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SENATE BUDGET COMMITTEE MIDSESSION HEARINGS FISCAL YEAR 2016 

HEARINGS 

BEFORE THE

COMMITTEE ON THE BUDGET 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

May 19, 2015-OVERSIGHT OF THE CONGRESSIONAL BUDGET OFFICE 

June 17, 2015-THE COMING CRISIS: CBO’S ANALYSIS OF THE 

FEDERAL GOVERNMENT’S DEEPENING FISCAL CHALLENGES 

October 21, 2015-REFORMING THE FEDERAL BUDGET PROCESS: THE 

NEED FOR ACTION 

November 4, 2015-REFORMING THE FEDERAL BUDGET PROCESS: A 

BIENNAL APPROACH TO BETTER BUDGETING 

December 9, 2015-MOVING TO A STRONGER ECONOMY WITH A 

REGULATORY BUDGET 

( 
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 

(II) 
iii 

C O N T E N T S 

HEARINGS 

Page 

May 19, 2015-Oversight of the Congressional Budget Office 1 

June 17, 2015-The Coming Crisis: CBO’s Analysis of the Federal Government’s Deepening Fiscal Challenges 31 

October 21, 2015-Reforming the Federal Budget Process: The 

Need for Action 71 

November 4, 2015-Reforming the Federal Budget Process: A 

Biennal Approach to Better Budgeting 137 

December 9, 2015-Moving to a Stronger Economy with a Regulatory Budget 189 

STATEMENTS BY COMMITTEE MEMBERS 

Chairman Enzi..................................................................................... 1, 31, 71, 137, 189 

Ranking Member Sanders................................................................................... 3, 34, 73 

Senator King ............................................................................................................ 140 

Senator Whitehouse ................................................................................................. 191 

WITNESSES 

William G. Batchelder, III, Edwin Meese III Distinguished Fellow, The Buckeye Institute, Columbus, Ohio, and Former Speaker, Ohio House of Representatives....................................................................................................... 160, 162 

Robert L. Bixby, Executive Director, The Concord Coalition ........................... 166, 168 

Thomas R. Carper, A United States Senator from the State of Delaware ................................................................................................................... 145, 148

Jerry Ellig, Ph.D., Senior Research Fellow, Mercalus Center, George Mason 

University.......................................................................................................... 199, 201 

John D. Graham, Ph.D., Dean, Indiana University School of Public and 

Evironmental Affairs........................................................................................ 192, 195 

Keith Hall, Ph.D., Director, Congressional Budget Office............................ 5, 8, 37, 40 

Douglas Holtz-Eakin, Ph.D., President, American Action Forum, and Congressional Budget Office Director (2003-2005)...................................................... 100, 102 

Johnny Isakson, A United States Senator from the State of Georgia ............. 141, 143 

Michael Peterson, President and Chief Executive Officer, Peter G. Peterson 

Foundation ............................................................................................................ 77, 80 

David E. Price, A Representative in Congress from the State of North Carolina..................................................................................................................... 151, 154 

Robert R. M. Verchick, Gauthier-St. Martin Chair in Environmental Law, 

Loyola University New Orleans ...................................................................... 206, 208 

Deborah Weinstein, Executive Director, Coalition on Human Needs ............. 109, 111 
Page

iv 

QUESTIONS AND ANSWERS 

Questions and Answers ......................................................................................... 61, 220 
(1) 

OVERSIGHT OF THE CONGRESSIONAL 

BUDGET OFFICE 

TUESDAY, MAY 19, 2015 

UNITED STATES SENATE, 

COMMITTEE ON THE BUDGET, 

Washington, D.C. 

The Committee met, pursuant to notice, at 10:34 a.m., in Room 

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

Chairman of the Committee, presiding. 

Present: Senators Enzi, Sessions, Toomey, Perdue, Sanders, 

Whitehouse, Warner, and Kaine. 

Staff Present: Eric Ueland, Republican Staff Director; and Warren Gunnels, Minority Staff Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. Since it is after the hour of 10:30, I am going 

to go ahead and gavel this in, and Senator Sanders can speak after 

me when he gets here. So I will call the meeting to order. 

Good morning, colleagues, and welcome to this oversight hearing 

of the Congressional Budget Office. If what I said sounds strange 

to everyone, it should. No Chair of the Senate Budget Committee 

has welcomed colleagues to an oversight hearing on CBO since 

1982. I have been complaining about other committees not doing 

their oversight. I thought we probably ought to do ours as well. 

Even so, the Congressional Budget Act of 1974 clearly gives us 

the authority to hold such hearings. Section 102(a) of the act 

amends the Standing Rules of the Senate to give the Budget Committee the ‘‘duty to review on a continuing basis the conduct by the 

Congressional Budget Office of its functions and duties.’’ A similar 

duty is given to the House Budget Committee in Section 101. 

Our research indicates the Committee executed this responsibility for several years after CBO’s founding in 1975. Specifically, 

the Committee held oversight hearings in 1975, 1976, 1977, and 

then in 1982. These hearings examined the agency’s operations, 

staff, travel, models, outside contacts, and other aspects of the 

CBO’s work. 

I doubt that the authors of the Budget Act had in mind ‘‘every 

33 years’’ when they gave the Committee the power to review CBO 

on a continuing basis. So today we are resetting our oversight relationship with the CBO. Let me assure the new Director and his 

staff that we will henceforth hold hearings on a continuing basis 

with the goal of helping CBO be an even better organization than 

it is today. 
2 

Congressional oversight of an office like CBO should always aim 

at clarifying the office’s mission and improving its operation. The 

growth and development of any organization often challenges it to 

maintain a consistent mission and frequently degrades efficient operations. Nonprofit and for-profit boards of directors probably focus 

more on the challenges posed by growth and development than on 

any other topic. Indeed, successful companies often have a harder 

time with mission and operations than the less successful ones. 

Staying focused on what we do really well while expanding in size 

and influence is tricky, and it is helpful to have a group like this 

Committee to advise and broadly guide the organization as it develops. 

What does this guidance mean, however? Guidance means helping CBO stay focused on its core mission, suggesting and overseeing the implementation of basic management processes in the 

office’s execution of its primary duties. Let me briefly elaborate on 

each of these oversight elements. 

Each CBO Director from Alice Rivlin to you, Dr. Hall, conceives 

and executes changes to CBO in many important ways. We know 

from the early CBO oversight hearings that 

Dr. Rivlin spoke with the Committee on CBO’s mission, and subsequent Directors have informally engaged Committee members on 

that topic frequently. 

That said, it is crucial that CBO keep firmly in mind its mission. 

The Budget Act clearly lays out that mission in Section 202 where 

you can read, ‘‘It shall be the primary duty and function of the office to provide to the Committees on the Budget of both Houses information which will assist such committees in the discharge of all 

matters within their jurisdictions.’’ 

Throughout this important section, that refers as well to the 

other House and Senate committees. You often read about CBO’s 

role in assisting and supporting the committees and members in 

the execution of their duties, and it is always helpful to remember 

that CBO exists solely for this purpose. 

Second, the Budget Committee’s oversight duties clearly extend 

to assuring the rest of Congress that this vital organization is operating with excellent management practices in place. There is no 

partisan divide when it comes to ensuring that CBO be the best analytical organization possible in Washington. Thus, the Committee 

should be focused on such fundamental management policies as the 

existence and growth of its disclosure and transparency, the role of 

its advisory panels, the implementation of its conflict of interest 

policy, its personnel retention and succession planning policies, and 

the office’s continuity of operation practice. The Committee does 

not create these policies and practices, but it is our duty to make 

sure they exist, are robust and effectively implemented. 

The Committee also is interested in helping the office resolve 

barriers that others might create to its effectiveness, as well as 

challenges that any broad, new legislation would present. As well, 

the Committee should take an interest and provide guidance to the 

CBO as its duties change and evolve. The budget resolution Congress recently adopted has several new requirements for CBO, and 

I was pleased how well we worked with you and your team, Dr. 

Hall, in conceiving and drafting those provisions. I look forward to 
3 

continuing our conversations with you about how best to carry out 

these new responsibilities. 

Finally, the Committee’s basic duty is to provide appropriate 

oversight of the operations of CBO. I think CBO management and 

the Committee could develop a set of metrics and reports that 

would allow the Committee to be assured that the resources are 

utilized effectively, that CBO has the tools it needs to do the work 

at a high level of effectiveness, and that appropriate investments 

are made in CBO personnel. 

I look forward to working with CBO management in the development of these metrics and reports. I believe I speak for all of my 

colleagues when I say that we want a great Congressional Budget 

Office. We want its focus to be sharpened and its effectiveness increased. Pursuing these goals for an organization that already 

owns a high reputation should assure everyone who cherishes CBO 

that this Committee has its best interests in mind and that, going 

forward, CBO builds on its solid foundation from its first 40 years 

with oversight from the Senate Budget Committee. 

When Senator Sanders arrives, we will—right now what we will 

do is go to Dr. Hall’s testimony, and then if Senator Sanders is 

here, he can do his statement. Then we will go into the questions. 

Our witness today is Dr. Keith Hall, the recently appointed Director of the Congressional Budget Office. It is my understanding 

that this is Dr. Hall’s first testimony given as CBO Director. On 

behalf of my colleagues in the Senate, let me welcome you to a 

place at the table that will soon become all too familiar. 

Prior to his appointment as CBO Director on April 1st, Dr. Hall 

served as the Chief Economist and Director of the Office of Economics at the U.S. International Trade Commission. Hall has over 

20 years of Federal service with the Department of the Treasury, 

the International Trade Commission, the Department of Commerce, the Executive Office of the President, and the Bureau of 

Labor Statistics. In 2007, President George W. Bush nominated Dr. 

Hall to be the 13th Commissioner of the Bureau of Labor Statistics. 

Before becoming Bureau of Labor Statistics Commissioner, he 

served as the Chief Economist for the White House Council of Economic Advisers, where he analyzed a broad range of fiscal, regulatory, and macroeconomic policies, and directed a team that monitored the state of the economy and developed economic forecasts. 

Dr. Hall has held numerous academic posts. He received his 

Bachelor of Arts degree in Economics from the University of Virginia and his Master’s and Ph.D. in Economics from Purdue University. 

For the information of colleagues, Dr. Hall will take 7 minutes 

for his opening statement, and then—since Senator Sanders is 

here, even after that introduction, we will go ahead with Senator 

Sanders’ statement. 

OPENING STATEMENT OF SENATOR SANDERS 

Senator SANDERS. Thank you, Mr. Chairman, and my apologies 

for being late. And, Dr. Hall, welcome. Thanks for being here. 

Mr. Chairman, thanks for holding this important hearing. 

Though you and I certainly have our disagreements about policy 

and about the budget, we can most certainly agree that it is abso-
4 

lutely essential for the CBO to provide us with independent, nonpartisan, and unbiased scores or projections to inform the decisions 

that we make, and that has been the history of the CBO, and we 

look forward to Dr. Hall continuing in that tradition. 

Mr. Chairman, we are here this morning to conduct oversight 

over the Congressional Budget Office, and that means making sure 

CBO sticks to its core mission of providing us with objective information about how legislation will impact the deficit in an unbiased 

manner. 

In my view, it is essential that the information that CBO provides Congress is as accurate as possible and as nonpartisan as 

possible. 

Director Hall, I recognize that you have been on the job for a 

very short time, but I am sure you already realize how important 

CBO’s nonpartisan reputation is for maintaining its ability to help 

us do our job. We need objective information regardless of one’s political views. 

CBO, like all agencies, depends on its people for its success. The 

agency’s ability to attract and maintain talented individuals is critical to what it does. It is also important to us since we and our 

staffs make countless requests of CBO each year. You know that 

you are running one of the most important agencies in this Congress. 

Like the rest of the Government, CBO has had to do more with 

less under sequestration. The cuts required to make the Budget 

Control Act caps have meant that CBO has shed employees and 

seen a shrinking budget. For fiscal year 2016, CBO’s funding request to Congress would provide a budget that is only slightly higher than the agency’s funding level was in fiscal year 2010. However, even if that funding level were provided, CBO would still 

have 5 percent fewer employees than it did in 2010. Relative to 

GDP, CBO’s budget has fallen by nearly half since its high point 

in 1977. And yet the fiscal year 2016 budget resolution conference 

report includes several additional requirements for CBO, including 

analysis on macroeconomic effects or dynamic scoring, so-called fair 

value estimates, and new requirements for longer-term estimates. 

Director Hall, I would like to be clear that several of these new 

requirements I believe are nothing more than a back-handed way 

to make it easier to cut taxes for those who have benefitted greatly 

over the past several years and to make it harder to assist those 

who have not. In other words, I am not a great fan of so-called dynamic scoring. 

Of course, these requirements are brand new, and we will have 

to wait and see what CBO produces as a result. I sincerely hope 

that in complying with these new requirements, you will maintain 

CBO’s standard for unbiased analysis. I know that the staff of CBO 

will do its very best to meet these requirements in a timely fashion. 

However, I question the wisdom of piling on these responsibilities 

with what seems to be little thought to the agency’s ability to absorb this new workload while carrying out its ongoing responsibility. 

So the bottom line is you have less money; you have been asked 

to do more. There are some of us who want to make sure you con-
5 

tinue to do your work in the traditional nonpartisan, objective way, 

and with that, we wish you the best of luck in your new task. 

Chairman ENZI. Thank you, Senator Sanders. 

Since I have done the introduction, we will go to Dr. Hall. 

STATEMENT OF KEITH HALL, PH.D., DIRECTOR, 

CONGRESSIONAL BUDGET OFFICE 

Mr. HALL. Great. Thank you. Chairman Enzi, Ranking Member 

Sanders, and members of the Committee, I appreciate the opportunity to come before you today to discuss the work of the Congressional Budget Office. We are pleased to discuss our accomplishments, which we believe are substantial, but we also welcome the 

feedback that you can provide about ways in which we can do our 

job better. 

In my short time at CBO, it has become very clear to me that 

the agency is blessed with a staff that is knowledgeable, highly 

skilled, very hardworking, and dedicated to providing the best possible objective and impartial analysis to Congress. And CBO has 

consistently been rated one of the best places to work in the Federal Government. But we are not perfect, of course. No economists, 

analysts, or forecasters are. So we welcome thoughtful assessment 

of our work and of ways to improve it. 

The Congressional Budget Act of 1974 created this Committee, 

the House Budget Committee, and the Congressional Budget Office. CBO’s work follows processes specified in that law or developed by the agency in concert with the Budget Committees and the 

congressional leadership. The agency’s chief responsibility is to 

help the Budget Committees with the matters under their jurisdiction. Also under law, it supports other congressional committees, 

particularly the Appropriations, Ways and Means, and Finance 

Committees. 

At CBO, we are committed to providing information that is objective, insightful, timely, and clearly presented and explained. In 

keeping with CBO’s mandate to provide analysis that is objective 

and impartial, the agency makes no policy recommendations. Instead, it strives to present fully and fairly the likely consequences 

of alternative proposals being considered by Congress. 

For fiscal year 2016, CBO has requested an appropriation of 

$47.3 million, an increase of $1.6 million from last year. About onequarter of the requested increase would fund three new positions, 

bring the agency’s staffing to 238. These new positions would be 

devoted to analyzing the economic effects of Federal tax and spending policies, including conducting dynamic analysis of certain legislation as specified in the budget resolution, and analyzing health 

care issues. 

Focusing for a moment on those two topics, we have devoted significant effort to developing analytical tools that enable us to assess the macroeconomic effects of fiscal policies. Recent reports incorporating such analyses include several on the macroeconomic effects of alternative budgetary paths, including those specified in 

the recently passed congressional budget resolution. We expect to 

devote considerable attention to further developing our capacity to 

conduct dynamic analysis in the coming year and have already 

shifted some resources towards that end. 
6 

Interest in legislative proposals related to health care—on the 

part of the committees of jurisdiction, the congressional leadership, 

and the Budget Committees—remains very high. We continue to 

analyze proposals to modify the Affordable Care Act and the forthcoming Supreme Court decision regarding that act that could require significant changes to baseline projections and could lead to 

significant legislative activity. 

We are in the process of analyzing various aspects of the health 

care system and enhancing our analytical capability to assess the 

effects of future legislation on that system and on the Federal 

budget. 

On a broader scale, in carrying out our mission of serving the 

Congress during 2015 and 2016, we will focus on meeting three 

goals. 

The first is to continue to provide Congress with budget and economic information that is objective, insightful, and timely. In the 

coming year, we expect to provide a wide variety of estimates and 

other analysis to Congress. They include: about 20 reports representing an assessment of budgetary developments during the current fiscal year, the outlook for the budget and the economy, analyses of the President’s budget, long-term budget projections, and 

options for reducing budget deficits. 

We will also produce more than 500 formal cost estimates, mostly for bills reported by committees. In addition to formal cost estimates, we will have about ten times as many preliminary, informal 

cost estimates, mostly to aid committees in the drafting of legislation. 

We will produce about 120 scorekeeping tabulations for appropriations acts, and we will produce roughly 85 analytical reports 

and other publications generally required by law or prepared in response to requests from the Chairman and Ranking Members of 

committees. 

All of our estimates and reports are reviewed internally for objectivity, analytical soundness, and clarity. That rigorous process involves multiple people at different levels in the organization. In addition, we will consult with numerous outside experts who represent a variety of perspectives. 

A continuing challenge is how to respond in a balanced way to 

requests from both the majority and minority of multiple committees in both the Senate and the House. We regularly consult with 

the committees and the congressional leadership to ensure that we 

are focused on the work that is of the highest priority to Congress. 

Our second goal is to continue to present and explain the methodology and results of analyses clearly. We make our work widely 

available to Congress and the public by releasing publicly all formal cost estimates and analytic reports. The input from outside experts and extensive external review will remain an important component of our transparency. Also, we will continue to have our documents and related information provide explanations that go well 

beyond just the presentation of results. 

In addition, CBO analysts will regularly explain details underlying the agency’s estimates and other analyses to interested Hill 

staff. They will present their work at professional conferences to 

promote discussion among experts in the field. 
7 

The transparency of our work is very important, and enhancing 

it is one of my prime objectives. We will look forward to the Budget 

Committees and other congressional users of our analysis to provide us feedback on the appropriate type and level of explanation 

of our methodology to be the most effective in supporting our work. 

Our third goal is to continue to improve our internal management. At CBO, we will continue to face considerable competitive 

pressures in attracting and retaining highly educated and skilled 

employees that we need. More than two- thirds of the staff consists 

of economists and budget analysts. Talented people with those 

backgrounds are highly sought by other agencies, private analytic 

organizations, universities, and private companies. The gap between compensation that we provide and the compensation that 

people with such backgrounds can receive elsewhere is increasing. 

For example, in the past 17 years, the average inflation-adjusted 

annual salary paid to professors of economics has risen by 47 percent while the highest inflation-adjusted annual salary paid at 

CBO has fallen by 7 percent. With current limits in salaries that 

CBO can pay, hiring and retaining strong performers will be difficult in the long term. 

In closing, I would like to emphasize how much we at CBO have 

relied on the oversight of the Budget Committees and their help in 

explaining and communicating to others in Congress about our role 

in the complex Federal budget process. We rely on your constructive feedback and guidance on important legislative developments 

and congressional priorities. We are grateful for the support and 

guidance you have provided throughout the 40 years of CBO’s existence and look forward to continuing that constructive relationship for many years to come. 

Thank you. 

[The prepared statement of Mr. Hall follows:] 
8 
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Chairman ENZI. Thank you. We appreciate the information and 

realize that you have not been there very long—yet. We will have 

questions, 5 minutes for each Senator, in the order of their arrival 

but alternating back and forth between the Republicans and the 

Democrats. 

Director Hall, I recognize that you have only been the Director 

for 59 days. In fact, I think today is the 59th day. But I suspect 

you have begun to reflect on the goals of your tenure in office and 

can tell that from your statement. Could you please take a minute 

or two to tell us what your midterm goals are for the CBO under 

your leadership—in other words, what accomplishments you would 

like to be able to talk about in 6 months and what objective measures we could have to determine if those have been achieved? 

Mr. HALL. Well, part of my initial impression is that the CBO is 

running and working very well. They have an excellent, well-deserved reputation for quality of the work, and I certainly did not 

come into the job with the idea that large changes were needed at 

all. 

Two things, though, that come to mind since I have been with 

CBO, and one is an interest I have had even before coming to CBO, 

and that is, providing transparency with what we do. You know, 

I think it is vitally important that the work of CBO is credible. The 

value to you is that our work is credible. It needs to be objective 

and independent. And people have to believe that we have made 

an honest effort at it, and part of that, I think, is being transparent—being transparent with what we have done, how we have 

done it, and being able to communicate it. 

In fact, I think transparency has two really important roles: one 

is the credibility; but, second, by being more transparent, I hope 

that we get feedback on what we are doing. So if we provide an 

estimate and somebody thinks it is too high, it is not helpful if all 

they can say is, ‘‘It is too high.’’ If we provide an estimate and explain how we got it and you think there are problems with our 

methodology or some of the estimates that we have made, you can 

say that, and that is something that we can talk about and we can 

make improvements on. 

So one thing I think is definitely with transparency, certainly 

with dynamic scoring, I think we have got some transparency there 

and sort of making clear how we are going to do our work. And I 

think we also need to make some effort to make sure we are working with economic consensus on dynamic methods. 

One of the things I think that we are starting to do now—in fact, 

we just did it last week. We had our Director of Macroeconomic 

Analysis present at the Conference of Business Economists about 

dynamic scoring, and the slides are now available online. It has 

provided some detail. She is going to make a similar talk to our 

panel of economic advisers in a month or so. And then starting fairly soon with a long-term budget analysis and the President’s budget, the economic effects of the President’s budget later this year, we 

are going to try to improve our presentation of dynamic results and 

try to improve the transparency. That is one place where I hope 

you will see a difference going forward. 

The other thing is the development of health care models. We are 

doing work on health care, and it has been a real challenge for 
21 

CBO, in large part because all we had was theory. And our modeling was based on theory, and we were doing our—CBO did its 

best to estimate the effects of the ACA based on what economic 

theory suggests. But now we are starting to get some experience 

with the ACA. We are starting to get some data, and we are going 

to need to adapt our methodology as we get more data and as more 

research is done. 

So one of the things I would like to do in the near term is starting to encourage, maybe trying to be more transparent about the 

sort of economic research that we would like to see from the private sector or elsewhere on how to improve our modeling of the 

health care. 

Chairman ENZI. Thank you. I appreciate that, and particularly 

your comments during your testimony about the disclosure of your 

methodology, too, which will help for people to have a better understanding of how you got there and whether they think it was right 

or not. And hopefully we will have constructive suggestions for 

ways to improve that. 

Now, your predecessor’s submission to the Appropriations Committee earlier this year—and I do mention that it was your predecessor—asked for authorizing provisions in the 2016 appropriations 

bill. CBO requested permission to hire employees with non-immigrant visas for difficult-to-fill positions and to keep half of the unused appropriations in fiscal year 2016 for use in fiscal year 2017. 

It is my understanding that the House Committee on Appropriations, which reported its legislative branch appropriations last 

week, did not include these requested authorization changes. Do 

you know why CBO sought those provisions through the appropriations process rather than with changes in the authorizing statute 

through the Budget Committee? And is there a list of administrative provisions that have been adopted in the appropriations bill 

that affect how the agency conducts it, share with the Senate and 

the House Budget Committees? If not, please prepare such a list 

and submit it to the Senate and House Budget Committees. That 

is a pretty long question. 

Mr. HALL. Well, I think I can give you kind of a short answer, 

because I was not involved and I do not know why the submission 

was made through the appropriations. I do know that generally the 

interest of increasing our ability to hire is a concern. It actually is 

a concern throughout the Federal Government that some skilled 

positions like economists and finance and some of those high areas, 

it is very hard to hire them, and it is very hard to pay those salaries. So I think there was some interest in expanding our capability 

to hire some non-citizens. 

And the other stuff, I will be happy to follow up. I do not know 

a lot about it at this point. 

Chairman ENZI. And it would be helpful to maybe have some 

comparisons. You mentioned professors went up by 47 percent, but 

47 percent of what? So it would be helpful to see what some of the 

dollar numbers are as well. 

My time has expired. Senator Kaine? 

Senator KAINE. Thank you, Mr. Chair, and thank you, Dr. Hall. 

Dr. Hall, I am interested in one kind of metric question. I understand that it is not your office’s job to offer policy, but here is a 
22 

metric question that has bothered me since I came into the Senate, 

and it is a question over what is an acceptable level of debt and 

what is a dangerous level of debt. We had a hearing in this Committee a couple months back, and I think the title of it was, ‘‘America’s Dangerous Debt.’’ We had three witnesses, and I asked 

them—and I think I may have been the last questioner that day: 

‘‘Describe what is a dangerous level of debt.’’ 

One witness said that he actually did not like the way we calculate debt, and so any debt-to-GDP ratio he thought was meaningless. He did not really offer—I do not think he offered us a great 

alternative, but he at least candidly said, ‘‘I do not think debt-toGDP ratios is a meaningful number.’’ 

The second witness said that she did not feel professionally 

qualified to offer an opinion about a metric for distinguishing acceptable debt from dangerous debt. 

And the third witness gave the most elegant 5-minute non-answer that I have heard on this Committee. 

So no one would say here is what the metric is. And, you know, 

early in my time in the Senate, the Rogoff- Reinhart study came 

out that, you know, tried to say here is acceptable and here is dangerous, and there was a lot of critiquing of that. And as I followed 

this in 2–1/2 years in the Senate, I have been struck by how different it is from being a Governor. We had debt ratios that we used 

that were bipartisan, that, you know, Democratic and Republican 

Governors and Democratic and Republican legislative bodies generally followed, with plenty of controversy about how to manage to 

the ratio. You know, how do you construct the expenditure side or 

the revenue side to manage to the ratio? But we used total debt 

as a percentage of State GDP and debt service as a percentage of 

the State general fund budget as our ratios. When I was mayor of 

a city, we used similar ratios. We did not have a number for debt, 

but we had ratios for debt. 

I wonder, you know, what is your particular opinion, your office’s 

opinion, or what you think is an economic consensus, to the extent 

that there is one, about what is an appropriate way to measure 

sort of appropriate debt versus dangerous debt. And then we would 

have all the controversies about how to, from a policy standpoint, 

manage to that. But I would love to hear your thoughts on the metric itself. 

Mr. HALL. Sure. Well, first of all, the idea of debt- to-GDP is 

helpful in that it gives you some idea of the ability to pay it back, 

right? So, you know, if a small business owes $1,000 or Starbucks 

owes $1,000, those are two different situations. So it does help to 

put it in some perspective with GDP, its ability to pay it back. And 

then, of course, there is sort of the time value of money. GDP 

grows, prices grow, the debt grows. It helps to give you some idea, 

again, about how that works. 

One of the things that CBO has done a fair amount of that I 

think is really useful is to make projections, long- term projections, 

under different scenarios. So you have a debt-to-GDP, and we can 

give you some idea of what could be the case in 10 years, in 25 

years, under different scenarios with respect to productivity 

growth, et cetera. So you get some idea of worst-case scenarios, 

best-case scenarios in that respect. 
23 

And then I think probably one of the most helpful things—and 

I think we are going to continue to try to do this—is give you some 

idea of what it would take to get rid of the current level of debt, 

you know, what sort of cutbacks in either spending or taxes that 

would eliminate debt, and that will give you some perspective as 

to how hard it will be to get away, just how big that problem is. 

That is probably as good a way as any. 

As far as a level, you know, it is hard to say a level that is a 

dangerous level. 

Senator KAINE. And just to follow up on that—and this is helpful—even recommendations about what it would take to get rid of 

the current level of debt, I mean, I do not think any of us around 

the table feel like we are going to be as a Nation just debt free. 

The idea would be to get rid of debt that could be unproductive or 

a challenge and to have an appropriate level of debt. But I just 

wonder whether you think in the province of the office is some advising of us about, you know, what are appropriate versus dangerous levels. Again, we have to manage the policy—we have to 

grapple with the policy choices about how to get to the metric. But 

is that something that you think is in the province of your office? 

Or is that more of just a hotly contested, you know, economic theory that you guys will be agnostic on? 

Mr. HALL. No, actually I think it is something that we can look 

at and think about, ways of sort of giving you perspective on just 

how big a debt is, how much trouble you can be in with it. I think 

that is a difficult thing because there is so much uncertainty and 

providing these sort of point estimates where there is lots of uncertainty, when you know that under some scenarios that debt could 

be much worse than it looks. I think it would be helpful for us to 

think about that. We could probably do a little work. 

Senator KAINE. Great. Thank you very much. 

Thanks, Mr. Chairman. 

Chairman ENZI. Thank you. 

Senator Perdue? 

Senator PERDUE. Thank you, Mr. Chairman. And, Dr. Hall, I am 

a fan. I have watched your work at the Council of Economic Advisers. I welcome you to your new role, and thank you for being willing to step up and help us. 

This is a great conversation. I want to follow up on Senator 

Kaine’s direction. Obviously, we have just gone through a budget 

cycle. I do not think anybody on this Committee is really ecstatic 

about the process. Our Chairman and Ranking Member did a great 

job with a budget, but the long-term thing that really concerns me 

is our ability to address this debt. And I want to follow up on Senator Kaine. I think he is headed in the right direction, and I want 

to commend him on the nonpartisan approach I think a lot of people are taking in this Committee with regard to the question. 

You did not mention interest rate models, and obviously the uncertainty around interest rates have a large impact on what happens with how we manage the debt. But I am really interested how 

you can help us look at the alternatives we have to address the 

debt issue. Like Senator Kaine says, we will deal with the policy 

issues, but one of those is particularly of interest to several of us 

here, and I know I have heard Senator Whitehouse talk about this, 
24 

and a few others on the other side, and that is, redundant agencies, 

agencies that are actually totally duplicative of other agencies. 

The GAO comes out with a report. They quantify some, they do 

not quantify others. And I know that they cannot really estimate 

savings without some help from the CBO or some reports from the 

CBO. Can you address how you are looking at maybe interfacing 

with some of these other agencies in terms of helping us answer 

some of the questions we are dealing with, specifically with regard 

to the debt? 

Mr. HALL. So you are talking about looking at sort of what they 

are saying about the debt? 

Senator PERDUE. Yes, and what would be the potential models 

around reduction or elimination of some of these—or changes really 

in mandates around some of these duplicative agencies that the 

GAO estimates or identifies every year? 

Mr. HALL. Yes, well, certainly the sort of thing that we can do 

is look at the possible effects of doing some of that work, the effect 

on the budget of eliminating some of this overlap. That is the sort 

of thing that I think is sort of in our wheelhouse so we get an idea 

perhaps of some specific ideas on that that we could do some work 

on that. 

Senator PERDUE. Let us go to dynamic scoring then. What are 

the risks—and I know this is one of several measures that you 

would use in evaluating any change. Talk to us about how we 

should be thinking about that relative to looking at ways to reduce 

the debt with regard specifically about growing the economy and 

doing some things on the public side—or the private side that 

would help generate growth in the economy. 

Mr. HALL. Well, sure. Certainly that is one of the things about 

the macroeconomic work that we have been doing, is sort of looking 

at the possible macroeconomic effects of some policy spending or 

taxation. You know, it is the sort of thing where it is very difficult 

to make these estimates. There is a lot of uncertainty. But there 

actually is pretty good consensus on some of these issues that there 

is some macroeconomic effect, there are some growth effects going 

forward. And it is certainly true if you are looking at Federal debt, 

a Federal budget deficit, there is sort of three things that are important there: it is spending, it is revenues, but it is also economic 

growth. So that is sort of a third thing that we are trying to take 

into account with a dynamic aspect. 

It is just a difficult thing to do for policies, but it is certainly an 

important thing. And you will see that actually in our forecast, especially our long-term forecasting, how much if we change some of 

the assumptions in something like productivity growth, how much 

that makes a difference in the debt going forward. 

Senator PERDUE. Thank you. That is very helpful. 

Switching over to just an oversight question, you mentioned that 

you were pleased with what you found so far coming in after 59 

days. Give us a sense operationally of how you think we should 

think about CBO’s effectiveness in terms of dealing with new 

things that we are asking you to do, like dynamic scoring and others, given the organization, the people you have, the challenges you 

have of retention, and the things that you have already mentioned. 

But going forward, as we look at dealing with this debt over the 
25 

next few years, what do we need to be thinking about relative to 

CBO’s resources, capabilities, and what we are asking you to do? 

Do we need to look at priorities? Or are we asking too many 

things? 

Mr. HALL. Well, certainly one important thing for a place like 

CBO is to always have a certain amount of their time and resources set aside for developing new methodologies, and right now 

I think the two things I mentioned—dynamic scoring and especially 

health care—those are really new areas. And so for a lot of the 

CBO work, we are sort of taking the consensus of economic science 

and applying that. And something like health care, we are sort of 

creating, we are on the frontier of that. So we have got to spend 

a considerable amount of time ourselves trying to develop the modeling and such and just having some resources where we can do 

that and vet that work is very important. 

And then, of course, just setting priorities for us. You know, one 

of the things that this really clears, we get more requests than we 

could possibly handle at times, and having some guidance as to 

which ones we should move on first is very, very helpful for us. 

Senator PERDUE. Thank you. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

Senator Whitehouse? 

Senator WHITEHOUSE. Thank you, Chairman. 

Mr. Hall, welcome. I think a lot of us are concerned about where 

this dynamic scoring issue goes. As you just pointed out, it is a new 

frontier for CBO, and you will be responsible for setting the kind 

of behind-the-scenes ground rules for the application of the rule. 

And my concern is that in setting the ground rules for the application of dynamic scoring, you might be inclined to set it up in such 

a way that it favors things that the majority party likes, like big 

tax cuts for wealthy people, and produce dynamic scoring results 

that show that that is such a wonderful thing, and not things that 

they do not like so much, like the Clean Air Act. So the Clean Air 

Act, according to EPA, for every dollar that the polluting utilities 

have had to spend to clean up the air has paid back more than $30 

in public benefit. A lot of that is in health savings. A lot of that 

comes back through the federally supported health care system. 

Are things like the savings from clean air and clean water likely 

to be picked up in the way that you will organize the dynamic scoring? Or is it just going to be taxation and the things our friends 

like so much? Will you treat us fairly in setting up this rule so that 

it falls on the just and unjust alike, as some would say? 

Mr. HALL. Well, I think as I said before, I think the credibility 

of what CBO does is important to us, but it is important to you on 

both sides, that we do not have any value probably for you if what 

we do is not credible and is not objective and independent. 

With respect to something like dynamic scoring, CBO has already been using dynamic scoring. You can sort of see how it has 

been implemented. But that is a big part to me of transparency, 

is making clear how we are going to do the dynamic scoring, what 

models we are going to use, what estimates we are going to use. 
26 

Senator WHITEHOUSE. And in making those selections, will you 

be sure that it can apply fairly to all results, no matter what the 

desired policy outcome might be by certain interests? 

Mr. HALL. Absolutely. As I say, that is part of the transparency. 

You know, for example, we have an economic advisory panel, and 

we are going to vet our methodology at our next meeting, in fact. 

We are going to talk in some length about our dynamic methodology and get some feedback from those folks. And as I say, when 

we increase our transparency, we are going to open ourselves up 

to criticism and comments if we are not doing a fair job. And I 

think that is the only way for us to remain credible and also improve on what we are doing. And the goal is, like I say, to do this 

in a way that represents sort of the state of economic science, and 

we are trying to look for consensus as much as possible in what 

we do. 

Senator WHITEHOUSE. You come to us from, among other places, 

the Mercatus Center, which is very heavily funded by polluting interests and has, from my view, an unfortunate record of attacking 

the Clean Air Act, pretending that the science of climate change is 

not real and in general supporting the industry antagonism towards doing anything about carbon pollution. And that would not, 

I hope you will agree, be an appropriate set of points of view to be 

bringing with you into your new position at CBO. Is that correct? 

Mr. HALL. Absolutely. The goal of CBO and my goal is to maintain what I think is an excellent reputation of CBO for doing independent and objective work, and we will continue to do that. 

Senator WHITEHOUSE. So the policy goals that Mercatus Center 

sought to achieve on behalf of its big funders are things that we 

need not worry about infiltrating your work as CBO Director? 

Mr. HALL. Yeah, I cannot—to be honest, I could not tell you offhand what their policy goals are, but absolutely. 

Senator WHITEHOUSE. All right. Delivery system reform is an 

area in the health care system where there is a lot of bipartisan 

support. Are there any provisions of the Affordable Care Act right 

now that you can say have led to health care savings? 

Mr. HALL. You know, I am pretty new on the job, and I do not 

want to talk too much about CBO’s work because I have not been 

involved in it. You know, certainly one of the things that has already happened at CBO was some of the early modeling of the 

ACA, like I say, was based on theory. And as we are starting to 

get some experience, the results are going to change a little bit 

based on an experience like that. 

So if what you say is true, we find that is true, it will be reflected 

in our modeling going forward. 

Senator WHITEHOUSE. Well, my time is up. I look forward to 

working with you, Mr. Hall, and I welcome you to CBO. 

Mr. HALL. Thank you. 

Chairman ENZI. Thank you. 

Senator Sessions? 

Senator SESSIONS. Thank you. Thank you, Mr. Hall, and we are 

glad to have you on board. 

Mr. HALL. Thank you. 

Senator SESSIONS. And you will be challenged, and I think Dr. 

Elmendorf did a pretty good job, and a lot of times he was under 
27 

intense political pressure, and I think in general he produced reports that were objective and respected on both sides. And you will 

be under pressure, too, and I hope you will adhere to what you just 

said. You are going to give the facts as you see them. 

Senator Kaine asked about debt and dangerous levels. Professor 

Kotlikoff from Boston University was here, and he gave us, I think, 

almost a passionate but objective analysis of our long-term unfunded liabilities that he said put us on a path to disaster. And he 

indicated that perhaps a better way to judge our financial condition 

rather than whether we have a budget that balances or not is 

whether we are adding to or reducing our long-term unfunded liabilities. 

Do you think that would be a valuable way, one valuable way to 

analyze the debt course of America? 

Mr. HALL. Well, certainly that is what CBO I think is already 

doing for you with some of the long-term forecasts and talking 

about some of the things that will impact those long-term budgets 

going forward. 

Senator SESSIONS. Now, Dr. Elmendorf said that even though we 

have seen some reductions in our deficits, we are under $500 billion presumably this year—hopefully we will be—that we will begin 

a relentless climb in those numbers in the years to come, reaching 

$900 billion or more 10 years from today, and he asserted that was 

an unsustainable future, that it presented unacceptable risks to 

our financial future. Would you agree with that? 

Mr. HALL. I absolutely agree with CBO’s assessment then, and 

I think it will continue that way for a little while. 

