at today’s process, there is 

nothing that is set in motion to even allow an early agreement. 

And so this at least would have the possibility, if the two sides 

were so inclined, to come to an agreement earlier rather than later. 

Chairman ENZI. Thank you. 

Mr. Anderson, you pointed out that the national debt is projected 

to exceed GDP by 2040 and the President and Congress face a 

unique challenge in addressing this issue because 2040 is outside 

of any 10-year budget window that we use to measure the spending 

and revenues. And so you have argued also for a long-term budget 

projection. 

How would an emphasis on the long-term budget proposal impact 

the budgetary decisionmaking? And what are some key elements 

that should be included in that proposal? 

Mr. ANDERSON. Mr. Chairman, in your introductory statements, 

you had a slide that indicated how much of current spending is 

now mandatory. I believe it was 70 percent is mandatory, 30 percent is annual discretionary. I go back many years, Mr. Chairman, 

and back when I first started out in budgeting, it was almost exactly the opposite; that is, we had close to 70 percent in annually 

appropriated funds and only 30 percent in mandatory spending. 

But the situation you painted accurately now does not portray 

what is going to happen in the future; that is, that portion of the 

mandatory spending is going to grow even further, shrinking the 

importance of the discretionary spending. 

With this in mind, I think there are five fundamental principles 

one should look to towards long-term budgeting: 

First, that long-term fiscal sustainability is necessary to promote 

long-term economic growth and better standards of living for the 

country. If you want a good example of that internationally, it is 

Japan. They do not have long-term fiscal sustainability, and they 

have had now two, going on three decades of low, if not declining 

economic growth. 

The second principle is that, in order to obtain long term fiscal 

sustainability, long-term projections are necessary. Certainly they 

should be transparent and have sensitivity analysis, but it is absolutely necessary to have them. 

The third is that, in order to obtain long-term fiscal sustainability, you do need some kind of constraints. I happen to believe 

that the PAYGO mechanism is inferior to caps on spending and 

that my experience with Sweden and a few other countries indicates that caps on spending can work. And, in fact, right now we 

have some kind of caps on tax expenditures. One is called the alternative minimum tax and the other is the Pease limitation on 

Schedule A itemized deductions. But we do not have any caps on 

the other major drivers of our long-term fiscal insustainability, the 

health programs and Social Security. 


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Fourth is that simplicity matters. The complexity that we have 

just is so hard to explain when it is all wrapped in spin, and, therefore, a simple presentation matters. 

And, lastly, the effort of the Congress and the President and the 

public ought to be to concentrate on what works. We have too little 

attention on the effectiveness of programs and too much attention 

on how much spending is going into them or the input as opposed 

to the output or outcome. 

So that is how I would change the long-term presentation. 

Chairman ENZI. Thank you. My time has expired. 

Senator Whitehouse. 

Senator WHITEHOUSE. Thank you, Chairman. 

I take somewhat to heart Mr. Collender’s warning that the problem is that the Senate Budget Committee, the full Senate, and 

Congress as a whole cannot figure out what they want to do and 

no one is willing to compromise. He draws the conclusion from that 

changing the procedures here will not have an effect, and that is 

where I must say I differ. I do think that there are ways in which 

by empowering process, ideas and individual leadership can be 

brought to the fore in healthier ways than the present process permits. 

The United States Constitution is a process document. Then 

came the Bill of Rights, which moved a whole lot of more substantive rights into the equation. But the original Constitution was 

a process document. I believe process matters, and I think we can 

do a lot better. 

There are a couple of areas that I would like to ask the witnesses 

to consider, and please do not—we are not going to have time for 

you to consider these right here in the hearing, but we are trying 

to build a record of ideas, so please do get back to us. I will make 

these questions for the record. 

I think the simplest thing we can do is solve the problem of votea-rama. When the budget process for every Senator is associated 

with tiresome mischief and nonsense, it is hard to undo that association and say, ‘‘Okay, now we are serious.’’ So removing the tiresome mischief and nonsense from the very undignified vote-a-rama 

process I think is something that we actually can agree on. Is that 

a big achievement? No. But I think it is an important start. 

The second thing I think that we should think about—and, 

again, this is all in terms of—we would like to have your responses. 

I think it helps if we actually push down a little bit further in the 

budget so that any budget that we have to come up with here gets 

applied to accounts within the appropriations level. Obviously, it is 

not going to be binding on appropriators. They can do whatever 

they please. But if a budget is pure hypothetical theater, at the 

most macro level, and nobody is responsible for applying it to every 

account, then what you end up with is people meeting with advocacy groups saying, ‘‘I am for you. Do not worry. We will protect 

you.’’ 

Well, no, because they say that to every single group that comes 

in, but none of that is true in the context of the overall proposal 

that has been made. So you have got to—it is a measure of accountability to have the budget actually connect to appropriations 


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accounts so people have to own what they are proposing one way 

or the other. 

A third is that, for me, the ideal goal would be that we could 

agree on three things. Thing 1 would be that we could find a way 

to agree on what an appropriate debt-to-GDP ratio is. And if we 

can agree on what an appropriate debt-to-GDP ratio is, we would 

then need to agree on a glide slope to get to it without too much 

of a brute shock to the economic system. And if we can agree on 

a debt-to-GDP ratio and a glide slope to get from where we are to 

that, then we would need to build fences so that there would be 

consequences of failure. If we can do those three things, I think 

that markets and Congress would take some assurance that, okay, 

we have got some degree of method for solving this problem rather 

than having it just be a free-for-all in which a lot of political posturing takes the place of policy development. 

The last point is that if we are going to do this, we cannot do 

it just looking at the expenditure discretionary piece of our budget 

picture. We have to look at tax expenditures. They are enormous. 

And we have to look at the cost of our social programs. And the 

thing that comes most readily to mind is the importance of health 

care costs, which witness after witness after witness after witness 

has said is what is really driving all of this. So we can get by okay, 

but health care cost is going to just go crazy. The projections are 

alarming, and where do we go? I think we are up 100 times on national health care costs just in my lifetime. It is a big number. 

So how do we do that? I think if you are planning ahead, there 

are ways to look at health care savings and think systemically of 

how you make a health care system that is not the world’s outlier 

for cost per capita by a huge margin compared to very well developed OECD countries that have robust and healthful health care 

systems. If we wait until the last minute and then the only tool we 

are left with is cutting benefits for seniors on Medicare, well, that 

is not going to go anywhere. We have got to have a way of looking 

at this as a systemic problem. 

So I think if we can work our way through some of those things, 

I am actually pretty optimistic that we can get this done. I think 

a lot of people in the Senate want it to get done, and I think that 

we have an opportunity through reforms to make that environment 

more hospitable so that people who want to lead in this area and 

can bring their colleagues away from brinkmanship have a means 

for doing so, because right now the means is the President, the Republican leadership in the House and Senate, the Democratic leadership in the House and Senate all go in a room someplace, and 

they wheel and they deal, and God knows what side deals are cut 

to make people happy, and the rest of us get presented something, 

there it is, you have 3 days to look at it, or 3 hours to look at it, 

and then we are all going to vote on it. I think there is a huge majority of Members in the House and Senate who think that that is 

a really crummy way to do business and that their voices and their 

constituents’ voices are completely eliminated in that process. 

So I see a pretty significant motivation to get this done, and I 

am more positive than Mr. Collender, I would say. Your concerns 

and cautions are notable, and your experience here is laudable. I 

just wanted to let you know I am a little bit more optimistic. 


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Chairman ENZI. And I appreciate your optimism, but I think it 

is backed by the ideas that you presented there. Of course, the 

devil is always in the details. 

Senator WHITEHOUSE. Yes. 

Chairman ENZI. And we need to get to some of those details and 

see how to do them. I am optimistic for our country, and I feel serious enough about this that I volunteered to eliminate the Budget 

Committee if it is irrelevant. 

Senator WHITEHOUSE. Yes. 

Chairman ENZI. We do not need more steps in our process. We 

need more effective steps in our process. 

Senator WHITEHOUSE. That should be one of the options that we 

consider. 

Chairman ENZI. Continuing on with questions, Mr. Capretta, the 

congressional budget resolution has not been effective in controlling 

any mandatory spending. I think one of the reasons we had it as 

part of the comprehensive budget before was because it was generating revenue for the rest of the things because we had more 

money coming into Social Security than was going out. But that is 

not the case anymore. The budget is enforced through procedural 

points of order that only require 60 votes to waive. As I mentioned 

before, it is the same as required to end debate, and offsets to new 

spending often do not result in real savings. So automatic mandatory spending has grown to this 70 percent. 

What enforcement mechanisms should Congress implement to 

enforce the mandatory spending levels in the budget resolution? 