Senator SESSIONS. Now, one of the most unusual things that happens here to me is to some degree our lack of understanding of the 

huge numbers that we deal with. I am not raising this to attack 

Obamacare, but I want to talk about it. On the eve of the vote, December 23rd, I pressed Mr. Elmendorf to give a report on the action 

that was proposed by that legislation, and it was going to reduce 

spending and produce savings in Medicare by $400 billion, as I recall. And that money was going to be used to fund the new program, Obamacare, and it was asserted that these reductions in 

spending in Obamacare—in Medicare would strengthen Medicare, 

put it on a sounder footing, and also provide money to the new program. 

Now, if we were dealing with a small amount of money, $500, 

people would obviously see the danger in this analysis. And so I 

said, ‘‘Isn’t this double counting? And I want a letter from you on 

it.’’ And he wrote me a letter, and he said, ‘‘You cannot spend the 

same money twice.’’ 

‘‘You cannot spend the same money twice. And it is double counting’’—he used those words—and he said, ‘‘Though the conventions 

of accounting might suggest otherwise,’’ was what his written 

statement to me was. Well, by then, it was too late. The bill passed 

and we never analyzed that. 

So have you thought about—and am I correct to say that we 

have a trust fund for Medicare, trustees that manage that fund, 

and when we reduced the payments to Medicare providers and 

saved $400 billion, that was a savings that accrued to the trustees 

for the Medicare beneficiaries. It did not provide any extra cash for 
28 

the Treasury of the United States to fund Obamacare with. And, 

in fact, the Treasury of the United States borrowed the money or, 

in effect, counted that savings improperly because the money belongs to the trustees of Medicare. 

Am I wrong about that? And it is a pretty big issue, wouldn’t you think, $400 billion? Can we agree on that? 

Mr. HALL. Well, I do not want to agree purely because I have not 

had enough experience and looked at this enough. I am happy to 

go back and take a look at Doug’s letter and sort of get an idea 

of, a better understanding of the issue. 

Senator SESSIONS. Well, you need to—we need to understand 

this. This is huge, because we have a unified budget. It ignores in 

that process the trust funds. It assumes that we just have all 

money coming into the Federal Government and all money going 

out of the Federal Government, and w have trustees of Medicare, 

and they claim it is—and it is their money that was saved, and it 

did not provide the money for Obamacare. It really in a sense was 

all borrowed eventually by the Treasury of the United States to the 

extent that it produced costs. 

My time is up. Thank you, Mr. Chairman. 

Chairman ENZI. Dr. Hall, that gives you a little indication of 

some of the written questions that you might get now, which, of 

course, you will have a little longer time to think about before you 

respond to us. But I would mention that any of my colleagues that 

have some additional questions, they are due by 6:00 p.m. today, 

the hard copy delivered to the Committee Clerk in Dirksen 624. 

And then we would hope that you would respond within 7 days 

from the receipt of the questions. 

I have a number of questions. Most of them have to do with 

numbers, and I learned a long time ago in the Senate that if you 

ask the number questions, at least the people in the audience fall 

asleep, even though you and I might be intensely interested in the 

details of those. So you can probably expect some more detailed 

questions that we would be interested in. 

So I thank you for being— 

Senator KAINE. Mr. Chairman? 

Chairman ENZI. Yes? 

Senator KAINE. Would it be possible to ask one more? 

Chairman ENZI. You have waited. Certainly. 

Senator KAINE. Thank you. 

Dr. Hall, one question I wanted to get to and did not, when we 

have had testimony from your predecessor, one of the things that 

interests me is looking at certain spending categories to GDP and 

how they are trending. So our defense spending as a percent of 

GDP is going down. Our nondefense discretionary spending as a 

percent of GDP is going down. Social Security as a percent of GDP 

is going up. Other health care, kind of combined Medicaid, Medicare, probably VA health care-related, going up. Tax expenditures 

as a percentage of GDP, growing pretty significantly. 

As we analyze expenditure categories kind of for the arc of going 

the right way, going the wrong way, should we look at tax expenditures sort of as a spending item? 

Mr. HALL. You mean in terms of the trend and the share of 

GDP? 
29 

Senator KAINE. Yes. 

Mr. HALL. Sure. It sounds like that is a useful way of looking at 

it. 

Senator KAINE. And I guess one of the challenges on the dynamic 

scoring is that, you know, you can reduce an expenditure that will 

have, you know, minimal kind of extra economic consequence or 

you can reduce an expenditure like an infrastructure expenditure 

that could have significant economic consequence, and similarly on 

the tax side, whether it is a rate or a tax expenditure, you might 

make a move up or down that would have minimal kind of ripple 

effect, or you might make a move that would have maximum ripple 

effect and what dynamic scoring, done well, should enable us to understand a little bit is what the magnitude of the sort of ripple effects are. 

Mr. HALL. Yeah, I think that is right, and I think that is why 

we have to be very careful and transparent about exactly how we 

have analyzed things, especially with the dynamic scoring. 

Senator KAINE. Great. Thank you. 

Thank you, Mr. Chairman. I appreciate it. 

Chairman ENZI. Certainly, and I appreciate your comments on 

that. And as another former mayor, we did our budgeting a little 

bit differently, and consequently we had one of the few debt-free 

cities in the Nation, I think. So we did not worry about what the 

percentage was of GDP. We worried about whether we were paying 

all our bills or not. 

I am going to have some more detailed questions on if the hiring 

of the non-immigrant visas for the difficult-to-fill positions saves 

money and also some other places where we are interested, since 

we are putting quite a burden on the other committees to come up 

with some savings to see if there are not some places where we can 

come up with some savings as well. 

Chairman ENZI. So thank you very much for being here at this 

first oversight hearing in 33 years. Thank you for your answers. 

Mr. HALL. Thank you. 

[Whereupon, at 11:26 a.m., the Committee was adjourned.] 

(31) 

THE COMING CRISIS: CBO’S ANALYSIS OF 

THE FEDERAL GOVERNMENT’S DEEPENING 

FISCAL CHALLENGES 

WEDNESDAY, JUNE 17, 2015 

UNITED STATES SENATE, 

COMMITTEE ON THE BUDGET, 

Washington, D.C. 

The Committee met, pursuant to notice, at 10:01 a.m., in Room 

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

Chairman of the Committee, presiding. 

Present: Senators Enzi, Grassley, Sessions, Toomey, Corker, 

Perdue, Sanders, Stabenow, Whitehouse, Warner, Kaine, and King. 

Staff Present: Eric Ueland, Majority Staff Director; and Warren 

Gunnels, Minority Staff Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. I will call this hearing to order. Good morning, 

Senator Sanders. Good morning, colleagues, and welcome to this 

hearing on the Federal Government’s long-run fiscal challenges. 

Today the Senate Budget Committee will focus on the Congressional Budget Office’s newly released publication on this vital topic 

while across the Capitol our colleagues on the House Budget Committee are discussing the need to act on these critical issues by balancing our budget. Together, the two Budget Committees are devoted to restoring order to our fiscal books. 

I both shudder and rejoice each year when the CBO publishes its 

long-term budget outlook. On the one hand, I am always amazed 

at the enormity of the fiscal problems our current policies have 

built and the calamity ahead of us unless we act. On the other 

hand, I am always grateful to CBO for telling us their accounting 

of where we will stand without a change in course. 

The 535 sitting Members of Congress are better positioned than 

any of the 330 million fellow countrymen to do something that 

avoids this dismal future. And what is it exactly that we have been 

hearing from CBO each year? 

Let us see. I want to congratulate Dr. Hall on this report. I found 

it to be fascinating reading. Maybe that is because I am an accountant. But I did get the point that raising taxes is a drag on 

the economy, increasing the debt is a drag on the economy, so cutting spending is the only thing that increases the economy, and a 

1-percent increase in GDP is equal to about $300 billion in additional tax revenue without raising taxes. If we send out signals of 

actions, that also stimulates the economy, and I am particularly 
32 

fascinated with Appendix A which goes into the difficulty of making projections. And I am reminded of Yogi Berra who said, ‘‘The 

future is hard to predict, especially since it is about the future.’’ 

It goes into the demographics that are involved in it and also the 

economic variables that can cause a problem. And it is very clear 

to me that the longer we delay, the less options that we have. 

So the message has remained remarkably consistent over the 

past generations. Let me quote briefly from testimony provided by 

the CBO’s Deputy Director, James Blum, in 1997. He had been invited by this Committee to testify on the long-term budget outlook 

and options, and he said, ‘‘Just over the horizon is the retirement 

of the large Baby Boom generation. That retirement will drive up 

the costs of three important Government programs: Social Security, 

Medicare, and Medicaid. If the resulting budget pressure from both 

demographics and health spending is not relieved, deficits will 

mount and seriously erode future economic growth.’’ 

We have done little to relieve this pressure since then and a good 

deal more to make it worse. Opportunities have come and gone 

over the intervening 20 years to reform Social Security and Medicare. We have failed to replace our broken and top-heavy tax system with one that supports a more vigorous economy. When the 

economy fell into recession in late 2007, we chose again to ignore 

much needed reforms and instead vastly expanded spending programs. We are left today with enormous debt, a crawling economy, 

and little evidence that we are prepared at all for the future that 

CBO has been warning us about for 20 years, and that future 

comes closer and closer every year. The Federal Government’s deficit in 2007 was just 3 percent of GDP. By 2009, it had grown to 

10 percent. Deficits from 2009 through 2012 exceeded $1,000 billion 

each year. 

As you can see on the screen—as you cannot see on the screen. 

At any rate, the total debt held by the public grows by 81 percent 

between the end of calendar years 2008 and 2012. Today publicly 

held debt stands 105 percent above its level at the close of 2008. 

So you kind of have 105 percent plus 105 percent, which comes to 

about 210 percent. 

Now our fiscal future is not worsening because we are starving 

the Federal Government for resources. Congress is already spending more tax revenue than at any point in history. Currently, Government’s revenues equal more than 17.5 percent of our GDP, and 

that percentage is growing while outlays more than revenues equal 

20.3 percent of GDP. 

Even so, our books are not what they need to be as the Baby 

Boom generation moves into the rapid phase of retirement. About 

10,000 Baby Boomers reach 65 each day, and nearly 4,000 of those 

retire each day. Fortunately, some are not. Both of those numbers 

will accelerate in the future. This enormous demographic shift will 

cause a vast expansion in the cost of Social Security, Medicare, and 

Medicaid, as well as a host of related programs. 

Last year, CBO estimated that Federal spending on these programs would double by 2039. Unless we choose to cancel all the 

rest of Federal spending, most of this additional spending will be 

funded through debt. That means, again, according to CBO, in 
33 

2014 a doubling in the interest expenses of the Federal Government. 

Let me direct your attention to the graph that is in the book on 

page 6. It shows CBO’s projection of future publicly held debt as 

a percent of GDP if we continue on our current path. Debt rises 

from about 74 percent of GDP today to nearly 245 percent of GDP 

by 2039, or 24 years from now. If CBO’s debt warnings are not 

enough to get our attention, well, here is one that might. It might 

be worthwhile to remind my colleagues of remarks made by Admiral Michael Mullen, former Chairman of the Joint Chiefs of Staff, 

‘‘A Nation with our current levels of unsustainable debt cannot 

hope to sustain for very long its superiority from a military perspective or its influence in world affairs.’’ 

Admiral Mullen understands that if our debt continues to grow 

unchecked, our Nation will be hobbled as it tries to fund programs 

that are critical to military and diplomacy. 

Some of my colleagues argue that growing debt is not a problem, 

that expanding debt in periods of slow or no growth is just what 

is needed to boost the economy. Hardworking taxpayers and millions of Americans who are out of work or underemployed have not 

benefitted from these types of policies over the last 6 years. 

Indeed, recent research from the International Monetary Fund 

finds a negative relationship between high debt and growth. In a 

report released earlier this month, the IMF authors conclude, 

‘‘Higher public debt leads to lower investment, slower transitional 

growth or recovery from a recession, and a lower long-run level of 

output. Debt is bad for growth.’’ 

Since high and growing public sector debt is bad for economic activity and rapid debts in our future, with the cause of that rapid 

buildup of debt currently unsustainable retirement and health programs, then, colleagues, I think it is well past time for us to reform 

the programs that drive up the debt, boost our economic growth, 

and provide a future that is secure for retirees and workers alike, 

as well as for the generations yet to come. Taking action now can 

help boost the economy and expand opportunity for each and every 

American. A boost in economic growth means more real jobs from 

the private sector and small businesses across the Nation. 

It is important to note that when we talk about boosting economic growth, we are talking about growth from the private sector. 

Government spending does not contribute to this growth. 

As my fellow Budget Committee member and businessman Senator Perdue notes, expanding Government does not help grow the 

economy. 

When is the right time to take action? As President John F. Kennedy once said, ‘‘The best time to fix the roof is when the sun is 

shining.’’ We are going to have to hurry. That same logic should be 

applied to boosting our economy and addressing our long-term fiscal challenges. Instead of waiting for another crisis or recession or 

watching our debt grow, we should take action on these critical fiscal challenges facing our Nation now. By working together on real 

reforms and real solutions, we can achieve real results, which is 

what hardworking American families want and what they deserve. 

Senator Sanders? 
34 

OPENING STATEMENT OF SENATOR SANDERS 

Senator SANDERS. Thank you very much, Mr. Chairman. Dr. 

Hall, thanks for being with us. Thanks for your work. 

Mike Enzi and I are good friends. We like each other. But I think 

it is fair to say we look at the world a little bit differently. 

The deficit and the debt are obviously very serious issues that we 

have to address, but I think it would be helpful to begin to understand maybe how we got to where we are today and what a fair 

and sensible approach to the problem is and to put the issue of 

debt in a broader economic context. 

For a start, here is some good news, and that is that when Presi- dent Bush left office, our deficit was $1.4 trillion. Today that deficit 

has been reduced by more than two-thirds. It is now $483 billion. 

$483 billion is a lot of money, but that is progress over a period 

of years. 

Second of all, there is a lesson that I am afraid some of us have 

not yet learned, but one of the causes of our debt and our deficit 

are wars that were fought in Iraq and Afghanistan. So we do not 

want to get into those wars right now. Whether we should have 

gotten into Iraq is not for this discussion here. But I think it is fair 

to say—and I have a hard time understanding how some of my conservative friends do not accept this. You talk about spending and 

spending and spending, and you want to cut food stamps, you want 

to cut programs for hungry kids, and you want to cut Medicare, 

and you want to cut Medicaid. But how come you went to war in 

Iraq and Afghanistan and chose not to pay for those wars? If you 

spend money to feed a hungry child, that is an expense. If you 

spend money on a war in Iraq, that is an expense. Why do we pick 

and choose? 

And then apparently the lesson is not learned because we are on 

the floor right now with the Defense Authorization Act, and there 

is another—what is it?—$38 billion to be put into the deficit for socalled emergency, which everybody knows is nothing more than a 

budgetary trick. Everybody knows that. 

So I guess when we spend money on wars, that does not really 

count. When you spend money on infrastructure, health care, the 

needs of our children, ah, that is a serious problem. Well, we have 

a difference of opinion on that. 

But it is not only wars that were not paid for. And, by the way, 

the wars in Afghanistan and Iraq are estimated, by the time we 

take care of our last veteran 50, 60 years from now, to cost between 

$4 and $6 trillion, all put on the credit card. 

Second of all, when we talk about how we got to where we are, 

everybody in this room understands that we have a massive level 

and a grotesque level of income and wealth inequality. I do not 

think anyone debates that. The Republican solution to that over 

the years has been to give even more tax breaks to the wealthiest 

people in this country. Less revenue comes in. Now, I understand 

there is this trickle-down theory that if you give tax breaks to billionaires and large corporations, they are going to invest in America, they are going to create jobs. It is a theory that most economists no longer believe has any credibility at all. And in this very 

budget passed out of this Committee, what the Republicans propose—this is part of deficit reduction—is to give over $200 billion 
35 

over a 10-year period in tax breaks going to the top two-tenths of 

1 percent by completely repealing the estate tax. Now, how that 

helps us with deficit reduction, I am not quite aware of. 

Under President Bush, Republicans for political reasons passed 

a Medicare Part D prescription drug benefit. I think seniors desperately need help with prescription drugs. But you have got to figure out a way to pay for it. They did not. 

And last, but not least, when we talk about where we are, part 

of this deregulatory philosophy that my Republican colleagues talk 

about—and, by the way, was bipartisan; certainly Democrats were 

involved in that discussion—had to do with the deregulation of 

Wall Street. What a wonderful idea. Let us allow commercial 

banks, investment banks, and insurance companies to merge because, as Alan Greenspan just told us, they will always do the right 

thing. Well, it turns out that it did not quite happen that way. 

Their greed, their recklessness, their illegal behavior resulted in 

the worst economic crash since the Great Depression, also adding 

to our deficit and our national debt. 

So those are, I think, some of the causes of why we are where we are today and why we have an $18 trillion debt that we might 

want to look at. 

Now, where do we go from here? What is a sensible and fair approach that is good for the American people? Well, if you are going 

to approach figuring out ways how you grow the economy, which 

I think all of us want to do, and at the same time also deal with 

the deficit and the national debt, you have to know the context in 

which you are operating. So what is the economic context of today? 

Well, the economic context is that for a variety of reasons the top 

1 percent now earns more income than the bottom 50 percent. And 

since the Wall Street crash of 2008, more than 99 percent of all 

new income goes to the top 1 percent. CEOs of large corporations 

now earn nearly 300 times what their workers make. You have the 

wealthiest family in this country, one family, the Waltons, owning 

more wealth than the bottom 42 percent of the American people. 

So you have a grotesque level of income and wealth inequality in 

America. 

Now, what is the rational solution? Do you really go to the people 

who are hurting? Do you go to the families where median family 

income has gone down by $5,000 since 1999? Do you really want 

to balance the budget by cutting education, by cutting health care, 

by cutting nutrition? Or maybe, just maybe, we might want to ask 

the wealthiest people and the largest corporations who are doing 

phenomenally well to start paying their fair share of taxes. 

You know, I know that my Republican colleagues talk a lot about 

their fears of redistribution of wealth. It gets them very nervous. 

And yet since 1985, we have had a massive redistribution of wealth 

in this country. Unfortunately, it has gone from the middle class 

to the top one-tenth of 1 percent. That is just a fact. And if you 

want to deal with the unmet needs of this country, rebuilding our 

infrastructure, making sure that our young people can get to college, dealing with the horrendous situation of child care in this 

country, making public education strong, all of the unmet needs 

that we have as a Nation, climate change and so forth, you know 

what? We are going to have to ask the billionaire class to pony on 
36 

up. If they to accept the benefits of being Americans, they are going 

to have to accept their responsibilities as well. You cannot run 

away from that. You cannot keep attacking a middle class which 

is disappearing. 

From 1985 until 2013, the share of the Nation’s wealth going to 

the bottom 90 percent of Americans has gone down from 35 percent 

to just 22.8 percent. Meanwhile, over that same period, the top onetenth of 1 percent saw its share of the Nation’s wealth more than 

triple from 7 percent in 1985 to 22 percent today. That is the reality. The very, very rich get richer, the middle class shrinks. The 

Republican solution: Let us attack the middle class and working 

families. 

Well, I respectfully disagree. We need to have a tax system 

which ends the enormous loopholes that currently exist. We lost 

$100 billion every year by corporations stashing their money in the 

Cayman Islands, Bermuda, and other tax havens. We have an individual tax rate such that hedge fund managers are paying a lower 

effective tax rate, as Warren Buffett tells us, than working people 

are. That is wrong. 

So, Mr. Chairman, I look forward to working with you. I know 

the people on our side of the aisle do. But the economic realities 

that we face now as a country have got to be very seriously considered before we go forward. 

Thank you very much. 

Chairman ENZI. Thank you. And I do have to make one comment 

on that. I would like to debate a number of pieces of that, but my 

one comment is on the—and this is very important for the debate 

we are having on the floor right now. On the overseas contingencies that are in the budget, that is to keep from breaking the 

BCA cap which results in a sequester across the board for everybody. But it is covered in the balanced budget numbers. It does not 

add to the debt. We had to make other corrections in order to make 

sure that it did not add to the debt. That is very important. 

Senator SANDERS. Well, if I could just very briefly add, Mr. 

Chairman, I think that some of your conservative economists out 

there regard this as—to say the word kindly—‘‘gimmickry’’ ‘‘Budget 

gimmickry.’’ I think that is a fair statement. 

Chairman ENZI. Well, I am just hoping there is less gimmickry 

in this one than we have had in any of the past. I am interested 

in any ideas you have for eliminating gimmickry, because that has 

got to be one of our goals as well because, otherwise, we will wake 

up one day in the midst of a financial crisis that the CBO has been 

telling us about for a long time. And every day that goes by, we 

have less choices for fixing what is wrong. So this will be a very 

important hearing. 

Our witness this morning is Dr. Keith Hall, the recently appointed Director of the Congressional Budget Office. It is my understanding this is Dr. Hall’s first testimony given as—no, it is the 

second one give as CBO Director because he has been before us before. On behalf of my colleagues in the Senate, let me welcome you 

to a place at the table that will soon become all too familiar. 

Prior to his appointment as CBO Director on April 1st, Dr. Hall 

served as Chief Economist and Director of the Office of Economics 

at the U.S. International Trade Commission. Hall has had over 20 
37 

years of Federal service with the Department of the Treasury, the 

International Trade Commission, the Department of Commerce, 

the Executive Office of the President, and the Bureau of Labor Statistics. 

In 2007, President George Bush nominated Dr. Hall to be the 

13th Commissioner of the Bureau of Labor Statistics. Before becoming the Bureau of Labor Statistics Commissioner, he served as 

the Chief Economist for the White House Council of Economic Advisers, where he analyzed a broad range of fiscal, regulatory, and 

macroeconomic policies and directed a team that monitored the 

state of the economy and developed economic forecasts. 

Dr. Hall has held numerous academic posts. He received his 

Bachelor of Arts degree in economics from the University of Virginia and his Master’s and Ph.D. in economics from Purdue University. 

For the information of colleagues, Dr. Hall will take about 7 minutes for his opening statement, and that will be followed by questions. 

Dr. Hall, please begin. 

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

DIRECTOR, CONGRESSIONAL BUDGET OFFICE 

Mr. HALL. Chairman Enzi, Ranking Member Sanders, and members of the Committee, thank you for the opportunity to testify on 

the Congressional Budget Office’s most recent analysis of the outlook for the Federal budget over the long term. 

The long-term outlook for the Federal budget has worsened dramatically over the past several years in the wake of the Great Recession and slow recovery. Financial turmoil and a severe drop in 

economic activity, combined with various policies implemented in 

response to those conditions, sharply reduced Federal revenues and 

increased spending. As a result, budget deficits rose, and the Federal debt held by the public soared, nearly doubling since 2007. 

Debt is now equivalent to about 74 percent of the economy’s annual 

output, a higher percentage than at any point in U.S. history except one. 

If current law remained generally unchanged and the economic 

recovery continued, this debt would decline slightly but remain 

very high over the next few years. After that, rising Federal Government spending, mainly caused by the aging of the population 

and rising health care costs, would push debt back to, and then 

above, its current high level. The deficit would grow from less than 

3 percent of GDP this year to over 6 percent in 2040. At that point, 

25 years from now, Federal debt held by the public would exceed 

100 percent of GDP. 

In particular, over the next 25 years, spending for Social Security 

and the Government’s major health care programs would rise 

sharply, reaching 14 percent of GDP. This would occur because of 

the aging of the population, growing in per capita spending on 

health care, and to a lesser extent, an increase in the number of 

recipients of exchange subsidies and Medicaid benefits attributable 

to the Affordable Care Act. 

In addition, net outlays for interest on the debt would grow to 

more than 4 percent of GDP, while in contrast, all other Federal 
38 

spending would decline to just 7 percent of GDP, a very low level 

by historical standards. Current law would also raise Federal revenues to a historically high level relative to GDP, but at a much 

slower pace than the rise in Federal spending. 

So what consequences would a large and growing Federal debt 

have? 

First, the large amount of Federal borrowing would draw money 

away from private investment and productive capital over the long 

term. The result would be a smaller stock of capital and, therefore, 

lower output and income than would otherwise have been the case. 

Second, Federal spending on interest payments would rise, thus 

requiring the Government to raise taxes, reduce spending for benefits and services, or both, to achieve any targets that it might 

choose for budget deficits and debt. 

Third, the large amount of debt would restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises. 

And, last, the rising debt would not be sustained indefinitely. Although there is no identifiable tipping point in the debt-to-GDP 

ratio to indicate that a crisis is likely or imminent, the larger a 

government’s debt, the greater the risk of such a fiscal crisis. 

So how large would policy changes need to be to lower the trajectory of Federal debt? Because under current law debt is projected 

to rise continuously relative to the size of the economy in the long 

term, the policy changes needed to reduce debt to any given level 

would become larger and larger over time. 

To put the Federal budget on a sustainable path for the long 

term, you would have to make significant changes to tax and 

spending policies by reducing spending for large benefit programs 

below the projected amounts, letting revenues rise more than they 

would under current law, or adopting some combination of these 

approaches. 

The size of such changes would depend upon the amount of Federal debt you considered appropriate. We have illustrated two possible goals in one of the figures from the written testimony that we 

have distributed to you. 

One possible target would be to cut debt roughly in half as a 

share of GDP, reducing it to about the average over the past 50 

years. Doing so by 2040 would require an increase in revenues and/ 

or a reduction in non-interest spending totaling 2.6 percent of GDP 

every year. That would come to almost $500 billion in 2016, with 

greater amounts each year after that. 

If all the change was made on the revenue side of the ledger, the 

average middle-income household would have to pay about $1,700 

more in Federal taxes in 2016 and larger amounts in subsequent 

years. If all of the change was achieved by cutting non-interest 

spending across the board, that would reduce initial annual Social 

Security benefits for an average 65-year-old in the middle of their 

earnings distribution by about $2,400 in 2016 and by larger 

amounts thereafter. 

In deciding how quickly to carry out policies to put Federal debt 

on a sustainable path, regardless of the chosen goal for debt, you 

would face several difficult tradeoffs. The sooner significant deficit 

reduction was implemented, the smaller the Government’s accumu-
39 

lated debt would be, the smaller the policy changes would need to 

be to achieve the chosen goal, and the less uncertainty there would 

be about what policies might be adopted. 

However, waiting for some time before reducing spending or increasing taxes would result in a greater accumulation of debt, 

which would represent a greater drag on output and income in the 

long term and increase the size of the policy changes needed to 

reach the chosen target for debt. 

Thank you. I am happy to answer any questions. 

[The prepared statement of Mr. Hall follows:] 
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Chairman ENZI. Thank you, Dr. Hall. 

We will turn to questions. Let me remind the members of the 

process before we start. Each member will have 5 minutes for questions, beginning with myself and then Senator Sanders. Then following the two of us, we will alternate questions between the Republicans and the minority. All members who were in attendance 

when the hearing began will be recognized in order of seniority. 

For those who arrived after the hearing began, you will be on the 

list in order of arrival. If you are not here when it is your turn, 

you will be put to the bottom of the list. And when everyone is 

done, then you will get a chance. 

With that, Dr. Hall, thank you for your testimony, and I do have 

a few questions. Am I correct in my reading of your report that 

nearly half of health care program costs are expected to come from 

excess cost growth? It seems to show about one-third of the increase will be due to provisions in Obamacare. I thought the Affordable Care Act was supposed to reduce the growth in health 

care costs. Did I read your document correctly? 

Mr. HALL. Well, that is right, but we have done analysis of repealing the ACA, and we found that doing so would actually increase deficits somewhat over 10 years, and the difference is the 

savings from repealing coverage provisions if you repealed the ACA 

would be outweighed by the costs of repealing other provisions, including those that reduced Medicare’s payment updates. 

Chairman ENZI. Okay. Thank you. 

Your report contains estimates of what a delay in addressing our 

rising debt would cost us if we delay 5 years in taking action and 

if we delay 10 years. Please review these costs and give us your 

thoughts on the benefits of taking action now rather than much 

later. 

Mr. HALL. Well, sure. In the example I gave you, we would 

need—if we started immediately, we would need a drop of—we 

would need to cut either spending or raise taxes by about 2.6 percent of GDP every year if we started now. If we waited just 5 years, 

that would go up to 3.2 percent. And if we waited 10 years, that 

would go up to 4.2 percent. So even with just 5 or 10 years’ delay, 

the policy change would be pretty significantly increased. 

Chairman ENZI. Okay. The long-term projections you released 

give a worse outlook for Social Security, which you kind of covered. 

In last year projections, it looks that nearly one-quarter of all Federal spending will be devoted to Social Security with increases on 

the way. Can you review some of the reasons for that worsening 

outlook? 

Mr. HALL. Well, sure. The main big reason, the main reason is 

the aging population. That is a big contributor. Then, of course, 

just generally rising health care costs also contribute to that. And 

that is stuff that has been there for a long time. It has been part 

of our long-term budget outlook forecast for a long time, so that 

really has not changed. 

Chairman ENZI. The future of your report portrays one where the 

Federal Government’s borrowing requirements would probably depress long-term national savings and income, and that would have 

a negative effect on the economy’s growth rate, again, in the long 

term. You also indicate that the rapid growth in debt would in-
50 

crease pressure for tax increases and reduce the ability to respond 

to domestic and international problems, including future financial 

crisis. 

Can you walk us through the likely economic and social costs 

contained in this future? Specifically, how will this fiscal scenario 

likely affect the prospects of young people just starting their working lives? 

Mr. HALL. Well, sure. One of the aspects of this, of course, is, as 

you say, the growing debt winds up being a drag on economic 

growth. But, also, there is the issue of delay. The longer you delay, 

there really is maybe a generational impact here. The longer you 

delay fixing this problem, the more you push the cost of fixing the 

problem back to later and later generations. So I think that is an 

important consideration here. 

In fact, right now we are doing a little work looking at sort of 

the generational impact of fixing this problem now versus later and 

to give you some idea of the sort of tradeoffs we have in delaying 

like that with respect to generations. 

Chairman ENZI. Yes, we have watched with Social Security the 

options that we had in 1998 when I was first here and the options 

that we have available now. 

Your long-term outlook report contained two budget projections, 

one that you called the ‘‘extended baseline projection,’’ which is the 

current law, and another you called the ‘‘extended alternative fiscal 

scenario,’’ which allows certain programs and policies to continue 

past their expiration date. I guess you could say that the alternative scenario is one Ronald Reagan has in mind when he suggested there is nothing more permanent than a Government program, and there are 260 programs that have expired. Under the alternative scenario, the deficit is a good deal worse by 2025, and especially 2040. 

How much deficit reduction do we have to do over the next several years to avoid higher deficits and bring our debt and deficit 

levels back to historical averages? 

Mr. HALL. Well, to get back to something like historical averages, 

actually that handout that I gave you gives you an idea of that. 

The scenario on the left in that handout, where you are aiming for 

getting debt down to 38 percent of GDP, which is the long-run average, would require a change of either—excuse me, a rise in revenue of either 14 percent or a cut in spending of 13 percent, or 

some combination of that. So that is pretty significant. And what 

that amounts to is if you did that every year for 25 years with that 

as the target, it would cost us about $480 billion, which winds up 

being about $1,450 per person, which is pretty significant. And, of 

course, if you wait, that number goes up quite a bit. 

Chairman ENZI. Thank you. My time has expired. 

Senator Sanders? 

Senator SANDERS. Thank you, Mr. Chairman. 

Director Hall, thanks in part, I believe, to work of members of 

this Committee, I see that the CBO has begun to study the impacts 

that climate change may have on the Federal budget, and this is 

a welcome development, and I thank you for your interest in that. 

Your team has begun looking at the impacts of increased hurricane 

activity and intensity due to climate change, and the results clearly 
51 

are not good. Even over just the next 10 years, you forecast billions 

of dollars in extra damages due to the effects of climate change, 

and that is just over the next 10 years and just from hurricanes. 

I suspect that if you added to it the impact of drought in the 

West and what that means for agricultural output, et cetera, the 

numbers would be a lot higher than that. 

But my question is: Would it be fair to say that climate change 

is having a very significant impact on the economy and on our deficit? And would you expect these costs to go up as climate changes 

further and its impacts become worse? 

Mr. HALL. Sure. Well, our expertise does not lie actually in climate change and the effects of climate change, so what we have 

done is we have taken some estimates of some other folks about 

the effects of climate change on things like the frequency of hurricanes and such. So I cannot tell you what the effects of climate 

change are going to be, but I can tell you that if we do get an increased number of hurricanes and a number of things like that, it 

would have a significant— 

Senator SANDERS. Well, that is kind of common sense, and, 

again, if you throw in the impact of drought that we are seeing in 

the West, I think it is very hard for anybody to not understand 

that climate change is going to have an impact on all of our lives, 

and certainly on the budget as well. And I am glad that you are 

beginning to consider that. 

Let me ask you another question. I think everybody in this room 

understands that our infrastructure, our roads, bridges, water systems, wastewater plants, rail are crumbling. The IMF tells us that 

investing in infrastructure would grow the economy without increasing our debt burden, especially when interest rates are as low 

as they are today. Other economists have made similar conclusions. 

In your view, would it grow the economy and help the budget if 

we invested more in infrastructure? 

Mr. HALL. Well, we have not done the sort of analysis about the 

actual investment, what levels, and then, of course, what effect it 

would have on the debt, because that would have sort of the opposite effect. But certainly if we do a dynamic analysis, look at the 

macroeconomic effects, investment in certain things would, in fact, 

have a positive effect outside of what the cost would be. 

Senator SANDERS. Right, and is it fair to say that we are spending less on construction, on infrastructure construction at the Federal, State, and local level, which is just 1.5 percent of GDP combined, than we have in decades? Bottom line is we are spending 

substantially less in rebuilding our infrastructure than we have in 

the past. Is that a fair statement? 

Mr. HALL. Yeah, I am not sure of the exact numbers, but I do 

think that is right. And let me say that the scenario that we went 

through, Federal spending on anything except Social Security and 

health care and those things goes down to very low levels over the 

next 25 years. So that is part of this story. 

Senator SANDERS. Thank you. 

There was a report that came out from the Center for American 

Progress last year which made a very interesting observation when 

we talk about Social Security, and that is, the impact of income inequality on Social Security. And what they pointed out is that be-
52 

cause wages were stagnant and we had more inequality so that 

more people were above the cap, which is now $118,000, their point 

was that if we had maintained the same level of income inequality 

back in 1983, Social Security would have $1.1 trillion more in the 

trust fund and would be solvent for another 20 years. 

Am I right in saying that income inequality not only is a problem 

unto itself but has impacted the solvency of Social Security? 

Mr. HALL. Yeah, the part where it particularly impacts what we 

are doing here is that the income inequality, because its growth in 

income above the taxable maximum, that has affected our forecast, 

and that is part of our forecast that this is—this issue does reduce 

revenues for Social Security and does create more of a problem. 

Senator SANDERS. And the other half of that is that if incomes 

for somebody making $50,000 do not go up, they are contributing 

less into the fund as well. True? 

Mr. HALL. That is right. 

Senator SANDERS. Okay. Thank you very much. 

Chairman ENZI. Senator Grassley. 

Senator GRASSLEY. Welcome to your new job. 

Question number one: Some individuals in recent months—and 

I will not name those individuals—and some people have been saying this for years that we have declared our debt problem solved. 

Looking at CBO’s long-term outlook, it is clear that that is nowhere 

near the case, so I hope you will give me a short answer. Is there 

anything to suggest that we are currently on a sustainable fiscal 

path? 

Mr. HALL. I think it is safe to say that we are on an 

unsustainable path right now. 

Senator GRASSLEY. Okay. Questions number two: When it comes 

to making difficult fiscal decisions, we hear a lot about economic 

harm done to this population or that population, depending upon 

whatever fiscal austerity you are talking about. However, I believe 

the debt burden that we are placing on our children and grandchildren and the negative economic impact that debt burden will 

have is a great moral tragedy that gets little attention. In other 

words, we tend to talk economics in this town, and there is a moral 

aspect of it. 

Can you talk about the economic harm that we are causing to future generations by ignoring the long-term debt situation? And let 

me quickly follow that up: Are we jeopardizing economic opportunities for future generations by ignoring long-term debt burden? 

Mr. HALL. Well, one of the things that is clear in our analysis 

is that the growing long-term debt is a drag on economic growth. 

So we do actually have—it actually really is a serious issue here 

in terms of economic growth and incomes going forward, and then, 

of course, just the debt service itself. Right now we are paying 

about 1.3 percent of GDP just paying for the debt with interest 

payments. In 25 years, at our current pace that is going to go up 

to 4.3 percent, which is a very high level. And so this is going to 

be an issue going forward. 

And let me also say one thing, too. Our little scenario here that 

takes us out 25 years, one of the big problems is not where we get 

to then, but it is also we are on a trajectory for worse numbers. 

And that is going to play in here in terms of future generations. 
53 

Senator GRASSLEY. Okay. To harm future generations. 

Mr. HALL. That is right. 

Senator GRASSLEY. Okay. Question number three: Much of the 

growth in spending between now and 2040 is due to major health 

care programs. Non-interest spending as a percentage of the economy actually decreases. Social Security increases somewhat. Net 

interest costs will triple. But the real driver is health care—and if 

I am wrong on that, you can correct me—which has averaged 2.5 

percent of the economy and will grow to 8 percent by 2040. 

If Congress were to attempt to increase revenues to meet the 

higher level of spending, do you have an estimate of the amount 

of revenue that we need to collect as a percentage of the economy? 

Mr. HALL. Well, the major health care programs, at the rate we 

are going they are going to—the cost is going to increase about 8 

percent of GDP by 25 years. I do not actually have a raw number 

on that, but that is a pretty significant number. That is a very 

large number. 

I think right now at the moment, individual income taxes are 

about 8 percent of GDP, so you get 25 years out from now, that 

8 percent is going to be going to major health care programs. 

Senator GRASSLEY. Okay. We have averaged around 17.5 percent 

of GDP on taxes. What level of revenue would be necessary—well, 

you talked about the income tax, so you have answered that question at 8 percent, right? 

Mr. HALL. Right. 

Senator GRASSLEY. But I would like to follow up. What impact 

would that have on the economy and economic growth? 

Mr. HALL. Of an increase in revenues to cover that? 

Senator GRASSLEY. Yes. 

Mr. HALL. Well, I can tell you right now in our scenario, because 

we are looking at current law, the tax rates actually are going up 

in our scenario, so we actually do have an increase in tax revenue. 

We go up from about 17.7 to about 19.4. 

When we did our alternate scenario and we did not raise taxes, 

and we also kept spending at a flatter level, we got ourselves into 

a much worse situation where about 175 percent of GDP is in debt 

versus our forecast now of about 107. So that is a really significant 

number, and we are talking about, gosh, I guess the difference is— 

like I say, it is about 8 percent of GDP, so that is going to have 

an impact on economic growth probably more than we have got in 

our current scenario. 

Senator GRASSLEY. Thank you very much. 

Chairman ENZI. Senator Whitehouse. 

Senator WHITEHOUSE. Thank you, Mr. Chairman. Thank you, Dr. 