Mr. CAPRETTA. Well, it would have to be done in conjunction with 

the President, so an enforcement mechanism that was inside just 

the Congress could only be a rules based approach. Prohibiting the 

consideration of any legislation that might increase spending on 

any entitlement programs until such time as the spending was 

brought in line with the budget plan, that would be one thing you 

could do. But that is not nearly as effective as something that 

would have the agreement of the executive branch and would bring 

about real consequences unless some new legislation was passed to 

reform the program and bring it into conformity with a budget 

plan. 

In terms of enforcing that, that is the million-dollar question because it is highly, highly controversial. How do you keep spending 

on programs that are automatically occurring in line with a budget 

that is below a projected baseline? Obviously, that will entail a lot 

of political controversy. 

I think the easiest things to do are to cancel future increases in 

spending until such time as new legislation comes in to bring a 

program in line with its budget. You could apply an across-theboard spending cut. When those have been designed in the past, 

large chunks of mandatory programs get exempted from it through 

the political process establishing the sequester. And then you end 

up with a very narrow base and a very large cut, and that ends 

up being not very effective. 

So I grant that this is the most difficult part of a more enforceable budget plan. It requires a lot of bipartisan patience to work 

through it all. I think the goal should be as I outlined in my testimony: cancellation of future spending increases first, broad-based, 


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as much as possible, spending reductions so you do not exempt a 

lot of programs. You are going to have to exempt some for very vulnerable populations, but targeting the budget also in a way that is 

realistic and consistent with a prudent approach to reining in future spending growth. 

Chairman ENZI. Thank you. 

One of the suggestions that I have been working on is that 

maybe mandatory programs ought to be limited to those that have 

a source of revenue that covers their costs annually, and everything else would come under the jurisdiction of budget and appropriations. 

While I have Mr. Anderson here and he has experience with 

other countries, I did want to see what he has seen from experiences with the budget processes in other countries that would contain features that might help us in our process. 

Mr. ANDERSON. Thank you, Mr. Chairman. I want to answer in 

three different ways. 

First of all, with respect to Senator Whitehouse and his ideal 

goals, we have a very good example of how those ideal goals do not 

work in Europe. The European Monetary Union—that is, the countries that use the euro—includes almost all the Western European 

countries except the U.K., Denmark, Sweden, Norway, and Switzerland. They set up a process similar to what Senator Whitehouse 

just described; that is, they started with a politically established 

debt-to-GDP ratio. Then they set up a glide path how to reach it. 

But what they did not do—and what Mr. Capretta just mentioned—was build effective enforcement mechanisms, and a result 

you can see not just from their debt or deficits but also from their 

economic performance. 

I would like to mention two other countries, one is Sweden. Sweden suffered in 1995 a financial downturn even worse than what 

we have suffered in the past 10 years. And what they did was vastly reorganize their budgetary status and processes. Again, they are 

part of the European Union, but not members of the European 

Monetary Union. They do not have the euro there. 

One of the things they did was set up 27 different categories of 

spending. That included every element of spending, including mandatory spending. Then they set up enforcement mechanisms. The 

enforcement mechanisms were the equivalent of ‘‘lookback sequesters.’’ They do not call them that, but they looked back in the next 

year at whether the targets were met or not. 

What they did not do in the beginning, however, was include tax 

expenditures. They realized what a mistake that was. 

Senator WHITEHOUSE. What a mistake it was not to include 

them. 

Mr. ANDERSON. Tax expenditures are a relatively new concept in 

budgeting. We in the U.S. are the ones who created it, I think, 

about 30 years ago. Sweden had them and did not realize that they 

needed to control them. Once they set limits on these 27 different 

categories of spending then they realized that they had to control 

tax expenditures. 

In one sense we are lucky here. We already have a modest type 

of caps on tax expenditures. They could be improved considerably. 

That is, through the alternative minimum tax and the hair cut that 


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one needs to take on the Schedule A deductions, there is some 

modification of the amount of tax expenditures. It might need to be 

improved. But what we do not have is any kind of limit at all on 

the other three major drivers of our long-term unsustainable fiscal 

outlook: Medicaid, Medicare, and Social Security. In response to 

your question, Mr. Chairman, Sweden does, and they have had a 

very good result from it. 

Lastly, I would like to mention Australia. Australia 15 years ago 

established long-term budget projections that go out for 40 years. 

And they use them in their budget process. Every couple of years, 

they look at what their original projections were and how the new 

projections are different and what are the reasons for those 

changes. They then try to understand the reasons for those 

changes in order to modify future legislation. 

So in the Committee’s consideration of budget process changes, 

keep in mind the European Monetary Union, Sweden, and Australia is what I would recommend. 

Chairman ENZI. Thank you. My time, again, has grossly expired. 

Senator Whitehouse. 

Senator WHITEHOUSE. I guess the last point that I would emphasize for your written comments, or if you have anything you urgently want to say, please feel free to do that now, is this problem 

of health care cost. There are two graphs that I think of all the 

time when I think about health care cost. One is the one I referred 

to earlier of all of the OECD nations, and the Y axis is life expectancy, and the X axis is per capita cost of health care. And the 

United States is a crazy, wild outlier on per capita cost in health 

care, miles from the most inefficient other OECD country in the 

world. And you would think, ‘‘Okay, cool, that is great. That means 

that we are spending all this money, but, wow, are we healthier. 

We must be living super long lives. America is great.’’ And then 

you dial back and look where we are on the Y axis, and we are like 

Croatia or Greece. We are not leaders of the pack by any stretch. 

We are barely holding our own in the middle of the pack. So that 

is, to me, a signal that there is an opportunity for cost savings in 

health care that do not require benefit cuts, which is sort of Civil 

War medicine applied to a much more complicated problem. 

The second is the distribution of cost per capita for Medicare 

State by State, and that is all over the place. And you can draw 

more or less a midline through that, and you could even draw a 

little bit of a safety belt bandwidth around the midpoint, and then 

I think you could start to look at the outliers and say, ‘‘Why is it 

that we are paying this State this much money for Medicare and 

Medicaid when they are costing significantly more per capita than 

other States?’’ We know you can do better because other States are 

doing better. It tends to be the Northern States that do better— 

I do not know why—and Hawaii, and it tends to be the Southern 

States that are vastly more expensive than the Northern States. 

But if you make that a State problem, it seems to me, by saying, 

okay, everybody gets a hair cut to the extent that you are outside 

of our bandwidth, every practitioner, every hospital, every doctor, 

everybody—we are not going to do it right now. We are going to 

give you 3 or 4 years to prepare yourself for this. But you can bet 

that the medical society in that State, the hospital association in 


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that State, the Governor of that State, the health director of that 

State are all going to start looking around in a new way and saying, Damn, why are we so bad? Why are we the McAllen, Texas, 

to use Atul Gawande’s example, compared to El Paso or someplace 

else in Texas that is way cheaper? And the doctors in the cheaper 

places are going to look down at the McAllen doctors and say, Hey, 

you clowns, knock it off, you are costing us money now; this is not 

just fun and games. 

And so I think that there are real opportunities to put pressure 

on these outliers and bring our outlier OECD status back in. And 

one of the happy things about pursuing that strategy is that over 

and over and over it has been shown that when you bring down 

the cost of care by improving quality, you actually have happier patients and better care and better outcomes and all of that. It is an 

unusual win-win-type virtuous circle if you can get yourself into it. 

But there has to be really an incentive to get people into it because 

the power of the status quo is very strong. 

So I emphasize that I do think there are things that can be done 

within the context of the big social programs that we have to reduce their cost that do not end up with us pointing fingers at each 

other over who is trying to cut benefits for the elderly. There are 

plenty of ways we can do it better. We are just beginning to learn 

it. The way we pay for health care is going to have a lot to do with 

how we make that happen. But I do not think that it is conceptually beyond the scope of the Budget Committee to say, based on 

solid testimony and good bipartisan support, you know, we think 

this really can be done. And we are going to put some caps out 

there, and we are going to demand that the authorizing committees 

and the appropriating committees drive towards it. And, by the 

way, if you cannot come up with something yourself, here is the 

way we can offer you that we think will help work. If you can do 

better, you are the authorizers. If you can do better, you are the 

appropriators. Great. Go for it. But if you cannot, if you are going 

to continue to muddle along like this, we have got a backstop, and 

here is our backstop. 

So I think there are some ways to address even those very difficult and challenging areas without getting into the usual partisan 

knife fights over them. 

So thank you again, Chairman, for the hearing. I do think that 

the witnesses have been very helpful to us. I look forward to their 

commentary back. As I said, at least on our side, and I think on 

the Chairman’s side as well, he has notes that he takes, and then 

he goes back, and when he thinks something is particularly good, 

he draws circles around them. He has described that process before, and hands them off, and I think we are doing a deliberate job 

of trying to put a book together of ideas and strategies so that we 

can have a really productive conversation as a Committee and decide where to go. And I think do not feel that you are sending these 

things to be put on a dusty shelf someplace with most of the other 

Federal written product, never read again. I think we will—you 

have our attention, and we appreciate it. 

Chairman ENZI. And we have a tentative comment by the Majority Leader that at the conclusion of the 12 appropriations, he will 

allow us to consider whatever we come up with. 


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Senator WHITEHOUSE. That would be very good. 

Chairman ENZI. So we have got some incentive to get it done— 

and, again, before the elections when nobody knows what the outcomes are going to be. And I feel real bad, Mr. Collender. You have 

not had another opportunity to speak. I would love to give you an 

opportunity to talk about anything in the budget process that you 

would like to. I do appreciate your testimony even though it felt a 

little directed. [Laughter.] 

Mr. COLLENDER. Please do not take it personally, Mr. Chairman. 

It was written with a great deal of respect and appreciation for 

your efforts. But I just felt a need to get it out of my system. 

Chairman ENZI. Sure. 

Mr. COLLENDER. The one thing that I would urge you both is to 

understand that our 40 years of experience with the congressional 

budget process shows conclusively—and not just the budget process 

but every budget commission that we have put together—that you 

cannot take the politics out of the budgeting process. In fact, the 

budget is the most political of all the things that Congress does. If 

there was enough money to do everything that everybody wanted 

to do, you would not need a budget process. You would just need 

a check writer. Once you decide that there is not enough money or 

you are not willing to provide enough money for everything that everybody wants to do, the question is: How do you decide? And in 

this environment, particularly these days, with relatively narrow 

majorities and hyper-partisanship, all of the procedural changes 

you have discussed will never be implemented. That is, you will 

put together a budget process that may pass and will then be ignored within seconds. 

As a quick example, in 1974, the budget process came together. 

It was done for a point in time. It was eventually implemented 

starting in 1976. The first year it was implemented, Congress 

balked at doing it. Members who voted for the budget process—and 

it passed unanimously in the Senate and with six dissenting votes 

in the House—a year earlier all of a sudden realized, ‘‘Oh, my God, 

I have got to vote for the deficit for the first time,’’ and they said, 

‘‘No, I am not going to do it.’’ Had it not been for the intervention 

of the leadership—at the time in the House, it was Dick Bolling, 

Chairman of the Rules Committee and Tip O’Neill as Speaker—the 

budget process would have died the year after it was created. 

The same thing is true with virtually every other budget process; 

it is good when it is passed because it solves a political problem 

at that particular moment. But then it starts being changed or people start having plans for it to change within seconds. Gramm-Rudman-Hollings was revised 2 years after it was put in place. And 

then the revised Gramm-Rudman-Hollings was revised 3 years 

after that. 

Forgive me, but it is a little naive to think that you can put together a budget process that will last for all time. You would be 

lucky to get it through for just one session of Congress. And forgive 

me for being disrespectful. 

Chairman ENZI. Well, you are not, and I appreciate your comments. I have to tell you, though, that in order to serve in the 

United States Senate, you have to be an ultimate optimist. [Laughter.] 


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Because, otherwise, after you bang your head against the wall for 

years on one topic, you might finally get it done. And if you give 

up earlier than that, it does not get done. So you have been working on this health care for a long time, and hopefully we will listen 

now. 

Senator WHITEHOUSE. Yeah. 

Chairman ENZI. I think it would have made a huge difference in 

what we have, had you had some of those things. 

Senator WHITEHOUSE. Yeah. 

Chairman ENZI. And to your comments on they always fail, I 

have done a lot of research on the previous processes and the 

changes that we have made, and I started doing it because I noticed that the format that we have the budget in and the format 

that Appropriations uses and the format that the President presents his budget in are all different. And through my research, I 

found out that it was intentional. It is so that you cannot follow 

the dollars, so that there is more flexibility, more capability to 

avoid any kind of constraints. And I think that Senator Whitehouse 

has come up with a good list, and we have got a good list from 

other members of the Committee. We will have to see if we can 

plug in details that will work. And as the ultimate optimist, maybe 

we can get one that they will actually listen to. 

So I appreciate the testimony of all three of you. Your whole 

statements will be a part of the record and be shared, and people 

have until 5 o’clock today to turn any other questions in that they 

want to have answered. So thank you very much. The hearing is 

adjourned. 

Senator WHITEHOUSE. Thank you, Chairman. 

[Whereupon, at 11:44 a.m., the Committee was adjourned.] 


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(437) 

OVERSIGHT OF THE CONGRESSIONAL 

BUDGET OFFICE 

WEDNESDAY, SEPTEMBER 14, 2016 

U.S. SENATE, COMMITTEE ON THE BUDGET, Washington, D.C. 

The Committee met, pursuant to notice, at 3:31 p.m., in Room 

SD–608, Dirksen Senate Office Building, Hon. Michael B. Enzi, 

Chairman of the Committee, presiding. 

Present: Senators Enzi, Grassley, Toomey, Johnson, Perdue, 

Whitehouse, and King. 

Staff Present: Matthew Giroux, Deputy Staff Director for the Majority; for the Minority: Joshua Smith, Budget Policy Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. I will go ahead and call this hearing to order. 

I am not expecting a huge turnout. 

Last year, the Senate Budget Committee conducted its first hearing in more than 30 years to provide oversight for the Congressional Budget Office. At that hearing I announced that we were resetting our oversight relationship with the CBO and we would 

faithfully execute Section 102(a) of the Congressional Budget Act. 

This provision gives the Senate Budget Committee the duty to review on a continuing basis the conduct of the Congressional Budget 

Office and its functions and duties. 

When our last oversight hearing was held, Dr. Hall was on the 

job as CBO’s Director for less than 2 full months, so it probably 

was not fair to have it then. But, again, I was trying to follow the 

law. Dr. Hall has now been at the helm for over a year and has 

seen CBO through an entire Federal budget cycle. This means he 

has been able to oversee CBO’s work on its recurring projections, 

thousands of formal and informal estimates of legislation, and then 

special reports requested by Members of both the House and the 

Senate. 

In conducting the day-to-day operations of this Committee, I find 

CBO reports and estimates to be of great assistance, particularly 

in my role as the Senate scorekeeper on budgetary issues. I look 

forward to hearing what experience you have had thus far and the 

goals you have for CBO under your leadership to continue the 

agency’s reputation for providing objective and insightful information to Congress. 

We on the Committee as interested in where things stand with 

the goals you identified from our last hearing. We are particularly 

interested in your efforts meant to increase transparency of CBO’s 


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analysis and operations, which you stated was one of your primary 

objectives. 

During our most recent work period, CBO released its latest 

round of projections this year, the update to the Budget and Economic Outlook: 2016 to 2026. What this report heralded was not 

a surprise to anyone. Whether under the leadership of Dr. Hall or 

his predecessor, CBO has continually showed in recent years that 

we are on the wrong fiscal track, and America’s current budget 

path is simply unsustainable. 

We have been having some hearings on that throughout the year 

to see what sorts of things could be done to change it. We have a 

list that there seems to be some agreement across the aisle on that 

could make a huge difference for America. But the August report 

has revealed that this fiscal year we will overspend by $590 billion. 

That is up $152 billion from last year’s deficit. 

There is no end in sight to this overspending. CBO tells us the 

deficits will hit the $1 trillion mark or, to say it differently, $1,000 

billion mark in 2024 and continue their upward trajectory. By the 

end of CBO’s projection window, 2026, our Nation’s mammoth debt 

will reach more than $28 trillion, or nearly a 50-percent increase 

from today’s level. Clearly, we have a problem. 

This Committee has spent the year holding numerous hearings 

and evaluating ways to fix our broken budget process. That work 

continues, but it is clear to me that when we are finally able to get 

this process back on track, CBO will be a critical element in getting 

our fiscal house in order. Its independence and nonpartisanship 

will be essential to get both sides of the aisle together to confront 

our budget realities. As such, the Committee remains invested in 

ensuring CBO has the policies, practices, and personnel in place to 

continue to fulfill its core mission of providing Congress the information it needs to make knowledgeable budget and economic policy. 

As part of the Committee’s ongoing efforts to make sure CBO is 

able to continue supplying Congress with accurate information in 

the most complete way possible, I was proud to include several provisions in the last budget resolution to require CBO to take into 

account the real-world effects that legislation would have on our 

budget. Most notably, Section 3112 of S. Con. Res. 11, the concurrent resolution on the budget for fiscal year 2016, which requires 

CBO to estimate the macroeconomic effects of major policy changes. 

This has come to be known as ‘‘dynamic scoring,’’ but in my view, 

it should be known as ‘‘honest accounting,’’ and that should be our 

goal. 