Hall, for being here. 

Could I ask that you run your projection changing one variable? 

In the projection that you have presented to us, you presume an 

increase of health care expenditure as a proportion of GDP from 16 

percent to 25 percent? 

Mr. HALL. I am just looking here to sort of see what we have got. 

On the major health care programs? 

Senator WHITEHOUSE. Yes. 

Mr. HALL. I think that is right. I do not have the number in front 

of me. 
54 

Senator WHITEHOUSE. Just for modeling purposes, could you let 

me know what would happen if over the forecasted period we were 

able to keep that flat at 16 percent? And could you let me know 

what would happen if that 16 percent could actually be reduced to 

the level of the least efficient OECD country that we compete with, 

which is around 12 percent? You could use 12 percent as a proxy 

or you could use the least efficient OECD number. I think that is 

a pretty easy run to make, and for the record, I would like to ask 

that question, if I may. Thank you. 

Senator WHITEHOUSE. Second, thank you for addressing the climate change issue. You point out that hurricane damage is expected to increase over time because climate change is projected to 

lead to rising sea levels, which will tend to increase damage from 

storm surges when hurricanes occur. It goes without saying, does 

it not, that that damage will be experienced primarily by the coastal States? 

Mr. HALL. That is right. If hurricane frequency went up, that is 

right. 

Senator WHITEHOUSE. So coastal States like Rhode Island would 

take the hit. 

Mr. HALL. I believe that is right. 

Senator WHITEHOUSE. And when you say that climate change 

may increase the occurrence of the most intense storms in the 

North Atlantic Basin leading to more damage in the United States, 

again, that damage would fall on the coastal Atlantic States, correct? 

Mr. HALL. Yes, let me just be clear, because it is not our expertise. We do not estimate that climate change will have these effects. What we are looking at is we are looking at the—that if these 

effects occur, what would be the economic impact? 

Senator WHITEHOUSE. No, you are— 

Mr. HALL. The answer is yes. 

Senator WHITEHOUSE. —reflecting conclusions— 

Mr. HALL. Reflecting somebody else’s— 

Senator WHITEHOUSE. —of people who know what they are talking about that these will be the effects. If they were not realistic 

effects, you would not have bothered to model them, would you? 

Mr. HALL. Well, I do not know how realistic they are. I am just 

trying to be fair here, that that it is not our work— 

Senator WHITEHOUSE. Are there any other scenarios that you 

model in here that you have no opinion as to whether they are realistic or not? Do you just flagrantly pick topics to model without any 

realistic basis for the concern? 

Mr. HALL. No, these were estimates—these were legitimate estimates. 

Senator WHITEHOUSE. Very good. Okay. 

Mr. HALL. These are not—I am just trying to be clear that that 

is not our— 

Senator WHITEHOUSE. This is not your voice speaking. You are 

doing the mathematics. 

Mr. HALL. That is right. 

Senator WHITEHOUSE. Somebody else has decided what the risk 

is. 
55 

Mr. HALL. That is right. So, really, if you think about it, our 

question was: If this occurs, what would be the economic impact? 

Senator WHITEHOUSE. Got it. And the economic impact would fall 

primarily on Atlantic coastal States like mine. 

Mr. HALL. That is right. 

Senator WHITEHOUSE. Okay. I would appreciate if at some 

point—you say you have not undertaken a full analysis of the 

budgetary costs stemming from climate change because of uncertainties. I think it would be helpful if you could do like a ranging 

exercise. What is the scope of the risk? Is it zero to a billion dollars 

a year? Is it zero to $100 billion, over what period of time? If you 

would consider doing that, I would appreciate it. 

Mr. HALL. Okay. 

Senator WHITEHOUSE. The last thing that I will mention is that 

I just cannot help but acknowledge what our Ranking Member has 

said, and that is that Republican concern about the debt and the 

deficit seems to vary considerably depending on the program at 

issue. If it is Pell grants, for instance, then the Ryan budget would 

love to slaughter them. When it is defense spending and the benefit 

of defense contracts to big contractors, well, then, my friends happily walk down the OCO path and use funny money to deficit 

spend. And I think if we are going to address this problem, we 

need to stop playing favorites and, in particular, we need to stop 

playing favorites by looking only at spending and not at tax spending. Once again, we have more money, as of 2014, going out the 

back door of the Tax Code in tax spending than we spend on Social 

Security, than we spend on Medicare and Medicaid together. It is 

about twice what defense discretionary spending is. It is more than 

twice what nondefense discretionary spending is. And there is not 

a tax loophole that it appears our colleagues are willing to address. 

Oil companies have never made more money, but can we take away 

their subsidies? Oh, no. Oh, no, that is way less important—it is 

more important to protect the subsidy than it is to do anything 

about the deficit. Similar for carried interest. On and on and on 

and on and on. 

The Tax Code is rigged and riddled with this nonsense, and at 

some point I think we really have to look at that. And with that, 

I will yield. 

Chairman ENZI. Senator Sessions. 

Senator SESSIONS. Thank you, Mr. Chairman. I appreciate the 

hearing. 

I would note with regard to global warming, we have had a rather dramatic decline in hurricane activity in the United States over 

the last decade. I live on the gulf coast. I saw Frederic and Katrina 

that impacted my area, and it has been remarkable. So the projections of tornadoes and hurricanes have been much higher than 

have occurred, and it raises some doubt about that, and also 

other—we know that the temperature increase did not occur as 

projected. So it is okay to do those studies, and I appreciate you 

doing that, but I think that is important to acknowledge. 

And with regard to income inequality, I am concerned, and the 

real concern is we have not had enough growth in working people’s 

salaries. It is not so much inequality. We need more growth in the 
56 

incomes of people who go to work every day. And I am concerned 

about that. 

Dr. Hall, with regard to the potential possible fiscal crisis that 

might occur, would you say that the risk of that increases with the 

increase in debt and that the severity of it and the ability of the 

country to work its way out of any crisis is more difficult with a 

high debt hanging over our heads? 

Mr. HALL. Well, that is absolutely right. Not only is it a drag on 

growth in incomes, but it does create an increased risk of another 

crisis, another recession or something that would have considerable 

harm. 

Senator SESSIONS. I would like to talk about the growth in income and growth in the economy. Our good economist Mr. Beach 

has done some research over the last several years, and I would 

just like to ask a few questions about it, because if this is correct— 

and I believe it is— then we need to have an additional intensity 

of interest in stopping the increase in debt. 

The International Monetary Fund published a report in June of 

2015 that finds a strong correlation between high and growing debt 

levels and reductions in economic growth. The IMF concluded, 

‘‘Higher public debt leads to lower investment, slower transitional 

growth or recovery from a recession, and a lower long-term level 

of output. Debt is bad for growth.’’ 

Do you agree with that? 

Mr. HALL. I do. 

Senator SESSIONS. Also, Rogoff and Reinhart—Mr. Rogoff has 

testified before this Committee, and Dr. Reinhart has, too. They 

found a distinct tendency for slower economic growth once total or 

gross debt approached and exceeded an amount equal to about 90 

percent of GDP. So we are at 74 percent gross debt, public debt 

today? 

Mr. HALL. That is correct. 

Senator SESSIONS. And for developed economies, they found, 

‘‘Gross debt in excess of 90 percent of GDP has typically been associated with mean growth of 1.7 percent versus 3.7 percent growth 

when debt is low, under 30 percent.’’ Do you think that is a valid 

concern? Would you be in general support of that analysis? 

Mr. HALL. Yeah, I do not know what the consensus is on that 

work, but that certainly seems like reasonable work, and I do support the idea that higher debt slows economic growth. 

Senator SESSIONS. And they went on to find that the drag on economic growth increases as the debt grew greater. And the economist at the Bank of International Settlements observed, ‘‘Our results support the view that beyond a certain level, debt is bad for 

growth. For government debt, the number is about 85 percent of 

GDP.’’ Is that consistent with your concerns about debt? 

Mr. HALL. That is right. I do not have sort of a magic number 

in mind about how big it gets before it is too large, but there is 

a ‘‘too large’’ there somewhere. 

Senator SESSIONS. Well, the International Monetary Fund also 

found a connection between growing debt and slowing economic activity, finding, ‘‘On average, a 10- percentage-point increase in the 

initial debt-to-GDP ratio is associated with a slowdown in annual 
57 

real per capita GDP growth of around 0.2 percentage points per 

year, with the impact being smaller on advanced economies.’’ 

Is that also consistent with the concerns of debt and slow 

growth? 

Mr. HALL. Yes. 

Senator SESSIONS. And the European Central Bank found that 

high debt slows the economy: ‘‘For high debt-to-GDP ratios above 

95 percent, additional debt has a negative impact on economic activity.’’ 

So if our concern is to help the American people do better and 

to deal with our debt crisis that we face, aren’t these studies consistent with the idea that we have got to confront the debt path 

we are on? 

Mr. HALL. Yes, and that is one of our messages for today, that 

we are on an unsustainable path at the moment. 

Senator SESSIONS. Thank you, Mr. Chairman. 

Chairman ENZI. Senator Warner? 

Senator WARNER. Thank you, Mr. Chairman. And, Dr. Hall, 

thank you for your very good work. 

Mr. Chairman, I have enormous respect for you and your background as an accountant. I do have to say, as somebody, like Senator Corker and Senator Perdue, who spent a whole lot of time in 

business, I could not imagine any of us using an OCO account, financial finagling that would pass any kind of FASB muster. And, 

again, let me acknowledge both sides have used it, but the sooner 

we get rid of these gimmicks the better. 

I also, Mr. Chairman, really appreciate the fact that you quoted 

Admiral Mullen about the challenge of the debt. I agree with Senator Sessions’ and Dr. Hall’s comments. I would simply—I think we 

need to make sure the record includes all of Admiral Mullen’s 

statement: ‘‘No partisan ideology is worth the cost to our Nation.’’ 

Then it goes on further to say: ‘‘So as eventually to bring the budget into balance, this framework must include tax reforms to raise 

more revenue, encourage growth, and enhance progressivity.’’ So I 

hope the record will reflect all of Admiral Mullen’s comments. 

I would also like to make sure—Dr. Hall, I know that this is not 

in your report, and I think your slides are quite good. A couple of 

comments. 

One, you probably have seen some of the things that we 

look at in the Finance Committee on our tax structures. You may 

not have this knowledge at your fingertips, but I would like to insert into the record that actually America, in terms of the 40 top 

OECD nations in terms of total revenue raised, is 37th. I think 

Korea and Turkey raise a little less revenue. So countries like 

Singapore and others that we say have growth patterns, you know, 

actually raise more revenues. They do it with a more efficient system. I would be the first to grant you that. But would you contradict—I mean, because I have got a couple other comments, but 

do you have any reference to kind of how we rank vis-a-vis the rest 

of the world? 

Mr. HALL. I do not. 

Senator WARNER. Well, I will get that for you. 

One of the things I also really appreciate you pointing out was, 

you know, oftentimes our colleagues sometimes on the other side 
58 

of the aisle cite historic revenue run rates of about 17.4 percent, 

which you show their average, 65 in 2014. I think it is helpful to 

note that we have never balanced the budget on that revenue run 

rate—with the exception, I would add, of the late 1990s when our 

revenue run rate—and I know CBO has changed the analysis—was 

closer to about 19.5 percent. Is that correct? 

Mr. HALL. Yes. 

Senator WARNER. Thank you, sir. So, you know, obviously we do 

have to bring down our spend, and there are a group of us on this 

side of the aisle that have taken some heat for laying out ways to 

rein in our entitlement costs. But I have not seen any realistic 

passed at least my smell test approach that does not include some 

increase in revenues. We can debate about how we get them. I do 

not think they can come from magic growth alone or simply cutting 

taxes to gain more revenues. I think those theories have been debunked in the past. But I think you have really laid out some great 

data for us to go through. 

One of the things I have tried to urge my colleagues to look at, 

you know, our deficit on an annual basis is really much higher, I 

would argue, than is reflected, although I am not sure $450 billion 

in the hole would be something to celebrate on the private sector 

side, because of, one, extraordinarily low interest rates; two, onetime payments from the Fed that last year averaged about $90 billion and had been for some time; and, three, an issue that Senator 

Corker and I have spent a lot of time working on, the extraordinarily kind of, again, one-time or couple-year profits from Fannie 

and Freddie. Is that accurate to reflect? If you took those—if you 

took traditional interest rates and got rid of the Fed payments and 

the Fannie and Freddie payments, our deficits, do you want to estimate how they would look? 

Mr. HALL. It would look much worse, and one of the things that 

we have done is look at different interest rate tracks in the future. 

That has a really big impact on the accumulation of debt going forward. If we do not get a rise in—sorry, if we get too large a rise 

in— 

Senator WARNER. Right. I have seen a number—you may not 

have it at your fingertips—that a 100-basis-point increase in interest rates adds $120 billion a year on an annual basis in debt payments. 

Mr. HALL. Yeah, I do not know. 

Senator WARNER. That I can point to my colleagues is much larger than the Department of Homeland Security spending alone. So 

I guess—and one other item I am working Senator Isakson on an 

issue—and I think, again, there is a lot of bipartisan interest on 

this—on chronic care. The remarkable thing is that 32 percent of 

our Medicare fee-for-service population which have only zero or one 

chronic condition only account for 7 percent of Medicare spending; 

the 14 percent that have more than six chronic care issues account 

for about half our Medicare spending, something that we hopefully 

can find some commonality on. 

So, Mr. Chairman, I appreciate this. I look forward to working 

with you and everybody else, and I will be willing to take on the 

entitlement issue. But we cannot get there without additional revenues. 
59 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

Senator Corker? 

Senator CORKER. Thank you, Mr. Chairman. And, Dr. Hall, 

thank you again for your service. You did not, I do not think, answer the question that Chairman Enzi asked in the way he wanted 

you to answer it on the ACA thing, but could you just spend maybe 

30 seconds talking about why deficits would increase if ACA was 

repealed. 

Mr. HALL. Well, sure. Our analysis has been that the other provisions in ACA, those that reduce Medicare’s payment updates, that 

that outweighs the spending on coverage provisions. But it is absolutely true, though, that our estimate of that depends—the fact 

that it really depends upon reducing Medicare’s payment updates. 

So that is a big part of uncertainty, I think, in our estimate of the 

impact of the ACA. 

Senator CORKER. And Congress’ likely inability to keep those in 

place, is that what you are saying? 

Mr. HALL. Well, I think it is just what sort of experience we are 

going to have going from. Will, in fact, those reduced payments materialize? 

Senator CORKER. The question came up earlier about the Highway Trust Fund, and you mentioned that investment in infrastructure certainly creates growth in the economy. 

Mr. HALL. Right. 

Senator CORKER. But it depends on how you actually pay for 

that, I think is your comment. What is the most efficient way—it 

has been paid for as it is a trust fund, or kind of. It has been a 

trust fund where a user fee has paid for those expenditures. What 

is the best way for us— you know, it is the ultimate malpractice 

that we have continued to deal with the Highway Trust Fund the 

way that we have. What would be the very best way to fund that 

in a manner that does not slow the economy or has the least negative impact? 

Mr. HALL. You know, I am not sure I can tell you that. I am not 

sure I know enough about it to tell you that. I think I can maybe 

get back to you. I think we have done a little work on some of the 

Highway Trust Fund. 

Senator CORKER. That would be good. It would be very helpful. 

I think we are actually beginning to look at that right now. I think 

it obviously expires here in the next 6 weeks, and so it is the beginning time for us to look at it, unfortunately. 

Senator CORKER. Let me ask you this: The growth in incomes 

issue, the inequality component of that, are you aware of policies 

that Congress has put in place that have exacerbated that? Or is 

it something to do with just the way society is and technology and 

the ability to make things happen so much more quickly than in 

the past and those with resources are able to multiple those resources even more rapidly? Or is it things that we have actually 

done here that have created that disparity? 

Mr. HALL. I think there is not really—there is not consensus 

among economists as to why the income inequality has been growing and continues to grow like it has. In fact, that was a challenge 

I thought for us in our forecast, because we simply forecast that 
60 

the income inequality was going to continue in the same path it 

has been. But I do not know that we really understand what has 

been causing that. 

Senator CORKER. Would that be something that your area should 

look at? 

Mr. HALL. Yeah, we can look at that. I think—yeah, we can get 

back with you. I can give you some idea what we have looked at 

with that. 

Senator CORKER. I mean, I do not think there is any question 

there is a serious amount of income disparity, and I think, you 

know, folks like Senator Perdue and myself and Senator Warner 

and others, you know, we do have the ability, when we are not 

serving in the Senate, you know, to increase incomes, and I do find 

a lot of people in the middle-income area no doubt are having significant struggles, and I think it would be really good for you guys 

to look at, you know, why that is taking place and are there policies that we are putting in place that are making that more difficult? Or is this just some kind of macro societal change that is 

occurring? I think that would be very helpful to us. 

There is no question you have mentioned that increased taxes 

slow growth, so you have to be very careful when you deal with 

that issue, and that increased debt—obviously, debt burdens lower 

the standard of living. Would you agree with that? 

Mr. HALL. Yes. 

Senator CORKER. And I think you would say that at present our 

Nation is really not prepared for another financial crisis or crisis 

of any kind. Is that correct? 

Mr. HALL. Well, absolutely correct, and I think all you need to 

do is look at what happened to debt. It almost doubled since 2007 

from that crisis, and now if we would have another one, with debt 

being as high as it is now, we would have real trouble responding 

to it. 

Senator CORKER. And so the alternative scenario that you lay out 

is really the scenario that is more realistic, is it not, than if you 

go by law— 

Mr. HALL. Right. 

Senator CORKER. —obviously we tend to have tax extenders that 

we extend every year. There are policies that Congress just cannot 

get away from. And so the alternative scenario is actually the real 

scenario in all likelihood based on past behavior. Is that correct? 

Mr. HALL. Well, yeah, we hate to predict what Congress is going 

to do, but based on past actions, that seems more realistic. 

Senator CORKER. It is likely that Congress will continue to not 

make difficult decisions. Would you agree? 

Mr. HALL. Well, if they do not, this would be the scenario. 

Senator CORKER. So, in essence, what you are saying is—and, by 

the way, let me ask you this: Do you know of anybody here in Congress today or any committee that is actually working to change 

previous behavior? Are you aware of any policy changes that may 

be under way to change the alternative scenario? 

Mr. HALL. I am not. 

Senator CORKER. So if I could, I would just say that I really appreciate your report. It seems to me that where we are is that our 

Nation is much worse off than your projections are, that there are 
61 

difficult decisions that are not being made. The longer we put those 

decisions off, the more difficult they become and the worse off our 

Nation is. And you are not aware of any effort under way whatsoever in Congress today to deal with this crisis that is brewing. Is 

that correct? 

Mr. HALL. Yeah, I do not want to hold myself up as an expert 

in what is happening in Congress right now, but— 

Senator CORKER. Well, I would not want to either. I am not 

aware of any, though. So I would just say that we have a lot of 

work to do. Mr. Chairman, I thank you for the time, and I would 

say that passing a budget is interesting, but actually enacting policies that put us in a better place is the most important work, and 

I am unaware of that taking place today. 

Thank you. 

Chairman ENZI. Senator King. 

Senator KING. Thank you, Mr. Chairman. I would begin by acknowledging that debt is a problem and it is a serious problem, and 

it is only going to get worse. ‘‘‘My other piece of advice, 

Copperfield,’ said Mr. Micawber...[is that] ‘Annual income twenty 

pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty 

pounds ought and six, result misery.’’’ Charles Dickens had it right, 

and we are in that situation today where we have chronically been 

spending more than we take in. 

I think the question is: How do we get out of this situation? And 

I want to commend you. The graphics and the presentation in your 

report I think is very good, very clear and helpful. 

I think one of the most important points—and it goes to what 

Senator Corker was just saying—is the sooner we do it, the better. 

The difficult decisions today will be impossible 10 years from now. 

That is one of the central realities. Every day that goes by, the difficult decisions become harder and harder to the point where it is 

almost impossible. So the choices, it seems to me, go from difficult 

to impossible, and if we do not start acting now— and I believe you 

have testified to this. 

I think it is also your testimony that the deficits are not being 

driven by what are sort of nondefense and defense discretionary 

spending, but by health care and demographics. Is that correct? 

Mr. HALL. That is right. 

Senator KING. It is Social Security, Medicare, Medicaid, health 

care. That is what is driving the deficit. And, in fact, discretionary 

spending is actually declining somewhat significantly in terms of a 

share of GDP. 

Mr. HALL. That is right, under current law. 

Senator KING. And they are, in fact, headed for historic lows, as 

I recall, the lowest in something like 70 years for both defense and 

nondefense. 

Mr. HALL. That is right. 

Senator KING. So that gets me to the point that targeting our 

budget-balancing efforts on discretionary spending, whether it is 

defense or nondefense, is really missing the big picture, which is 

health care and entitlement programs. 
62 

Mr. HALL. Well, certainly those are the things that are creating 

the problem. You know, it is up to you to decide how they are going 

to contribute to the solution. 

Senator KING. But the salient point you just made is those are 

the things that are creating the problem. 

The truth is, if you carry the projections out far enough, those 

nondefense—I am sorry, nondiscretionary expenditures plus interest rates essentially will drive everything else down to—it could be 

nothing or certainly much lower. I mean, that is what is happening, correct? 

Mr. HALL. Yes. 

Senator KING. The X factor in all of this, it seems to me, is 

growth, and the question is: How do we—all of these problems 

would go away, we would not be having this hearing if we were 

growing at 4 percent a year instead of 1.8 or 2.1. The question is: 

How do we get there? And I am not being argumentative or partisan here. I am being genuinely curious, and perhaps you would 

want to take this question for the record. 

It is an article of faith around here that tax cuts stimulate 

growth and that tax increases drive growth down. I am interested, 

is there any economic literature that substantiates that sort of article of faith? 

Mr. HALL. Well, yes, when, for example, we do our macroeconomic effects and we look at the effects of taxes, we are basing 

that on research and estimates of the likely effect. 

Senator KING. And it shows a direct correlation between reductions in taxes and economic growth? 

Mr. HALL. That is right. But just to be fair, we are also talking 

about literature that shows the effect of Government spending, particularly investment side spending that actually can increase productivity and raise growth as well. So it is— 

Senator KING. Well, you anticipated my next point, because I 

would argue that the two most successful economic development 

projects, if you will, over the last 50 years are the Interstate Highway System and the GI bill after World War II, both of which were 

expenditures. They were investments. So you have got to have both 

of those. It seems to me you have to look at both sides of the ledger 

if you are talking about stimulating economic growth. 

Mr. HALL. Right, and let me just say our biggest challenge in 

economic growth is not—is really from demographics. That is actually part of the aging population issue. And when you look at our 

GDP growth forecast, that is in large part due to the aging population. 

Senator KING. Is there any data on—I mean, Senator Sanders 

made a strong point about income inequality, and you cannot argue 

that it has happened. The question is: What is the impact? Is there 

any data on the actual impact of growing income inequality in 

terms of economic growth? 

Mr. HALL. You know, there is some recent research looking at 

that. I do not think there is a consensus on that yet. And I do not 

know how that research is holding up in terms of additional work 

on that. 

Senator KING. I will submit a question for the record on that. 

Mr. HALL. Okay. 
63 

Senator KING. Because, clearly, if the middle class has more 

money to spend, that is economic—and Henry Ford figured that out 

100 years ago when he doubled his workers’ salaries so they could 

buy his cars. I mean, if the middle class has more money in a consumer-driven economy—70 percent of our economy is driven by 

consumer spending—it just seems to me logical that more money 

for the middle class equals greater economic growth. But I would 

appreciate getting your reaction for the record. 

Senator KING. Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

Senator Perdue? 

Senator PERDUE. Thank you, Mr. Chairman. And, Dr. Hall, it is 

good to see you again. 

I for one am excited that you are in your new role. You and I 

are taking on our responsibilities at a similar time, and I look forward to working with you. I have got several questions relating to 

this debt and the long-term forecast that you are working on. And 

I really would look forward to working with you on that because 

I think getting accurate information in this town is really hard. 

Getting objective information is even harder. 

There are divergent views on where we are, how we got here, 

and what we need to do. To me it is very simple. I just think that 

this debt crisis already is past the tipping point in several areas. 

First of all, I would like to qualify—or quantify, rather, what this 

debt really is. We talk about the public debt being about $13.5 trillion today. The number I use is about $18 trillion because we have 

got those interdepartmental numbers in there. And I do want to 

have some clarification of that, and I really want us to get on the 

same page, because we are still talking about public debt as the 

$13.5 trillion. But when you talk about ultimate responsibility, the 

interdepartment that we borrowed the money from, that is a liability there, too. Social Security has got a problem. If we had a surplus there, I would not be making this comment. 

But if interest rates today alone were at their 30-year historical 

average, if you use the $18 trillion number, now we are approaching $1 trillion in interest alone, either current interest payments 

or deferred interest payments that go as an accrual. That is 

unsustainable. It is twice what we spend on our military. That is 

one issue. 

The second tipping point are these future unfunded liabilities, 

driven, as we have said, by Social Security, Medicare, pension benefits for Federal employees, and the interest on the debt. It is a 

self-fulfilling prophecy. If we do not solve it today, it is not going 

to get solved in the future. 

But then I think the third tipping point is Social Security and 

Medicare. Not only is a long-term debt crisis, we have a program 

that right now we will not be able to meet the commitments that 

we have been making over the last 100 years, and that is a critical 

crisis, in my mind. 

I just want to point out I think there is a lot of, you know, partisan opinion and comment on this Committee and so forth, and 

that is all well and good. There is also a lot of nonpartisan—not 

bipartisan—nonpartisan opinion in here. Senator Warner made 

several comments. Even the Ranking Member and I agree on some 
64 

things. There is no argument about the growth in income inequality. I know Senator Kaine and I and Senator King and I have 

talked several times about there are things that we agree on. There 

are obviously things we disagree on, but one of the things I am putting in the record right now is that there are no innocent parties 

up here, Mr. Chairman. And, Dr. Hall, I for one, I want you to hear 

me say that. This is not about how we got here. But I think it is 

informative because to determine where we go, we have to look at 

the mistakes we made in getting here. 

First of all, the Social Security and Medicare are major commitments that we made. We have known since 1949 or somewhere in 

that period of time that we had a baby boom coming. But we had 

comments even in the 1960s made, ‘‘Well, we know that is coming. 

We will deal with that in the future.’’ 

If you look at the last 100 years, we have had three political 

super majorities. The first gave us the New Deal; the second gave 

us the Great Society; and the third has given us Obamacare and 

Dodd-Frank. And I would argue that a lot of this fiscal catastrophe 

that we have right now, Mr. Chairman, can be laid at the feet of 

those three super majorities. 

Now, the Ranking Member is accurate in saying that in 2000 we had $6 trillion of public debt. That compares to the $18 trillion. 

That is all debt, private and—or public debt and the interdepartmental debt, $6 trillion. At the end of the Bush administration, 

2008, we had $10 trillion. So we added $4 trillion pretty much on 

the back of two wars that were not paid for outside the line items 

of the budget. 

Since then, we have doubled down, and we spent—in the last 6 years, we have spent $21.5 trillion, I think, running the Federal 

Government. We borrowed $8 trillion of that. Therein lies the problem. We all talk about growth. I have spent my life in difficult situations in the business community dealing with how to work out situations very similar to this—not with numbers this large, I will 

say. But we never were able to cut our way out, and we were never 

able to raise prices enough—or raise taxes, in this analogy. We had 

to grow the business, and that means that we had to become more 

important to our customers. We had to educate our workforce. We 

had to grow our workforce. 

There are ways that we can do this. It seems to me pretty simple, Mr. Chairman. We have got choices to make, hard choices to 

make relative to our spending. We need to cut overhead in D.C.— 

not the programs. I mean, we get accused of wanting to cut programs all the time. I want to cut the overhead here. Delivery of 

these safety net programs is really critical. We have got to grow 

the economy. There are simple ways to do that. Lee Kuan Yew 

talked about the—somebody mentioned the Singapore example earlier. They invested in water; they invested in cheap power; they invested in infrastructure; they invested in educating their workforce. And they created an economic miracle. In all four of those 

counts today, America is lagging the world, and I am going to come 

to you and ask for some modeling on what would it look like if we 

invested in some of those things and actually got results. 

But it takes priorities. We have got a lot of spending in Social 

Security and Medicare right now, and yet both of those trust funds 
65 

go to zero in the next 15 to 18 years. We have got to change the 

budget process, Mr. Chairman. I know you and I have talked about 

that; other members on both sides of the aisle are talking about 

that. I believe that gimmicks have to be dealt with. We have got 

to do away with the artificial sense of security that we build up 

through the budgeting process, through the use of corporation timing shifts, SNRFs, DNRFs. We need to look at these one-time funding issues with the Fed, with Fannie and Freddie. That has already 

been mentioned today. I will not take time and do that. 

But, lastly, I think honestly this crisis has risen to a point that 

we are so far past getting political oneupsmanship on each other, 

that this is going to require all of us to make tough decisions about 

priorities and how do we dig out of this with regard to getting the 

economy growing. 

Let me say one last thing, Mr. Chairman. I know I am over my 

time, but I think it is important to counter an argument that has 

been made in here repeatedly, and that is, income inequality is not 

a Republican-generated issue. There are no innocent parties on this 

issue. In my mind, one of the largest contributors to income inequality today in the middle class—and I think it is there—is the 

fact that we have fewer people working as a percentage of our 

workforce than we have had since 1978. Middle-class net worths 

are down 19 percent, and in the last 6 years alone, we have allowed 4 million women to fall into poverty. 

So if we focused on getting our people back to work, that alone 

would help us grow this economy. Thank you. 

Chairman ENZI. Senator Kaine. 

Senator KAINE. Thank you, Mr. Chair. This has been a great 

hearing, and I want to commend Dr. Hall. Your opening page is 

just a great bit of data. I mean, I think there is so much good data 

here that we are going to go back and study it. But I will kind of 

gig you just a little bit. 

I think you are already adopting the ways of a Senator or a 

Member of Congress, because I look at your opening page, and you 

talk about how we would—if we wanted to stay on an appropriate 

path, and you can put an asterisk by what is an appropriate path, 

debt to GDP, how we would get there, and then you talk about, you 

know, what we would have to do to increase revenue or cut spending—increase revenue or cut spending. And I think we all know the 

answer is both, and if you did both, then the magnitude of the 

changes to revenue and spending are a good bit smaller in the percentages under either scenario. 

One of the things that I just have found sort of frustrating over 

2–1/2 years is an unwillingness to contemplate doing a little bit of 

both rather than a whole lot of either. And so, you know, one side 

generally does not want to do anything on the revenue side, and 

one side generally does not want to do anything on the spending 

side, especially when it comes to programs that, you know, we 

would call Medicare, Medicaid, or Social Security. 

But if you had a balanced package where you did a little bit of 

both, where you do tax reform that increases revenue, and when 

you tackle some of the challenges, especially Medicaid and Medicare, some of these long-term programs driven by health care and 

demographics, I do not agree—I agree with Senator King on vir-
66 

tually everything. He said if we wait, it goes from difficult to impossible. I do not think it is that difficult. I think the deal has been 

apparent to anybody who has looked at this for probably 5 years, 

and if you do some mixture of it and each side has to give a little 

bit, okay, well, we do not want to do this, but we will—you know, 

we will concede a little bit if you will concede a little bit. I think 

it is actually not that hard to do. 

You know, we are not a Japan with the debt-to-GDP at 200 percent. It gets bad if we do not touch it for a while. But I think we 

are in a good place right now to do something. It is just my hope 

Senator Corker is right. It does not seem like there is real discussions going on now about the solution. I just do not think it is that 

hard. And the inability thus far to get to it is troubling to me. 

I want to ask you about one answer that you gave to Senator 

King. He has pointed out a long time that, to the extent we have 

spending challenges, it is not spending generally. It really is—and 

I think your phrase was ‘‘health care and demographics.’’ And even 

those two are not independent, because a lot of health care is a demographic issue. 

I pulled up on my iPhone here—Mr. Chair, I was not just doing 

e-mails during the hearing; I was really doing research—Time 

magazine’s February cover with the little baby on it: ‘‘This baby 

could live to be 142 years old.’’ A lot of our challenges are not driven because Democrats and Republicans have done horrible things. 

They are driven because, thank God, we are living longer. It is 

great. The average life expectancy of a human being on the planet 

Earth was 30 in 1990, and it was 30 in 2000 B.C. But it has gone 

from, you know, 30 to nearly 80, and it is growing even more. But 

the consequence of the good news—and it is good news. We should 

celebrate the good news. It is a triumph of American ingenuity and 

global ingenuity in medical care. My kids know all four of their 

grandparents. I did not know my four grandparents. Two of them 

had died by the time I was born. 

So it is great that we are living longer, but that seems to be the 

thing that, you know, we can say it is good news, but it really 

poses these challenges for us. 

What assumptions did you make going forward about life expectancy as you were looking at this, at all your projections? 

Mr. HALL. Sure. A lot of what we relied on certainly on that one 

is current trends, trends over the past 50 years, something like 

that. We do know that that is one of those unknown things, and, 

in fact, if you look back, we have a chapter on uncertainty. One of 

the things we do is we vary the mortality rate pretty significantly 

to see what kind of effect that has on our numbers. That will give 

you a feel for how much this contributes to it and how much of a 

budget problem it creates if you have the good news about mortality rates going down. 

Senator KAINE. So I would suspect in your answer to the earlier 

question that Senator Whitehouse asked you about why did you 

have kind of the medical cost as a percent of GDP going from 16 

to 25, it is not just because, you know, a procedure costs more, but 

you were probably—that is probably affected to some degree by 

your trend lines about life expectancy and just people living longer, 
67 

and then more years of actually consuming health care. That is 

probably one of the reasons you have that going on. 

Mr. HALL. It is one of the reasons, but there has been a trend 

of rising health care costs. That is part of that as well. 

Senator KAINE. So you capture both factors in there. 

Mr. HALL. Yes. 

Senator KAINE. Well, I am going to encourage the Aging Committee that I am on to have a hearing on this longevity stuff because—it was Senator Warner who first pointed this out to me a 

number of years ago, Mr. Chair. Policymakers do not have their 

arms around the consequences of growing longevity. And it is a 

good thing, but everything from how long people should get driver’s 

licenses to what our policy should be about how we pay for programs and the Tax Code, I mean, it is so massive, and we are not 

really thinking about it. The good news is it is good news. But it 

puts a burden on our shoulders to be more thoughtful about the 

policy. 

Thank you, Mr. Chairman. 

Chairman ENZI. Senator Toomey? 

Senator TOOMEY. Thank you, Mr. Chairman. And, Dr. Hall, 

thanks for joining us. I do want to respond—I wish the Ranking 

Member were still here for this because he gave an impassioned argument about income inequality, and it is real, and it is something 

I think we ought to be concerned about. But I think it is necessary 

to observe that over the last 6 years, certainly, the policies that 

this Federal Government has pursued have not exactly been at the 

top of, say, my priority list. We have seen huge tax increases, massive net tax increases, big stimulus spending, huge bailouts, massive deficits and debt, an unprecedented wave of regulation between Obamacare, Dodd-Frank, EPA—really across the economy, 

the level of regulation is, I think, at an all-time high—a zero interest rate policy. 

Our friends on the other side really got all the policies that they 

wanted when they had the opportunity to get them, and now we 

are living with the consequences, which include the slowest economic growth after a major recession that we have ever had and 

rising income inequality. So I think it is worth pointing that out. 

We have also had this discussion about how revenue needs to be 

part of some kind of solution, so I want to talk about that a little 

bit. Our figures for this year show that revenue is already 17.7 percent of GDP. Is that correct, Dr. Hall? 

Mr. HALL. That is right. 

Senator TOOMEY. And the historic average, around about 50 

years, has been 17.4. 

Mr. HALL. Yes. 

Senator TOOMEY. Next year it goes to 18.4. And by 2040, it is up, 

under your projections, to 19.4. 

So we are already operating where the amount of money we are 

taking out of the private sector that the Government is consuming 

is greater than its historical average, and it is going to get greater 

and greater still under your projections. 

So to suggest that somehow we have to agree to part with more 

revenue is a little hard to take, because it is already there. We 

have had a huge tax increase. We are already operating year in 
68 

and year out—in fact, isn’t it true that every single year of your 

projections, the projected revenue number is above what the historic average has been for the last several decades? 

Mr. HALL. I think that is right. 

Senator TOOMEY. So, I mean, the way I look at this, this tax increase that my friends on the other side want, they have gotten. 

It is there. It is in the numbers. 

Now let us look at the spending side. Spending this fiscal year 

is currently about 20.5 percent of GDP, correct? 

Mr. HALL. Yes. 

Senator TOOMEY. And that, too, is higher than the historical average. Over this roughly comparable period of time, the historical 

average is about 20.1 percent. So spending is already higher than 

it has historically been. It rises to 22 percent by 2025 and to 25 

percent of GDP by 2040. And we know there are a lot of reasons 

why, but the reality is if you are looking at historical averages, if 

you are looking at where we have come from, it seems to me in disputable that the source of the increasing deficits and corresponding 

debt are the increases in spending. It cannot be—it is not the case 

that we have less revenue than we had before, right? 

Mr. HALL. That is right, although I will say that spending on Social Security and major health care programs are dominating. 

Senator TOOMEY. So let us talk about that. So your GDP growth 

forecasts about 4.3 percent per year over the next 10. That is the 

nominal growth. 

Mr. HALL. Right. 

Senator TOOMEY. Three categories of Federal spending— the Social Security program, mandatory health care, and interest on our 

debt, just those three—they grow at 7 percent per year. And they 

are projected, just those three, by 2025 to consume 81 percent of 

all the revenue that you are expecting us to take, which is a record 

high level of revenue. It goes up to 95—by 2040, these three 

categories- -Social Security, mandatory health care, and interest— 

by 2040 consume 95 percent of all the revenue that we are projected to take in, and we are projected to take in more than we 

used to. 

It seems to me—well, let me ask the question this way: Is it fair 

to say that major Government programs cannot be considered sustainable if they are growing faster than nominal GDP indefinitely? 

Mr. HALL. Yeah, that is right. 

Senator TOOMEY. Right. And you cannot fix that phenomenon by 

raising someone’s taxes. Taxes do not change that fundamental dynamic, right? 

Mr. HALL. Right. 

Senator TOOMEY. Then the last thing I want to touch on—well, 

I am kind of running out of time here, but the last thing I do want 

to touch on briefly is the reduction that you have made in our economic growth forecasts, because this is a very big deal. Our average historical growth over these same time periods we are talking 

about is a little over 3 percent, 3.1. Now we are talking about real, 

not nominal. And your numbers suggest that our potential for 

growth now is only 2.2 percent. That may sound like a very small 

difference to people. Nine-tenths of 1 percent, you know, doesn’t 

that sound small? Here is what that adds up to. That means in 
69 

2023 we are going to have a $1.5 trillion smaller economy than we 

would have had based on your forecast—not yours, but CBO’s forecast just 2 years ago. that is $4,000 per person less. Is that about 

right? Does that sound—I know that is a lot of math to do in your 

head. If it is $4,000 per person, doesn’t that mean a significantly 

lower standard of living for average Americans? I mean, isn’t that 

what we are talking about? Even what might seem nominally to be 

a small difference in the rate of growth, I guess my point is over 

time doesn’t that end up having a very big impact on the standard 

of living of ordinary Americans? 

Mr. HALL. Yes. 

Senator TOOMEY. Thank you. 

Thanks, Mr. Chairman. 

Chairman ENZI. Thank you. 

That concludes our questions. Director Hall, thank you for your 

testimony today. We appreciate your time here with us and your 

service to Congress. 

I want to remind colleagues that questions for the record are due 

no later than 6:00 p.m. today, with a hard copy delivered to the 

Committee clerk in Dirksen 624. Under our rules, Director Hall 

will have 7 days from receipt of the questions to respond with answers. 

With no further business before the Committee—well, before I 

say that, I am going to mention that one of the questions that I 

will be submitting will be one that deals with how much revenue 

increases—because we have talked about revenue increases quite a 

bit—how much revenue increases will happen with a decrease in 

the rate of regulation that we are having. Regulations affect a lot 

of things, and I will have a more properly phrased question, of 

course, that we will be submitting in writing. 

[The questions follow:] 

/ COMMITTEE INSERT 

Chairman ENZI. With no further business to come before the 

Committee, the hearing is adjourned. 

[Whereupon, at 11:32 a.m., the Committee was adjourned.] 

(71) 

REFORMING THE FEDERAL BUDGET 

PROCESS: THE NEED FOR ACTION 

WEDNESDAY, OCTOBER 21, 2015 

UNITED STATES 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, Sessions, Crapo, Toomey, Ayotte, Corker, 

Perdue, Sanders, Murray, Whitehouse, Baldwin, Kaine, and King. 

Staff Present: Eric Ueland, Majority Staff Director; and Warren 

Gunnels, Minority Staff Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. I call this hearing to order. Good morning, and 

welcome to the first in a series of hearings this Committee will 

hold on reforming the Federal budget process. We are meeting here 

today to discuss America’s challenging fiscal future and our outdated budget process that is ill equipped to deal with it. 

According to the Congressional Budget Office, Federal spending 

is set to rise rapidly in the coming decades based solely on growth 

in a few of the largest Federal programs and debt interest costs. 

It is an unsustainable course that threatens the solvency of critical 

programs that serve our most vulnerable citizens. Our balanced 

budget resolution met this challenge head on, but there has been 

very little progress since. 

The American public knows that Congress is not doing its job, 

and the institution’s approval rating has plummeted as a result. 

Generally, a well-functioning budget process strengthens democracy by giving citizens a better idea of Government’s role and provides them with the knowledge that their tax dollars are being 

spent wisely. When the process breaks down, so does the people’s 

faith in Government and their elected officials. 

Congress and the President have ignored this most basic of governing and have decimated the faith and trust of hardworking 

Americans who yearn for a Government that is both accountable 

and effective. That is why budget process reform is critical. 

While the nuances of budget law may be overly complicated, the 

basic elements of a strong budget process are clear: It must encourage regular order, predictability, require legislative review, and 

provide transparency and accurate information for lawmakers and 

the public. These elements are critical to ensuring an effective and 
72 

accountable Government, and our current process has failed on all 

three fronts. 

First and foremost, Congress must be able to do its job and enact 

its budget and appropriations on time and in a deliberate manner. 

I have long spoken on the merits of considering bills, amending 

bills, and passing bills under regular order. It is a process that our 

constituents demand, and it is one that makes the Senate a 

healthier institution. This is especially true for the budget and appropriations bills that set our Government’s priorities and allocate 

taxpayers’ hard-earned dollars. 

Earlier this year, we took the first step by passing a balanced 

budget that would serve as a fiscal blueprint for lawmakers to authorize and appropriate funding. But, once again, the progress has 

ground to a halt. Regular order has been increasingly rare in the 

budget process. 

Congress’ first job in the annual process is to pass a budget resolution, but Congress has passed budget resolutions in less than half 

of the last 15 fiscal years. Prior to this year’s balanced budget resolution, the last time we passed a 10-year balanced budget was 

2001. Once the resolution establishes top-line spending levels, Congress must enact 12 annual spending bills before the start of the 

next fiscal year. 

If you look up on the screen, you will see a chart showing how 

the appropriations process has functioned since the Budget Act 

took effect. The bars show the number of appropriations bills enacted on time for each fiscal year. You will see that in the last 40 

years, all appropriations bills have been completed on time in only 

four fiscal years. The red bars show you when at least one appropriations bill was signed into law. But in most years, Congress did 

not even come close to enacting all the annual spending bills. In 

15 of those years, not even one appropriations bill was enacted on 

time. Instead, since 1977, Congress enacted 173 short-term spending bills—we call them ‘‘continuing resolutions’’—to prevent a Government shutdown, and the Government operated under a shortterm spending bill for an average of 186 days per year. That is over 

half the year. 

The power of the purse is one of the most important constitutional roles of Congress. Its authority to tax and spend must be exercised by the representatives of the people so that Americans can 

hold Government accountable. The Founders knew that without 

legislative oversight, the bureaucracy would run amok. Congress, 

therefore, has a constitutional duty to use its regular deliberative 

process to exercise the power of the purse and provide constant review, not forfeit that power to the executive branch. 

There are many signs of Congress’ failure to effectively oversee 

Government budgets, the most obvious being our unsustainable 

overspending and explosive debt. Since the Congressional Budget 

Act was passed 40 years ago, the Federal Government has spent 

more money than is coming in about 90 percent of the time. And 

the national debt as a share of the economy has almost tripled. 

Duplication, fraud, waste, and spending with no current authority is also rampant across Government. But the Government Accountability Office’s annual list of offending programs has yet to 

force meaningful legislative action. Program authority or congres-
73 

sional committees’ review programs for validation, transparency, 

and measurable goals are often ignored. Last year, the Government 

spent $293.5 billion on 260 expired programs, according to the Congressional Budget Office. One obvious problem is that the composition of Federal spending has changed dramatically, and the budget 

has not kept pace. 

The chart on the screen shows the share of total Federal spending that falls under the annual appropriations process, which is 

called ‘‘discretionary spending.’’ That is the spending where we actually get to make decisions. 

In 1974, when the modern budget process was created, discretionary spending accounted for 60 percent of the budget. Forty 

years later, discretionary spending has increased dramatically in 

terms of dollars spent, but it now accounts for just one-third of all 

spending. We keep making more programs mandatory. That is because permanent or mandatory spending has grown to take its 

place, as the red line in the chart shows. 

Over 40 years, Congress enacted many new programs that spent 

automatically or mandatorily. Without further congressional action 

or review, mandatory spending now accounts for two-thirds of the 

total Federal spending. 

Despite the growing share of our budget devoted to mandatory 

spending, our current budget process still forces Congress to spend 

the majority of its time each year worrying about annual appropriations that now account for a much smaller portion of Federal 

spending. While each of the appropriations bills must travel 

through the normal legislative process each year, mandatory programs continue to spend and grow. Unless Congress musters its political will and decides to vote otherwise, the budget process must 

change to keep up with the new composition of Federal spending. 

Finally, outdated budget rules mean Congress is not even given 

the accurate information it needs to conduct oversight and make 

rational budget decisions. The last Government commission to conduct a comprehensive review of Federal budget concepts concluded 

its work in 1967. That is 50 years ago. As such, many of the rules 

governing the Federal budget today are outdated and have not kept 

up with advances in finance, economics, or accounting. Nor have 

they provided the best tools for controlling spending. This deprives 

Congress of the most accurate information with which to make 

budget decisions and determines budget enforcement rules meant 

to keep Congress honest. 

The first step to correcting Government spending and trust deficits is to put in place a process that encourages regular order, increases legislative oversight, and provides accurate information to 

Congress—all critical ingredients to strengthening our democracy 

and reducing our Nation’s unsustainable spending and debt. 

Senator Sanders? 

OPENING STATEMENT OF SENATOR SANDERS 

Senator SANDERS. Mr. Chairman, thank you very much. 

Before I get into the thrust of my remarks, let me put your discussion of the financial situation of the Government in a broader 

context. Obviously, that is a usually important issue, but it has to 

be put into the context about what is happening in our economy 
74 

in general. And what is happening in our economy in general is 

that, for the last 30 years, there has been a massive transfer of 

wealth from the middle-class and working families of this country—we are talking about many, many trillions of dollars—to the 

top one-tenth of 1 percent. So when we talk about budget priorities 

and budget process, we have to look at the broader picture of what 

is happening in America. We cannot forget that. 

So we are living in a situation now where, unbelievably, the top 

one-tenth of 1 percent now owns almost as much wealth as the bottom 90 percent. We are looking at a situation where one family, the 

wealthiest family in America, owns more wealth than the bottom 

40 percent. We are looking at a situation today where people in the 

State of Vermont, and I suspect in Wyoming, are working longer 

hours for lower wages, millions of people working two or three jobs, 

and yet 58 percent of all new income is going to the top 1 percent. 

So to begin this discussion about budget without looking at the 

reality of what is happening in America, which is that for 40 years 

the middle class of this country has been disappearing, looking at 

a country today which has 47 million people living in poverty, looking at a nation which has the highest rate of childhood poverty of 

almost any major country on Earth, looking at a country which has 

more income and wealth inequality than any other major country, 

and worse here today than at any time since 1928—if we do not 

take those factors into consideration, we are missing, I believe, the 

most important point. And that takes us to where we are right 

now. 

Just a couple of weeks ago, we started a new fiscal year without 

eliminating sequestration. I think that was a serious mistake. 

These arbitrary, across-the-board budget cuts are damaging the 

economy and are hurting millions of the most vulnerable people in 

our country, especially the children, the very old, the sick, and the 

poor. Are those the people we really want to go after at a time 

when we have massive income and wealth inequality? 

Adding insult to injury, we are also less than 2 weeks ago from 

hitting the debt ceiling. If we do not act by November 3rd, we will 

default on our bills for the first time in our Nation’s history. 

Mr. Chairman, you talked about people’s faith in Government diminishing. Well, let me tell you something. If the United States 

Government under Republican leadership in the House and the 

Senate does not pay its bills, you ain’t seen nothing in terms of 

people’s faith in Government diminishing. 

Mr. Chairman, let us be clear. Defaulting on our debt would be 

a disaster. I hope and expect there is not a lot of disagreement on 

that. It would precipitate a national and international financial crisis. If a default occurs, interest rates will spike for home mortgages, car loans, student loans, and credit cards. Millions of Americans can lose their life savings and pensions. Millions of veterans, 

senior citizens, our brave men and women in our armed forces, 

young children who depend on food stamps, and our entire economy 

would be put at risk. 

I hope my Republican colleagues will not allow that to happen 

and will do what we have done throughout the history of this country: pay our bills. 
75 

Mr. Chairman, it would be wrong for my Republican colleagues 

to attempt to shut down the Government or threaten the full faith 

and credit of the United States Government, as they have done in 

the past, because of their dislike of Obamacare or Planned Parenthood or because of their desire to cut Social Security, Medicare, 

and Medicaid. You have your opinions. That is fine. But you talked 

about regular order. Fine, let us debate those issues. We have a 

budget process. Do not shut down the Government because people 

disagree with what Planned Parenthood does. I think they do a 

great job. You may not. Do not shut down the Government because 

of that issue. 

I hope everybody in this room would agree that that is wrong. 

A democratic Government cannot function when a small faction 

chooses to hold the American people hostage in hopes of cutting 

programs that, in fact, the vast majority of the people in this country actually support. 

I understand that my Republican colleagues are concerned about 

the deficit, which, by the way—and I think it is important to throw 

this on the table. Is the deficit today a serious issue? Yes, it is. But 

let us not forget that that deficit has been reduced by more than 

two-thirds in the last 6 years—not an inconsequential effort. And 

when we talk about the deficit and when we talk about an $18.4 

trillion national debt, let us not forget—but apparently it is a lesson that some of my Republican colleagues have forgotten—that a 

lot of this deficit and debt has a lot to do with wars in Iraq and 

Afghanistan which we have not paid for. 

And I do find it always remarkable that many of my Republican 

colleagues feel we have to cut Medicare and Medicaid and nutrition 

programs for hungry children. We just have to pay for those things. 

But apparently when you go to wars, you can put that on the credit 

card. 

The national debt is an issue that all of us are concerned about, 

but where we disagree is how you address the deficit and the debt. 

And we feel strongly that from a moral perspective and from an 

economic perspective, you do not balance the budget on the backs 

of the elderly, the children, the sick, and the poor. When you have 

massive income and wealth inequality, you do not balance the 

budget on the backs of the most vulnerable people in this country. 

Today, as I think most people know, major corporation after 

major corporation pays in a given year zero—nothing—in Federal 

income taxes. Profitable corporations like GE, Verizon, and Boeing 

have not only paid nothing in Federal income taxes in a given year, 

they actually got rebates from the IRS. So maybe we want to take 

a look at that issue before we cut the WIC program, which provides 

assistance to low-income pregnant women and their babies. 

According to a report from the Congressional Research Service, 

each and every year profitable corporations are avoiding about 

$100 billion in taxes by stashing their profits in the Cayman Islands and other offshore tax havens. In 1952, corporations contributed about 32 percent of all Federal revenue; today they contribute 

about 11 percent— one-third of what they did in 1952. 

In terms of individual tax rates, we have a situation where hedge 

fund managers on Wall Street who make hundreds of millions of 

dollars a year pay an effective tax rate lower than a truck driver 
76 

or a nurse. Yet my Republican colleagues have been absolutely determined to make certain that the wealthy and large corporations 

not contribute one penny more for deficit reduction and that all of 

the sacrifice comes from the middle-class and working families in 

terms of cuts to Social Security, Medicare, Medicaid, LIHEAP, community health centers, education, Head Start, nutrition, affordable 

housing, et cetera, et cetera. 

Mr. Chairman, here are just a few examples of what will happen 

if we do not eliminate sequestration this year. 

At a time when real unemployment is over 10 percent, 800,000 

fewer jobs will be created; 2 million young Americans, dislocated 

workers, and veterans will not get the job training they need; 620 

community health centers will not open their doors, which would 

reduce access to primary care for more than 2.6 million Americans; 

144,000 young children will not be able to enroll in Head Start; 

430,000 Americans will not get the comprehensive family planning 

and preventative health services they need; and 20,000 veterans 

will not get the medical care they need through the VA. 

Mr. Chairman, I would hope that all of us would agree that this 

is unacceptable. At a time of massive wealth and income inequality, let us work together on a budget that is fair, that does not go 

after the most vulnerable in our country. At the very least, I hope 

we can all agree right now that the United States Government 

should pay its bills on time, and that we will not allow the U.S. 

to become a deadbeat Nation. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you, Senator Sanders. I hope I am not 

oversummarizing by saying that we must need some budget reform 

and some appropriations reform. But instead of pushing forward 

for reform, we are kind of mired in negotiations right now over 

spending that should have been set months ago and will expire in 

less than a year. So how can— 

Senator SANDERS. Well, Mr. Chairman— 

Chairman ENZI. —we competently exercise this power of the 

purse? 

Senator SANDERS. Yes, we do need reform, and I think we do 

need to be involved. But I hope you will agree with me that we 

should not be shutting down the United States Government because some people dislike Planned Parenthood. 

Chairman ENZI. That is an oversummarization of my opinion. 

Senator SANDERS. And I was not just focusing on you, but there 

are people in your party who hold that point of view. 

Chairman ENZI. Well, that is a discussion that will be held outside of budget reform, I am sure. And I hope that we can come up 

with some suggestions for an accurate, transparent, deliberative 

process that will get us out of this kind of a situation in future 

years, that will allow us to make those spending things with a lot 

more looking at the details rather than doing these omnibuses 

where we do not get to really see or talk about what is in them 

or make amendments to them in case there are things that offend 

us, or that we think need to be done differently. 

So that is why we have this outstanding panel today, and our 

first witness is Michael Peterson, who is the president and chief executive officer of the Peter G. Peterson Foundation, an organization 
77 

dedicated to increasing public awareness of the nature and urgency 

of key fiscal challenges threatening America’s future and urging action. He oversees the strategic direction of the foundation, guiding 

policy and shaping its major initiatives, partnerships, and longterm objectives. 

Our second witness is very familiar to us, Douglas Holtz-Eakin, 

the president of the American Action Forum. Dr. Holtz-Eakin has 

a distinguished record as an academic, policy adviser, and Government administrator. During his career in Government service, Dr. 

Holtz-Eakin was the sixth Director of the Congressional Budget Office and twice served on the President’s Council of Economic Advisers, first as a senior economist and later as the chief economist. A 

lot of experience there. 

Our third witness is Deborah Weinstein, the executive director of 

the Coalition on Human Needs since 2003. She was previously director of the Family Income Division of the Children’s Defense 

Fund and executive director of the Massachusetts Human Services 

Coalition, a nonprofit advisory organization made up of human 

service providers, religious organizations, labor, and advocacy 

groups. 

I want to thank you all for joining us today and to share your 

expertise on this very important subject, and we will begin with 

you, Mr. Peterson. 

STATEMENT OF MICHAEL PETERSON, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, PETER G. PETERSON FOUNDATION 

Mr. PETERSON. Thank you. Good morning, Chairman Enzi, Ranking Member Sanders, and members of the Committee. Thank you 

for the opportunity to appear before you today to discuss how budget process reform can help secure a brighter fiscal and economic future for our Nation. 

The Peterson Foundation is a nonpartisan organization. Our mission is to increase awareness and accelerate action on America’s 

long-term fiscal challenges because we believe that our 

unsustainable fiscal outlook is a serious threat to our future. Our 

foundation works with policy experts from across the political spectrum to educate and engage Americans and build support for solutions. 

Today’s hearing is important because the current budget process 

hinders our ability to address these challenges. While process alone 

is not responsible for our growing debt, the current Federal budget 

process keeps policy focused on the short term, reinforces the tendency to go from crisis to crisis, and diverts attention from the key 

drivers of the budget long term. 

Let me begin by providing some context. Current annual deficits 

are down from $1.4 trillion at the height of the Great Recession to 

$440 billion today. Even though that is still a large deficit, that is 

a great improvement. 

However, the more significant problem is the trajectory of debt 

over the long term. The Congressional Budget Office projects that 

within 25 years, debt held by the public could climb to more than 

100 percent of GDP under current law, and to a staggering 175 

percent of GDP under less optimistic assumptions. By any definition, the fiscal path we are on is unsustainable and dangerous. 
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We need a more effective, forward-looking budget process because there are severe consequences of our current fiscal path. 

Most directly, interest costs will consume a huge amount of the 

Federal budget. Over the next 10 years alone, CBO projects that 

interest costs will be more than $5 trillion under current law. 

Under CBO’s alternative fiscal scenario, interest costs will become the third largest category of the budget in 2023, the second 

largest category in 2032, and the single largest category by 2040. 

With our many important budget priorities, none of us wants interest to become the largest Government program. 

Higher interest costs would crowd out important public investments that can fuel economic growth. Discretionary spending is already on a path to fall to well below historical averages. And a Nation saddled with debt will have even less to invest in its own future. 

In addition, growing Federal debt reduces the amount of private 

capital for investments, which hurts economic growth and wages. 

Furthermore, this fiscal path would lower income levels. CBO projects that our debt will reduce incomes by $6,000 per person in 

2040. We are all very concerned about the lack of growth in low 

and median incomes and the growing disparities in income and 

wealth. At the very least, the Federal Government should not let 

its own budget imbalances contribute to these very harmful trends. 

In addition, on our current path, we are at greater risk for a fiscal crisis, and it leaves us with much less fiscal flexibility to deal 

with future economic crises. If we faced another major recession 

like 2008, we may not be as able to work our way out. 

Lastly, and in many ways most importantly, this high level of 

debt imperils the safety net and the most vulnerable in our society. 

If our Government does not have the resources and the stability of 

a sustainable budget, these essential programs, and those who 

need them most, are put in jeopardy. We cannot let that happen. 

The good news is that there are plenty of solutions to choose 

from. One of the Peterson Foundation’s most important projects is 

the Solutions Initiative, which brings together policy organizations 

from across the political spectrum to develop long-term fiscal plans. 

Experts from five leading think tanks participated: the American 

Action Forum, led by Dr. Holtz-Eakin; the American Enterprise Institute; the Bipartisan Policy Center; the Center for American 

Progress; and the Economic Policy Institute. Each of these organizations developed specific, ‘‘scoreable’’ proposals. And I am very 

proud to report that all of them successfully stabilized the debt as 

a share of the economy over the long term. 

While these very different organizations have a wide range of 

priorities, their plans demonstrate that comprehensive solutions do 

exist. 

Finally, let me close with a brief discussion of budget process. 

While budget process reforms alone cannot solve our fiscal challenges, there are various changes that would better encourage longterm fiscal planning. Let me discuss three key principles for you 

to consider. 

First, look further into the future. The current Congressional 

budget window looks out only 10 years. We would recommend increasing that to 25 years. If we do not look further out, then there 
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is no meaningful discussion of long-term trends, there is no visible 

information about long-term effects, and there is no credit given for 

long- term improvement. This is perhaps the single most important 

change that would encourage better long-term budgeting. 

Secondly, set goals. Requiring Congress and the President to set 

medium- and long-term fiscal goals, and then report on progress 

annually, would improve accountability and transparency. 

Lastly, improve enforcement. Adding new or strengthening existing enforcement measures would help lawmakers meet budget targets. Of course, measures should be flexible enough to accommodate changing conditions, but they should be strong enough to reinforce the commitment to long-term fiscal sustainability. 

In summary, we have a long-term fiscal challenge that could do 

great damage to our Nation’s economy and role in the world. We 

know the causes, and we know the range of solutions. All it takes 

is leadership, commitment, honesty, and cooperation. The Peterson 

Foundation is committed to helping our Nation, and both political 

parties, to address the challenge successfully. 

Thank you for your invitation to participate in this important 

discussion. I would be happy to answer any questions you may 

have, and with your permission, Mr. Chairman, I would like to submit this testimony and our Solutions Initiative plans for the record. 

[The prepared statement of Mr. Peterson follows:] 
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Chairman ENZI. Thank you, and they will be a part of the record, 

as will your full statements from everybody. 

[The plans follow:] 
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Chairman ENZI. Dr. Holtz-Eakin? 

STATEMENT OF DOUGLAS HOLTZ–EAKIN, PH.D., PRESIDENT, 

AMERICAN ACTION FORUM, AND CONGRESSIONAL BUDGET 

OFFICE DIRECTOR (2003–2005) 

Mr. HOLTZ-EAKIN. Chairman Enzi and members of the Committee, thank you for the chance to be here today. You have my 

written statement. Let me make three simple points, and then I 

look forward to answering your questions. 

The first, as everyone has noted, is that the Federal budget is in 

serious jeopardy. There are lots of ways to characterize this, but I 

think one of the most telling is that if you look at the CBO baseline 

for 2025, 10 years from now, if we remain on autopilot, the CBO 

projects a deficit of $1 trillion. So we are back to $1 trillion deficits. 

Of that $1 trillion deficit, $755 billion is interest on previous borrowing. So we as a Nation are perilously close to borrowing solely 

for the purpose of paying off previous borrowing. The U.S. is entering into a debt spiral in a very predictable, mechanical fashion. It 

is an untenable situation for us to be in. If left on that path, the 

only question is when the crisis happens, not whether a crisis happens. And so that trajectory is extremely damaging and would 

threaten the very foundations of our economy. 

At the heart of that explosive debt is the rise in mandatory 

spending, the large Federal health programs, Medicare, Medicaid, 

the Affordable Care Act, the Social Security program, and other 

elements of the mandatory spending, are driving these ever larger 

borrowing and debt and deficits. 

That is bad enough, but those programs are also not functioning 

very well. Social Security promises a 25- percent cut across the 

board in 20 years. Medicare offers substandard care for the dollars 

that we plow into it for our seniors. The Medicaid program sends 

those with Medicaid to ERs at greater rates than those who are uninsured. These are all programs that should be improved so that 

our safety net is both financially more secure, but also delivers 

higher-quality service. 

Now, in terms of supporting these programs and reforms of these 

programs, the current budget process is transparently broken. 

There is no single document on which the House, the Senate, and 

the executive branch agree on the level of revenue and the level of 

spending in any year. So the U.S. Government does not have a 

budget. It has budgetary outcomes, usually bad, and that is a piece 

of the record that the Chairman showed. 

Often, as the Chairman outlined, the budget resolution is not 

done. The appropriations process is not completed. There is a heavy 

reliance on continuing resolutions and omnibus appropriations. 

And I do not think anyone can make the case that the budget process is working well. 

So in thinking about budget process reforms, I would encourage 

the Committee to think hard about this, but also think about some 

fairly large reforms. As some of the research outlined in my written 

testimony has shown, there is a great value to fiscal rules in solving problems like this. In Sweden and the Netherlands, adopting 

what would effectively be constitutional rules for the maximum 

amount of spending as a fraction of GDP or a balanced budget 
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amendment or a debt-to-GDP rule have effectively brought back 

into alignment things which were previously not working very well. 

That might be a bridge too far. But if you do start looking at real 

changes, I think a good lesson would be to focus on the problem 

and make changes in the area of the biggest problem, and that is 

mandatory spending. 

To date, we have only one piece of the budget process that focuses on mandatory spending, and that is reconciliation. Reconciliation has not done its intended job of making it easier to reform 

mandatory spending programs and control the growth in spending. 

So other approaches, whether it is capped allotments for those programs run by the States or whether it is changing the form of 

Medicare to be much more of a defined contribution than a defined 

benefit, all things which have been explored but have not been 

really pursued very hard, I think that should be at the center of 

the agenda for the Committee in thinking about process reform. 

So I really appreciate the chance to be here today. I am happy 

to answer your questions. I think this is a topic that is of paramount importance. But it is important to remember that in the end 

the problem is not the process. The problem is the problem, and 

these programs needs to be reformed. And the budget process can 

help in that effort, but it will not solve it by itself. 

I thank the Chairman and look forward to the questions. 

[The prepared statement of Mr. Holtz-Eakin follows:] 
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[Applause.] 

Chairman ENZI. Thank you. 

Mr. HOLTZ-EAKIN. All my years, that is the first time anyone 

ever applauded. 

[Laughter.] 

Mr. HOLTZ-EAKIN. Thank you, sir. 

Chairman ENZI. I think I had some notes here for what I am 

supposed to do if that happens, too. 

[Laughter.] 

Chairman ENZI. Mrs. Weinstein? 

STATEMENT OF DEBORAH WEINSTEIN, EXECUTIVE DIRECTOR, 

COALITION ON HUMAN NEEDS 

Ms. WEINSTEIN. Thank you, Chairman Enzi, members of the Senate Committee. Thanks very much for the opportunity to testify 

about ways the Federal budget can better fulfill its primary purpose: to serve as a blueprint for meeting the Nation’s needs. 

It should be a first principle that poor people must be protected 

from efforts to reduce deficits and debt. This was understood to be 

important by Bowles and Simpson as the Nation struggled to free 

itself from the Great Recession. But the impacts of the recession 

are long lasting. 

More than 40 percent of families with children headed by young 

parents are living in poverty. And it would take 25 years to cut 

poverty in half if the recent gains continued year after year; and 

to get child poverty to the same point, 35 years. 

A second point. Programs do work to lift people out of poverty. 

It is simply unacceptable for a Nation as wealthy as ours to fail 

to speed up poverty reduction when we know how to do it. We need 

to protect low-income tax credits because they lift 10 million people 

out of poverty. SNAP or food stamps lifts 4.7 million people; Social 

Security, 26 million. 

We must stop the cuts to domestic appropriations, cuts that are 

taking all those programs—education, housing, Head Start, so 

many more—to their lowest share of GDP in 50 years. 

Now, the sequestration cuts occurring in fiscal year 2013 hit 

harder, caused 57,000 children to be denied Head Start, lost rental 

housing vouchers to 100,000 households, reduced the number of 

meals provided to seniors by about 5 million. A lot of those reductions were restored as part of the agreement in fiscal years 2014 

and 2015, but we still have a long way to go for rental housing 

vouchers and senior meals. 

Cuts over the past few years have affected both discretionary and 

mandatory programs. Most painfully, Congress cut SNAP, the benefits per meal from $1.70 to $1.40 per person. It is important for 

you to know, as you construct a budget, that these kinds of reductions hurt people. Researchers found that babies and toddlers in 

households that experienced that cut were more likely to be at risk 

for bad health and education outcomes. The loss of benefits hurts, 

but the other side of the coin is that the presence of benefits like 

SNAP and WIC can set children on the path out of poverty. 

Rental housing vouchers are another case in point. If the Senate 

Transportation, HUD appropriations bill were to become law, not 

only would we continue to lose 70,000 vouchers that have not been 
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restored, we will lose another 50,000. Housing subsidies lift 2.8 

million people out of poverty, and children who are in that kind of 

housing are more likely to go to college and raise their children out 

of poverty. Instead, if sequestration returns, fewer will get help. 

You can say the same of Head Start and other preschool programs. 

But my third key point, congressional budget practices are slanted against funding for these effective programs and other programs 

like transportation funding which spur economic growth and jobs. 

If these kinds of programs need increases, Congress is resolute in 

requiring cuts elsewhere. Congress even changed the rules this 

year for the highway bill, now forcing all money taken from the 

general fund to be offset by other cuts or savings, and that did not 

used to be the case and will force competition over those offsets, 

those were envisioned to help pay for sequester relief. While antipoverty programs are cut, Congress is evading caps on Pentagon 

spending through the use of the uncapped overseas contingency operations account. 

A fourth key point: We cannot meet our people’s needs and put 

Federal spending on a sustainable path without increased revenues. We can afford to meet our needs. Income and wealth has 

been increasing for decades, but most of these gains are going to 

the top 1 percent. Income from capital as opposed to labor is growing. We need to alter the Tax Code to capture growing income 

sources from those who have the most ability to pay. But Congress 

has been willing to deepen the deficit for tax cuts that mainly help 

the wealthy and corporations. 

The budget is about choices. Congress ought to use hearings and 

reports to investigate the impact of those choices. 

What should we do? End the tax loophole that provides hedge 

fund managers with a $1.5 billion break or expand preschool and 

Head Start? 

We could use Senator Sanders’ far-reaching tax on corporate 

profits sheltered overseas. That income would stop a great portion 

of sequestration cuts. 

We do need to reduce our debt over time. We are making 

progress, though. The deficit is now lower as a share of the economy than at any time in President Reagan’s Presidency. While it 

will go up, the upward trend has been significantly slowed by the 

Affordable Care Act, and that is a piece of very good news. 

One final point: the debt limit. It is worth noting that even the 

threat of U.S. default can dampen economic growth. Please, we are 

getting close to Halloween. Do not scare us. Just raise the debt 

limit to pay automatically for programs that Congress has approved. 

Thank you. 

[The prepared statement of Ms. Weinstein follows:] 
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Chairman ENZI. Thank you. 

Now we will turn to questions, and I will take a second to explain how we do this. Each member will have 5 minutes for questions, beginning with myself, and then Senator Whitehouse has 

suggested— 

Senator WHITEHOUSE. I will yield to the rest of the Democrats 

since I will be here to the end. 

Chairman ENZI. Okay, yes. All members who were in attendance 

when the hearing began will be recognized in order of seniority. 

And for those who arrived after the hearing began, they will be 

listed in order of arrival. So we will begin with the questions. 

Dr. Holtz-Eakin, I mentioned in my opening statement that the 

balance between discretionary and mandatory spending in the Federal budget has changed substantially, and you mentioned it in 

your comments as well. Given the increasing share of outlays devoted to mandatory spending, does the current budget process 

allow adequate legislative oversight? Does it allow review of existing mandatory spending programs? And can it allow oversight and 

review? 

Mr. HOLTZ-EAKIN. I do not believe so. As everyone has noted, the 

rise in mandatory spending is squeezing out of the budget the annual discretionary appropriations. The Budget Control Act merely 

codified something that has been going on for a long time. I think 

it is important to think hard about how the Congress can essentially budget the mandatory programs. Medicaid is an appropriated 

entitlement, and so you have the opportunity there every year in 

principle to look at Medicaid and figure out how much you are 

going to spend on it. 

I think anything that the Committee and the Congress as a 

whole can adopt to better regular oversight of the trajectory of 

these mandatory spending programs is the single biggest step toward getting things lined up correctly. 

Chairman ENZI. Because we do not get a chance to actually look 

at the details of those programs, we do omnibuses. That runs into 

some problems. 

Mr. Peterson, your foundation’s Solutions Initiative gathered 

long-term budget plans from groups across the ideological spectrum 

with the goal of laying out some options to set the Federal budget 

on a sustainable path for prosperity and economic growth. 

Taken together, can we provide a range of scoreable policy proposals? Can we shift focus to the true drivers of the future Federal 

spending and debt? Do you think the current budget process encourages Congress to think and create policy within some sort of 

strategic long-term framework? 

Mr. PETERSON. Clearly not. I think the current budget process, 

as I said in my testimony, does not look enough out into the future, 

and that is why we recommend looking out 25 years. I think one 

of the best aspects of the Solutions Initiative was that we set a 25- 

year period. And I think the organizations enjoyed having the ability to look out longer and be more strategic and forward-thinking. 

Really, there are two problems with looking at only 10 years. 

One is visibility. As we say, I think the greatest threat to the future of the country is not happening within the next 10 years, but 

it is in the next few decades. If you only look 10 years, you actually 
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do not see the big problem. If you measure debt as a share of GDP, 

it is relatively stable over the next 10 years, but it really begins 

to skyrocket thereafter. So if you have a budget process that effectively ignores the real problem, how are you going to solve it? 

And then, secondly, credit. A lot of the best long- term reforms 

are phased in gradually. They deal with things over time. If the 

budget process is so focused on 10 years that any of the latter second-decade effects are not even measured, how do you get credit for 

those reforms? How do you justify those reforms, et cetera? So we 

think that is a very important component of budget process reform. 

Chairman ENZI. Thank you. 

Dr. Holtz-Eakin, in recent years we have seen Government loan 

programs expanding significantly. Do the current budget rules understate the cost and risk of these loan programs and make them 

seem profitable? Do the rules encourage Congress to add and expand these types of programs without adequately disclosing the 

true risk to taxpayers? Perhaps you can tell us what the origins are 

of the scoring system and how it can be improved to incorporate 

modern financial concepts in our budget estimates. 

Mr. HOLTZ-EAKIN. I think this is an important issue. I mean, 

credit market activities are a large fraction of what the Federal 

Government now does, and the original Federal Credit Reform Act 

was intended to level the budgetary playing field between direct 

loans, which showed an immediate outflow and then a series of receipts over time, and loan guarantees, which showed no outflow 

but, in the event of default or delinquency, cash flows going out of 

the Federal budget. Those are economically equivalent activities 

and should have looked the same in the budget. The Credit Reform 

Act did a good thing by getting those equalized and their budgetary 

treatment equalized. 

What it did not do was treat as the same a loan that exists in 

the private sector and a loan that is put on the Government balance sheet. And, indeed, by leaving out the market risk associated 

with loans and only putting into the Credit Reform Act the credit 

risk of those loans, it made all of the Government loans look more 

valuable than they really are. And a great budgetary problem is 

getting rid of a private loan, putting in on the Government balance 

sheet, and showing that as a scoreable savings for the Federal Government when, in fact, it is exactly the same economic entity in 

both locations. That needs to get fixed. Fair value accounting is the 

way that could get fixed. And I would encourage any budget reform 

to take a good, hard look at getting that squared away because it 

is a big part of what the Federal Government does and we are misleading people in every way when we show the transactions at the 

moment. 

Chairman ENZI. Thank you. I do have additional questions for all 

three of you, and I will submit those in writing, and anybody else 

can, too. I would appreciate it if you would provide us timely answers on those. 

[The questions of Chairman Enzi follow:] 
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Senator WHITEHOUSE. Mr. Chairman, since I will be here as 

Ranking Member until the end of the hearing anyway, I am going 

to allow my colleagues to go first. And I believe Senator Baldwin 

was the first of those who are present. 

Chairman ENZI. Correct. 

Senator WHITEHOUSE. So, Senator Baldwin. 

Senator BALDWIN. Thank you. I appreciate your holding this 

hearing. 

We talk often about budgets as documents reflecting our values 

and our priorities, and I know I bring to the Senate Budget Committee a priority on building an economy that works for everyone 

and not just the wealthy few. But, also, I served on the House 

Budget Committee early on in my House tenure, and now I have 

the privilege of serving on this Committee in the Senate. So I have 

had the chance to see how the process has worked at various points 

in time, and it is interesting to sort of see this predictable path to 

crisis and manufactured crisis. 

You know, in 2013, as a brand-new Member of the Senate and 

this Committee, we had one House in Democratic control, one 

House in Republican control. Each passed a budget that, arguably, 

reflected a set of priorities, partisan priorities, because they came 

out on pretty partisan votes. But then there was a negotiation that 

occurred between Senator Murray, our Chairwoman, and Paul 

Ryan, the House Committee Chairman, that gave us a blueprint for 

2 years. 

This year, as we started our process, each House is obviously 

controlled by a member—or by the same party, but we have a 

President who made it very clear that in order for the final products, the individual appropriations bills, to gain his signature, 

there had to be some compromise. So I think part of our challenge 

is how do we get compromise up front rather than on the eve of 

a crisis or create unnecessary ripple effects throughout the economy as we approach the brink time after time after time. 

I guess I would ask the three of you, in terms of a process focus, 

how do you put compromise earlier in the process? If you have any 

brilliant ideas for all of us, let me know. Please. 

Ms. WEINSTEIN. Thank you. That is a tough question, and I wish 

I did have a magical process answer for what is, as I think others 

have said, a policy dilemma, and that two things I would put out: 

one is when there were compromise efforts being discussed, it really did start with the premise that there needed to be multiple parts 

to a solution, and that that solution needs to include revenues, that 

there certainly have to be some spending reductions, but that—and 

that they should certainly not be limited to the discretionary area. 

Everybody understood that would be a very bad outcome. 

But because we could not agree at the outset that all elements, 

spending and taxation, needed to be part of the solution, then 

things did transpire to be this kind of Government by crisis and 

standoff. 

Senator BALDWIN. Let me make sure in the time remaining that 

I get to hear from each of you. But if I were not using up all my 

time, my next question would have been about a revenue proposal, 

my bill to close the carried interest loophole, which you talked 

about in your testimony, Ms. Weinstein. 
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Douglas? 