Now that CBO has had several opportunities to conduct this 

macroeconomic analysis, the Committee is interested in hearing 

what you have learned about this approach, what you view as the 

next steps in integrating this approach into CBO’s operations, and 

how you plan to maintain transparency with your methodologies. 

Just as CBO will continue to be a crucial component in the Federal 

budget process, so, too, must this Committee’s oversight of CBO. I 

look forward to fostering this constructive relationship, both in today’s hearing and in the future. 

Would you like to make any statement? 


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Senator KING. Mr. Chairman, I was looking forward to Dr. Hall’s 

testimony, and I will have some questions. Thank you. 

Chairman ENZI. Okay. And if Senator Sanders or Senator Whitehouse come, we will give them time for a statement as well. But 

especially since we are starting late, I want to continue on so that 

we do not take more of your valuable time. 

I would imagine that everybody here knows exactly who Dr. Hall 

is, or they probably would not be here. But at any rate, he is the 

ninth Director of the Congressional Budget Office. He is no stranger to this Committee, having served as CBO Director since April 

of last year. Since that time he has appeared before this Committee 

to discuss CBO’s work as a congressional support agency and its 

projections of the Nation’s ever-worsening fiscal situation. Dr. Hall 

has over 25 years of experience in various Government positions, 

including serving as the Chief Economist and Director of Economics at the International Trade Commission. He was the Chief Economist for the White House Council of Economic Advisers, and he 

was Chief Economist for the Department of Commerce. He has held 

several academic posts. He has earned his Ph.D. and M.S. in economics from Purdue University. 

This afternoon, Dr. Hall will be talking with us about CBO’s 

work over the last year and the goals he has set out for his critically important agency, and we look forward to receiving your testimony. 

With that, Dr. Hall, I turn it over to you. Thank you for being 

here. 

STATEMENT OF KEITH HALL, DIRECTOR, CONGRESSIONAL 

BUDGET OFFICE 

Mr. HALL. Chairman Enzi and Members of the Committee, I appreciate the opportunity to discuss the work of the Congressional 

Budget Office. CBO’s mission is an important one: to provide nonpartisan budgetary and economic analysis that is timely and carefully thought out in order to support the work of the Committee 

and the Congress as a whole as you address the critical issues facing the Nation. 

To that end, CBO is committed to providing information that is: 

objective, representing the consensus and diversity of views of experts from around the country; insightful, applying the best new 

evidence and innovative ideas as well as the lessons of experience; 

timely, responding as quickly as possible to the needs of Congress; 

and clearly presented and explained so that policymakers and analysts understand the basics of our findings and have the opportunity to question the analysis and methods used. 

All of CBO’s estimates and reports are reviewed internally for objectivity, analytical soundness, and clarity. And in releasing our results, we are committed to maintaining a level playing field, ensuring that our work is made widely available to Congress and the 

public. 

Just as the Budget Committees rely on us for sound and timely 

advice, we rely on you as well to explain and communicate to others in the Congress what CBO’s role is, to provide constructive 

feedback on how we can best serve the Congress, and to provide 

guidance on what legislative developments are occurring and what 


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the Congress’ priorities are. We are very grateful for that support 

and guidance, which are key to our success. 

Since I last testified about CBO’s work before you in May 2015, 

we have continued to work diligently to carry out our mission, emphasizing five areas of work that are of particular interest to the 

Committee: preparing cost estimates for legislation, enhancing the 

transparency of our work, refining our methodology for dynamic 

analysis, developing greater capacity to analyze trade agreements, 

and continuing to build a high-quality staff. 

First, to respond to the needs of the Budget Committees, CBO 

has prepared a multitude of cost estimates, both formal and informal, to support the Committee’s role in budget enforcement as well 

as in the development of a budget resolution. Last year, we produced more than 600 formal cost estimates and mandate statements, as well as thousands of informal estimates to aid committees in crafting legislation. In 2016, the pace of our work is much 

the same. 

Second, CBO continues to make its analysis transparent. Our 

publications go well beyond simply presenting results. Indeed, we 

work hard to explain the basics of our findings so that members 

of Congress, their staff, and outside analysts can understand the 

results and methodologies we used. For example, we supplemented 

some reports with working papers presenting details about our 

methodology. We also made a number of enhancements to the 

website, including displaying in one place the spread sheets that 

show budget and economic projections prepared in various years 

and displaying in another a collection of the detailed baseline projections for selected major programs. 

Third, CBO has emphasized dynamic analysis. For example, in 

response to the requirement for certain dynamic analysis specific 

in the budget resolution for fiscal year 2016, CBO—in collaboration 

with the staff of the Joint Committee on Taxation—completed several such estimates in the past year, and we have devoted significant effort to developing and enhancing the analytical tools we 

need to assess the macroeconomic effects of fiscal policies. And in 

selected reports, CBO has provided estimates of the effects that significant changes in Federal spending and tax policies would have 

on the overall economy. We also solicited extensive feedback on our 

methods so that we could continue to refine and enhance our modeling approaches. 

Fourth, CBO has devoted significant resources to analyzing trade 

agreements and improving our capability to model their effects. We 

continue to prepare to analyze potential legislation related to the 

Trans-Pacific Partnership, and we anticipate this will be the first 

time that we provide any dynamic analysis of a trade agreement. 

Finally, CBO continues to devote resources to attracting and retaining talented people and developing their skills. Among the notable staffing changes, Mark Hadley became the agency’s Deputy 

Director in June, and two new Assistant Directors—one for macroeconomic analysis and the other for tax analysis—joined the agency 

this year. 

In focusing for the upcoming year, CBO will aim to further explain its analytical capability with an emphasis on macroeconomic 

analysis, health care issues, and modeling capabilities. We have alVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00446 Fmt 6601 Sfmt 6601 E:\HR\OC\A333.XXX A333

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ready shifted some resources to bolster our work on dynamic analysis and have requested funding for additional staff to work on 

such analyses. 

In the health area, more data will become available about the 

costs of expanded health insurance coverage under the Affordable 

Care Act, which will further our understanding of potential effects 

of changing that law. 

We are also in the process of analyzing various aspects of our 

health care system and enhancing our capacity to assess the effects 

of future legislation on that system and on the Federal budget. To 

enhance the transparency of our work in this area, we will publish 

working papers explaining our updated and enhanced model of the 

health insurance system. We are also continuing to expand our capacity to analyze energy and environmental issues and to enhance 

our access to important sets of data. 

We look forward to continuing to support this Committee as it 

carries out its important responsibilities by providing the Congress 

with budget and economic information that is objective, insightful, 

and timely, and by presenting and explaining the methodology and 

results of CBO’s analyses also as clearly as possible. 

Thank you for your attention. I would be happy to answer any 

questions. 

[The prepared statement of Mr. Hall follows:] 


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Chairman ENZI. Thank you for your testimony. 

I will yield to Senator Johnson, then Senator King, then Senator 

Perdue before I ask my questions. 

Senator JOHNSON. Thank you, Mr. Chairman. Welcome, Dr. Hall. 

Mr. HALL. Thank you. 

Senator JOHNSON. You mentioned doing more and more work in 

terms of health care. It just so happens in my Committee, the 

Homeland Security Committee, tomorrow we are going to be holding a hearing on the current state of affairs in terms of the exchanges. 

One of my concerns when I first came to the Senate and was on 

the Budget Committee, looking at what information we had in 

terms of potential cost implications of the Patient Protection and 

Affordable Care Act, it just never seemed like there was a specific 

line item, that tracking the ongoing costs of that act was going to 

be extremely difficult. Can you tell me with a little more specificity 

where CBO is at in terms of accumulating on an annual basis, you 

know, exactly what are you publishing, the exact costs of the 

health care law? 

Mr. HALL. Well, sure. One of the things that we have done—and 

this is to your point about separating out the effects of the Affordable Care Act from other things—is we will be producing every 

spring the cost of health care and the subsidies for health care that 

will include the ACA as part of that. And we are going to continue 

to try to detail that as much as possible. And we really are anticipating getting some real data as we go forward and being able to 

use that data to talk about things, and this is going to be an important part to us of transparency. And a key for us, too, is adapting 

what we are doing to the realities of actually what happens in exchanges and elsewhere with health care. 

Senator JOHNSON. So I tasked my staff this morning with giving 

me the current figures. Historically, since the ACA has been implemented, do you have that information? Again, I wish I knew 

whether we actually had it at our disposal or not. In other words, 

are they going to be able to give me a figure when I leave this 

hearing room? 

Mr. HALL. Well, yes. I can tell you that right now we—just this 

March, we got some new data, and we have adapted our estimate 

of the number of people receiving health care through exchanges. 

We now think there are about 11 million people receiving health 

care through exchanges, and about 9 million of those are subsidized. That is actually a downward revision of about a million 

people from our previous estimate earlier this year. 