Mr. HOLTZ-EAKIN. In terms of process proposals that are in the 

spirit of what you asked, probably the most prominent is to change 

the budget resolution from a congressional resolution into a law 

and force the House, Senate, and President to agree at the outset 

on the broad outlines of— 

Senator BALDWIN. Which the Murray-Ryan proposal ultimately 

had as an impact because it amended the sequestration Budget 

Control Act language. 

Mr. HOLTZ-EAKIN. Right. I think the lessons of Murray-Ryan are: 

Number one, the discretionary caps are a great budget gimmick, 

but they do not reflect real policy. And so until you have got a policy underneath those caps that people are willing to live with, they 

do not really mean much. 

The second is the Murray-Ryan deal raised discretionary spending and cut mandatory spending. That is the fundamental need in 

the Federal budget going forward, and repeating those steps again 

and again would be a good idea. 

Mr. PETERSON. I would just simply add, back to the point I made 

earlier about setting fiscal goals, I think if you are looking to get 

compromise and cooperation earlier in the process, I think it would 

be easier to agree on a goal than some of the other measures of 

the budget. So putting something forward in the beginning of the 

process, like what is our fiscal goal in general, to me would start 

the process off better. 

If you look at our Solutions Initiative, all of the organizations, 

despite being very different, all came out pretty similar in terms 

of the long-term debt as a share of the economy. So setting fiscal 

targets, fiscal goals, to me is an essential part of the budget process 

anyway. But if you are looking for more cooperation, I think it is 

easier to come around a goal first and then move toward the policy 

second. 

Chairman ENZI. Senator Perdue. 

Senator PERDUE. Thank you, Mr. Chairman. I do have some 

questions that I will submit for the record. I just have a couple of 

comments, and I hope I have time to get to a question on the 25- 

year planning horizon. But I want to give a little context, just as 

the Ranking Member did. 

First, in the last 100 years, we have had three super majorities, 

all Democratic: the first gave us the New Deal, the second gave us 

the Great Society, and the third gave us Dodd-Frank and the Affordable Care Act. I am new to this process, but I am a business 

guy, and I am looking at this thing, and I can—a lot of the responsibility for this current financial catastrophe we can lay at the feet 

of those three super majorities. 

But I will tell you the irony is that they have not achieved a lot 

of the goals that we had set for them even when they were imagined many years ago, and that is, to help the people who need help 

the most. And those are the people—Ms. Weinstein, I agree with 

you. One of my first jobs was in the Head Start program. The people in most jeopardy because of our intransigence in Congress are 

the people who need help from the safety net 

However, what we have got right now is a system where today 

the poverty rate is the same as it was when the Great Society was 
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signed into law. In the last 6 years, we have spent $21.5 trillion 

running our Federal Government. That is so large, Mr. Chairman, 

it is hard to relate to that. What I can relate to is the fact that 

of that $21.5 trillion, we have borrowed $8 trillion of that. 

Now, in the year 2000, we had $6 trillion—$5.5 trillion of debt. By 2008, we had $10 trillion, as the Ranking Member rightly pointed out, probably largely due to two wars. However, since then we 

are on track since 2010 to more than double the debt by the time 

this administration leaves office. 

The budget process does not produce a budget, as we in the business community know it. Dr. Holtz-Eakin, I agree with you, the 

reason I applauded is that you called that out. This is not a budget 

process. We have got a situation right now literally today where we 

have passed a budget this year, as we call it, we have gone through 

an authorization process, and here we are in the appropriations 

process, and yet one side in a partisan way is blocking those very 

bills which 11 of the 12 appropriations bills were passed in a bipartisan way in Committee. One party is deciding that we are going 

to block those from even getting to the floor to have debate. This 

process does not work. The people back home know that, and it is 

time to do something about it. 

But let me just remind everybody. When this budget process was 

put in place in 1974, the debt was 32 percent of our GDP, full debt. 

In 2000, it was 55 percent. Right now, it is a little over 100 percent 

if you include the $4 trillion that is owed to various parts of the 

Government. 

It seems to me that with a system that has only worked four 

times in the last 40 years, Mr. Chairman, we have got to change 

the process. I think all three people here with different perspectives are saying the same thing, and I applaud your testimony 

today. 

Mr. Peterson, I am going to run out of time, but I really want 

to ask you—the 25-year planning horizon is very intriguing to me. 

On the one hand, I agree 100 percent, because if you look at the 

mandatory expenditures over the next 10 years they double; over 

the following 10 years they quadruple. It runs away from us. So 

while I hear one side beating their chests about our deficits are at 

an all-time low, well, I understand what the math is, but the debt 

continues to spiral out of control. 

My only problem with the 25-year planning horizon is it seems 

to me we need to have two things. If you have a 25- year planning 

horizon that allows us to spend money now and save it later in the 

25-year planning horizon, that is a problem. I see it even in the 10- 

year horizon. So it seems to me we need to do what most corporations do in the world, and that is, look much shorter term in terms 

of the expenditure planning with a 3-year budget and a 25-year 

strategic plan to look at these important dynamics as they come at 

us, particularly in our crisis here with the mandatory spending and 

the people we are putting in jeopardy. 

Would you respond to that? 

Mr. PETERSON. Well, listen, I think looking out 25 years does not 

mean you only look at the 25th year. You have got to look at the 

path from here to there, clearly. And as I said also, setting 

medium- and long-term goals would be part of the process. So if 
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you have been in business, you know you do not just look at the 

fifth year. You look at every year, for example, in a 5-year plan. 

And, lastly, I would say budget enforcement— 

Senator PERDUE. But we do not really do that. This budget does 

not do that. I agree with you 100 percent. If we did it properly, it 

would not be a problem. We do not do that. A lot of what we do 

is we will spend the money in the first few years, but we will save 

it in the last few. Then the problem is we roll into the next year, 

and now everything is forgotten. All bets are off, and here we go 

again. 

I agree with you we need a longer-term perspective but address 

the shortfall in— 

Mr. PETERSON. Well, I think it comes to the third point I was 

making about budget enforcement. We have got to make sure we 

are staying on that path. So if agree on a long-term path and you 

agree on a set of goals and objectives, you have got to make sure 

you are meeting them along the way. And I think we cannot have 

the dessert before the vegetables, so to speak, and have all the 

easier things to do and delay that and then delay that further. So 

we have seen kicking the can down the road for a long time, and 

we need enforcement measures to make sure we stay on that path. 

Senator PERDUE. I am out of time. I have got other questions. I 

am going to hang around, Mr. Chairman. I hope to be able to ask 

Dr. Holtz-Eakin and Ms. Weinstein a couple questions as well. 

Thank you. 

Chairman ENZI. Thank you. 

Senator Kaine? 

Senator KAINE. Thank you, Mr. Chair, and thanks to the witnesses. My time running a law firm and being a mayor and being 

a Governor has made me a certainty fanatic. I think both internal 

to the organization of a government—State, local, Federal—external, you know, the nonprofits that are out there doing work, universities, citizens making their plans, companies trying to decide 

what they want to do, certainty has only an upside and no downside. And where we have really failed here is we have not provided 

certainty to anybody, internally or externally. 

Senator King and I were just coming from an Armed Services 

hearing with former Secretary Gates talking about defense reform, 

and he said the biggest threat to the United States is not the deficit. He said the biggest national security threat to the United 

States is dysfunction and indecision within the 2 square miles encompassing the White House and Capitol Hill. 

He talked about the fact that over the last 10 years, only twice 

has a fiscal year started with the Defense Department or any other 

unit of Government having an appropriations bill that gave them 

certainty about what they could do, how they could plan to use 

their funds. He talked about 2013 when mid-year suddenly, because of the sequester going into effect, they had to achieve a whole 

bunch of savings during a partial fiscal year or CRs that then there 

is later appropriations where then they have to spend money that 

they did not necessarily know they would have. 

So, Mr. Chair, I applaud you having this as the first of a series 

of hearings about budget reform, and I am going to be pro-budget 

reforms that promote certainty and that force us to do what we are 
126 

supposed to do. Even if I do not like a line item, I would much 

rather have a line item than have a question mark. And we should 

not be getting to October 1 of every year, if we are going to say 

that is the start of a fiscal year, and have everybody just have 

question marks and not know what we are going to do. 

So I guess I would like—you know, I do not know who it was 

that said that consistency is the hobgoblin of small minds. Is a desire for certainty a hobgoblin of small minds? Or would you all 

agree that the more certainty we could put into a budget process 

that Congress would actually do the job and have appropriations 

bills by October 1 the better? 

Ms. WEINSTEIN. Well, I completely agree that if you are a social 

service agency wondering what allocation you are going to get or 

a Federal agency trying to figure out how to plan, it sure does help 

if you know what you are going to get. You are absolutely right. 

I would say that kind of certainty is something that we need to 

work towards. The way we are going to get there, though, is to 

have that agreement on goals and be assessing what works, and 

that will help us to be able to have the agreement that you are 

looking for. 

I would say on the long term we need a little humility in terms 

of, you know, right, it would be nice to be able to predict 25 years 

out, but at least we need to understand that we have got to keep 

reassessing because we can be wrong, and small wrongness creates 

a gigantic problem down the road, so a little humility in recognizing where we cannot be totally certain. 

Senator KAINE. Thank you. 

Mr. HOLTZ-EAKIN. There has been some very good work done by 

Steve Davis at the University of Chicago and some of his co-authors on the impact of product uncertainty on economic performance, literally how will we grow and create jobs. And those impacts 

are dramatic, and this is a period of very high uncertainty with big 

negative impacts on the economy. 

So there is no question that diminishing that uncertainty would 

be beneficial not just to the process but to the economy as a whole. 

So I would applaud that. 

The one certainty we do have, I will point out, is that we are 

going to have a crisis. We do not know what day yet, but let us 

not confuse the short-term uncertainty with long- term uncertainty. 

We know what is going to happen in the long term. We are off 

track, period. 

And I just want to, you know, as someone who has sat at this 

table and tried to explain how we made $7 trillion misses in the 

10-year window, forecasting 25 years is not an easy task. Enforcing 

a 25-year budget, when some of the reasons it changed are not policy decisions but, in fact, forecasting changes by people like the 

Congressional Budget Office becomes a very difficult thing to actually do. 

So I like the idea of knowing what is going on over 25 years. But 

you know. You can look at the CBO’s long-term budget outlook 

right now, and that is very different than doing something about 

it. And I do not think the process is going to get you to do something about it. That is a policy decision that you should make. 
127 

Senator KAINE. Mr. Chair, could I ask Mr. Peterson just to respond to my certainty point? I am at my time, but if he could? 

Chairman ENZI. Yes, briefly. 

Mr. PETERSON. I would agree with Doug. Certainly it is very important for the economy for businesses to make decisions. When 

you delay important policy decisions that are designed to create a 

positive economic environment and no one knows what the policy 

is, that certainly is a strong negative. In particular, sometimes tax 

credits are not dealt with until the end of the year in which the 

behavior that was supposed to—or in the tax credit that has already happened. So that is probably the worst example of that. But 

I think it is very important to focus on certainty. 

Senator KAINE. Thank you. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

Senator Corker? 

Senator CORKER. Thank you, and thanks for having this type of 

hearing, and I want to thank all three of you for your testimony. 

I could not agree more that the budget document ought to be a 

law. I think the American people are fooled by the budget. They believe that we actually have a budget process, and they do not understand that it is not really a law. And so what it becomes is a 

political document that, at best, sets 1-year spending caps. But because we do it in a totally partisan way, it ends up leading to the 

type of situation that we have right now. So I could not agree more 

that it should be a law that is signed by the President and something that we go forward with. 

Now, let me ask you this question: To make it a law that works, 

we would have to also put in place all the policy assumptions, it 

seems, that we make that we know we totally make them up. It 

is unfortunate. It is never going to happen. Our 10-year budget is 

never going to happen, the policy assumptions that we make. 

What would be a forcing mechanism—you have been here inside 

Government, Douglas. What would be a forcing mechanism not just 

to set the spending levels but to force us to actually put the policies 

in place so you would actually achieve those levels? 

Mr. HOLTZ-EAKIN. So I think there are two different answers. On 

the discretionary side, I would not try to solve that problem, and 

the reason I would not try to solve it is I think a future Congress— 

Senator CORKER. On the mandatory piece. 

Mr. HOLTZ-EAKIN. That is the piece. That is where the big money 

is, and that is where— 

Senator CORKER. Okay. But how do we make—how do we create 

a forcing mechanism so instead of laying out these things that we 

know are never going to happen, it forces us to deal with these 

issues? 

Mr. HOLTZ-EAKIN. So if you go down—you sign a law, then that 

law should contain language that would be quite similar to the reconciliation instructions, that says to hit these targets, we will give 

to the Ways and Means, the Senate Finance Committee, you know, 

the committees of jurisdiction, the responsibility of delivering policy 

that hits that target. If they do not, the Budget Committee can 

draw it up, and we have an actual procedure that has been used. 

That would force it to happen. And if they choose not to do it, since 
128 

it is a law, it would then go to the executive branch. So if Congress 

decides to punt entirely, you live with the consequences. 

Senator CORKER. Mr. Peterson, I love what your organization 

does, and I thank you for your testimony, and the 25-year issue is 

interesting to me. The problem with it is, because we do not have 

forcing mechanisms to actually change policies on the mandatory 

piece, it would be just as irrelevant as the 10-year budget that we 

have right now. Again, all we have done is established a 1-year 

spending level that now we are not even going to adhere to. 

Let me come to another point. What about the process we go 

through here where we spend money like we are doing this year 

on the highway bill; we spend it over 3 years, and we act like we 

are paying for it over 10. Now, that is not part of the budget process. It is unfortunately the character of this body. What is it we 

can do to affect that so that we are not making up—I mean, for 

instance, in this highway thing, it is unbelievable. The Republicans 

are doing this, by the way. Fiscal hawks. Republicans. We are 

going to spend money over a 10-year period, only 9 percent of the 

offset—we are going to spend money over 3 years, pay for it over 

10, only 9 percent of the offsets occur during the years we are 

spending the money. 

And, by the way, we are making up stuff, like oil is going to sell for $89 a barrel at some point. 

So how do we cause there to be some integrity—there is none in 

this bill, in my opinion, but some integrity in how we pay for 

things? 

Mr. HOLTZ-EAKIN. I am not usually a source of integrity. 

[Laughter.] 

Mr. HOLTZ-EAKIN. So the highway bill is probably the biggest example of something that is all wrong, I mean, because it is part 

discretionary, part mandatory, the easiest place to evade anything. 

So do not create more things like the Highway Trust Fund, okay? 

Be honest about what is coming in and what is going out and put 

it in there, force—you can in some cases force offsets to lie within 

the same area and, thus, not get into this business. Or you can 

have points of order for any time you increase the out-year, meaning the second year, third year, fourth year. But in the end, if you 

allow for this time shifting that Senator Perdue mentioned and 

which is common congressional practice, there will be the temptation to defer the pain and take the spending up front. It has been 

true for a long time. 

Senator CORKER. Well, look, we have got—the budget document 

should be something that has integrity and means something. And 

a way for that to happen is for it to be a law and for us to force 

the policy changes that it takes to meet those numbers. 

Now, this is probably far-fetched, but one of the things we could 

do without changing the law is decide we are not passing any more 

budgets unless they pass with strong bipartisan support. If we do 

that and we move away from them becoming political documents, 

then we actually have something that we have a much greater 

chance of adhering to. 

But with that, Mr. Chairman, I thank you for the time. 

Chairman ENZI. Thank you. 

Senator King? 
129 

Senator KING. Thank you, Mr. Chair. 

Taking off on what Senator Corker just said, I am all for looking 

at process. I think it is important. I think there are things we can 

do, perhaps a 2-year budget, a capital budget. I think there are lots 

of process. But, come on, the problem is us. It is not the process. 

We could have any kind of process. This is perfectly good process: 

pass a budget bill, pass appropriations bills, and vote on them before October 1st. I mean, that is where the problem is. 

I would say, you know, changing the process is like rearranging 

the deck chairs on the Titanic, except that would be an insult to 

the Titanic. I mean, we—there is no process change that is going 

to fix this. It is that Congress has to do its job, which it is not 

doing. 

I am sort of speechless, which is very uncommon for me, but— 

and here is another example. If a terrorist group—I am on the Intelligence Committee. If we went to a meeting this afternoon and 

found out that a terrorist group was going to attack our financial 

system in 2 weeks, raise our interest rates, disrupt our economy, 

cost us jobs, and devalue the dollar around the world, we would be 

bombing them. Oh, wait a minute. That is the debt ceiling debate. 

We are doing that to ourselves. 

It is just completely—to the man in the street, to our citizens, 

they do not get this. You know, this is not nuclear science. This is 

making numbers balance. Every household does it. Every business 

does it. And we are just kidding ourselves. 

One of the things that surprised me when I came here is nobody 

ever heard of net present value. We are using 25- cent dollars 25 

years from now to offset real dollars today. I mean, that is a just 

a minor example. 

If you can find a question in there, you are welcome to it. 

[Laughter.] 

Senator KING. But, seriously, do any of you want to— now is 

your chance to take a shot at this really—well, I will save the adjectives. ‘‘Poorly performing institution,’’ how is that? 

Ms. WEINSTEIN. I guess here is the question I will glean out of 

that. Congress does understand really that they are doing the 

budget for a purpose. Everybody may not agree on the primary 

purpose, but they know that there are important things and needs 

that our Nation has that the budget should enable us to meet. And 

where we get so snarled up or you get so snarled up in, you know, 

budgetary tricks that pay for things in odd ways, it is because you 

really want to meet some of those needs. We absolutely— 

Senator KING. We want to meet the needs, but we do not want 

to necessarily pay for them. That is the problem. The Highway 

Fund is a perfect example. Everybody says, you know, we need to 

do something about our infrastructure, and we are using this Rube 

Goldberg scheme about foreign taxes and everything else that has 

nothing to do with highways because nobody around here wants to 

say we have got to pay to fix the highways. 

Ms. WEINSTEIN. And if you— 

Senator KING. The one thing this institution does really well is 

avoidance, and that is the pattern, whether it is the Highway Fund 

or the overall budget. 

Sir? 
130 

Mr. HOLTZ-EAKIN. I would say two things. Just to repeat, the 

problem is not the process. The problem is the problem. I think we 

recognize that, and you have to deal with the problem. 

The second is, you know, I mentioned fiscal rules in my written 

and my oral remarks. One of the reasons those have worked is it 

gives the legislatures, who have a rule that says you cannot do 

more X, Y, or Z, a way to say no. You have no good way to say 

no to a constituent right now, because there is no boundary. There 

is nothing you really cannot do. And so it empowers lawmakers in 

ways, and I think looking at those rules is important. And, you 

know, all I can say is what the current process has accomplished 

in 40 years, you know, if you look back 40 years at the Congressional Budget Act, I think now the budget is, you know, performing 

poorly and Congress is more embarrassed than it used to be, and 

that is all we have really accomplished. 

Senator KING. Thank you, Mr. Chair—oh, I am sorry. 

Mr. PETERSON. I was just going to add briefly, I agree with Doug 

that the process is not a substitute for the policy. And one of the 

challenges here it is very easy to defer difficult decisions. But if you 

need additional incentive, one of the charts we have in here talks 

about, if we keep waiting, how much harder it is. 

Senator KING. Oh, yeah. 

Mr. PETERSON. The current fiscal gap is 3.2 percent of GDP, so 

that is the sum total of all the changes, revenue or spending, we 

need to make to solve this problem. If we wait just 5 years, that 

amount goes up by 24 percent. So the problem is 24 percent more 

difficult 5 years from now. Ten years from now, the problem is 66 

percent more difficult. 

So, yes, in the moment, it is easy to postpone these things, but 

you are actually—you know, the more we wait, the harder it gets. 

Senator KING. But we are not going to be able to solve them as 

long as both sides of the political equation adhere to almost theological positions that make it impossible. 

Thank you. 

Mr. PETERSON. It requires compromise. 

Chairman ENZI. Senator Whitehouse. 

Senator WHITEHOUSE. Thank you. 

First, I want to thank Chairman Enzi for holding this hearing. 

This is a really important issue, and I think that the selection of 

the panel has reflected the sincerity of his views about getting 

something done. This is a very helpful, thoughtful, honorable panel. 

You say you do not represent integrity, Mr. Holtz- Eakin, but I 

think you do. And I appreciate your views, even though we do not 

always agree. 

As a member of the Budget Committee, it pains me to say this, 

but the budget process has become meaningless, and I am sick of 

it. Partly it has become meaningless because the penalty to the 

Senate for violating the budget process always was that you had 

to get all the way to 60 votes if spending violated what this Committee had authorized. 

Now that we are at a place where you have to get 60 votes for 

anything and everything, we have mooted any effect that this Committee has. The appropriations folks know they have to get 60 
131 

votes for their stuff. Once they have got 60, who cares what the 

Budget Committee did? 

Also, given the size of things, I think we need to look beyond a 

1-year budget. It just does not make sense to me to be putting all 

that effort in to only get 1 year of return out of it, particularly 

when ultimately it does not matter and the appropriators can completely ignore this Committee because they have played the 60-vote 

target already. 

The result has been, I think, really a pretty embarrassing process. The most embarrassing day in the Senate is vote-a-rama. Most 

of the amendments are preposterous. Only slightly less embarrassing is the Budget Committee process when we go through 

hours after hours of these deficit-neutral budget reserve fund 

things, which never have any effect but occupy the day, and when 

the dust really settles, what happens is one party produces a budget that I think in the case of the last one—I have said this before. 

I do not think the Republicans actually would have lived with the 

budget they passed. I think they passed a budget knowing that 

Democrats, thank God, would be there to stop them from what they 

passed, because if they had passed it and had to go home and sell 

it with its outcomes in regular families’ lives, people would have 

said, ‘‘What did you maniacs do? What is going on here?’’ 

So that whole process, I think—and that was the last one, but 

I think it happens on both sides. We do not get to the process of 

it. I think the best comment that has been made today was Senator 

Corker’s. Either do it bipartisan or do not do it at all. And I hope 

that if I ever become Chairman of this I can get an agreement real 

early on that the budget vote-a-rama process is of fixed duration, 

and at some point if you want to hang around for voice votes, that 

is your business. But these votes that have nothing to do with 

budgeting, that are targeting individual Senators for political campaigns, I mean, it is—we have become preposterous, and it is a 

shame because there was a good intent behind this Budget Committee. But I am tired of being on a Committee that is preposterous and meaningless. So we need to change 

So thank you, Chairman Enzi. I think your desire to do this is 

very sincere, and I think this has been very helpful. 

The second point I will make is that if we are going to do this, 

right behind the question of the budget reforms is the question of 

what you do. And if we are going to do this—and I agree that the 

debt has got to come down, but everybody who has looked seriously 

at this has looked at it and played multiple cards. We cannot do 

this just with cuts. This is not where you only get to play the 

drums, you know? There is also a horn section. There is strings. 

We have got to work on all of it. And from our point of view on 

our side of the aisle, we have seen discretionary spending go from 

over 9 percent to under 7 percent. We believe we kind of have 

given at the office on spending. And yet we see out there the most 

wealthy and heavy-earning corporations in the history of the planet 

getting completely unnecessary and ridiculous subsidies for oil 

drilling, and people defend that as if it were essential to the survival of the Republic. It is not. It is ridiculous. It is unnecessary. 

Hedge fund folks who earn more money in a year than their 

grandchildren could spend pay lower tax rates than hospital order-
132 

lies and truck drivers, and we cannot get any movement on that 

to add revenues to the equation? 

The Social Security problem, one easy way to solve it is there is no reason somebody making $118 million should make the exact 

same contribution to Social Security as somebody making $118,000. 

And that is the silly rule that we have, and people defend it as if 

it was essential to the continuation of the Republic. 

We have to have a longer-term conversation, I believe, and my 

time has expired, but I want to thank *** pages 8 to 11 about what 

health care costs mean. We can have a sensible conversation, but 

not if the only thing we can say in this building is, ‘‘Repeal 

Obamacare,’’ ‘‘Oh, do not,’’ ‘‘Repeal Obamacare,’’ ‘‘Oh, do not.’’ We 

absolutely have to have a sensible conversation because it is preposterous for us to be spending 50 percent more than our least efficient international competitor and delivering health care outcomes 

that Croatia matches us on. We can do a lot better, and I will yield. 

I see Senator Ayotte has come for her time, so I will silence myself. 

Chairman ENZI. Senator Ayotte. 

Senator AYOTTE. We are not asking you to silence yourself. Well, 

thank you very much. I appreciate it. And I thank all of you for 

being here. 

I wanted to ask about a couple of different issues. I first wanted 

to get your thoughts on baseline budgeting. We have this process 

that, under the current process, I know that Dr. Holtz-Eakin is 

quite familiar, given his prior positions, with the baseline budget 

practice that automatically builds in increased spending based on 

inflation into the Federal budget. And there has been discussion 

about the potential of eliminating that so we can compare apples 

to apples, and I wanted to get your thoughts on that. 

Mr. HOLTZ-EAKIN. I think this is one of the top things for the 

Committee to look at. I actually do not have a strong position on 

where you end up, but the current asymmetries do not make any 

sense. 

Senator AYOTTE. Right. 

Mr. HOLTZ-EAKIN. On the spending side, the inflation of discretionary accounts over the 10 years, the continuation in the baseline 

of any spending program over $50 million, but on the tax side, 

things following current law exactly in the moment— 

Senator AYOTTE. Right. We have got to disconnect, right? 

Mr. HOLTZ-EAKIN. It ought to be the same. 

Senator AYOTTE. Right. On one side we are building in the automatic inflationary increase. 

Mr. HOLTZ-EAKIN. Yes. 

Senator AYOTTE. The other side, we cannot do any dynamic scoring, so they are inconsistent. 

Mr. HOLTZ-EAKIN. So, you know, if you want to do current law 

both sides, fine. But that means the discretionary goes away. At 

the end of the year it is gone. Or you can essentially do current 

policy, extend everything that is going on for 10 years. But, number 

one, make it symmetric so that you are at least dealing on a level 

playing field. That seems like a minimum requirement for a budgetary document. 

Senator AYOTTE. Make it consistent. 

Any other thoughts on the panel about this? 
133 

Mr. WEINSTEIN. Well, just very important to recognize that if you 

are trying to assess what it actually costs to provide a service and 

you do not factor in inflation over the years, you will ratchet down 

these programs, and we know that discretionary domestic programs have already, as everyone has said, been ratcheted down 

hugely. So you want to watch out for making that worse. 

Senator AYOTTE. No, I appreciate the role of inflation, and I 

think the idea—one thing that gets frustrating is a lot of times we 

have these fights about, okay, we are cutting spending, but, you 

know, it is not— your average person thinks like, okay, I have got 

$25 and if, you know, I am cutting spending, I am going to $20, 

right? So I just want to make sure that we have an honest conversation on both the revenue side and also on the spending side, 

which is—I hope this is something we could think about as a group 

on a bipartisan basis, how are we going to judge this. There is no 

doubt that we have to look at what things currently cost, but I 

think we also need to make sure that we are consistent in how we 

are doing that and have an honest conversation about it. 

The other issue that I wanted to ask about briefly is biennial 

budgeting. There has been a lot of discussion about biennial budgeting here, and that is how it is done in New Hampshire. And in 

conjunction with that, I want to ask about something that is probably a little controversial, but—and that is this, because at the 

State budget level, it is a biennial budget where you pass the budget for 2 years. 

The second—what we would do in this Committee on the second 

year is we would actually have oversight of how it is going, the 

numbers that we put together, and make sure that we would actually look at is it working, did we make the right conclusion, and 

have much greater time for oversight. 

So I wanted to get your thoughts on the idea of a biennial budget, and then, so my time does not expire, I also wanted to get your 

thoughts on—many of us serve on authorizing committees, and 

then there is the Appropriations Committee. And a lot of times at 

the State level, there are not two separate entities. In other words, 

you actually have to make a decision on the policy basis for the 

numbers which you are enacting. And it seems like we have this 

very divided process that makes it very difficult to actually put together a real budget, which is we have got one committee over here 

who tends to be an expert in a certain area—I serve on the Armed 

Services Committee, so I have seen this experience time and time 

again, and some of my colleagues who are here as well do that. 

And then you have got a separate committee doing the same thing, 

and it seems to me to be a very divided way to do things and not 

how it has been done at the State level. 

So I wanted to get your thoughts on the two things: biennial 

budget and this process of—I know it is controversial to suggest 

that, but this divided authorization versus appropriation process. 

Mr. PETERSON. Okay. In terms of biennial budgeting, I think 

there are some key advantages. I think budgeting in non-election 

years must somewhat help it be less political. If you are a little further away from an election, that should help. It obviously makes 

things more efficient if you are doing it less often, and it provides 

more time for other things. 
134 

And back to Senator Kaine’s point about certainty, I think you 

would have additional certainty knowing that we have 2 years of 

budgeting. I tend to think more about trying to go 25 years than 

2, but I see advantages to that, and these are really separate 

issues, anyway. 

Then in terms of process, I would really defer to the rest of you 

on how to go along to get along a little bit better. But I am sure 

there are efficiencies that can work throughout that process. 

Mr. HOLTZ-EAKIN. I would point out that you are doing biennial 

budgeting. When was the last time you did a budget resolution in 

an election year? You are doing it already without the structure 

and the oversight, so you might as well acknowledge the reality 

and do it better. So that seems reasonable to me. 

And on authorizing versus appropriations, I could happily lose 

one or the other, but it is easy to suggest congressional reform from 

this side of the table. 

[Laughter.] 

Senator WHITEHOUSE. Prudently said, Mr. Holtz-Eakin. 

Senator AYOTTE. I did not say that was without controversy why 

I asked the question. 

Ms. Weinstein? 

Ms. WEINSTEIN. Well, as somebody who worked in Massachusetts 

for many years, when I came here I was very perplexed by the distinction between authorizing and appropriating. I guess I would 

only say that whatever process is revised, it needs to be able to 

take continued reassessments of what is actually happening to people. And so longer-term processes where you cannot go back and 

adjust when you see that people are being harmed would be a 

worry. But I have to admit that right now the logjams mean that 

things are not being decided in a very timely basis, anyway. 

We do need to get back to the certainty that Senator Kaine was 

talking about, and longer time periods where all we are doing is, 

you know, sort of stopgap measures, that is the worst. 

Senator AYOTTE. Thank you, 

Chairman ENZI. Well, the purpose of this hearing, of course, was 

to see if there was a need for budget reform, and I have not heard 

anybody disagree with that. So I am going to schedule two more 

hearings for solutions, because we are starting to get into solutions 

at this point, and we need to get into solutions, and we need to do 

something about this. 

When I became the Budget Chairman, I did not have time to 

change the process. There were certain set schedules, April 15th 

being a key one that we have to meet. We recognize difficulties 

with it. I have been on the Budget Committee almost since I got 

here, and it has always worked the same. And by ‘‘the same,’’ I 

mean the majority party has us do the opening statements on the 

budget and then lets us see the budget. I changed that this year 

so that you got to see it before we did the opening statements. I 

offered to allow it much earlier than that and hopefully have more 

interaction. But I wanted to do that in exchange for having a limited—not a limited number of amendments, but amendments submitted before the actual day of the markup. That is what is done 

in all of the other committees, and that gives the Chairman and 

the Ranking Member a chance to go through the amendments and 
135 

see which ones are similar and see if they cannot be put together 

so that there are less amendments and so that the amendments 

are more effective. 

So there are a lot of things that we could do, and I hope we will 

be thinking about what some of those are so that we can change 

the process, get it to work, have more oversight, and maybe make 

the authorizing committees do a little more work. I mentioned that 

there are 260 authorizations that are out of date, but we are still 

spending money on them. That means that those committees have 

not looked at their authorization again and brought it to the group 

with a solution for how it really ought to work. If you have got a 

program that goes back to 1983 when it expired, we are probably 

not doing our work. 

So there are a lot of things that we can do, and I am going to 

schedule two more hearings for doing that. And I appreciate Senator Perdue being the first on my side to show up and wanting 

some additional questions. But I am hoping that he will be willing 

to submit those in writing, along with everybody else that might 

have additional questions, so that we can move on to the—and I 

hope you will share with me any suggestions that you have for solutions, and we will be sharing with you the people selected for the 

next panels on solutions on what we can do. I think we have a 

chance to make a real difference, and I want to do that. So thank 

you all for attending. 

Senator Whitehouse, did you have a comment? 

Senator WHITEHOUSE. May I ask one question of Mr. Peterson 

and Mr. Holtz-Eakin before we leave? 

Chairman ENZI. If Senator Perdue gets to ask his questions, yes. 

Senator WHITEHOUSE. Let us do it. 

Senator PERDUE. No. I will waive my time to Senator 

Whitehouse. 

Senator WHITEHOUSE. I just wanted to ask this: Mr. Peterson, 

you have talked about extending our budget horizon into the second decade. Mr. Holtz-Eakin, you have talked about extending it 

25 years. If you do look out into a second decade and if you do look 

out 25 years, how do each of you anticipate that the effects of climate change would roll into the budget and the costs of the country? 

Mr. HOLTZ-EAKIN. So just for the record, I am in favor of having 

the information, but I am less enthusiastic about putting it into the 

formal budget process because of the uncertainties that come with 

this kind of an exercise. You know, if you look at revisions to 1- 

year CBO projections of the deficit, they could be quite large, especially in percentage terms. So, you know, if you asked me to roll 

into it all of the impacts of climate change, economic uncertainty, 

what happens with international relations, potential for war, you 

are getting into some very difficult territory. And that is why I am 

nervous about formally embedding that. 

Senator WHITEHOUSE. Looking out, do you think the effects of climate change within that kind of a period would be small, moderate, or large? 

Mr. HOLTZ-EAKIN. I do not know enough to say, but, you know, 

one would have to look. 

Senator WHITEHOUSE. Mr. Peterson? 
136 

Mr. PETERSON. I am not an expert on that either. I know the 

CBO has started to roll climate change estimates into its forwardlooking projections. 

Just to clarify, I think at a minimum we need to look out at that 

period in some fashion. It does not necessarily have to be the exact 

same as the 10-year budget window. But bringing that dialogue 

into the conversation more directly, in a more focused way, again, 

gives us better visibility over the real problems and gives us a 

chance at implementing solutions that address that. I think without even looking, it is just hard to imagine we would solve this 

problem. 

Senator WHITEHOUSE. Understood. And you would both support 

a carbon fee if it reduced taxes on other productive effort? 

Mr. HOLTZ-EAKIN. I could imagine eliminating the corporation income tax and replacing the revenue with a carbon fee, yeah. 

Senator WHITEHOUSE. That would be good for the economy? 

Mr. HOLTZ-EAKIN. Yeah. 

Senator WHITEHOUSE. Very good. Thank you. 

Chairman ENZI. Senator Perdue. 

Senator PERDUE. I will waive my time, Mr. Chairman. Thank 

you. 

Chairman ENZI. I want to thank the panel for their participation, 

a difficult topic to stay to topic, but I think we got a lot of guidance 

on some things that we can do and things that need to be done and 

ways that the Budget Committee can maybe get them started for 

doing. So thank you for being here, and I think everybody has until 

6 o’clock tonight to submit any questions in hard copy in Dirksen 

624, and we would hope the witnesses would answer those within 

7 days of the receipt of the questions. 

So if there is no further business, the hearing is adjourned. 

[Whereupon, at 12:00 p.m., the Committee was adjourned.] 
(137) 

REFORMING THE FEDERAL BUDGET PROCESS: A BIENNIAL APPROACH TO BETTER 

BUDGETING 

WEDNESDAY, NOVEMBER 4, 2015 

UNITED STATES 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, Sessions, Crapo, Portman, 

Ayotte, Perdue, Whitehouse, Warner, Kaine, and King. 

Staff Present: Eric Ueland, Majority Staff Director; and Warren 

Gunnels, Minority Staff Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. Since it is 10:30, I will call to order the Senate 

Budget Committee for the hearing on ‘‘Reforming the Federal 

Budget Process: A Biennial Approach to Better Budgeting.’’ Good 

morning and welcome to the second hearing in a series this Committee is holding on reforming the Federal budget process. 

In our last hearing, we discussed the serious budget challenges 

our country faces. We all agreed that the current budget process 

is broken and not adequate for the task before us. In today’s hearing, we will move from defining the problem to identifying solutions. We know that an effective budget process should follow regular order to provide predictability and stability. It should also encourage legislative oversight of the entire Federal budget and promote reduced spending and increased savings. Moving to a biennial 

budget cycle would improve the current process on all of these 

fronts. 

The worst-kept secret in Washington is we essentially operate on 

a 2-year budget already. In 2011, 2013, and now in 2015, Congress 

has set spending limits for the following two fiscal years, but these 

deals have been negotiated without the transparency and predictability that regular order provides. 

True reform of the Federal budget process would formalize biennial budgeting and move spending decisions from the shadows and 

into the light where they belong. They would also have many other 

benefits beyond increased transparency. 

A biennial process would create more stability and predictability 

for agencies, for the States, and for local governments, and for 

American citizens that rely on Federal funding. They would know 
138 

and be able to plan for 2 years of funding. Under the current process, spending bills are nearly always late. We have completed all 

appropriation bills on time in only 4 of the last 40 years. In 15 of 

those years, we did not pass one appropriations bill on time. Instead of well-considered funding decisions, the Government operates on short-term spending bills or continuing resolutions. We 

have had 173 short-term spending bills since 1977. Biennial budgeting would help Congress return to regular order. The legislative 

floor time required to complete the appropriations process would be 

cut in half. Politically difficult spending decisions could be made in 

non-election years, avoiding partisan disputes that might otherwise 

derail full consideration and passage. And appropriations would 

last for 2 years, preventing the annual expiration and renegotiation 

that encourages and delays and causes fiscal cliffs. It would also 

allow agencies and States and local governments 2 years of stable 

planning and spending. 

As appropriation bills are enacted on time and for 2- year terms, 

agency management and efficiency will improve. Under habitually 

late appropriations bills, agency managers must submit requests to 

the OMB for the next fiscal year at the same time Congress is still 

deciding what they will get for the current fiscal year. That does 

not make any sense. And then also with the delays, sometimes the 

cuts that are made in that period of time have to be condensed into 

a shorter period of time, which makes them more drastic. 

Two-year appropriations would give managers more certainty 

concerning current funding and a longer timeline to implement 

strategic decisions rather than having to resort to short-term reactionary policies. A biennial process would also improve Congress’ 

management and oversight of Federal spending. If less legislative 

time were devoted to setting budget targets for the next year, more 

time could be spent on reviewing program management. Under an 

annual cycle, authorizing and appropriating committees only have 

time to assess how much money is needed in relation to the previous year rather than conducting a systematic review of Federal 

programs in their jurisdiction. This oversight would help make 

Government more accountable by allowing additional time to consider whether taxpayer dollars are being spent effectively. 

Congress’ energy and attention could also be redirected to reviewing all Federal spending. Despite the two-thirds of our budget 

devoted to mandatory spending, the current budget process still 

forces Congress to spend the majority of its time each year worrying about annual appropriations that now account for one-third 

of Federal spending. 

While each of the appropriations bills must travel through the 

normal legislative process annually, mandatory programs continue 

to spend and grow unless Congress votes otherwise, which we do 

not have time to do. By taking up less of Congress’ time with annual appropriations bills, it will have more time to focus on the 

true drivers of spending and debt. 

Despite these benefits and nearly 40 years of strong bipartisan 

support, not one biennial proposal has been enacted into law at the 

Federal level. Today there are few different legislative options that 

would implement a biennial process. In just a moment, Senator 

Isakson will tell us about his proposal to require a biennial budget 
139 

and all biennial appropriations bills to be adopted in non- election 

years. This is a good proposal that would go a long way in fixing 

our broken budget process, and I have cosponsored the legislation 

to show my support. 

I have also introduced legislation to establish biennial appropria- tions. When you are dealing with $1 trillion, you ought to have 

more time to consider the actual spending than what the current 

process allows. It is hard to grasp the magnitude of millions or billions of dollars let alone trillions. Amendments dealing with a million dollars should be a big deal. But when framed with the debate 

over a trillion dollar, or as I prefer to call it, a thousand billion dollars of annual funding, there really is not enough time to work on 

that level of detail. 

People have become frustrated because of the time it takes to 

fully consider and review all 12 of these huge appropriations bills 

every year. And the level of detail that they are able to get into 

has frustrated me for a long time. When I first got here, I was curious about Yellowstone Park and why they were running out of 

money in August. So I asked to see what they were spending it on. 

You cannot get that. Unless you now go to the current superintendent, who is superb and has an accountant doing the work for 

the park, you can get that. 

So I am not sure how many different agencies really do not have 

good information for appropriators to make their decisions. My legislation would split the appropriations process in two parts. In nonelection years, we would consider biennial appropriations for the 

more controversial bills. In election years, we would consider the 

less controversial biennial bills. This would give Congress more 

time to review where tax dollars are going and make it more likely 

that the process is completed before the start of the fiscal year. 

Support for a biennial budget cycle is broad and it is bipartisan. 

Presidents from both parties have supported the concept. Organizations like Third Way, Americans for Tax Reform, Bipartisan Policy 

Center, the Committee for a Responsible Federal Budget, and the 

Partnership for Public Service have also endorsed this idea. 

In the House of Representatives, a majority of Members, both 

Democrats and Republicans, are currently cosponsoring biennial 

legislation, and a 2013 Senate amendment calling for adoption of 

biennial budgeting received 68 votes in support. That is a super 

majority of Senators in favor of a 2-year process. 

Biennial budgeting has also gained support at the State level. In 

Iowa, Governor Terry Branstad moved the State from an annual to 

a biennial process by demanding that the legislature send him 

spending bills. The Governor credits this move with restoring predictability and stability to a budget process that is in the midst of 

crisis. He also noted that it removed the incremental cost increases 

that were creeping into the State’s base budgets. A witness on our 

second panel will discuss similar successes in Ohio. Twenty States 

have adopted biennial budgeting, and 12 of the Senators of this 

Committee represent biennial States. Such widespread support at 

the Federal and State level proves what we have been saying for 

decades. Our annual appropriations system is broken and incapable of providing predictability and proper legislative oversight at 

the Federal level. 
140 

Moving to a biennial process is well vetted, it is nonpartisan, and 

it is a solution that will make our Government more accountable 

and ensure taxpayer dollars are spent effectively. 

Since the Ranking Member is not here, we will allow a statement 

from the minority side whenever someone is here for them. 

OPENING STATEMENT OF SENATOR KING 

Senator KING. Speaking as the Ranking Member on this— 

[Laughter.] 

Senator KING. That was a fast ascent, Mr. Chairman. I would 

just echo your comments. I am a former Governor of a State with 

a biennial budget, and it has always struck me as sensible for our 

Federal Government to adopt a similar method, which would both 

give more stability to the funding process but also allow the Congress to do more vigorous oversight, which I think everyone believes would be in the best interests of the country. So I look forward to hearing the witnesses and am certainly receptive to their 

position. 

Thank you. 

Chairman ENZI. And thank you for being here. 

We will now move to the introduction of the witnesses, but before 

I do that, I will mention that it is the tradition in the Senate that 

when colleagues either from the Senate or the House are testifying, 

they are not asked questions following their testimony. 

Senator KING. Oh, come on, Mr. Chairman. 

[Laughter.] 

Chairman ENZI. However, if you want to submit written questions for them, we will pass those on and then circulate the answers. 

I want to congratulate the witnesses on something else that often 

does not happen, which is we do have the testimony in advance 

from each of the witnesses so that members of the Committee could 

review those. And I really appreciate that extra effort that you 

went to. 

Senator Isakson is the Chairman of the Veterans’ Affairs Committee. He is a long-time champion of biennial budgeting and the 

lead sponsor of the Biennial Budgeting and Appropriations Act 

here in the Senate. There are few Senators who have fought harder 

for biennial budgeting, and I am happy to be a cosponsor of his legislation. 

Senator Carper is the Ranking Member of the Homeland Security and Governmental Affairs Committee and a former Governor 

of Delaware, so he knows how important a predictable, stable budget is to effective Government. He is also a cosponsor of legislation 

I have introduced called the ‘‘Biennial Appropriations Act,’’ and I 

appreciate his support on that. 

Congressman David Price represents North Carolina’s 4th District in the House of Representatives. He currently serves on the 

House Appropriations Committee and is the Ranking Member of 

the Transportation, Housing, and Urban Development Appropriations Subcommittee. He is also a member of the Appropriations 

Subcommittee covering homeland security, military construction, 

and veterans’ affairs. 
141 

I would mention that Senator Cochran, the Chairman of the Senate Appropriations Committee, has submitted testimony, which is 

available to everyone as well. 

So, with that, Senator Isakson? 

STATEMENT OF THE HONORABLE JOHNNY ISAKSON, A 

UNITED STATES SENATOR FROM THE STATE OF GEORGIA 

Senator ISAKSON. Well, Chairman Enzi, thank you very much for 

calling this hearing today, and thank you very much for your introduction and testimony because you made all the points that all of 

us who look to support biennial budgeting 

have tried to make for years in the United States Senate. 

This is my 34th year in elected office, 17 in the State 

legislature and 17 in Washington, D.C. In the State of Georgia, 

in the legislature where I was an appropriator, we had a constitutional prohibition on meeting for longer than 40 days. We had a 

constitutional prohibition on deficit spending, and bonded indebtedness and debt service could not exceed 10 percent of the budget. 

Therefore, we had a good fiscal policy. We did not waste time when 

we were in session, and we did not overspend. 

I would submit to you Congress needs the same type of imposed 

self-restraint to begin to handle the money of the people of the 

United States of America in a more responsive manner. If we were 

hired rather than elected, we would have all been fired for the way 

in which we handle the money of the people of this country, and 

I think it is time we changed our discipline and changed our restrictions. 

As the Chairman noted, he is a cosponsor of my bill, and I am 

a cosponsor of his. We have 25 cosponsors of S. 150, and I appreciate Jeanne Shaheen from New Hampshire being my cosponsor as 

a Democrat on that legislation. 

Sixty-eight Members of the Senate 2 years ago in the budget debate adopted this concept as a concept the Senate would like to go 

to. I can tell you from having gone to 

every Member of the United States Senate and talked one on one 

about this bill, almost everybody on the Budget Committee favors 

it, almost every rank-and-file member that is not an appropriator 

favors it, and almost every appropriator does not. And it is the fear 

of the appropriators of giving up something by going to a 2-year 

cycle. 

I want to submit early on in my testimony they are giving up absolutely nothing, except to appropriate on a supplemental basis 

when there is a crisis in need in between the 2 years of budgeting 

and appropriating. That is all the appropriators give up. And, in 

fact, if we have a crisis and they need to appropriate, it is important that it only be on one subject rather than redoing the entire 

budget or the entire appropriations act. 

This idea’s concept is based on exactly what the Chairman said. 

If we appropriate in odd-numbered years when we are not running 

for reelection and do oversight in even- numbered years, then instead of bragging about how much bacon we are bringing home 

when we go back to campaign, we brag about how much money we 

saved because of quality oversight. Every one of us in the Senate 

knows this fact to be true. There is little, if any, oversight of the 
142 

spending of Federal money in the Congress of the United States of 

America. We cannot even get our appropriations acts passed within 

time, much less get an oversight bill done in time. 

It is time we change the rules by which we govern ourselves to 

see to it we do the oversight that is necessary to efficiently and effectively spend the $3.7 trillion taxpayer dollars we spend every 

year. And as the Chairman said, that oversight does not just mean 

discretionary spending. It means mandatory spending as well, because we all know the way to reduce our debt and our deficit over 

time is to reduce our mandated spending by reforming Social Security, reforming Medicare, and reforming a lot of other programs 

which we will best do if we dedicate ourselves to oversight. 

So I will just simply say this: I have been elected to office for 30 

years. I have operated under rules. I have operated where there 

are no rules in the United States. And I personally prefer having 

the rules that make me do what I am supposed to do rather than 

leaving me to my own devices. After all, it is our people’s money. 

It is not our money. It is our country. It is not anybody else’s country. And if we will begin to put in place the disciplines we need to 

put in that you did in your shoe store and I did in my real estate 

company when we ran a business and had to balance budgets, we 

would be a lot better off. And I submit to you the biennial budget 

is the best process to move America forward to better fiscal accountability, less deficit spending, and a richer, more robust future 

for our children and our grandchildren. And I thank the Committee 

for its time and its willingness to allow us to testify today. 

[The prepared statement of Senator Isakson follows:] 
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144 
145 

Chairman ENZI. Thank you for your testimony, both oral, which 

is well prepared, and the written, which is well prepared. 

Senator Carper? 

STATEMENT OF THE HONORABLE THOMAS R. CARPER, A 

UNITED STATES SENATOR FROM THE STATE OF DELAWARE 

Senator CARPER. Thanks, Mr. Chairman, and thanks to you and 

to your colleagues, our colleagues on the Budget Committee. It is 

nice to be with all of you today. And it is great to be with Senator 

Isakson and my former compadre in the U.S. House of Representatives, David Price. I have known David for over 30 years. He has 

never changed. He looks just the same. I do not know how. Either 

he got old early or he is just well preserved. 

[Laughter.] 

Senator CARPER. It is great to see you, David. 

I want to go back in time a little. Sometimes, as Angus knows, 

I call myself, I refer to myself as a ‘‘recovering Governor.’’ And we 

have a support group for recovering Governors around here that 

meets pretty often. But before I was a recovering Governor, I was 

a recovering State treasurer, and I got elected State treasurer 

when I was 29 in Delaware. And at the time, Pete du Pont was 

elected Governor that same year, in 1976. He turned out to be a 

terrific Governor. But we had the worst credit rating in America. 

We were ranked dead last, Baa1. We were tied with Puerto Rico. 

The folks in Puerto Rico were embarrassed to be in the same company with us. We were the best in the country among the 50 States 

in overestimating revenues and underestimating spending. That is 

how we got the worst credit rating. We had no cash management 

system. We had nothing in the pension fund. We had a 19.6 percent marginal personal income tax rate. We had the lowest startup 

of new businesses of any State in the country. We paid our bills 

by issuing tax-exempt revenue anticipation notes. Imagine that. 

That is how we met payroll. That is how we met our pension payments on a monthly basis until the revenues actually came in in 

the spring. 

We did not move to a biennial budget process, but what we did 

under the leadership of Pete du Pont—and we had Democrats and 

Republicans in the legislature who were part of this. I hope that 

I helped a little bit as State treasurer. But we did move to a number of changes in our budget process. We could only appropriate 

three-fifths of the revenues that we anticipated. We put together 

actually a sound revenue forecasting system, not one that was juryrigged by us and those in the legislature. 

In order to raise revenues, when we raised taxes, you needed a 

three-fifths vote. We created a rainy day fund that could not be violated or used for just any old reason. We have never taken a dime 

out of that rainy day fund since that time. 

So I say all this in order to say that we can have sound budgeting in a State without having a biennial budgeting process. But 

a lot of States have done it, and a lot of States have done it to good 

effect. I think the key is to find out what works and do more of 

that. And around here, the system we have does not work. 

I was a House Member—I do not know if David and I were 

House Members were together, but Jim Wright was elected Speak-
146 

er of the House, and when he became Speaker of the House, he 

said, ‘‘We are going to pass every single appropriations bill next 

year.’’ Every one, on time, signed by the President, Democratic Senate, Democratic House, and a Republican Governor. And you know 

what? We did. We did. 

So I would just suggest to all of us, one of the keys to getting 

things done like this is to have the kind of leadership that is committed and you have folks who work together in the House and the 

Senate toward a mutual purpose, and hopefully with the Chief Executive. 

I was just downstairs having a hearing in the Homeland 

Security Committee on a voucher program here in the D.C. area, 

looking at it and seeing how it is working with Federal money. And 

I reminded my colleagues of a hearing that you and I, Mr. Chairman, were in a couple of years ago in the Finance Committee 

where Alan Blinder was our witness. The subject of the hearing 

was what to do about our fiscal mess in the Federal Government. 

Alan Blinder now teaches economics at Princeton. He used to be 

Vice Chairman of the Federal Reserve when Alan Greenspan was 

Chairman. He testified that unless we get our arms around the 

health care costs in this country, we are doomed. He talked about 

Medicare, Medicaid, and other aspects of that, and he said that 

was the biggest challenge. When I asked my question of him, I 

asked him what should we do about it. What should we do about 

that? He said—here is what he said. He said, ‘‘I am not a health 

economist. I do not pretend to be an expert about this. But if I were 

you, here is what I would do. I would find out what works and do 

more of that.’’ That is all he said. And I said, ‘‘Do you mean find 

out what does not work and do less of that?’’ He said, ‘‘Yes.’’ 

Well, we can look at the States, which are the laboratories of democracy, and find out what seems to be working pretty well for 

them. I applaud Senator Enzi and Senator Isakson and others for 

providing the leadership to say let us look at those things, let us 

look at those laboratories of democracy and see if there are other 

things, whether it is from Delaware, North Carolina, whether it is 

from Maine or Virginia or whatever State it is from, and find out 

what is working and do more of that. A longer budget cycle does 

allow for greater long-term strategic planning for both legislatures 

and Federal agencies. It also encourages and ensures greater certainty and predictability for agency officials who are tasked with 

implementing legislative decisions. And, in addition, a 2- year appropriations process allows for more time, for more thorough program evaluation and oversight during the second year, ensuring 

better informed decisions about program spending in the budget 

cycle that follows. 

I am proud to be a cosponsor of your bill, and I would be proud 

to be a cosponsor of your bill, Senator Isakson, if I am not already. 

And I would call on us in Congress to see what we can learn from 

both of you and other efforts to improve this process. 

Again, find out what works and do more of that. Find out what 

does not work and do less of that. 

What did Einstein used to say? Einstein said a lot of things that 

are memorable. But my favorite was the definition of insanity? Do 
147 

you remember that one? Doing the same thing over and over again 

and getting a different result. He was right, and still is. 

Thanks so much for the chance to come by and put a spotlight 

on the way our appropriations process could be made more effective, and my hope is that we will be in a position to give it a shot. 

Thank you. 

[The prepared statement of Senator Carper follows:] 
148 
149 
150 
151 

Chairman ENZI. Thank you for coming and for leaving the other 

Committee, which you are the Ranking Member of. I appreciate 

that. 

Congressman Price? 

STATEMENT OF THE HONORABLE DAVID E. PRICE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH 

CAROLINA 

Mr. PRICE. Thank you, Mr. Chairman. It is a pleasure to be here 

with you and your colleagues and with these two renegade House 

Members. Mr. Isakson and Mr. Carper are both good friends. 

I would like to request that my full statement be put in the 

record. I will give an abbreviated account. 

Chairman ENZI. Without objection. 

Mr. PRICE. I remember first testifying about biennial budgeting 

something like 15 years ago before the House Rules Committee, 

and we were considering legislation to transition Congress to a biennial appropriations process. Then our Nation’s fiscal situation 

was quite different than it is now. We had had multi-year budget 

agreements in 1990, 1993, 1997, coupled with a growing economy 

that had produced several years of balanced budgets. It allowed us 

to pay down more than $400 billion of the national debt. 

Well, needless to say, we are now in a very different situation. 

Since the 1990s, we have had trillions of dollars in lost tax revenue, two unpaid-for wars, a necessary but expensive countercyclical response to the Great Recession, and most recently 5 years 

of extremely partisan and largely dysfunctional congressional budget politics. So it is understandable that the idea of biennial budgeting would once again hold some appeal for members in search of 

solutions to our current woes. But my position here today is that 

this is a case where we better be careful. The remedy might well 

be worse than the disease. 

Now, I am the first to agree that the congressional budget and 

appropriations processes have eroded significantly in recent years. 

The pressures of divided Government and a polarized electorate, 

the general subjugation of Congress’ ‘‘power of the purse’’ to partisan political forces, all this has greatly delayed the enactment of 

our annual spending bills, increased our reliance on continuing resolutions and omnibus packages, not to mention the damage that 

has been done by the consolidation of power within leadership circles at the expense of Appropriations and other committees. 

But biennial budgeting, by which I mean biennial appropriations, 

would do nothing to address the underlying causes of this dysfunction and would likely make matters worse by weakening congressional oversight of the executive, jacking up even more decisions to 

the leadership of both parties, and increasing our reliance on supplemental appropriations bills considered outside the regular order. 

I should stress that the same argument does not necessarily 

apply to a multi-year budget agreement or to a 2-year budget resolution of the sort that we passed last week. My argument this 

morning applies to the 12 appropriations bills that must be passed 

under any budget agreement regardless of its duration. 

Now, proponents of biennial budgeting claim that it would free 

up Congress to conduct oversight in the off-year. That is a su-
152 

premely ironic claim because the most careful and effective oversight Congress conducts is through the annual appropriations process. When an agency’s performance and needs are reviewed program by program, line by line, off-year oversight would be less effective, not more effective, because it would be further removed 

from actual funding decisions. Congress’ leverage would be far, far 

less. 

Supporters sometimes note that four recent Presidents— both 

Bushes, Bill Clinton, and Ronald Reagan—all favored biennial appropriations. Why should that surprise anybody? If this suggests 

that the proposal is not a partisan issue, it should warn us that 

it is definitely an institutional issue. It should be obvious why 

Presidents would support a free pass every other year from a legislative process that could make or break an administration’s agenda—for the same reason they support the line-item veto, they support a ban on congressional earmarks. Republican and Democratic 

Presidents support all those things because they weaken Congress’ 

authority vis-a-vis the executive branch. 

Now, it is often asserted that opponents of biennial budgeting are 

merely defenders of Appropriations Committees’ turf. I am a senior 

appropriator, so I am sensitive to those charges. But the annual 

work of appropriations serves the entire institution and its place in 

the constitutional balance of power, regardless of who is President. 

I agree that the appropriations process must be held accountable 

to Congress and the country. But here, too, I fail to see why biennial budgeting would deliver that result. 

Asking agencies to put forward a budget request for the second 

year of a 2-year cycle as many as 28 months in advance would require a level of advance planning and foresight that may not be 

possible or realistic, especially given the uncertainty of revenue 

and expenditure projections and the constantly evolving challenges 

the Federal Government must tackle. 

So faced with outdated and unworkable funding levels for individual programs in the second year of a biennial appropriation, 

each Federal department would be forced to present the Appropriations Committees with countless requests to reallocate, or ‘‘reprogram,’’ their annual budgets. Typically, these requests are granted 

or denied solely by the Appropriations Subcommittee Chairman 

and Ranking Member. There is no debate, there are no amendments, there are no votes, there is no public scrutiny. 

Off-year budget problems that could not be handled through reprogramming would necessitate supplemental appropriations bills. 

We already enact supplemental bills when unforeseen needs crop 

up. Budgeting 2 years in advance would only lead to a greater mismatch between the country’s needs and agency budgets. In fact, the 

whole purpose of a biennial budget could be undermined by the 

proliferation of supplementals in the off-year. 

So, perversely, we would have replaced the deliberative and 

democratic process of annual appropriations with supplemental 

bills that are sporadic, rushed, and heavily controlled by leadership. 

So for reasons practical as well as institutional, biennial budgeting is not really any better an idea today than it was 15 years 

ago. It would be a mistake to allow recent budget disagreements 
153 

to lure us toward a supposed ‘‘remedy’’ that would make the appropriations process less systematic, less flexible, and less potent. 

Finally, Mr. Chairman, we all know that the congressional budget process has broken down. For years, we have passed unrealistic, 

ideologically driven budget resolutions that not only make bipartisanship impossible; they sometimes make appropriations itself impossible. This year, once again, it is only in the face of a Government shutdown that we have revised our budget resolution to enable us to stitch these 12 appropriations bills together into an omnibus bill 3 months into the fiscal year. And that is currently our 

best-case scenario. 

But, tell me, what of any of this would biennial budgeting fix? 

It might make it worse. What we have got to do is muster the political will to make difficult and politically costly decisions, including 

a comprehensive budget plan that addresses the main drivers—the 

main drivers—of our deficits and debt, namely, tax expenditures 

and entitlement spending. So I urge colleagues to reject the siren 

song of biennial budgeting. We should all redouble our efforts to 

address instead the underlying causes of our long-term fiscal challenges. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Price follows:] 
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Chairman ENZI. Thank you. 

Senator CARPER. Mr. Chairman, could I ask unanimous consent 

that my full statement be made a part of the record. 

Chairman ENZI. Actually, all of the statements will be a part of 

the record. I appreciate you submitting them in advance. 

Senator CARPER. And, Mr. Chairman, could I just have 15 seconds to just say one quick thing and sort of thinking through what 

David just said, please? You know, we have all these States that 

are doing biennial budgeting, and it gives us an opportunity to kick 

the tires and see if it works for States. The legislation I think that 

you have introduced and that Johnny has introduced would, as I 

understand it, move us to biennial budgets with the Government 

sort of like at once. And I was just in a high school not long ago. 

There was a charter school, a Marine Corps charter school in 

Dover, near Dover, and this year is 9th and 10th grade, next year 

11th grade, next year they added 12th grade. We have seen this 

in schools in our States. The idea of like moving—if we are going 

to do something, let us try it on. The idea of maybe to pick like 

one appropriations bill and do like one of them, a handful of departments on a biennial basis, and if it works, then maybe try two, 

and three and four and five, like phase it in. I do not know if that 

is a good idea or not, but that might be food for thought. 

Thanks so much. 

Chairman ENZI. I appreciate any ideas. That is what this Committee is about, is collecting ideas on how we can do the budgeting 

and the spending in a better way. 

As I mentioned before, it is typical that we do not give questions 

to colleagues at the hearing. But if any of you want to address 

written comment, written questions, those should be submitted by 

the end of business tomorrow, and we will pass that on to them 

and ask for as speedy an answer as possible on it. I thank you for 

taking the time out of your busy days for the testimony and all of 

the ideas that you put forward. 

I would mention that Senator Cochran, the Chairman of the Senate Appropriations Committee, was unable to join us this morning, 

but he submitted a statement for the record about his concerns regarding biennial budgeting, which go along with Congressman 

Price’s concerns, and I ask unanimous consent to have his statement appear in the record in its entirety and would allow questions 

for him as well. Without objection. 

Chairman ENZI. While we are setting up for the next panel, I will 

introduce the two additional witnesses appearing before the Committee this morning. 

Bill Batchelder joins us from The Buckeye Institute in Ohio. Before that, he served in the Ohio House of Representatives for more 

than 30 years. Most recently, he was the Speaker of the House and 

worked with Governor Kasich’s Administration to pass responsible 

budgets that balanced billion-dollar deficits. 

And Bob Bixby is the executive director of The Concord Coalition 

where he has worked for over 20 years. His nonpartisan organization encourages and educates the public about the Federal budget 

and the need to protect our children and future generations from 

excessive Government debt. 

So we will start with Speaker Batchelder. 
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STATEMENT OF THE HONORABLE WILLIAM G. BATCHELDER 

III, EDWIN MEESE III DISTINGUISHED FELLOW, THE BUCKEYE INSTITUTE, COLUMBUS, OHIO, AND FORMER SPEAKER, 

OHIO HOUSE OF REPRESENTATIVES 

Mr. BATCHELDER. Thank you, Mr. Chairman, members of the 

Committee, and the gentleman from Rhode Island. The opportunity 

to speak to this question is particularly interesting because we 

have had this system for a number of years, beginning in 1908, and 

it has resulted in our ability to keep a handle on Government 

spending as well as budgeting and the timelines on budgeting. 

Having been Speaker, I serve now as the Edwin Meese III Distinguished Fellow at The Buckeye Institute in Columbus. I was in the 

House of Representatives for 38 years. 

We have seen everybody in the budgeting field do something 

wrong at least once, and that includes all Governors and all members of the legislature. I am here to tell you today that budgets of 

a biennial nature have worked well to protect Ohio taxpayers and 

to avoid crisis budgeting. 

When I was in the legislature, we did not have a budget crisis 

every year because our system of biennial budgeting provides a 

great deal of flexibility in handling emergencies, but at the same 

time requires us to use foresight and to look at what will happen 

if certain things are done in the process instead of having the 2- 

year budget. 

For example, in the 1980s, we had a group of savings and loan 

banks which got in trouble. We had a private insurance system. 

They ran out of money. I was on the Banking Committee where I 

received a call from then-Governor Richard Celeste. He was of the 

other faith, but he knew that I had paid attention to what was 

going on in the banking area. We were faced with a situation in 

which there would be a series of bankruptcies because of the weakness of the private effort to provide insurance, like FSLIC, only 

this was a private system. 

Working together in a bipartisan fashion, we solved the problem 

because we had anticipated difficulties in the passage of the first 

budget. What we did, in effect, was to set aside money in that 

budget in the event that there was a series of insolvencies. Those 

occurred in Colorado and Maryland, if I recall correctly, but because of the budget technique that we were using, we were in a position to save people who had their life savings placed in building 

and loans which were, unfortunately, part of a private insurance 

system. States with annual budgets had a harder time solving 

problems than we did. Those two I mentioned were among them. 

Biennial budgets are not new. They have withstood the test of 

time. Ohio has had biennial budgeting since, as I said, the early 

1900s. We are now a full-time legislature, and not having annual 

budgeting means that we can devote a whole year to setting priorities and adapt to the concerns of Ohio citizens. 

In my last year as Speaker, we did not have to do an annual 

budget, which enabled us to deal with issues that were challenging, 

some of the municipalities, because of the tight national economy, 

and as a result of that, we did some things that were imaginative 

and I think helpful in the long term to the State. We had a piece 

of legislation on mens rea which was very complicated. Those of us 
161 

who are lawyers loved it. Everybody else took a bye. But I am not 

sure that a great and bipartisan bill like that could have been approved had we had a battle over the annual budget prior to its passage. 

We are also flexible when we get a new problem. We have had 

a drug epidemic, and I know many of you in your States have had 

the same thing. I had two freshmen who were really concerned 

about it. They were younger, and so we set up in the second year 

of our budget, we set up hearings all across the State so that we 

could find out from medical professionals, from law enforcement, 

and others what it was that needed to be done about the problem 

that we faced. They were freshmen. They were freshmen, but they 

absolutely devoted themselves to statewide travel and taking testimony. Without the ability and the flexibility that you get in a biennial budget, they would probably still have been trying to figure 

out the budget. 

It also offers stability and certainty, which is good for businesses, 

and it is good for taxpayers and for planning for the future. We do 

not have very many crises in Ohio. Only twice since 1990 have we 

missed our budget deadline, and that was because of recession. Fiscal emergencies are bad for budgeting. In times of crisis, deals get 

struck which mean wasteful spending, and you do not have an 

oversight on spending. Every Governor I have worked with has hidden money, and with more time, we can make sure that money is 

not then wasted on issues that have not been examined. 

Agencies that receive State spending—in Ohio, the public schools 

in particular and the criminal justice system—can be more efficient 

because they know what their budget will be for a 2-year period. 

They can hear the train whistle before they get hit. I personally believe that we avoid wasting resources trying to get more money. Instead, we have more time to do the job in law enforcement, construction, and education. 

The key to successful budgeting is strong leadership and coordination between the General Assembly and the Governor. The Governor submits a budget. The House really does most of the work 

in Ohio. After our budget, we then meet with the Senate to work 

out differences. Obviously, there are always differences. Ideally, 

you want to get the budget completed on time and then leave it 

alone for 2 years. We only needed to worry about the budget in the 

off- year because there was a recession or an economic downturn. 

In summary, biennial budgeting allowed me to have more time 

to help Ohio instead of fighting over spending every year. If there 

was a real problem, we fixed it. I could talk the budget over with 

my colleagues from the opposite party. We simply had more time 

to put thought into the process. 

Biennial budgeting is not necessarily a miracle cure- all, but certainly it can lead to a better and more thoughtful process, increased stability and certainty. And I want to thank you again for 

the opportunity to be with the members of this Committee on this 

very important challenge that we face. 

[The prepared statement of Mr. Batchelder follows:] 
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Chairman ENZI. Thank you for your testimony. 

Mr. BIXBY. 

STATEMENT OF ROBERT L. BIXBY, EXECUTIVE DIRECTOR, 

THE CONCORD COALITION 

Mr. BIXBY. Well, good morning, Mr. Chairman and members of 

the Committee. Thank you for inviting me here today to discuss 

ways to reform our broken budget process. 

Given the frequent breakdown of the budget process in recent 

years, The Concord Coalition commends you and the Committee for 

devoting attention to improving the process in ways that will 

produce more informed, thoughtful, and far- sighted decisions. In 

that regard, I would like to express The Concord Coalition’s strong 

support for moving to a 2-year budget cycle. 

Mr. Chairman, I think I agree with almost everything you said. 

I would like to be associated with the remarks of the Chairman in 

his opening statement, and I will make several of the same points. 

A 2-year cycle would lengthen the scope of the budgetary decisionmaking process, allowing for a more strategic approach. Ideally, the first session of each Congress would be spent setting priorities and establishing funding levels. The second session would be 

devoted to long-term planning and oversight. 

The Federal budget is a statement of political values as well as 

a management tool, and the individuals expressing those values 

through the budget resolution are elected on 2- year cycles in the 

other body. But we all function in the whole Congress on 2-year cycles. It is logical, therefore, that Congress should adopt one statement of priorities for each full cycle. 

When you look at appropriations bills, historically Congresses 

have been twice as successful at budgeting during their first session than during their second. Over the past 18 Congresses, 10 

have passed more appropriations bills on time in the first year 

compared to 5 in the second year. Given that track record, it is 

hard to defend the idea of repeating the entire Federal budget process and appropriations process in the second year of each Congress. 

Having time for greater oversight would certainly help to further 

the cause of a more efficient Government in which programs are 

evaluated on their merits and extended strategically, not simply extended by default because no one has the time to ask whether or 

not they are still working or are needed. 

The Congressional Budget Office estimates that roughly $300 billion per year was appropriated for programs with expired authorizations in both fiscal years 2014 and 2015, and that number has 

been growing. 

The value of building in time for adequate planning and oversight would go far beyond the dollars saved. Our Nation’s fiscal 

challenges require policymakers to evaluate existing programs and 

eliminate those that are no longer needed, ineffective, or are 

unaffordable. 

To me, this is a crucial step in restoring public trust in Government. There is no question that the public right now has a low regard for the process of the budget, as well as other things, but I 

think getting back to a more regular budget process where they see 

that the public dollars are being treated more respectfully and 
167 

wisely would help restore trust. And that is really going to be needed because our really big problems are with the entitlement programs and the Tax Code. I think it is going to be very difficult to 

make those tough decisions with the public being so distrustful of 

the way money is handled around here, so restoring trust in the 

budget process I think is a real precursor to the more difficult 

choices that we are going to have to make. 

So it would be particularly useful for Congress to devote enhanced scrutiny to the mandatory spending. It is not reviewed in 

the annual appropriations process, and it has been an alarming 

trait in the past 40 years that Congress has spent an ever growing 

amount of time on an ever shrinking fraction of the Federal budget. 

The mandatory spending programs already consume around 60 

percent of every dollar spent, and that is projected to grow more 

quickly than the economy and at a faster rate than the resources 

allocated to pay for them. So this is not sustainable over the long 

term, and we need to focus more attention on that. 

Congress could also use biennial budgeting as an opportunity to 

give lawmakers more time to conduct needed oversight of the special provisions, loopholes, exclusions, preferences in the Tax Code, 

sometimes referred to as ‘‘tax expenditures’’ or ‘‘tax entitlements,’’ 

because economically they function similarly to direct spending programs. These tax provisions add up to over $1 trillion a year, and 

like mandatory spending, they avoid the scrutiny of the appropriations process and grow on autopilot. 

Critics of biennial budgeting simultaneously argue that it would 

become both a fiscal straitjacket and an excuse for uncontrollable 

supplemental appropriations. In fact, it would be neither, or at 

least it need not be either of those. You could still enact a corrections bill in the second year, but such changes, barring major 

events like a war or economic recession, are likely to be modest and 

would not necessarily require extensive review. 

A biennial cycle will work as long as realistic discretionary 

spending assumptions are used in the congressional budget resolutions, rosy economic assumptions are avoided, and a mechanism is 

in place to consider second session updates if needed. 

Process reform obviously cannot serve as a substitute for the real 

and challenging budget choices we need to make, but it can create 

the space for those choices to be made. The realities our Nation 

faces are far different today than they were about 30 years ago 

with the budget process, but neither the budget itself nor the process to create it reflects these changes, and I strongly encourage you 

to consider this reality. 

Biennial budgeting is certainly not a panacea, but I do not think 

it needs to be in order to be a better idea than what we are doing 

now. So I thank you again for inviting me to testify on this important issue, and I look forward to taking any questions you may 

have. 

[The prepared statement of Mr. Bixby follows:] 
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Chairman ENZI. Thank you very much. I want to thank both of 

you for testifying, and we will have a round of 5- minute questions 

in order of where they were at the gavel or their order of arrival. 

I get to begin, and I would mention that Wyoming has a biennial 

budgeting session. We meet 40 days one year and 20 days the next 

year, and the 20-day session is the budget session. Of course, that 

is all we do is budget. You can bring up legislation, but the legislation requires a two-thirds vote of the body with no debate. So seldom is anything able to pass that unless it is an emergency. But 

we have balanced the budget and done some of those rainy-day account things that Senator Carper talked about, which have never 

been touched. It has never rained that hard in Wyoming. We are 

kind of a dry State. 

[Laughter.] 

Chairman ENZI. I will begin with Speaker Batchelder. Congress’ 

adoption of late appropriations bills and the frequent short-term 

funding bills, the extensions, how does that uncertainty affect State 

governments and private organizations like the colleges and the 

universities in your State? Do you have to deal with that as an 

emergency basis when we delay? 

Mr. BATCHELDER. We have a Governor who is somewhat tightfisted by his Washington training, John Kasich, and we try to avoid 

that and have done so. But you are correct. We do have problems 

particularly with the colleges and universities, which are results of 

young people not having adequate funds or scholarship help to go 

to our various State institutions. 

We do, however, provide funds to the operation which runs the 

State colleges, the Board of Regents, and that money is available 

to them in the event that there is some untoward circumstance 

that occurs. But basically that is not a problem. Our problem would 

be more in the primary secondary schools. If people do not renew 

our voted millage, then we face a difficulty, obviously. But most of 

the private—pardon me. Most of the primary secondary actually 

anticipate that and start raising those issues early enough that we 

ordinarily do not have to bail them out. 

Chairman ENZI. Okay. Thank you. 

Mr. Bixby, a Gallup survey fielded in February asked whether 

the responses approved of the way Congress is conducting its business, and only 20 percent of those polled said yes, and I think that 

was our best poll. Do you think Americans’ low opinion of Congress 

is a reflection of our inability to pass spending bills under regular 

order? Would the biennial budget restore predictability? Would it 

help public trust in our institutions? 

Mr. BIXBY. Well, I think it would, and 20 percent strikes me as 

high— 

Senator WHITEHOUSE. Microphone. 

Mr. BIXBY. Oh, I am sorry. Twenty percent strikes me as high, 

so maybe that is a bit of good news. But I do think that the budget 

process is—because I spend a lot of time around the country going 

to—you know, conducting budget exercises and talking to people 

about the budget. And I do think that a lot of the frustration people feel is as a result of the budget process. They hear about bills 

not being passed and wonder why the Government might shut 

down or nobody knows what is going to happen with the debt limit. 
173 

And it is a very high profile reflection of a system that is not working. 

So sometimes I really think that budget process reform, while it 

seems rather dull on its face, saying those words sounds kind of 

dull, is a key to regaining public trust. If people begin to see an 

orderly budget process and that their dollars are being dealt with 

more wisely and thoughtfully and the process is running on time, 

I think that it would help restore public trust that Congress will 

need to make far more difficult budget choices. And, look, the process is definitely broken. I agree with the adage, ‘‘If it ain’t broke, 

don’t fix it.’’ But that is not what we are dealing with here. It is 

broken, and so we do need to fix it. 

And so the idea really is, you know, I think we have an opportunity here to come up with a new budget process that, you know, 

seems to be more rational on its face and more, you know, oriented 

towards long-term planning. 

So, yes, I do think it could have benefits beyond just dollars 

saved or ‘‘efficiency.’’ 

Chairman ENZI. Thank you. My time is almost up. 

I will yield to Senator King, followed by Senator Ayotte. Senator 

King? 

Senator KING. Mr. Batchelder, it seems to me one of the most important things you said is that legislatures have no shortage of 

problems to deal with, so why deal with the same problem every 

year when you can deal with it every other year and use the time 

otherwise? Is that your experience in Ohio? 

Mr. BATCHELDER. Not really. In Ohio, I have had interim efforts 

when we are not in session. I sent those two young men out to look 

at the drug problem, and our new Speaker spent a great deal of 

time when we were out of session dealing with the problems of 

higher education, particularly the financial problems that students 

are having. And so we do get around the problems by addressing 

them in the off-season, as it were. 

Senator KING. Well, that was my point, that by not having to do 

the budget every year, you freed up legislative time to deal with 

other issues. 

Mr. BATCHELDER. That is correct. But, obviously, if we were in 

an annual appropriations situation, then you would have a whole 

different set of problems that would arise as a result of the inability of the members to get together on issues and to work through 

them, in my opinion. I have had a nice career of being a friend of 

both caucuses, and as a result of that, we are able to anticipate 

problems and take care of them in the biennial budget. 

Senator KING. Mr. Bixby, you have been watching the Federal 

budget process for some years. It strikes me that we are in the 

middle of the second Federal biennial budget. The Murray-Ryan 

was 2 years, and the agreement reached just the other night is 2 

years. So, in effect, we are doing it. And what you are suggesting 

is that should be the regular part of the process, that we are doing 

it and I think everyone would agree that it made it a lot easier 

around here knowing that we had the certainty of 2 years. But it 

did not compromise the appropriations process because the appropriations have to be done within those overall budget levels. 
174 

It seems to me we have had our trial run, in effect, and it seems 

to be working. 