And then we have got a new estimate of the subsidies. We now think there are about $43 billion worth of subsidies this year, and 

that is going to be up about $5 billion from last year. So those are 

the latest numbers based on data. 

Senator JOHNSON. So last year, we had about $38 billion in—how 

does that track with what the original estimate was for the health 

care law? 

Mr. HALL. Well, I think our original estimate was a little high, 

a bit high. That was in large part, I think, because there was such 

an increase in getting medical help through Medicaid at the State 

level, that that sort of—that was much higher than we thought, 


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and the exchanges was a bit lower than we thought. And then, of 

course, our estimate of the average price of premiums was a bit 

high early on, and we have adapted that, where we still expect that 

price to go up over time. 

Senator JOHNSON. The number of people expected to receive subsidies was initially forecast to be far higher than what we are looking at here, correct? 

Mr. HALL. That is correct. 

Senator JOHNSON. So on a subsidy per person—again, I do not 

have the figures. I would think the subsidy per person is higher 

than was originally estimated. Is that true or—— 

Mr. HALL. You mean the spending per person? 

Senator JOHNSON. Yeah. 

Mr. HALL. I would have to follow up on that. That sounds like 

that is right, the logic. But I do not know for sure. 

Senator JOHNSON. Do you know exactly how much lower the subsidies, that $43 billion, is versus the original forecast? 

Mr. HALL. Not offhand. I will have to follow up. I am sorry. I do 

not know that. 

Senator JOHNSON. Okay. I will be asking my staff that, so 

maybe—but you believe you have—CBO publishes that information, I will be able to get that for the hearing tomorrow? 

Mr. HALL. Oh, yes. Yes. 

Senator JOHNSON. Okay. I really have no further questions. 

Thank you. 

Chairman ENZI. Senator King. 

Senator KING. Thank you, Mr. Chairman. Dr. Hall, thank you for 

your good work. 

I note that the budget of the Congressional Budget Office has essentially been frozen since 2010, even adjusting for inflation. Are 

you adequately funded to perform the functions that you are being 

asked to do? 

Mr. HALL. Well, we have asked for a little bump up because we 

need it, in large part because—— 

Senator KING. You asked for $1.7 million additional this year, I 

think? 

Mr. HALL. Yeah. Yeah, it was—yeah, it was a few million. It was 

not very—we are looking to add at least basically three positions 

to help with the macro modeling in the health care work. We will 

still function fine without the money, but it really would help our 

move towards transparency and some other things. 

Senator KING. Good. Dynamic scoring, very interesting economic 

theory. When you attempt to score something on a projected basis 

based upon effects on the macro economy, do expenditures get the 

same kind of dynamic scoring—in other words, an investment in 

education, which is expected to return higher taxes in the end by 

the people earning more money? Are expenditures dynamically 

scored as well as tax provisions? 

Mr. HALL. We do try to do that. That is correct. To be honest, 

it is somewhat harder to do that, and we have been doing a bit 

more research so we can get better at that aspect of it. But that 

certainly is part of our plans, to be able to do that sort of work. 

Senator KING. So it works both ways, in other words? 


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It is not just here is the positive effect of a tax cut. It is also here 

is a positive effect of an investment in education or highways or 

bridges or whatever infrastructure. 

Mr. HALL. That is right. In fact, just this spring, maybe this 

summer, we produced a report on Federal investment, and what we 

have done is we have looked at the research and summarized what 

we think is the likely impact of Federal investment. We find that 

the research is pretty thin, unfortunately. But we have got a summary of that, and we are, in fact, doing some work to try to advance that. 

Senator KING. Well, that was going to be my next question. The 

concept of dynamic scoring has been around for quite some time, 

and a lot of discussion. 

Mr. HALL. Right. 

Senator KING. Is there sort of actual versus projected studies 

that show whether the dynamic scoring works, whether it is accurate? The Chairman mentioned—he has called it ‘‘more accurate 

budgeting.’’ 

Mr. HALL. Right. 

Senator KING. But I wondered if there was any data to underlie 

that assertion. 

Mr. HALL. There is a little bit on the Federal investment side, 

like I said, but that one is a bit thin. 

One of the troubles on the spending side is the amount of time 

it takes for things to affect the budget. For example, if you look at 

education, well, that is not something—— 

Senator KING. Maybe a 30-year—— 

Mr. HALL. Exactly. That is one of the challenges. 

Senator KING. I would argue, for example, that the GI bill is one 

of the most cost-effective programs in history, but the results did 

not come in for some years. 

Mr. HALL. Right. And we have looked at the idea of trying to get 

a better handle on that, not so much in our scoring, because that 

is a different time frame, but in terms of research. 

Senator KING. How about on the tax side? Are there any studies 

about the effect—the accuracy of dynamic scoring of tax changes? 

Mr. HALL. Well, it is not specifically in dynamic scoring, but 

there is a bit more literature on the effect of taxes on economic 

growth. In fact, that is part of why we are more comfortable, I 

think, on the tax side in terms of our estimates. And that is guided, 

that is very much guided, our actual estimates, is what the literature actually says about this. But, again, just like anything else, 

we will have to keep looking at the literature and seeing if we are 

being correct in things. 

It is really hard to specifically estimate the effects of dynamic 

scoring, specifically on what we do, because the changes often are 

not that big to sort of find an impact on GDP. 

Senator KING. Now, when you are doing this scoring, are we presented with two sets of figures—one is here is the actual loss to the 

Treasury, and here is the analysis based upon a dynamic assumption of economic growth? Do we get both numbers now? 

Mr. HALL. You do. We made the decision that every time we did 

a cost estimate that had dynamic elements to it, we would give you 

both numbers. So we would give you the estimate without the dyVerDate Sep 11 2014 01:00 May 10, 2017 Jkt 021333 PO 00000 Frm 00461 Fmt 6601 Sfmt 6601 E:\HR\OC\A333.XXX A333

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namic and the macroeconomic effects, and we would give you the 

estimate with the macro effects so you can actually see the different parts of that. 

Senator KING. And it seems to me over a course of time we will 

have some data built up to see whether the projections under the 

dynamic scoring model are accurate. 

Mr. HALL. I think that might be right. I think that is correct. We 

certainly look at how accurate our revenue estimates are and our 

spending estimates are on the Federal budget as a whole, and we 

have a plan to continue to look at how well we are doing there. 

Senator KING. One of the problems with the whole concept is 

that it is not a single-factor analysis. In other words, the economy, 

as you know, is so complicated. 

Mr. HALL. Yes. 

Senator KING. We could have a dynamic score of a tax cut and 

say we should produce X, but then there is a housing crash or a 

terrorist attack that affects the economy, the economy does not 

grow, and it is impossible to point and say this did this and this 

did that. How do you account for that kind of uncertainty? 

Mr. HALL. Well, it is hard to, and it is hard to in any kind of 

forecasting. If we just forecast the macro economy, we have exactly 

that issue. By putting the dynamic element into our cost estimates, 

I think it makes it more accurate, I believe it makes it more accurate; otherwise, we would not do it. But it does probably introduce 

some more uncertainty in our estimate than is already under our 

regular—— 

Senator KING. My only concern as a policymaker is that we not 

be seduced by the rosy projections that never manifest themselves. 

My time is up, but for the record, I would really appreciate it if 

you could supply some studies of the dynamic effect of tax policy. 

You know, do tax cuts increase economic growth? That is what I 

am interested in seeing. 

Mr. HALL. Sure, and I believe we do have some significant research papers on that. 

Senator KING. That would be helpful. Thank you very much. 

Thank you, Doctor. 

Chairman ENZI. Excellent questions. If you have some more, I 

can give you a little more time. We are not that—okay. 

Senator KING. We have plumbed the shallows of my knowledge. 

[Laughter.] 

Chairman ENZI. I know that that is not true. And in regard to 

one of the comments that you made, I know that forecasting is a 

lot easier if it was not about the future. 

Last year, in your testimony you mentioned several goals that 

you had. One of them was, ‘‘The transparency of our work is very 

important and enhancing it is one of my prime objectives.’’ What 

actions have you taken since you made that statement to increase 

the transparency? And how does that compare to efforts of the 

agency in previous years? I know you remain committed to increasing transparency. Do you have any new targets that you are working on that we ought to be aware of? 

Mr. HALL. Sure, well, I have actually got a number of things I 

would like to mention. First of all, throughout our entire range of 

publications, we had an increased effort to be more transparent 


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and be more open about the basis for our analysis and the methodology used. Part of that has been some serious training and establishing some best practices, especially on cost estimates for our 

budget analysts to use and sort of describing more clearly how they 

arrived at their estimates. And, of course, here the basic goal is 

that we want to open ourselves up to feedback on how we are doing 

things. 