Mr. BIXBY. Yes, I think we have had an experiment by default, 

biennial budgeting by default. And so moving explicitly to a biennial budgeting process would not be a radical change. It would almost be confirming what we have stumbled into. And perhaps it 

has been a stumble, but I do not think it is an accident that the 

last two budget agreements have been 2-year agreements. It makes 

sense. And so when you have Democrats and Republicans negotiating a budget deal, doing it over a 2-year period makes sense. It 

gives a certain amount of stability. You have got budget caps in 

place, and the appropriators can, you know, make decisions, as 

they should, about what happens beneath those caps. 

So, yes, I think we are—we are looking at four fiscal years in a 

row where we will, in effect, have been governed by a 2-year budget. 

Senator KING. How would you feel about a proposal—and there 

are various proposals, as you know, that have been submitted— 

where you had a biennial budget but single-year appropriations? In 

other words, you would set the overall budget limit for 2 years, but 

then the Appropriations Committee would still do the allocation 

within those numbers on an annual basis. That might be a way of 

finding a solution that we could find consensus on here. I am not 

advocating it. I am just interested in your view, both of you. 

Mr. BIXBY. Well, from my view, as kind of a biennial budgeting 

purist, you might not get as much of the benefit of the biennial 

budgeting. You would for the 2-year budget, as we are doing now. 

If you went through still an annual appropriations bill, a lot of the 

time for oversight and that sort of thing that we are talking about 

would probably be lost, so you would not get—most of the time is 

spent on the annual appropriations, not the budget itself. 

Senator KING. Mr. Batchelder, what are your thoughts about 

that hybrid? 

Mr. BATCHELDER. I have not examined that, even though I was 

hanging out there for 38 years. But I would think that the—I can 

see that there would be some pluses, but I think the system that 

we have used—when Kasich became Governor, I became Speaker. 

We had an $8 billion deficit. And that is 18 percent of the State 

budget. So we had to move lightly and quickly to get that taken 

care of. We did pass a balanced budget. It was more partisan than 

I had hoped. All of my party voted in favor of that budget. The 

other party, with two exceptions, voted against it. But I think part 

of this has to do with the focus that you do get on budget issues 

in terms of priorities and so forth. If you could have time to send 

people out—our new Speaker, for example, I sent him out to the 

universities to meet with the presidents, and we have a carload of 

universities in the State of Ohio. And he was able to profit by that 

and participate in the making of the budget in an in-depth way 

that a freshman ordinarily would not have had. 

Senator KING. Thank you, gentlemen. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

Next will be Ms. Ayotte, followed by Senator Warner. 

Senator AYOTTE. Thank you, Chairman. 
175 

Speaker Batchelder, do you have a balanced budget requirement 

in Ohio? 

Mr. BATCHELDER. Yes. We have had occasions, obviously, over 

the period of time that I have been there where they were observed 

perhaps in the absence of action, but basically both parties adopt 

that as their approach. 

Senator AYOTTE. And does that help contribute, obviously, to 

what you have to come up with in terms of limitations? 

Mr. BATCHELDER. Indeed. 

Senator AYOTTE. Also, in terms of this biennial budget—and let 

me just say I am a cosponsor of this. New Hampshire has a biennial budget process like many States, and I think that it is a very 

effective process. But to the point that is being raised about separating the budget from the appropriations, I guess my concern 

would be about that, and I wanted to maybe ask Mr. Bixby about 

this. If we separate the budget from the appropriations, I just do 

not see how the oversight gets done because we are still in this 

continuous appropriations process as opposed to using the second 

year to really look at, okay, what is working, what has not worked; 

otherwise, you are just constantly appropriating. I want to get—if 

you had a preference, do you prefer that we just take the unified 

approach? 

Mr. BIXBY. Yes. I would think that the benefits of biennial budgeting mostly come from doing the appropriations once for a 2-year 

term. 

Senator AYOTTE. Right. 

Mr. BIXBY. That is what frees up the time. 

Senator AYOTTE. The time, because we are actually—if you look 

at the work we did on the Budget Committee this year putting together a budget, we were pretty—we had a time deadline that we 

had to follow under the Budget Act, and we did our work in a pretty efficient time period. And so the budget process took up a lot 

less time that I see, obviously, the appropriations process or the 12 

appropriations bills overall. And the appropriations are really 

where the rubber meets the road in terms of what programs you 

are going to fund within the overall number. 

And one of the things that has frustrated me over the years, too, 

is that we have a Government Accountability Office that does audits and does some really good work on some ideas on which programs are performing, which programs have issues, and yet too 

many of those reports sit on the shelf. 

Do you see an opportunity in this process, if we did have the second year in oversight, to more effectively take up the work that has 

been done of that agency auditing programs and saying here are 

things you should be addressing if we were to move to this process? 

I would have either of you comment on that. 

Mr. BATCHELDER. My sense would be that you apparently have 

something working for you which was like our old Legislative 

Budget Office, and we had very good success with that. And, in 

fact, I was disappointed because that budget office was done away 

with. That was a legislative tool. We hear enough from the Governor about the budget. He is traveling from city to city informing— 

Senator AYOTTE. He is traveling in my State, too. 
176 

[Laughter.] 

Mr. BATCHELDER. I understand. But I think that that kind of an 

approach is superior to what we are doing now, which is relying 

on the Governor to send the budget, and then he sends new taxes. 

He and I—in Ohio, we have been blessed with a whole new source 

of funds. We hit oil. And as a result of that, the Governor wanted 

to put a severance tax into effect. And it seemed to me what we 

needed to do was encourage everybody who wanted to drill holes 

in the ground to do so. And that did not involve taxing them. The 

LBO would probably have been against doing that until we had a 

good sense of what the prospect was going to be in that particular 

area. 

Senator AYOTTE. What do you think about the GAO role and us 

using their work more if we had more oversight? 

Mr. BATCHELDER. Oh, I think it would be terrific. I think that 

they put out some— 

Senator AYOTTE. Some really good work. 

Mr. BATCHELDER. Some really good work, and that is exactly the 

kind of oversight that is needed. 

You know, we always emphasize the mandatory part of the budget, but oversight can go to the discretionary and mandatory side, 

and as I said, even the Tax Code. There are a lot of things that 

need to be reviewed for whether or not they are even working. I 

mean, we all know that things get into the Federal budget, and, 

you know, they stay there and they do not get that much oversight. 

So I think making better use and having time to make better use 

of the GAO work would be a really good idea. 

Senator AYOTTE. Thank you both. I appreciate it. 

Chairman ENZI. Senator Warner. 

Senator WARNER. Thank you, Mr. Chairman. 

Let me just follow up on Senator Ayotte’s comments. I also am 

supportive of this 2-year approach. I think most States that have 

2-year budgets have worked that process successfully, and I think 

Senator Kaine will make this point as well. It is not like having 

a 2-year process and in effect a 2-year appropriations that you cannot make adjustments at the end of each year. 

Mr. BATCHELDER. Right. 

Senator WARNER. In our State, the Governor submits true-ups 

and budget amendments. The legislature takes that and disposes 

of it as appropriate. But it does not dominate the whole time. And 

I would hope my colleagues on the appropriations process would realize they would still have a bite at the apple if we were to do this 

2-year process. So I do hope that we are able to move forward. 

My line of questioning, I actually want to follow up again on 

what the Senator from New Hampshire, was talking about, and 

this is an area that I know Senator Whitehouse, when I first got 

on this Committee, had talked about this Budget Committee having a Government Performance Task Force. We worked together on 

that. Senator Portman and I have worked on legislation in this 

area. And I would argue that GAO is one tool we could use, but 

that we have absolutely done legislative activity. It was called the 

Government Performance and Results Modernization Act, GPRA, 

the smallest little bill that nobody had ever heard of that, if actually fully implemented, can have enormous results because it re-
177 

quires every agency to actually identify not only its most successful 

programs but its least successful programs, something that entities 

are loath to do, but we have never really taken those results—actually, the administration has started to put out just in the last year- 

-and really reviewed those underperforming programs. 

Senator Portman and I last year worked very hard on something 

called the DATA Act, again, bipartisan, trying to bring transparency to our financial reporting systems. There are 200 separate 

financial reporting systems just inside the Department of Defense 

alone. How are we ever going to sort through how our taxpayer dollars are wisely used and where we need actually additional investments if we do not have commonality of terms? 

What I feel, Mr. Chairman—and I am going to get to a question 

here—is that every administration, Democrat or Republican, OMB 

has this responsibility, but the ‘‘B’’ part always trumps the ‘‘M’’ 

part, and management always seems to get left to being a secondary item. And, frankly, a lot of this activity is nitty-gritty, but 

if you are really going to roll up your sleeves and say where can 

we save resources and where are there programs that need additional resources, you got to do this review. And whether it is GAOwise or whether it is taking legislative actions that the administration is charged with right now, like GPRA or the DATA Act, and 

actually making sure we have that oversight, I think it would add 

tremendous value. 

Mr. Bixby, I know we have worked together on these issues for 

a long time. I would like you to speak a little bit more to the question of the oversight tools that we can use. OMB has that list every 

year. I remember my first year on this Committee where they published the programs that both the Bush Administration and Obama 

Administration thought should be eliminated, I thought that would 

be low-hanging fruit. I quickly learned that was not as much lowhanging fruit, even though both administrations had looked at 

that, but I do not think we had ever looked in-depth at those programs to reach some kind of legislative conclusion. 

Mr. BIXBY. No, and I think that that is what is missing. We have 

got a lot of—as you said, we have got a lot of reporting mechanisms 

now that were put in place, geez, going back about 10 years or 

more, that the Federal agencies need to report their progress and 

defining goals and meeting them and reporting each year how they 

are doing. And that information is available along with the GAO 

reports, and what is missing is some sort of formal process for 

making use of that material. 

And I think now this is something that should get bipartisan interest because we are living under tight spending caps, and we 

know that the budget pressures in the future are going to get, you 

know, more acute. 

So there really is—there never is an excuse for wasteful programs, but there is even more of a necessity to find as much—to 

require as much efficiency and effectiveness as we can. So making 

use of those tools that you mentioned I think is really the next logical step, and hopefully the biennial budget process would help do 

that. 

Senator WARNER. I would just add one last editorial comment, 

and Mr. Bixby raised this. I think we put lots of requirements on 
178 

every program to have reports. One of the things Senator Ayotte 

and I have worked on is actually saying if some of these reports 

are not looked at, let us eliminate them, because I think at some 

level we have actually gotten so report-heavy and yet we do very 

little analysis on that. 

Mr. BIXBY. There may be waste in looking or waste. 

Senator WARNER. There may be waste in looking for waste. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you. 

Senator Portman? 

Senator PORTMAN. Thank you, Mr. Chairman, and it is an honor 

to have Bill Batchelder here with us. I know he was able to introduce himself earlier, but he has spent 38 years in the House and 

the last 4 or 5 years as Speaker. And he really is one of our icons 

in Ohio, one of our great legislative leaders, and he was also an 

elected judge, so he will go down in Ohio history as one of the great 

public servants. And unless term limits change, he will also go 

down as having some of the most impressive longevity. So it is 

great to have you here and have your wisdom on this particular 

issue, Bill. Thank you so much for coming. 

Mr. BATCHELDER. Thank you. 

Senator PORTMAN. And, Bob Bixby, always good to see you. 

Thanks for sticking in there and fighting the good fight, not just 

on this but on entitlement reform and other things. 

I was, as you know, in the position at OMB to put together these 

budgets, and I am a 2-year budget person in part because of that 

experience. So I was on the Budget Committee in the House and 

on the Budget Committee here, and I am happy to be cosponsoring 

the legislation as it relates to Congress. 

But even at the Office of Management and Budget, as you know, 

there is an enormous amount of effort and time put in every year 

to coming up with the budget, and it is probably the biggest single 

job of the OMB Director, although as Mr. Warner has said, you 

know, there is also an important management function and regulatory review function and policy function on every single administration initiative. Frankly, doing the budget every year makes it 

harder to address those, so I would think there is an analogy to 

what Speaker Batchelder talked about, and more time spent on the 

oversight side would be important. 

I am looking at your testimony. You said four things that I think 

are really interesting. One, legislators spend the second year of a 

budget cycle focused more on programmatic review, and you talked 

about some specific examples of that and big things you have gotten done. You also mentioned oversight later. You talk about the 

flexibility to respond to serious new problems rather than being 

sort of hemmed in by the budget process. You talked about, for instance, now our unfortunate situation with drug overdoses in Ohio. 

You talked about more predictability and certainty, including for 

the Government. Specifically, you talked about the agencies can be 

more efficient; they can hear the train whistle before they get hit. 

That is one I would like to have, again, your 38 years of experience 

with this, working with the State agencies, a little more on that. 

Could you flesh that out a little more? I think we do not talk about 
179 

that enough, the certainty, the predictability, and, you know, being 

able to plan, and the efficiencies you get from that. 

Mr. BATCHELDER. That is an area where I think we need to have 

a very much increased focus because, frankly, in the absence of it, 

then we end up with people who are short of programs funding 

them, particularly when the money is sent back to the local level. 

You can have problems emerge if you do not do that properly, and 

we have had some of those. We had a previous Governor who had 

a significant number of them. And an $8 billion deficit, 18 percent 

of the budget, is not a laughing matter. And I think it is something 

that can be very, very helpful if you have the people in place, obviously, who are willing to come to you and say we have a situation 

here and we need to address it. And, generally speaking, our Cabinet members are capable of that. 

Senator PORTMAN. I think for them, much like the Federal agencies and departments here, there is sometimes a temptation with 

the annual budget also to spend it all— 

Mr. BATCHELDER. Oh, yeah. 

Senator PORTMAN. —so that you are not penalized the next budget year, and having a 2-year budget and being able to be maybe 

a little more efficient and thoughtful about your spending makes 

sense as well. So I appreciate that. And I do think Ohio is a good 

model in terms of just the better governing at the agency and department level. 

I have also found it interesting, and you talked about focusing 

during that second year more programmatic, you said, and on oversight. Can you give us an example of that, something that you were 

able to do during an off-year that would have been difficult to do 

during a budget year? 

Mr. BATCHELDER. We had a situation in which there was a great 

deal of prescription writing going on down at your region of the 

State in particular, and there was very little enforcement by those 

people who are in charge, if you will, of the policing of the medical 

profession. And we were able through meetings with various officials who were local as well as actually an expansion of some of the 

power of the Highway Patrol to solve those problems, to take away 

their licenses and to get them out of the selling of paper businesses 

that they were in, and particularly in some of the rural areas of 

the South, those were very, very serious problems. 

Senator PORTMAN. Shutting down the pill mills. 

Mr. BATCHELDER. The pill mills, yes, sir. 

Senator PORTMAN. That is a good example where it takes a lot 

of time and effort and focus. 

Well, my time has expired. I want to apologize to my colleagues. 

Mr. Sessions, I did not know he was coming, and he is actually 

more senior than me. He should be seated on my right, not on my 

left—I just want you to know that—as former Chairman of the 

Committee. 

Senator SESSIONS. Senator, I like you on my right. 

[Laughter.] 

Senator PORTMAN. But, Mr. Speaker, thank you for coming. 

Mr. BATCHELDER. Well, thank you for your kind comments. 

Senator PORTMAN. I know it was an inconvenience for you to 

have to come here to D.C. We always appreciate having you here. 
180 

And, Bob Bixby, thanks for your testimony, and I appreciate your 

continued work on these budget process reforms. 

Mr. BIXBY. Thank you. 

Chairman ENZI. Thank you. 

Senator Whitehouse, followed by Senator Sessions. 

Senator WHITEHOUSE. Thank you, Chairman, and thank you for 

the continuing series of hearings on our Budget Committee process 

that you have had. I think I share your frustration with the process that I think we probably all on this Committee feel. I think 

there is a reason that nobody shows up at Budget Committee hearings, today being a case in point. If you could turn the camera 

around, you would see more empty seats than full. Even when we 

are debating the budget here in the Committee room, there are 

usually masses of empty seats. The insignificance and irrelevance 

of this Committee has really become quite apparent, and I think 

a good deal of that has to do with the fact that we have changed 

as a body from the practice of majority votes on appropriations to 

the new practice that everything has to go by 60 votes. So if you 

are an appropriator and you know that your appropriations bill has 

to get 60 votes, the penalty of a budget point of order for violating 

the budget is nonexistent. 

So it seems to me—first of all, let me say I support the idea of 

biennial budgeting. I am intrigued by it. I am not comfortable with 

any particular bill yet, but I look forward to working with people 

who are interested in trying to make this work. 

I do think that there should be some procedural obstacle to appropriations that violate the Budget Act or the budget level that we 

have set. And since there is not one right now, we are just making 

noise over here, and everybody knows it. The 60 votes is really the 

procedural obstacle, and you have to be at 60 anyway, so we have 

basically neutered ourselves. 

We also, I think, have the opportunity here to be kind of a bipartisan crucible for a, you know, Ryan-Murray type deal. But for a 

variety of reasons, we have not taken advantage of that political 

opportunity either. So both for want of any procedural value to 

complying with what we have done and because we have not taken 

advantage of the political opportunity, we have basically made ourselves insignificant. 

I think there is hope for this Committee. I think it has a great 

role. But I do think that under present procedures we will continue 

to see rooms full of empty seats and an Appropriations Committee 

that takes zero interest in what we do because they know that they 

do not care. 

I would add one additional point, and this follows up on what 

Congressman Price said. By not paying attention to the budget, by 

not paying attention to appropriations, by not paying attention to 

oversight, we are transferring immense political power from the 

legislative branch to the executive branch. 

I remember coming here and somebody said, look, there are three 

great battles in Congress. One is the battle between the parties, 

Democrat on Republican. The other great battle is the battle between the branches, executive versus legislative. That is a battle 

that has been going on since the founding of the country. And the 

third, they said—and you are going to have to pay attention to 
181 

this—is the great battle between members and staff. I do not know 

about the third battle, but we have become so intoxicated with the 

first battle that we have totally overlooked the fact that we are 

having our clocks cleaned by the executive branch year after year 

after year after year. It is like a boat with a hole in it, and instead 

of plugging the hole and paying attention to our jobs, the two people in the boat are busy having a fistfight in the boat. 

So, you know, I am willing to work with all of you. I have got 

a minute left. If either of the witnesses have any reaction to that 

set of observations, I will yield the remainder of my time to the 

witnesses. 

Mr. BATCHELDER. Governors are interesting. I would have to say 

that in all those years I have seen totally different kinds of Governors. Some of them are very cooperative. In the case of our Governor, he, of course, cut his teeth here on the Budget Committee 

in the House. I believe that was the last time the budget was balanced. So those of us who are budget balancers and planners have 

an edge. I am not sure you can get one of those guys in every State 

to run for Governor, but I understand exactly what you are saying. 

One of the frustrations that I think a lot of new young legislators 

have is the fact that they are really not in charge in any substantial way. I had the privilege of running the House a little bit differently. I started with 45 members. I took that up in 2 years to 

60 members and then to 65 members. And the reason was they 

knew when they went down there, they were really going to work, 

or they were not going to be part of the process. So we had a good 

relationship that way 

Senator WHITEHOUSE. Yeah. I guess my point in conclusion is 

that even if we do get a good agreement on a biennial budgeting 

system here for the Committee, if we have not solved the procedural problem that there is no value to anybody to complying with 

our budget, and if we have not somehow engaged on the political 

opportunity of having this be the bipartisan crucible for trying to 

work something out, then doing what we do now over 2 years is 

just slowing down a bad and ineffectual process. So I think that 

has to be part of a larger conversation. But the fact that we are 

here today having this part of the conversation I think is a testament to the Chairman’s continuing interest in this and is one that 

at least this Senator appreciates very much. Thank you, Chairman. 

Chairman ENZI. Thank you. 

Senator Sessions, followed by Senator Kaine. 

Senator SESSIONS. Well, Senator Whitehouse, as he frequently 

does, makes some very important points. We have passed some 

budgets, but we have not followed our budgets. And I think Congress is timid to challenge the Executive, which I have expressed 

concern about for some time. And Congress is failing to understand 

that at the bottom line, we are responsible for spending. We have 

the appropriations power. The President cannot spend any money 

that we do not authorize or direct to be paid through an entitlement program. And so the debt, as a practical political matter, can 

be blamed on the President because he is advocating more spending and opposing reductions. But, fundamentally, the bottom line 

when it becomes law and the money is appropriated, Congress has 

done it, it cannot be spent. 
182 

I worry about that. What good is a budget if we do not follow it? 

And we had a pretty tough budget, but not— Senator McConnell 

likes to remind me I voted against the Budget Control Act. I did 

not think it cut enough. But we cannot adhere to that. And it did 

constrain spending on the discretionary side in a significant way. 

Also, I do not think the American people are unaware of the debt 

situation that we have. I think the American people do, in fact, 

think this Government spends a lot of money it does not need to 

spend, and that properly done, like so many Governors have done, 

Governor Kasich—you go in there, and you defend your actions and 

fight for them, and most people are going to give the Executive and 

the Congress a chance, see if you can do it. And are people going 

to be thrown in the streets, children going to be starving to death 

if we trim some of these increases in spending? So I do think that 

we are at a crisis time. 

I appreciate both of you and your thoughts on the 2- year budget. 

Senator Enzi has worked hard on this. A number of our other 

members, Johnny Isakson and others, have spent time on it. I 

think it is a good idea. But it has got some complexities, Senator 

Enzi, as you know. You could see doing it this way, this way, that 

way, and that way. But I believe if we do this right, we could improve the expenditure of the taxpayers’ money. 

Mr. Batchelder, in your experience does it actually reduce spending and help contain spending with a biennial budget as opposed 

to an annual budget? And how? 

Mr. BATCHELDER. That has been our experience in Ohio. Basically what happens is that some of the programs that a Governor 

would want to fund simply do not have appeal to a majority of the 

members of either the House or Senate, and, therefore, the result 

is that that item is either reduced or taken out entirely from the 

budget. 

We have had in Ohio in recent years growth in business and industry, as you have in Alabama, and that has been an offset for 

us, too. We have been able to count on more income than we had 

had previously. I will never forget one day— 

Senator SESSIONS. But when you do this for 2 years— 

Mr. BATCHELDER. Yes. 

Senator SESSIONS. So you make a decision, and you are not subject to an emotional appeal the next year. At least it is 2 years before the next appeal comes forward. 

Mr. BATCHELDER. Exactly. 

Senator SESSIONS. And if somebody has got a new program, then 

they have a period of time to propose it and a period of time to analyze it before a new spending program is adopted? Is that a factor? 

Mr. BATCHELDER. It is a factor the way our Finance and Appropriations Committee operates, but that is largely a result of the 

leadership within the House and the Senate. The House, of course, 

gets the budget first, and we do remove things. And it is not a 

problem if you remove things with Kasich as Governor. 

Senator SESSIONS. Mr. Bixby, I appreciate the work of your organization. You have been at it a long time, and you have constantly 

pointed out dangers that we have in the debt that we face. Can you 

say to us, without repeating some of the things I know you have 
183 

already said, how you think in your organization, after its years of 

work, believe that biennial budgeting is a positive step? 

Mr. BIXBY. Well, I start from the premise—and I have been testifying about biennial budgeting going back to the last century. 

Senator KAINE. The last millennium. 

Mr. BIXBY. Exactly. So, I mean, there you go. But I think that 

the argument maybe has changed a little bit. I mean, it used to be 

we were more focused on just the idea of sort of the good government aspect of it. You would have more time for oversight, and 

that would be good for the process. 

I think right now the budget process is just so totally broken that 

it is important for Congress to make a statement by coming up 

with a new budget process. It is not just biennial budgeting. I think 

there are a lot of things we could do to focus more attention on the 

mandatory side of the budget where the real budget problems are. 

The dynamic of the budget has changed a lot even just in the time 

that I have been talking about this. But you go back to the 1970s 

and everything, you know, the discretionary part of the budget is 

only about a third of the budget right now, and that is what we 

are talking about in the annual appropriations bills. 

So spending so much time rehashing the same issues over and 

over again over an appropriations bill that is a shrinking part of 

the budget seems like a misuse of congressional time when we have 

some real issues to address with health care programs or veterans’ 

programs or Social Security or tax expenditures. So I think that 

the argument is still that I think we would do a better job looking 

at the appropriations bills if we had more time for oversight. But 

I also think it is very important to think of Congress reestablishing 

its credibility with the budget by coming up with a new budget 

process. And I think this would be part of it because it strikes people, it strikes me, I think it strikes a lot of people—there is nothing 

partisan about it- -as a logical thing to do, to take a 2-year budget, 

to use it as a planning document to guide each Congress, each session of Congress, and starting with that and doing the appropriations and then making time for those oversight activities that, you 

know, you do not have enough time for right now. 

So, yeah, I mean, I just think it would not only be good government, but I think it would save money, and I think it would help 

regain trust that we are going to need going forward. 

Senator SESSIONS. Thank you, Mr. Chairman, and maybe this 

hearing will provide some momentum to some of the ideas you 

have worked for. 

Chairman ENZI. I hope so. Thank you. 

Senator Kaine? 

Senator KAINE. Thank you, Mr. Chairman, and thanks so much 

for doing this. I am a strong supporter of your budgets. I was a 

mayor, I was a Governor, and I have come to the conclusion really 

that my support is less about good governance, less about oversight. It is about the economy does better with more certainty than 

less. It is a certain producer. I mean, I think we all have this experience in dealing with constituents, you know? You may not like 

my answer, but I will give you an answer. And everybody kind of 

adjusts around a known, and it is very difficult to adjust around 

an unknown. 
184 

I am on the Armed Services Committee. We have got Pentagon 

planners who are supposed to be planning to deal with these very 

challenging threats in the world who are spending time wondering, 

you know, will we have a budget and when will it be? Or will we 

have a CR? Will we have a shutdown? Will we have to furlough 

people? Will we have full sequester budget caps or partial or none? 

And they spend their time, where they are supposed to be planning 

about cyber attacks and whatever, running seven or eight budget 

scenarios instead. 

And in the outside world, there is good economic research on this 

point—we had some testimony, Mr. Chair, about this at the last 

hearing—that uncertainty has a cost in terms of economic growth 

and GDP. And I would argue that the primary generator of economic uncertainty in the last decade in the United States has been 

the United States Congress. And so we should do things that reduce uncertainty. 

As a mayor, a Federal budget that was done in October and a 

State budget that was done in January and February gave a mayor 

the ability to do a city budget in April or May for a July 1 fiscal 

year. And we all know how much budgets are transfer pays. The 

Federal budget is filled with transfer payments to State and locals. 

State budgets are filled with transfer payments to locals. And so 

if you have a Federal budget that is uncertain, then you end up 

with State and local budgets with question marks throughout the 

line items. 

And so whether you are talking about the outside world, the private sector, or the Pentagon planner or States and localities, the 

more certainty the better. 

Senator King said something that I love and I think is true, but 

I am going to offer a cautionary tale about it. Are we now in a new 

norm of 2-year budgets? We did a Murray-Ryan deal in 2013. That 

was a 2-year budget, essentially a 2-year deal. The vote last week, 

a 2-year deal. That is great, and I have already been promoting, 

Mr. Chair, this is proving to the world that the Senator Enzis and 

others like us who support 2 years, we are normalizing the idea of 

a 2-year budget. Remember what it took to get each of them. The 

Murray-Ryan deal only worked after the two Houses each did 

budgets but refused a conference, and then the Government shut 

down because we got to the end of the fiscal year and there was 

no deal. And we had a 16-day shutdown because there was a refusal to do a budget conference. The end of that shutdown was an 

agreement to go to conference, and then that produced the 2-year 

deal. 

What produced this deal? Arguably, absent the unprecedented 

resignation of the most powerful member of the most powerful legislative body in the world, who was not in danger of losing a reelection and his party was not in danger of going into the minority— 

that has never happened before, that the number three person in 

line to be President has said, ‘‘I am tired of being the most powerful person in the most powerful branch in the most powerful Government in the world.’’ Absent that, we do not know whether we 

would have gotten a deal. 

So I like the idea that we have maybe normalized 2-year deals, 

but I am not sure we can count on something as extraordinary as 
185 

a Government shutdown or a resignation of a powerful person to 

push us to do something. So that is why I think we have to normalize it through legislation. 

The last thing I will say is this: There are different ways to do 

this, and, Mr. Chair, I think a 2-year budget is a good thing if we 

do 1-year appropriations. I think it is a good thing if we do 2-year 

appropriations. I think it is a good thing if we do staggered 1-year 

appropriations of the kind that you have suggested. And what I 

worry a little bit is we will all have our own preferences about it, 

and then a strong consensus behind 2-year budgeting could get diluted because of the different ones. You know, if I was just thinking this is kind of a game theory problem, I would hope for a bill 

on the floor that would be the one that would compel the greatest 

number of votes, and I suspect that would probably be 2-year budget, 1-year appropriations, just because of the testimony of folks like 

Senator Cochran. I think that we could pick up some appropriators 

that might otherwise have worries. 

Then you do floor amendments. You do a floor amendment about, 

okay, let us consider 2-year appropriations but staggered, or let us 

consider straight 2-year appropriations and we see whether we can 

amend the bill and get to, you know, plus 60 for a 2-year bill. But 

I hope we do not—I think the votes are here to do a 2-year budget. 

I hope we do not dilute down into subgroups over exactly how we 

do it and then whittle away the momentum that we picked up because we have done two 2-year budgets in a row. 

So I really am glad you are doing this reform hearings and you 

are particularly focused on this, and I am going to vote for 2-year 

budgets of all—you know, reform bills of all flavors until we get 

one passed. So thanks, Mr. Chair, and thank you to you all for 

coming and offering your perspective on this. 

Chairman ENZI. Senator King. 

Senator KING. Before we close, Mr. Chair, I just wanted to follow 

up on Senator Kaine’s— 

Chairman ENZI. As the Ranking Member of this, you have that 

right. 

Senator KING. Yes, thank you. 

[Laughter.] 

Senator KING. My fame eluded me for a moment. 

I was going to ask the Chair, are we at a place where we can 

do a markup and move a bill? I think there is some momentum developing here. 

Chairman ENZI. We are getting close. We have one more hearing 

on budget reform yet that could play into coming up with something more concise for this. That could be soon, and then we need 

to do that. 

Senator KING. Good. I certainly would be supportive, and thank 

you. 

I just had one other observation, as we were discussing it, and 

I think Mr. Bixby made this point but it needs reemphasizing. We 

are fighting over a smaller and smaller share of the budget. It is 

under a third now. If you count tax expenditures, it is more like 

28 percent, approaching 25 percent, or will be in a couple years. So 

all the drama is around 25 percent of the budget, and there is virtually no discussion of the other three-quarters. And I think as we 
186 

talk about this budget issue and deficits and the fiscal issues, we 

really need to take cognizance of the fact that we are just not even 

talking about three-quarters of the budget, and that is the threequarters that is growing. We have all in the Armed Services Committee, discretionary spending, either defense or nondefense, is declining as a percentage of GDP. It is the lowest it has been in 50 

years. 

So we have to sort of shift this discussion, it seems to me, to talk 

about the whole budget, including tax expenditures, which now, by 

the way, equal the entire discretionary budget, $1 trillion a year, 

and the parts that do not get any review. 

So, anyway, Mr. Chairman, I am delighted to work with you and 

continue the work of this Committee. I think it is very important. 

Thank you. 

Chairman ENZI. Thank you. 

Senator Whitehouse, did you have an additional comment you 

wanted to make? 

Senator WHITEHOUSE. No. I think I am fine. I am just interested 

in hearing what my colleagues had to say. I think this is a really 

noteworthy discussion. I think the work on this Committee to try 

to reboot itself and make itself relevant again is important. 

Mr. BIXBY. Can I say something, Mr. Chairman? 

Chairman ENZI. Sure. 

Mr. BIXBY. I just want to—I have testified a lot. I think this is 

just—I have noticed such a terrific bipartisan nature to this hearing, I think thoughtful, cooperative questions on both sides, people 

trying to find some way that might work. And I think that is terrific, and I want to commend the Budget Committee for the way 

in which the hearing was conducted. 

Chairman ENZI. Well, thank you, and I appreciate all the great 

ideas that have been thrown out, a whole number of different ways 

that we could do biennial budgeting or budgeting. And I have got 

to say I have been pretty frustrated with the whole process. It begins with the Office of Management and Budget doing a budget, 

but quite often, if that President is not from the same party as the 

Chair of the Budget Committee, it was kind of a worthless exercise. 

And more so than that, from my experience on the Budget Committee, we usually do opening statements and then we get to see 

the budget. I reversed that this year, and you actually got to see 

the budget beforehand. I wanted to even give more advance, but 

was hoping that we could have some kind of a pre-filed amendment 

process, which is normal in the other committees. 

So there are a lot of things that we can do to make this process 

a lot better. We did not even get into capital budgeting or regulation budgeting or it was mentioned but now how we would actually 

do the Government Performance and Results Act, which has been 

around for a long time. That is where every agency is supposed to 

say what they are going to do and how we will know if they got 

it done. And then we are supposed to review that and see if they 

actually did it. 

So there are a lot of tools out there that I think we could impose 

or use, so I hope that will come out of the process. And we will get 

into more of the solutions in our next hearing. 
187 

Thank you for your testimony, and we do have a system where 

Senators can ask questions for the record until 6:00 p.m. today that 

will be sent to you that we hope you will provide us with some 

speedy comments on. And the same applies to the Senators and the 

Congressman that spoke earlier and provided testimony. 

So, with that, thank you, everybody. Even though it is small attendance, I think we got a lot accomplished. The meeting is adjourned. 

[Whereupon, at 12:10 p.m., the Committee was adjourned.] 
188 
(189) 

MOVING TO A STRONGER ECONOMY WITH A 

REGULATORY BUDGET 

WEDNESDAY, DECEMBER 9, 2015 

UNITED STATES 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, and 

Whitehouse. 

Staff Present: Eric Ueland, Majority Staff Director; and Warren 

Gunnels, Minority Staff Director. 

OPENING STATEMENT OF CHAIRMAN ENZI 

Chairman ENZI. Since it is 10:30, I will call to order this hearing 

of the Senate Budget Committee. Our topic today is ‘‘Moving to a 

Stronger Economy with a Regulatory Budget.’’ It is the last hearing 

of the year, and it is a fitting end to a very eventful year for the 

Budget Committee. 

One of the usual customs that goes along with the new year is 

reflecting on the old and bringing in the new. First, the old. This 

hearing in many respects is an extension of the June 23rd joint 

hearing the Committee held with the Homeland Security and Governmental Affairs Committee. That hearing, the first joint hearing 

between the two Committees in 30 years, discussed the need for 

the Budget Committee to measure the regulatory costs of the economy and explore different accounting methods to control those 

costs, including a regulatory budget. 

Also a first, the head of Canada’s Treasury Board testified about 

their successful one-for-one red tape reduction effort which they enacted into law earlier this year. 

Now, the new. In the new year, one of the Committee’s goals will 

be to focus on the dangers that high regulatory burdens pose for 

our ability to sustain economic growth and fiscal health and on 

how Congress can exercise more effective authorization and oversight of the regulatory agencies. With our almost $19 trillion in 

debt, we cannot afford to accept the notion that we are entering 

into what some call the ‘‘new normal’’ of anemic economic growth. 

Maybe better guidance by Congress will help lift some of the regulatory drag on the economy and put an end to this view that we 

have no choice but to grow slowly. 

I am looking forward to hearing from our witnesses today their 

ideas and suggestions on how we should move forward. According 
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to the Congressional Budget Office, the potential growth rate of our 

economy, or the rate of growth that is possible given the education 

of workers, the quality of capital equipment, and the business formation rate, averaged 3.3 percent from 1950 through 2014. This 

concept of potential growth may seem a little strange, but it means 

about the same when we talk about a person or group of individuals achieving their potential. When we do not achieve our potential as a group, we begin to look for reasons why, and that is what 

we are doing now about the U.S. economy. 

The potential growth rate of the U.S. economy has been dropping 

steadily since 2002. Indeed, from 2008 through 2014, it averaged 

1.4 percent. CBO now expects the annual rate to remain significantly below its long-term average and to fall to 2.1 percent for the 

period of 2015 through 2025. That is a 36-percent reduction in the 

long-run average potential growth rate of the economy. 

Why is this so critical? According to the President’s own Office 

of Management and Budget, a 1-percent increase in the economy’s 

annual growth rate will yield more than $400 billion in new revenues for the Government without raising taxes. But when the 

growth rate falls, when we grow more slowly than we could and we 

are not meeting our full potential, Government revenues also fail 

to keep up with budget projections. So what happens when the 

Government revenue comes up even shorter in the face of growing 

overspending? More borrowing, more overspending, expanded debt. 

The effects of regulation can be seen every day in my home 

State, not as fluctuations in statistical data but in lost jobs and in 

the concerns that people have about the future of their communities. The EPA’s crusade to keep coal in the ground is already 

costing hundreds of jobs in my State and will cost my State and 

this country billions of dollars. At the end of July, Wyoming had 

15 percent fewer energy industry jobs than it did a year earlier, according to the U.S. Department of Labor and Labor Statistics. 

Since 2012, two EPA rules—the Mercury and Air Toxic Standard 

Rule and the Ozone Rule—are estimated to cost tens of billions of 

dollars. The two rules do not even include the final rule of the 

Clean Power Plan. With an estimated price tag of at least $366 billion, the Clean Power Plan will not only devastate the energy industry by mandating unrealistic carbon reductions, it will also 

squeeze American families’ checkbooks by causing double-digit electricity rate increases in more than 40 States. And that is just a few 

of the major rules recently announced. 

The Senate exercised its power under the Congressional Review 

Act an unprecedented four times this year by voting to disapprove 

four different agency rulemakings: the National Labor Relations 

Ambush Elections Rule, the EPA’s Waters of the U.S. Rule, and the 

Greenhouse Gas and the Carbon Limits Rules on utilities. 

Congress is also trying to control the agencies through the annual appropriations process, but stopgap efforts to address problems once they have been created are not the answer. We need fundamental reforms to rebalance and fix the authorizing and budgeting authority Congress has over agencies. 

Over 35 years ago, on the Joint Economic Committee, Chairman 

Lloyd Bentsen asked a fair question at the first Senate hearing on 

regulatory budgeting. He said, ‘‘What is so different about pre-
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paring a regulatory budget from preparing a fiscal budget?’’ As an 

accountant, I know firsthand how effective a sound budget process 

can be, not just to provide discipline against overspending or overregulation, but to provide a path forward for success and prosperity. I look forward to hearing a discussion about this more 

today. 

I would yield to Senator Whitehouse. 

OPENING STATEMENT OF SENATOR WHITEHOUSE 

Senator WHITEHOUSE. Thank you, Chairman. I guess as the only 

Democrat present today I am standing in for our Ranking Member, 

and I would like to make a brief opening statement, and let me 

open with a word of gratitude for regulation. 