The second thing is we produce a number of supplemental reports which are follow-ups intended to provide transparency. One 

example was last year we did produce an estimate of the removal 

of the Affordable Care Act with the macroeconomic effects included. 

We followed that up with a research paper describing the labor 

market effects of the Affordable Care Act, and that was the primary macro effects in that result. And so in that we detail exactly 

how we got to that number on the labor market, and hopefully we 

will get some feedback on that. 

And something similar, I guess, on the—we also looked at the effect of potential increase in hurricane damage, and we also have— 

not only did we produce that likely effect over the next 30 years 

of increased hurricane damage, but we then produced a follow-up 

paper detailing the model exactly that we used so folks can imitate 

that. 

In addition to our regular assessment of how our economic forecasting is doing, we compare ourselves to OMB and private sector 

forecasters just to see sort of how well we are doing. We have just 

done one on revenue projections, and we are working on one right 

now on spending projections. So we are going to have these regular 

reports to sort of tell you how we are doing in our forecasting. As 

you say, forecasting the future is difficult, but we are doing our 

best to sort of figure out how we are doing. 

We have done a number of things with our website. We have got 

several spots—I would say at least four different spots on our 

website now where we are collecting things to increase transparency. For example, we have a home page on our website now 

that is dedicated to dynamic analysis. So on there, we are putting 

on all our research papers on dynamic analysis, and we will continue to populate that as we do more research and adapt our methods. 

We have got a second page on health insurance, health care, so 

we are going to do the same. We have got some of our estimates, 

and we have got some presentations we have made to increase 

transparency. They are all there in one spot. 

We also got a spot on the website that has spread sheets that 

show our baseline budget and economic projections historically. 

That makes it very easy for you to sort of see how we have forecasted things in the past as well as in the current. 

And then we are providing a fourth spot that has a lot of detail 

on our baseline projections. You can see at a much more detailed 

level where our baseline projections are at any point in time, and 

we separated out some selected programs. 

And then last, but not least, we are looking hard at one of our 

most important models where we are modeling health insurance 

coverage. That has been a real work horse for us. But the problem 

with that has been it is not very well documented. So what we 


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have done, we are now working on a second-generation model, and 

part of why we are doing this is we want to be able to incorporate 

actual data. It is not just the theoretical model. But as we are producing the model, we are going to be stopping and producing research papers and supplementary data to document the model as 

we go along over the next year. 

So if you look at our output over the next year, you will see several papers coming out which, when the year is done, you will be 

able to stick them together, and we have got a documented model 

that people will be able to see, sort of see exactly how we are modeling the insurance markets. 

Chairman ENZI. I am sure that will be helpful not only to us but 

to other people that are affected, too, so I appreciate your effort on 

that. 

I know that many of the budget concepts that you use to estimate the costs of legislation and that the Budget Committee uses 

to enforce fiscal discipline, are decades old. It looks to me like most 

trace back to the President’s Commission on Budget Concepts in 

1967. How critical is it that the accounting rules and budgetary 

concepts be reviewed often and kept up to date? And is there anything we need to do to see that that happens? 

Mr. HALL. Well, as you say, that document has been and continues to be very important for us. It is used a lot. It has some important recommendations. But it has been a long time, and there 

have been a significant number of issues that have arisen since 

1967, and we have sort of dealt with that on a case-by-case basis. 

So I absolutely do think that something like a new budget concepts 

commission or some other format for reaching a consensus on a lot 

of these new issues that have popped up over the past almost 50 

years I think would be very valuable to us and very helpful. 

Chairman ENZI. Good suggestion. Thank you. 

Now, over the last year, we have seen some errors in the CBO 

reports such as mistakes in the calculations of the Social Security 

replacement rates, in your long-term projections and cost estimates, also in the Water Resource Development Act in which the 

PAYGO score went from an estimated savings of $6 million to a 

deficit of $300 million once it was corrected. We just had that debate on the floor. To your credit, these errors have been publicly 

acknowledged and promptly corrected. However, it does raise the 

question about the review process. 

Can you explain how decisions are made, particularily on whether you seek outside review? What is done to get the cost estimates 

correct? How do you find out that there has been mistakes? 

Mr. HALL. Sure. Well, let me say I have been at a number of 

places in the Federal Government now, and CBO probably has the 

most extensive review process for analytical reports that I have 

seen. We have a great deal of internal review, and we are focusing 

on objectivity and analytical soundness and clarity in those things. 

But in analytical reports, in terms of external review, almost any 

time we have got enough time, we get external review. And it is 

targeted for outside experts with a wide variety of views on things, 

so we sort of get several things from that. We make sure that we 

are objective. We make sure that we are somewhat in the middle 

of the profession on topics. And hopefully folks help us catch errors, 


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if there are some errors in there, as we go along. That is an important thing. We will continue to do that. 

Also, it so happens that the last few months we have, in fact, 

been looking at our review process on analytical reports and thinking about adapting that somewhat. And we are getting fairly close 

to enacting some of that, so we will do that, and I do think that 

we will probably make sure that we look at the issue of errors, not 

just, you know, the objectivity and soundness and clarity, but make 

sure that what we are doing is actually correct. But we are human, 

and that happens. 

On cost estimates, that is actually a different process, and one 

of the issues for us with cost estimates is, frankly, you guys are 

often in a real hurry. And the most often phone call I get is questions about, ‘‘When will you be done?’’ So we actually always have 

this issue of we want to be thorough in a cost estimate, we want 

to be balanced and correct, and we want to be accurate, and sometimes you all are in a hurry. So we continue to worry about that 

balance on things. 

Actually, in that area I think we have been remarkably accurate. 

With the 114th Congress so far, we have actually produced almost 

1,400 formal cost estimates, and a very small handful have involved errors where we have had to submit a revision. In fact, we 

count only about four of those. 

Nevertheless, we actually have been actively exploring ways to 

improve our review process. Part of it is for increased transparency. Part of it is because of the heavy workload for our managers. But part of it will be ways to sort of increase the accuracy 

of what we do. 

Chairman ENZI. Thank you, and I have run quite a bit over. I 

still have more questions, but I appreciate Senator Whitehouse 

being here. I have enjoyed working with him on trying to get some 

budget reform that we still need to do, and so I will turn the time 

over to Senator Whitehouse. 

Senator WHITEHOUSE. Thank you, Chairman. I concur that we 

still need to do that, and I look forward to continuing to work with 

you on that issue. I think it is very important, and working with 

you on it has been a pleasure. And for the record, let me say that 

I have just come in, so the Chairman, in going over his time, was 

not inconveniencing me or anybody else. He was having a discussion in a room in which nobody was champing at the bit for their 

turn. So I appreciate him yielding now so that I could ask a question or two. 

First of all, welcome, Dr. Hall. Thank you. 

Mr. HALL. Thank you. 

Senator WHITEHOUSE. One of the recurring issues that we have 

to deal with on the Budget Committee is the cost of health care, 

particularly the projections into the outer years, which tend to 

dominate the conversation about our national debt. 

We have seen since the Affordable Care Act the budget projections that CBO has put out for Medicare, Medicaid, and other 

health programs drop pretty substantially. For example, you guys 

look forward to the 2017 to 2026 period and identify it as a time 

horizon in which to make projections. And now you are projecting 

for that time period $2.9 trillion less in health care spending than 


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CBO was projecting back just in 2010. So that is a very big move, 

a $3 trillion move in a 10-year period over the 6 years that have 

taken place since then. It is about 60 percent of the $5 trillion that 

we are projected to spend on Medicaid, so it is a big, big number. 

And I am interested in exploring with you ways in which we can 

try to get whatever policy signals we should be getting out of that 

change. 

I am, as I think most people on this Committee know from my 

perennial remarks on this subject, kind of a maven of delivery system reform. I continue to remark on the inefficiency of our health 

care system compared to the OECD countries and the rather parlous life expectancies that Americans have with respect to their 

OECD neighbors. 

You have said that CBO, and I will quote here, ‘‘has found no 

direct link between the recession and slower growth in spending for 

Medicare.’’ So if there is not a direct link with the recession, then 

presumably other things did have that effect. I am hoping that 

what had that effect is the increased focus on that quality and cost 

nexus that we are seeing out there in a great deal of the privacy 

that is driven or rewarded to a certain degree by the ACOs but 

that has its own momentum going, and there are groups like Intermountain and Geisinger and Gundersen Lutheran that are private 

sector leaders in all of that. 

So if you could comment on that a little bit, I would be grateful 

to you. 

Mr. HALL. Sure. In the past, and certainly we will in the future, 

we based our forecasting on historical rates, to a large degree, and 

certainly what has happened is in recent years health care spending has grown more slowly than historical rates would suggest, and 

we have adapted to that. We have lowered our estimates. 

One of the things that is tricky for us, of course, is we did just 

come out of the Great Recession, so it is hard to separate temporary versus more permanent effects from that. And I think that 

is going to be one of the things that we are going to continue to 

try to focus on to try to get that right and make sure that we identify some sort of permanent slowdown that is there. 

Senator WHITEHOUSE. So can you kind of back up a step and, 

rather than comment on the phenomenon itself, comment briefly on 

what you think the most prudent steps would be for CBO to undertake to try to tease out of all that information what seems to be 

working and what does not seem to be working? Are there things 

you could look at that would provide a model that would allow you 

to back out some of the projection savings or otherwise adjust for 

this? And what are you doing to achieve that? 

Mr. HALL. Well, certainly one of the things that we are doing— 

I mentioned a little bit a minute ago when we were looking at a 

large model for health insurance that we are doing a second generation of that, and the goal there is to make it something that 

takes on actual data. One of the difficulties for us, of course, before 

this is we had no real data to base forecasts on the ACA, that we 

were just applying some theory. And now we are going to be getting data and looking at real data, and so we are setting ourselves 

up so we can take that on board. 


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We have also spent some time trying to talk about gaps in what 

we know. We have used a blog several times now to—which I kind 

of think of as invite the research community to help us out and do 

some research on some things that are gaps in our knowledge that 

would be helpful to us. 

Senator WHITEHOUSE. My time has expired, I am sorry to say. 

I thank you, and I look forward to continuing our discussion. 

Thank you, Chairman. 

Chairman ENZI. Thank you. 

Senator Grassley. 

Senator GRASSLEY. I just have a couple questions. 

In your testimony, you outlined work that CBO is doing to fulfill 

Congress’ request that it incorporate macroeconomic effects into the 

cost estimates for major legislation. You mentioned that macroeconomic analyses requires complex modeling and takes a great 

deal of time. As a result, you have only been able to provide a dynamic analysis a small number of times. 

Several think tanks and universities—to name a couple, Brigham 

Young, Wharton School—have developed their own dynamic models. I think there are others that have as well. So my question is: 

Has CBO reviewed these efforts to determine how it might improve 

its own models and increase transparency? 

Mr. HALL. Sure. We have, and one of the limitations a little bit 

for us is those particular models you mentioned are focused on the 

tax side of things, and the Joint Committee on Taxation does the 

tax side modeling for us. So we actually are not as active on that 

side of things. We focused on the other side. 

But, yes, we have looked at that, and I think we are going to continue to try to work with JCT to sort of understand what they are 

doing. And a big part of transparency to me, I think, is for us to 

be clear about how we are doing modeling and how the modeling 

is being done so we can get feedback from experts like the folks 

that you mentioned. It is sort of inviting criticism, but I think as 

long as it is in a constructive way, that is really helpful for us. 

Senator GRASSLEY. Okay. Then my last question deals with Federal regulations and how they affect small businesses, farmers, and 

families. It has grown significantly in recent years, or at least the 

burden of it has. The cost of these regulations is surely impacting 

the entire country and our economic growth, and I notice that the 

CBO’s latest economic outlook does not incorporate the estimated 

impact of the cost of regulations into its discussion of the long-term 

economic outlook. 

Has CBO considered incorporating the cost of regulation on economic performance in your future economic forecasting? 

Mr. HALL. We have not explicitly, because we have looked at sort 

of the historical performance of the economy and the historical performance of the budget, it is very hard to pull out the effects of regulation. It gets to be a little bit off our main focus on budgetary 

effects and on budget issues. 

That being said, we have increased our look at regulation and 

regulatory effects with the eye to sort of see if there is something 

more that could be done to sort of help Congress in understanding 

regulatory burden going forward. But we do not explicitly take it 


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into account in our modeling, and I think that would be quite difficult to do. 

Senator GRASSLEY. Could I follow up then because of your words 

‘‘difficult to do’’? There are organizations that I am not sure I can 

name that put some cost on a certain regulation or a lot of regulations and stuff like that. You are saying it is difficult. Would you 

say that from an intellectually accurate standpoint we should not 

believe too many of the other people that say regulations cost—a 

specific regulation or maybe a mountain of regulations is costing 

the economy a certain amount? 

Mr. HALL. I do not mean to suggest that their work is not accurate and not a best estimate. The difficulty is for us to take this 

on as a burden, is the problem, I think, when I say it is very difficult. We would—— 

Senator GRASSLEY. Does that mean a personnel problem that you 

have to do it? 

Mr. HALL. That is right. We are not geared up for that. 

Senator GRASSLEY. Okay. Thank you. 

Thank you, Mr. Chairman. 

Chairman ENZI. Certainly. 

Senator Toomey. 

Senator TOOMEY. Thank you, Mr. Chairman. 

Director Hall, thank you very much to you personally and your 

entire team. You and your colleagues work with my office on a regular basis, and it is a very helpful and constructive ongoing dialogue that we have, and I appreciate the work that you do. 

I wanted to ask you a little bit about fair value accounting and 

the methodology that CBO uses as compared to the methodology 

that perhaps should be used. But to start with, I would just like 

to understand the current methodology, which my understanding is 

you are required not to use fair value accounting but, rather, when 

discounting a promised cash flow, the systematic approach of CBO 

is to discount that cash flow using a Treasury rate that roughly 

corresponds in term. Is that correct? 

Mr. HALL. That is correct. 

Senator TOOMEY. Is that the standard methodology? 

Mr. HALL. Yes. 

Senator TOOMEY. So if you use that methodology for different 

borrowers, is it fair to say that that methodology fails to capture 

the different credit quality of different borrowers? 

Mr. HALL. That is right. The biggest difference I think in looking 

at fair value versus the so-called FCRA one is that market risk is 

not included, and because market risk is not included, there are 

things, there are elements of risk that are not being captured by 

that, that even the Federal Government would be exposed to, even 

the taxpayer would be exposed to. So the fair value we think is a 

bit more comprehensive estimate of the present value. 

Senator TOOMEY. So an illustration for a layman to understand 

the flaw of using a single Treasury rate to discount projected case 

flows—correct me if I am wrong. I want to understand this. 

Mr. HALL. Sure. 

Senator TOOMEY. If you have a loan that is made or guaranteed 

by the Federal Government through a vehicle like the Ex-Im Bank 

or more directly, and you have two loans, identical in all terms, but 


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in one case the borrower was a large multinational AAA corporation, and in another case the borrower is a small undercapitalized 

startup in a politically unstable Third World country, would you 

use the same discount rate to discount those identical cash flows 

from those very different borrowers? 

Mr. HALL. I am not sure you would use the same rate for those 

two. Obviously, if they are borrowing from private markets, they 

have got to pay the market rates for borrowing. Yeah, I am not 

sure. I think those would like be different. 

Senator TOOMEY. Under what basis? I mean, under a fair value 

accounting method they certainly should be discounted at different 

rates to reflect the very different risks. 

Mr. HALL. Right. 

Senator TOOMEY. And failure to do so would absolutely mislead 

about the nature of those risks. But in the absence of fair value accounting, what is the guiding principle that would allow you to distinguish, and what rates would you use? How would you do that? 

Mr. HALL. Okay. Yeah, I am sorry to be a little vague in this. 

Finance is not my main area, so I am—— 

Senator TOOMEY. Okay. I would be happy to get a follow-up answer. 

Mr. HALL. That would be good. 

Senator TOOMEY. But I am concerned that we do not have an 

adequate mechanism, and I think CBO’s hands are tied, is my understanding, into a methodology that does not sufficiently take into 

account the different range of credit risks that we take as a government. And to the extent that we do not take that into account, we 

understate the risk. 

And, therefore, in the form of these assets, when they are loans, 

we are overstating the value of some, and we are kidding ourselves 

about our finances to the extent that we do that. 

Now, as a general matter, my understanding is you and your colleagues have been supportive of moving to a fair value methodology 

because it does more accurately reflect all the risks. 

Mr. HALL. That is correct. 

Senator TOOMEY. But you cannot, you are not permitted to do 

that under existing law. 

Mr. HALL. Well, we are required to do the FCRA accounting, but 

we often can do the fair value accounting in addition. 

Senator TOOMEY. Right. And you provide that often as an addition, but it is just informative, right? 

Mr. HALL. That is right. 

Senator TOOMEY. And that is helpful, but it is not the official 

score from CBO on a given piece of legislation. 

Mr. HALL. That is correct. 

Senator TOOMEY. So there is a systematic risk that we are underestimating the risks of the assets that we are claiming. 

Mr. HALL. That is the nature of our—we have been pretty consistent for a while now in saying that the fair value is more comprehensive because it includes more of the risk that the taxpayer 

really bears on—— 

Senator TOOMEY. Exactly. Well, thank you very much. 

Mr. Chairman, I do think this is a really important item that I 

would like for us as a Committee to take up, if we could, simply 


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in the interest of having a more accurate portrayal and understanding and accounting of the risks that taxpayers takes. 

Chairman ENZI. Thank you, and I will have some follow up questions on that, too. 

Senator King. 

Senator KING. Thank you, Mr. Chairman. One follow-up question. 

The Congressional Budget Office issued a study in December of 

2015—and I think you mentioned it in your testimony—on labor 

market effects of the Affordable Care Act. That was widely reported as the Affordable Care Act will cost 2 million jobs or something like that. 

As I read it, though, what you really found was it was the labor 

supply that you were analyzing, not people losing their jobs but 

people choosing not to stay in a particular job because they could 

have health insurance. Is that not correct? 

Mr. HALL. That is right. It is one of the limitations. What we calculated was the idea of full-time equivalent, so we reduced hours 

equivalent to 2 million. That does not mean it was actually 2 million jobs. That is exactly right. It is a mix maybe of lower hours 

and maybe some job loss. 

Senator KING. But both effects were based upon people’s choices 

that they were likely to make not being bound to their job by their 

employer-supplied health insurance. 

Mr. HALL. That is exactly right. So it is on the labor supply, so 

that is exactly right, people’s incentive to work. 

Senator KING. I think that is an important point, because there 

was a lot of talk at the time that CBO says ACA will cost 2 million 

jobs, and that is really not accurate. 

Mr. HALL. That is correct, that we are talking about—— 

Senator KING. Have you done any analysis of the economic effect 

of people being freed from their employer based health insurance 

and, therefore, able to begin their own businesses, for example? I 

know anecdotally of people who have said that, ‘‘I have wanted to 

do this for 20 years. Now that I have health insurance, I can start 

my own business.’’ Any studies of that? 

Mr. HALL. We have not seen any, and that would be an interesting topic perhaps as time goes on and we get a little more experience with the ACA. 

Senator KING. Thank you. Thank you, Dr. Hall. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

Senator Whitehouse, did you have some other questions you 

wanted to ask? 

Senator WHITEHOUSE. If you do not mind, I did want to ask one 

other thing. 

Dr. Hall, your CBO June report, ‘‘Potential Increases in Hurricane Damage,’’ assigned—first of all, it projected significantly higher increases in hurricane damage costs, and the report attributed 

about half of the growth to the effects of climate change and the 

other half to more development and more value in the way of the 

increase. 

Mr. HALL. Yes. 


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Senator WHITEHOUSE. That focuses on hurricane damage specifically. Can you tell me about how CBO is including those climate 

change projections into your fiscal projections for other weathersensitive programs, like the National Flood Insurance Program, 

which is probably going to be dramatically affected by the combination of storm growth and sea level rise, and various measures that 

either depend on sea level rise, like what do we do about Norfolk 

Naval Station if the sea level rises 3 feet, coastal resiliency, and 

then our disaster relief? That is often off budget, comes in as an 

emergency, but it is still a big expenditure. How are you evaluating 

those areas? 

Mr. HALL. Well, we certainly tried to include as much of that as 

we could and the budgetary effect, going from the GDP effect to the 

budgetary effect. 

Senator WHITEHOUSE. I am sorry. PDP? 

Mr. HALL. GDP. I am sorry. 

Senator WHITEHOUSE. GDP. Got it. I misheard you. 

Mr. HALL. The effect on economic growth. 

Senator WHITEHOUSE. Yeah, yeah. I thought you said ‘‘PDP,’’ and 

that was not an acronym I recognized. GDP I know. 

Mr. HALL. I am sorry. I am an economist. I do that. I apologize. 

We did, in fact, try to look at as much of that as we could, Federal insurance and some things like that. To be honest, I am not 

sure about how much of all those things that you mentioned are 

included in that, but we did focus on the budgetary effect, and we 

did find that that was certainly a measurable significant effect over 

the next 60 years. 

Senator WHITEHOUSE. Okay. Thanks very much. 

Thank you, Chairman. 

Chairman ENZI. Thank you. 

Senator Grassley touched a little bit on the regulatory impact 

analysis and regulatory budget. That came up in some of our hearings that we had earlier, and I wondered if you had worked on developing a plan for how that could be done. I understand that you 

and your staff have had some discussions about the role that CBO 

might play in assessing regulatory costs of proposed rules and proposed legislation, and that you are in the process of conducting 

some more research into what infrastructure might be needed for 

the CBO to engage in this work? How is that moving forward? 

Mr. HALL. Sure. Well, primarily what we focused on is the idea 

of how Congress can have more impact on regulatory studies and 

more impact on assessing the burden of regulation. And the role 

that CBO could play certainly it really depends upon what Congress decides they want to do, how much involvement they want. 

For example, if Congress is looking for an organization to do 

complete studies on the effect of proposed regulation, that can take 

a long time, and that can be a really big deal. That would be tough 

to do something like that at a place like CBO, for example. 

If you are looking at a place that would assess executive branch, 

assessment of a regulation, regulatory changes, and sort of look at 

it as is this something similar to what OIRA does but just something for the legislative branch, that sort of thing makes more 

sense. 


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So what we have tried to do is we have tried to focus on some 

of the different options Congress may have to get more involved in 

regulation and thinking that that is sort of the first step before we 

think about CBO’s involvement. 

One of the things that comes to my mind, for example, is if there 

is a large involvement, if Congress wants to get involved in a more 

active way, I spent some time at a place called the U.S. International Trade Commission, which is an independent commission 

that focuses on trade issues, and it is set up, you know, with Commissioners from both parties, and it is set up to—and it is fairly 

large, and it is set up to do not just assessment of trade but also 

particular studies on trade that Congress wants. Something like 

that would be an option, for example. That would be an organization that could be as big as CBO. Something smaller we could certainly take on. 

One of the things that we would have to think about, of course, 

is if we took on almost anything, we are not geared up to do it 

under current staffing. So even if we did even fairly modest help, 

we would have to think about what sort of skills we would need 

to add to our skill set and maybe add some resources to that. 

Chairman ENZI. Okay. Thank you. 

I think this might be an area where Senator Toomey was going, 

because I had recently written a joint letter to the Secretary of 

Education about the Department’s plan to issue a final rule on Federal student loans. That rule would amend existing guidelines concerning interpretation and implementation of the defense to repayment provision in the Higher Education Act. The Department estimated that its proposed rule issued in July would increase the cost 

of the Federal student loan programs by somewhere between $2 

billion and $43 billion over the next decade. That is a pretty big 

range. How does CBO approach a matter like this when projecting 

costs in the next baseline? Is the Department of Education’s estimate of value, or will you have to use a separate estimate to incorporate it in the baseline? 

Mr. HALL. We will, and we always perform our own estimates. 

So we would probably take a look at what they have done, but we 

would perform our own analysis and come to our own conclusions 

about the likely impact and whether that—and discuss about incorporating that into the baseline if it is not already there. That is 

something that we wind up doing all the time as it is, and we always do our own independent analysis of things like this. 

Chairman ENZI. To get back to what Senator Toomey was asking 

about, would that have some of these risk factors in it as well? Or 

does that fit within what CBO does? 

Mr. HALL. You mean the risk factors are in how much uncertainty there is and—— 

Chairman ENZI. On different student loans, whether they will be 

repaid or not. 

Mr. HALL. Oh, yes, yes. Certainly we try to take the risk factor, 

obviously, into account. I am not sure we do a present value sort 

of analysis of this, but we would probably come up with a point estimate and revisit it as experience allows and try to communicate 

somewhat the uncertainty, the risk involved in the estimate. 


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Chairman ENZI. One proposal that I have heard out there—and 

I do not know who it was from—was that if students complete their 

college degree and there is not a job in that field, they should be 

able to sue the Federal Government for forgiveness of their loan. 

That would be a new risk factor, I assume. 

Mr. HALL. Well, that is right, and we would try to forecast that. 

Chairman ENZI. Yes. So would you have to look at what majors 

they have? [Laughter.] 

That is not a fair question. I do not have any more questions. 

Senator Whitehouse, do you have any other questions? 

Senator WHITEHOUSE. Nor do I. Thank you, Chairman. 

Chairman ENZI. Thank you, Dr. Hall, for being here and for your 

answers. And if anybody has any additional questions they want to 

submit, they can do that, but they should be turned in by 5 o’clock 

tomorrow night, and we would appreciate it if you would answer 

those, plus there were a few that we needed follow-up on from the 

questions that were given already. 

Mr. HALL. Absolutely. Thank you. 

Chairman ENZI. Thank you very much. This hearing is adjourned. 

[Whereupon, at 4:31 p.m., the Committee was adjourned.] 


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