Medicines are not snake oil mysteries any longer. People are 

rarely burned or killed in boiler explosions. Automobiles have air 

bags. Smokestacks have pollution controls. Stock jobbers have a 

harder time gulling innocent investors. Most insurance policies actually pay when the insured risk occurs. Quacks and barbers cannot be doctors. 

We too often take for granted the safety and reliability that a 

regulated world has built. We also take for granted how regulation 

helps advance our economic progress. Regulation helps channel 

America’s competitive enterprise into good and helpful innovations 

instead of into new tricks and traps for consumers or new ways of 

cutting safety corners. Confidence in our industries grows when 

consumers know they can count on the safety and reliability of the 

product. 

Ask yourself, Would the American pharmaceutical industry be a 

world powerhouse if patent medicine hucksters were still allowed 

to operate? Regulation sets a positive frame for economic progress. 

Where there are common goods we share, like the clean streams 

of Wisconsin, like the sparkling oceans of Rhode Island, or the 

unpolluted skies of Wyoming, there is a perverse economic incentive to abuse that resource, leaving all of us poorer. This is the 

principle famously described in Garrett Hardin’s ‘‘Tragedy of the 

Commons.’’ Regulation is what constrains this perverse economic 

incentive and protects our precious common resources. 

If we are to look at a regulatory budget, it should be incumbent 

upon us to look both at the costs and the benefits of regulation. 

Otherwise, it is not a sound budget process, no more than a budget 

process that looks only at expenses and not income would be a 

sound budget process. Without looking at both costs and benefits 

of regulation, all we would be doing here is putting a thumb on the 

scales in favor of the big industries that create hazardous pollutants, that create dangerous chemicals, that create risky financial 

products, and that create unsafe consumer products. 

It is really important that we look at both sides of the ledger. 

Otherwise, this entire process is not actually a process in budgeting. It becomes only a process in creating talking points for the 

big industries as they try to subvert the regulations that keep 

America safe. 

Thank you, Mr. Chairman. 

Chairman ENZI. Thank you, Senator Whitehouse. 
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The task for today is to discuss how to make the economy stronger through regulatory budgeting. Federal regulations are threatening to overwhelm our struggling economic recovery. Today’s 

hearing will focus on moving the Committee and Congress to a 

long-run goal of greater annual oversight of Federal agency regulatory priorities. 

We have three expert witnesses with us today that have volunteered their time and expertise to help us with our work, and I 

would mention that with the education bill that is going on today, 

we might not have many here, but we always invite them to ask 

questions as well which would be sent to you, and we would ask 

for you to respond to those. 

Our first witness today will be Dr. John Graham, who is the 

dean of the School of Public and Environmental Affairs at Indiana 

University in Bloomington. Dr. Graham leads the two-campus, $50 

million professional school with programs in public affairs, environmental science, and nonprofit management, among others. Dr. 

Graham served as the head of the Office of Information and Regulatory Affairs from 2001 to 2006. He is also well known as the 

founding director of the Center for Risk Analysis at Harvard’s 

School of Public Health. 

Dr. Jerry Ellig is a senior research fellow at the Mercatus Center 

at the George Mason University where he is a member of the graduate faculty in the College of Humanities and Social Sciences. In 

addition to teaching, Dr. Ellig has worked at the Federal Trade 

Commission, serving as Acting Director in 2003. He is an author 

of several books and articles, including reviewing the performance 

of the Government Performance and Review Act, or GPRA. He 

holds a Ph.D. in economics from George Mason University. 

Robert Verchick holds the Gauthier-St. Martin Eminent Scholar 

Chair in Environmental Law at Loyola University in New Orleans 

and is the faculty director of the Center of Environmental Law at 

Loyola. He is also a senior fellow in disaster resilience leadership 

at Tulane University, and he is the president of the Center for Progressive Reform. In 2009 and 2010, he served in President Obama’s 

administration as Deputy Associate Administrator for Policy at the 

U.S. Environmental Protection Agency. He helped develop the climate adaptation policy for the EPA and served on President 

Obama’s Interagency Climate Adaptation Task Force. 

Dr. Graham, you can begin. We may have to recess to do a quick 

vote, but we will continue the process and get finished up. Dr. 

Graham. 

STATEMENT OF JOHN D. GRAHAM, PH.D., DEAN, INDIANA UNIVERSITY SCHOOL OF PUBLIC AND ENVIRONMENTAL AFFAIRS 

Mr. GRAHAM. Thank you, Mr. Chairman. Our topic today is a 

promising reform of the Federal regulatory system called the ‘‘regulatory budget.’’ 

In the late 1970s, when the regulatory reform movement began 

to gather steam, reformers noticed an oddity about how the Federal 

Government operates. If the costs of a Federal program are incurred within the Federal budget, then those costs are subject to 

scrutiny in the normal congressional appropriations process. But if 
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instead Federal agencies impose costs on the private sector or on 

State and local governments, those costs are ‘‘off budget’’ and, thus, 

are not considered a part of the Federal budgetary process. Why, 

reformers asked, should $1 billion in compliance costs on investors, 

workers, and consumers be treated differently than $1 billion in 

Federal budgetary outlays that are typically financed by taxpayers? 

Congress imposes annual limits on these appropriations but not 

on these regulatory costs. So what is the idea of a regulatory budget? The basic notion is that Congress would place annual limits on 

these off-budget regulatory expenditures through a process similar 

to what is currently used to define appropriations for agencies. 

Step 1, agencies request a regulatory budget from OMB within the 

executive branch for the forthcoming fiscal year. Step 2, OMB, representing the President and the agencies, would make a regulatory 

request to Congress for the Federal Government as a whole and for 

specific departments and agencies. Step 3, Congress would make 

the final decisions regarding the regulatory budget, first in committee actions and then in floor actions. The regulatory budget is 

enacted by the Congress, is defined in monetary units that represent the costs of regulation. 

Now, what would be the advantages of this type of system? The 

first point is that this process of setting an annual regulatory budget would force the Members of Congress, who oftentimes do not like 

to take difficult votes, to accept accountability for regulatory costs, 

both the costs of individual agencies and programs and the overall 

magnitude of regulatory burdens on the economy. 

Second of all, the regulatory budget would induce a competition 

between new regulatory proposals, since the budget may not be 

large enough to support all of the new proposals supported by regulators. By setting priorities among these worthy proposals, the regulators will work to advance the best proposals and drop the weaker ones. As a result, new regulations under a regulatory budget are 

expected to be more effective and more cost-effective than they 

would be without a regulatory budget. 

Finally, budget limitation creates an incentive for agencies to 

streamline or reduce waste in the existing regulatory programs, 

since those savings can be used, under the regulatory budget, to finance promising new regulatory proposals. Thus, if an agency is already at its cap with a regulatory budget, the agency can still move 

forward with a promising new regulation if the savings from the 

rescission or modernization of an existing regulation are adequate 

to pay for the new rule. 

There are some myths about a regulatory budget that I would 

like to discuss. 

One is this idea that a regulatory budget is not feasible because 

nobody knows what the existing costs of regulations are. There is 

an element of truth to this argument; that is, the thousands of existing regulations now in operation, nobody has ever touted up 

whether these regulations work or how costly they are. It is, however, feasible to do on an annual basis a prospective, incremental 

regulatory budget, and the costs of those rules are already being 

estimated in the Federal review process supervised by OMB. 
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The second myth is the idea that a regulatory budget is unnecessary. Because OMB is already reviewing all these regulations for 

costs and benefits, what do we need a regulatory budget for? 

The truth be told, the tenacity of OMB’s review process varies 

not only from administration to administration, but even from rule 

to rule, depending on the preferences of the White House. In some 

cases, agencies and OMB do not consider costs and benefits because of statutory preclusions or because of public opinion or interest group pressures. A regulatory budget would constrain burdens 

in situations where the executive branch is disinclined to constrain 

burdens. 

The third myth I want to address is this idea that a regulatory 

budget looks only at the cost of regulation and ignores the benefits. 

The key point to remember is that in the argument on behalf of 

raising a regulatory budget, the regulatory agency introduces their 

information on benefits, whether it be lives saved or environmental 

protection or consumer protection. That is the currency of the argument in OMB. Just on the budget side, when agencies ask for more 

appropriations or more spending, they make arguments based on 

benefits of those programs for why they are seeking to have a higher budget. So there is no difference between a regulatory budget 

and a regular appropriations budget with the role of benefits information. 

Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Graham follows:] 
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Chairman ENZI. Thank you. 

Dr. ELLIG. 

STATEMENT OF JERRY ELLIG, PH.D., SENIOR RESEARCH 

FELLOW, MERCATUS CENTER, GEORGE MASON UNIVERSITY 

Mr. ELLIG. Thank you, Chairman Enzi and members of the committee, for the opportunity to appear here today. 

I work at a university. That means I am in favor of knowledge 

and I am against ignorance. I think regulators and legislators have 

a moral responsibility to make decisions about regulations based on 

actual knowledge of regulations’ results, not just on hopes or intentions. 

Effective budgeting of tax dollars in the Federal budget or effective budgeting of social costs in a regulatory budget requires knowledge of the results of regulations and programs. And a decisionmaker’s failure or refusal to acquire this knowledge is a willful decision to act based on ignorance. 

To try to promote knowledge and to try to combat ignorance, over 

the past 15 years the Mercatus Center at George Mason University 

has run two research projects to evaluate the quality of information 

about results that Federal agencies produce. The first we called the 

‘‘Performance Report Scorecard.’’ This was a project we ran between 1999 and 2008 that evaluated the quality of the annual reports that Federal agencies are required to produce under the Government Performance and Results Act, and our evaluation criteria 

were based on the criteria in GPRA. 

What did we learn from this project? Well, the information about 

the results of Federal programs did improve over this period, but 

it required a full-court press by the Office of Management and 

Budget and, in particular, by an Associate Director for Management who had a very close relationship with the President and the 

President’s full backing. We found that results information did affect some decisions in agencies. There is evidence that it affected 

some Presidential budget recommendations. But the use of results 

information in budgeting foundered when the Appropriations Committees made it clear that they did not want the information and 

did not plan to use it. 

One Appropriations Committee told a Federal agency essentially, 

‘‘If you are going to continue this wasteful practice of trying to include results information in your budget submission, we will assume you have excess resources, and we will budget accordingly.’’ 

And this was in a Congress controlled by the President’s own 

party. 

The next evaluation project was the Regulatory Report Card. Between 2008 and 2013, we looked at the quality of regulatory impact 

analysis conducted for every proposed prescriptive—that means 

non-budget regulations— economically significant regulations between 2008 and 2013 according to criteria laid out in the Executive 

orders and OMB guidance. 

We found that the quality of this analysis is highly variable. 

There are some good ones, but on average, I would give a lot of 

them an F. In 60 percent of the regulations we looked at, the agency made no claim to have used the analysis to make any decision 

about the regulations. We found that review by OIRA does help im-
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prove the quality of analysis, but the end result still falls far short 

of what you would expect if you read the requirements in the Executive order and in OMB guidance. 

In about half of the regulations we looked at, statute required 

the agency to issue a regulation. Congress made the decision to 

regulate. But Congress currently has no system for conducting rigorous analysis of the problem and alternative solutions before it 

passes regulatory legislation. 

A couple of examples I can give you with some of these regulations. I have seen a regulation on catfish inspection that extrapolated the benefit—that created a benefit estimate by extrapolating 

from the incidence of salmonella on chicken because there was only 

one instance in recent years of salmonella infection that might be 

linked to catfish. Yet we used chicken instead of catfish—the other 

white meat. 

I have seen a regulation in which the accompanying analysis presumed that half of the benefits come from preventing injuries to 

blind bicyclists. This was a regulation requiring hybrid vehicles to 

make more noise so that people who are vision impaired can hear 

them. It makes sense if you are talking about pedestrians. It does 

not make sense if you are talking about bicyclists. 

I have seen energy efficiency regulations that assume that 

greedy businesses, not consumers but greedy businesses, when they 

buy things like washing machines and refrigeration equipment do 

not understand their own financial self- interest, and so they have 

to be forced to do things that are in their own financial self-interest. 

If you remember only three things from my testimony and my 

written testimony, remember this: 

First off, regulations do not enforce themselves, and neither do 

requirements for analysis. Regulatory agencies need stronger incentives to focus on results, conduct high- quality analysis, and explain how they use the analysis. What is sauce for the goose is 

sauce for the gander. If Congress is going to make decisions about 

regulations and appropriate money to regulatory agencies and authorize regulations, Congress needs a system to ensure that it has 

high-quality analysis of the likely effects of regulations. 

And, finally, ignorance is not bliss. It is a sin. There are a lot 

of important values at stake when we regulate, and given the importance of values, decisionmakers, regulators, as well as legislators ought to be acting based on genuine knowledge of regulations, 

likely results, and the results that a regulation has already accomplished. That is why the real choice in the debate over regulatory 

reform and the real conflict should not be Republicans versus 

Democrats, should not be business versus the public. It should be 

knowledge versus ignorance. And I urge all of you to choose knowledge. 

[The prepared statement of Mr. Ellig follows:] 
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Chairman ENZI. Thank you very much. 

Dr. VERCHICK. 

STATEMENT OF ROBERT R.M. VERCHICK, GAUTHIER–ST. MARTIN CHAIR IN ENVIRONMENTAL LAW, LOYOLA UNIVERSITY 

NEW ORLEANS 

Mr. VERCHICK. Chairman Enzi, others present, thank you for inviting me here today to share my concerns about regulatory budgeting and to explain why I think this strategy could deprive Americans of common-sense protections while producing no overall benefit to the economy. 

As a former EPA official, I am proud of the achievements of our 

regulatory agencies. And as a law professor, I know there is still 

room to improve. But regulatory budgeting, which essentially puts 

a lid on the quantity of regulation produced each year, is the wrong 

approach. 

It first fails to credit the regulatory system for the amount of 

good, the enormous amount of good that it does, and it would ration that good just when technologies create a larger need for it. 

It would also hamstring the Government with legal and political 

complexities, and it would, last, distract us from many effective reforms, which I will outline a little bit later. 

First, in contrast to what many say, there is no question in our 

country that our regulatory system benefits Americans immensely. 

Federal rules keep our air clean, our water drinkable, our workplaces safe, and our access to energy reliable. 

Government estimates have routinely shown—in the administrations of both parties—that the combined benefits of significant regulations far outstrip the costs. For significant regulations, OMB’s 

latest report shows that benefits exceed costs by seven to one. If 

you look at just a single statute, like the Clean Air Act, the ratio 

is 25 on the benefit side to one. 

But instead of trying to enhance this success, regulatory budgeting rations it. Instead of raising quality, it is interested in lowering quantity. Under regulatory budgeting, carrying out the will 

of Congress is subordinated to an arbitrary cap. And that is going 

to be a problem when we face a future with even more deepwater 

drilling, edible nano-particles, self-driving cars, and other advances 

that could be risky. 

Just as there is no end to what we can imagine or invent, there 

is also no end to the amount of good sense that we should expect 

of people along the way. Good sense in the form of reasonable 

standards is what allows society to innovate while at the same 

time remaining profitable and safe. 

To those who ask if we can afford to have more regulations like 

these, the simple answer is we cannot afford not to. Imagine that 

before you put a $20 bill in your wallet or your purse you had to 

first take out a $5 bill to make room for the $20 bill. Regulatory 

budgeting is just like that. It asks you to leave advances in public 

health, environmental protection, and money on the table. 

Second, a regulatory budget poses a series of legal and political 

problems. Setting the cap is a first challenge because advocates 

have no standard for determining the ideal amount of total compliance costs without referring to corresponding benefits. Once the 
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cap is set, you have got all kinds of legal problems. One can imagine legal challenges for arbitrary deletion of rules under administrative statutes, constitutional claims over delegations of authority, 

and the special problem, very familiar to me from my EPA days of 

court-ordered rules. And if you think that EPA can make room for 

a new court-ordered rule by removing an old rule, you need to consider that a lot of those old rules were also at one time ordered by 

courts. 

Add to that political battles over saving popular rules from the 

chopping block or shutdown threats that could arise over raising 

the ‘‘reg ceiling’’ to accommodate new must-have rules. And you 

could have many years of lawsuits and logjams to look forward to. 

Finally, regulatory budgeting would distract us from more effective reforms, like eliminating unnecessary ex ante analytical and 

procedural requirements, empowering agencies to emphasize backend adjustments in the implementation of completed rules, and empowering agencies to emphasize more flexible agency-driven reviews of their existing regulations and regulatory programs. And I 

expand on all of these in my written testimony. 

So thank you, and I would be pleased to answer any questions 

that you would have. 

[The prepared statement of Mr. Verchick follows:] 
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Chairman ENZI. Thank you. I want to thank all of you for your 

testimony and for your written testimony, all of which will be a 

part of the record. 

The vote is a 15-minute vote, and I think there are 2 minutes 

left, so I will have a recess while I go vote. 

[Recess.] 

Chairman ENZI. I call the hearing back to order. I said 5 minutes 

over and 5 minutes back. I guess it took me 1 minute longer than 

that. But I want to thank all of you for your testimony and what 

you submitted beforehand, some excellent suggestions and warnings, and mechanisms that we might be able to use. 

I would mention that there is another hearing going on at the 

same time, and it is on gun control, and apparently there are a lot 

more people who understand guns than regulations. 

[Laughter.] 

Chairman ENZI. So we will conduct this a little bit more perhaps 

conversational, and others will be able to submit questions, specific 

questions for you based on what they have read from the testimony. But I will start with Dr. Graham because it has been argued 

by some that, on average, Members of Congress lack the subject 

matter expertise sufficient to do a regulatory budget. Indeed, so 

this argument goes, one has to know how a regulation works, for 

example, a clean air regulation, technically and scientifically before 

you know whether it should go forward or how much money to 

spend on it. That is the evolution of our increasingly complex economy, is simply taking regulatory oversight and budgeting out of 

Congress’ hand and put them in the hands of experts working in 

the administration. It has pushed aside the lawyers, the business 

people, and even the two accountants who serve in 

the United States Senate, and it puts the scientists and economists in control of regulation. And it is a good idea to have people 

that have some expertise in charge of things, but technically we are 

the ones who assign regulations. And, increasingly, we have had 

less and less ability to have any input into those regulations. 

So one of the ideas that was suggested and even promoted by the 

Canadians based on their experience was having a regulatory 

budget. So how would each of you answer the critics of the type of 

budgeting the world is simply too complicated for people’s elected 

representatives to be involved in annually making budget decisions 

about major regulations? We will start with Dr. Graham. 

Mr. GRAHAM. Sure. I think the first thing I would say is that the 

regulatory budget idea I think envisions a more modest role for 

Congress because simply setting overall budget targets than the 

concept that Congress should vote on every single regulation. And 

there are proposals out there that suggest that Members of Congress should study—should be required to study every rulemaking 

or every significant rulemaking and they should vote on every single one of them. And I understand the sentiments behind that idea, 

but I do not think that that is practical in the way that our legislative process is set up. 

But I do think it is reasonable for Members of Congress to look 

at the information that agencies are providing for their performance, how well they have done in the past with their regulations, 

and what the benefits are prospectively of their new regulations, 
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and say, Is this an agency that we think should have a substantial 

regulatory budget or a smaller regulatory budget? And I think it 

is reasonable to expect Congress to do that. 

So it is a big difference between voting on every single regulation 

versus just setting the budget and letting the executive branch 

then move forward in the implementation of that budget. 

Chairman ENZI. Thank you. 

Dr. Ellig? 

Mr. ELLIG. Well, I think it is common sense to say that budgeting decisions, whether you are talking about tax dollars or social 

costs of regulation, that budgeting decisions ought to take benefits 

into account, as Senator Whitehouse said in his opening remarks. 

To me that is uncontroversial, and, heck, that is what I have been 

trying to do for 15 years, is improve the quality of information 

about the results of Federal programs and regulations. 

But I think that what members ought to ask themselves about 

every argument you hear against a regulatory budget, ask yourself, 

Is this also an argument against having a Federal budget for tax 

dollars? Because many of the arguments against a regulatory budget also imply we should not have a Federal budget for tax dollars 

either, Congress does not have the relevant expertise. Well, gee, to 

evaluate—to understand programs, you have to understand how 

the program works; you have to understand complicated chains of 

reasoning in order to understand whether the program is actually 

accomplishing results. 

Now, in reality, Congress does not have to know those things, 

but it does have to have access to good information about those 

things that is hopefully impartial and done by people with the relevant expertise. 

Here is why we have a Federal budget and a Federal budget 

process, and I think it is the same reason that you would want to 

have some kind of regulatory budget. Without a Federal budget, 

the process of appropriating is like a bunch of people who get together for dinner, sit around a table and agree they are all going 

to share the check equally. And if we are all sharing the check 

equally but I am ordering whatever I want, you can be if I know 

I am sharing the cost with everybody in the room, I am going to 

order the filet mignon, and I will be happy to get an extra bottle 

of wine toward the end of the evening. There is a difference in the 

type of discipline that people exercise when you are spending 

money or spending social resources and all of the costs are shared 

among the general population. 

The reason we have a Federal budget process is so that there is 

somebody—the Budget Committees—in charge of giving an overall 

look at everything and saying, okay, what is the limit on spending 

that we are going to have, and then we will divide that up among 

various priorities. And that prevents the appropriators from saying, 

well, gee, if you are—you know, if somebody else is sharing the 

cost, we will just kind of go and buy whatever we want. The same 

kind of logic applies to a regulatory budget. 

Now, I would be the first to admit, though, that the one argument I have heard about a regulatory budget that I think has 

merit is it is harder to count, reliably count social costs of regulations than it is to count tax dollars. And so a regulatory budget 
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may have to work somewhat differently than the budget for tax 

dollars. But that is a difference in how you implement the concept, 

not a problem with the concept of an overall limit set by some entity in Congress whose job is to look at the totals rather than be advocates for particular programs or regulations. 

Chairman ENZI. Thank you 

Dr. Verchick? 

Mr. VERCHICK. Thank you. I think it is a really good question 

that you ask, and it concerns me a lot because I agree with what 

I think your belief is, which is that Congress can certainly find the 

resources to understand these complicated problems and that the 

public engaged in the process politically also has the ability to understand what is at stake. 

What I fear is that this kind of budgeting process actually disarms Congress in a particular way. So, for instance, when Congress 

right now makes decisions about what the train—you know, what 

sort of safety we need on trains or in automobiles or whatever, and 

they issue statutes, and then the organizations, the agencies come 

up with rules as a result, and then, of course, there is congressional oversight over that and a tremendous amount of cajoling, 

lobbying, whatever you want to call it in the political spheres when 

agencies are making these decisions. 

Now, the problem, why I say that there is less accountability for 

Congress is that Congress is essentially saying to the agencies we 

think you have too many regulations, or you are destined to have 

too many regulations, so you go figure out which regulations we 

told you to initiate and find the ones you do not like and take them 

out, because all of the regulations that the agencies have enacted 

have been authorized by Congress. 

And so, you know, for instance, your constituents who may tell 

you that there are some unfair barriers to operating their businesses because of regulations, if that is so, I think that the right 

way to do it would be to look into those regulations, to find out 

what is going on and harming the constituents, see if they are 

right, and if they are, then make a move in Congress to change the 

authorizing statute. 

But if you vote instead for a budget, there is no guarantee at all 

that the people that you care about in your community are going 

to see any effect of that, because what are the odds that the particular rule that is posing a barrier to them is the exact rule that 

some agency is going to scrap in order to make room for a new one? 

I would just make two quick points. The Canadian example I 

think is really interesting, and I watched on video the Treasurer’s 

remarks, and I think it is an interesting plan. But one thing to 

keep in mind in comparing other plans is the Canadian plan really 

only applied to what he described, what the Treasurer described as 

‘‘red tape’’ on small businesses. And the large examples he brings 

up are regulations about scrapping a regulation that required national registration before you could put a kayak in the river. 

I am not so concerned with those kinds of regulations in the 

sense that I am much more concerned with regulations in my community outside of New Orleans, for instance, where the EPA just 

created a new regulation to keep benzene from billowing out in 

clouds over communities from oil refineries. My neighbors, just 
225 

miles away from there, they see that regulation not as something 

onerous or burdensome. they see that as an improvement to their 

lives. 

The very last thing about the budget, I think it is a fair question 

to say, well, should we not be aware of the amount of cost that we 

are shifting from one group to another? And I say it that way because before the oil refinery rule, the cost was borne by those poor 

and mainly African American communities in those neighborhoods. 

The cost was waking up in the middle of the night choking and 

having to go to an emergency room. Now the cost of that is shifted 

to compliance on the part of refineries. And so the cost is always 

there. It is just a question of who is going to bear that cost. 

But I would suggest that we think every day about the affordability of compliance rules. Congress does not pass a single act, I 

am sure, without hearing from groups about what the expenses are 

going to be. In almost every authorizing statute I can think of, at 

least under the EPA, costs of compliance are baked into the system, either in implementation or in writing the standard or in 

some other way. It is not fair to say that affordability is never a 

concern. Affordability is always a concern. My only point is that 

once we find that rules are affordable and that they produce net 

benefits in health, environment, and other things, it is a mistake 

to say of those successful rules, we will only choose a single one. 

We should choose them all, because we are better off with all of 

them than with just one of them. 

Chairman ENZI. Thank you. I have exceeded my time. I am not 

sure if Senator Whitehouse is ready to ask questions. He was here 

at the sound of the gavel. 

Senator WHITEHOUSE. Ready to go if it is my turn, but I am 

happy to defer to Senator Crapo. Why don’t we let Senator Crapo 

go? He was here, and I just got here. 

Chairman ENZI. Senator Crapo. 

Senator CRAPO. Thank you, Mr. Chairman. I just have a couple 

of questions, and I am conceptually interested in how this is going 

to work if we were to do something. 

Let us assume that Congress were to pass a law that created a 

regulatory budget, which means that we say that all of the regulations—maybe I am not even describing it right—that all the regulations in the United States can only cost X dollars, and then that 

is allocated to the various agencies. Is that how a regulatory budget in concept works? 

Mr. GRAHAM. That is one variant, but it is the more complicated 

one. 

Senator CRAPO. Tell me a simpler one. 

Mr. GRAHAM. The simpler one is you look for the next year, and 

Congress would say this is the amount of regulatory cost that you 

are allowed to impose for the next year. 

Senator CRAPO. Okay. 

Mr. GRAHAM. You do not have to quantify all the existing ones. 

You see the difference? 

Senator CRAPO. All right. Yes. Let us take the simpler version. 

Who decides whether the agency has exceeded the budget? How is 

that calculated? 
226 

Mr. GRAHAM. Right. There either needs to be an executive 

branch process through OMB where the cost estimates of the agency are certified, or there needs to be a parallel process at CBO or 

a CBO-like organization that would do the same thing, or both. 

Senator CRAPO. Okay. So if I understand you right, the agency, 

at least in the approach that you just described, the agency would 

get the first cut at it with their estimate, but either the CBO or 

GAO or— 

Mr. GRAHAM. Or OMB. 

Senator CRAPO. Or OMB would validate that. And what I am 

getting at here is the potential for gaming the analysis, because I 

personally think we see a lot of that. So it ultimately in my mind 

comes down to whoever the final decisionmaker is making sure 

that there is a system of accountability for the right kinds of analysis. I definitely personally would not like to see the agency be its 

own watchdog. So I like the idea of having some other entity do the 

cost analysis. 

But is there a way—I guess my next question then is: Do we 

know how to do that? 

Mr. GRAHAM. Now, just a reminder that we do this on the budget 

side. 

Senator CRAPO. I know we try. 

Mr. GRAHAM. Okay, and we have a Congressional Budget— 

Senator CRAPO. This is why I am suspicious. 

Mr. GRAHAM. We have a Congressional Budget Office, and when 

I was in the administration from 2001 to 2006, we would float up 

proposals of how much it would cost in the budget if we were to 

make certain changes, say, in the Medicare prescription drug benefit or whatever it was. But then CBO would run off and do their 

own analyses, okay? And oftentimes they would call us on, in their 

view, we made errors or we low-balled or whatever it is, and so 

forth and so on. 

The first thing I want to say is there is nothing intellectually or 

qualitatively different about what we are talking about, what happened under our regulatory budget, than what we are already 

doing on the budget process. 

Senator CRAPO. All right. So let me ask just another couple of 

questions, because my time is already starting to run out. When 

the agency, which would presumably in this process take the first 

cut at it, when the agency puts out its analysis, does it do a costbenefit analysis and subtract the benefits of the rule from the costs 

of the rule? 

Mr. GRAHAM. There are variants of the regulatory budget that 

propose that that be done that way. That is not what I would argue 

is the preferred approach to it. But if you wanted to structure it 

that way, you could. 

Senator CRAPO. Would you say the preferred approach is to simply identify the cost? 

Mr. GRAHAM. Exactly, like you do in the budget side. 

Senator CRAPO. And that cost would be the dollars that would be 

expended by the economy to comply with the rule. 

Mr. GRAHAM. Correct. And the benefits are the way the agency 

argues for why they should get permission to impose— 

Senator CRAPO. To impose those costs. 
227 

Mr. GRAHAM. Right. 

Senator CRAPO. All right. I guess then the last question would 

be—I would like to shift a little bit to the one-in/one-out system 

that Canada has tried. That is one that has been talked about a 

lot. I would just love to have each of you give us quickly—I have 

only got 45 seconds, so if you could each take 15 seconds and give 

me your impression of what Canada is doing there. 

Mr. GRAHAM. Well, I think the key thing to remember is that the 

metric is not overall regulatory cost. The metric is paperwork burden or think of it as red tape. But you could design the whole regulatory budget just around paperwork burden and information collection, and you could achieve a lot of the benefits of a regulatory 

budget through that process. 

Senator CRAPO. All right. 

Mr. ELLIG. It should not be hard, at least in the initial years, 

under one-in and one-out to find a few regulations that do not accomplish much and are kind of costly. At some point in the future, 

you might have to ask whether that is the best way to do it, but 

at least initially there are probably a few things that could go. 

Senator CRAPO. Okay. 

Mr. VERCHICK. The main difference with the Canadian system is 

it does not apply to public health, to environmental regulations, or 

safety regulations, which I think is a positive thing, because those 

actually are protections to real people, and to take them away is 

a problem. 

Senator CRAPO. All right. Thank you very much. 

Chairman ENZI. Senator Whitehouse. 

Senator WHITEHOUSE. Thank you, Chairman. 

Would all of the witnesses agree that there are regulations whose 

benefits exceed their costs? 

Mr. GRAHAM. Absolutely. 

Mr. ELLIG. For sure, but we do not always know which ones. 

Mr. VERCHICK. Yes. 

Senator WHITEHOUSE. And would you even agree that there are 

regulations for which the benefits so exceed the costs that it is really clear that the benefits exceed the costs? 

Mr. GRAHAM. Yes. 

Mr. ELLIG. Conceptually, yes, not making any commitment on 

any particular regulations. 

Senator WHITEHOUSE. Did not ask that. 

Mr. VERCHICK. Yes, the air regulations are a good example of 

that. 

Senator WHITEHOUSE. Yes. And we have a phrase that we use 

very often called ‘‘cost-benefit analysis.’’ Will you all agree that we 

use that phrase ‘‘cost-benefit analysis’’ because the cost comparison 

to a benefit is a relevant comparison? 

Mr. GRAHAM. I try to persuade my students that it is more than 

a phrase, that it is actually an analytic tool. 

Senator WHITEHOUSE. But you agree? 

Mr. GRAHAM. Yes. 

Senator WHITEHOUSE. Dr. Ellig, yes? 

Mr. ELLIG. Yes. 

Mr. VERCHICK. Yes. 
228 

Senator WHITEHOUSE. Okay. So there are some basics. And if we 

were to look at things that companies have to report, for instance, 

statements of assets and liabilities, or statements of income and expense, if a company were to omit the assets or omit the income and 

just report the liabilities or just report the expense—actually, it 

would probably be the other way around—and you filed that with 

the SEC, for instance, you would be in trouble. It would be dishonest, and you would be violating our disclosure laws, correct? 

[Witnesses nodding heads.] 

Senator WHITEHOUSE. Yes. Let the record reflect three yeses. 

Mr. GRAHAM. As much as I know about that law, yes. 

Senator WHITEHOUSE. Great. Okay. So here is my problem with 

where we are. Out there in the regulatory world, there are regulations and there are costs of compliance and there are benefits that 

emerge, and undoubtedly there are times when it is inefficient or 

obsolete. Got it. 

I live in a smaller world. I live in Congress world. And in Congress world, we deal with the forces that do not want there to be 

regulation at all. They are interested selfishly in their own costs 

and have zero interest in the benefits that accrue to the general 

public versus their balance sheet. And we see that over and over 

and over again in industry studies on environmental and other regulations that do exactly that. They only report the industry costs. 

They do it over and over again. We have even heard that done here 

today. Over and over again you hear only the cost. And that is a 

weapon in the battle here in Congress world where corporations try 

to get out from under regulations. And my worry is that—and I 

will make one other observation. 

Over and over again we hear about how important it is to lower 

the burden of regulation, excessive regulation, burdensome regulation. These have become catch phrases. And yet virtually every 

time we actually take up anything that would reduce the burden 

of regulation, it is always the same stuff. I is always Wall Street 

and polluters. We hear about burdensome regulation across the 

board, but I have never seen a list, let us get together, Democrat 

and Republican, let us look at what is really burdensome, let us 

look at what is obsolete, let us look at what is excessive, let us look 

at what is unnecessary. No. As soon as you pull back the curtain 

that says burdensome regulation, you see the same creatures: Wall 

Street trying to get out from under regulation, and polluters trying 

to get out from under regulation. And over and over again we have 

had headlines this year saying, you know, GOP moves to attack 

Dodd-Frank and EPA regulations. That is what I see. That is the 

world I live in. 

And so I am very worried that a mechanism that looks only at 

costs not only is wrong from a point of view of cost-benefit analysis, 

but also is a tool designed to be used by the industries in Congress 

world in their fight against regulation. And I guess I will give you 

a chance to react to whether you think a cost-only analysis would 

be amenable to that type—would it be an abuse of your analysis 

to be used for those political purposes? 

Mr. GRAHAM. The first point I want to make is that there are 

proposals in the literature for a regulatory budget to operate on 

benefits minus costs, so it would be formally in the calculation. So 
229 

if that is what you want, you can design a regulatory budget system to do that. 

The second, more important point I want to make is on the budget side right now, when OMB makes a request to the Congress for 

the budget for a program or agency, in the narrative of the justification are benefits. The ask is just for the authorization to 

spend. The regulatory budget would proceed the same way. The 

limitation is on the regulatory burden, but the rationale and the 

evidence that is provided to the Congress is benefits. So benefits 

are really a central part of this process. 

So I think that everything you are talking about is going to—all 

this stuff about the industries not wanting any regulation, that is 

going to be true with or without a regulatory budget. 

Senator WHITEHOUSE. True. But I guess I would conclude by saying if a regulated industry were to use the cost analysis without 

taking into account benefits, you would view that as an abuse of 

the budget— 

Mr. GRAHAM. Right. But all the staffers and all the members, 

they have got the request right there from OMB, and they see all 

the benefits. It is right there in the documentation. 

Senator WHITEHOUSE. Got it. Well, that is helpful to clarify. I appreciate the Chairman allowing me to go over the time a little bit, 

and I thank the witnesses for being here. My time is over. 

Chairman ENZI. Well, thank you, and I appreciate a lot of the 

points that have been made here today. I want to pursue the Government Performance and Results Act a little bit more since I have 

an expert on that here and others who are very knowledgeable on 

it as well. 

One of the things that—well, when I was running for office for 

the very first time, people said, ‘‘You know, there ought to be some 

way we can tell what the agencies think they are doing and whether they get it done or not.’’ And I said, ‘‘You know, if I go to Washington, I am going to put something in that will cause that to happen.’’ And I got back here and got to reviewing it, and I found out 

there was already this law in effect called the ‘‘Government Performance and Review Act,’’ and each agency was supposed to say 

what they are going to do, and then at the end of the year evaluate 

whether they did it or not. 

So I started collecting those to see, you know, how it went, and 

most agencies had not done the list of things to begin with that 

they were going to achieve. And those that had listed them and 

then reviewed their own, I would have given them a failing grade 

because they were not paying attention to the goals that they had. 

So one of the problems that we have around here is our accountability for what we find or fail to find. One of the processes I found 

as Budget Chairman was that we have 260 programs that are out 

of authorization. Their ability to get appropriations has expired. 

But we are still doing them. One of them expired in 1983, another 

one in 1987. Most of them are before 2006. And does it amount to 

much money? $293.5 billion a year that we are spending on things 

that we have not taken a look at to see if they are worth doing anymore. Some of them may be too controversial to be reauthorized. 

I am not sure. I have tried to figure out the reasons. The biggest 

reason is we do not go back and look at anything. And that is why 
230 

we brought the Canadians down, to get some kind of an emphasis 

on how do we get Congress to go back and look at the old stuff. 

It is only sexy to look at the new stuff. And that is sometimes what 

happens with regulations. And I do appreciate the distinction that 

has been made by several of you that their budget deals with red 

tape costs. 

Another experience that I had when I got here is I had teacher, 

a principal that got a hold of me and wondered where all his reports went. And his district let him come back and intern for me, 

so I sent him down to the Department of Education, and he followed all those forms around for a semester and then reported back 

to me. And his answer was, ‘‘It is absolutely amazing. They check 

every one of those reports. They make sure that everything is filled 

in, that everything is logical. If it is not, they send it back. They 

get a new one. And once it is all completed, they file it in a drawer, 

and nobody looks at it.’’ 

So that is some of the red tape and paperwork and cost that we 

could be talking about. What we are trying to find is some kind of 

an incentive for people to actually look at that. And that is why we 

talked about a regulatory budget— it could be called a ‘‘red tape 

budget’’ or ‘‘excess reporting budget’’ or something like that—as a 

starter budget. 

But one of the things we have gotten into a little bit- -and you 

have talked a little bit about it—is this cost- benefit analysis, and 

the ones that I have looked at, the costs are fairly easy to delineate. Well, in some cases they are easy to delineate. In some cases 

the inventions have not been made yet for industry to put in those 

things. So they have not been costed out yet. But on the benefit 

side, I cannot get much information on what they anticipated were 

these benefits. We get kind of a gross number of what it is, but 

when we try to get into the details, that is a little bit more nebulous. And, of course, it is usually done over varying lengths of time, 

which is something the Canadians solved. They said that there is 

an international standard for doing the benefit analysis as well as 

the costs. But it puts them on a equal basis for the cost of the time 

versus the cost of the benefits. 

Have you got any ideas on how we can get better cost analysis 

and benefit analysis or either or both? I will start with Dr. 

Verchick on this one. 

Mr. VERCHICK. Thanks. I would say that in some ways we do a 

very good job of focusing on those issues. I myself have sometimes 

troubles with seeing how costs are estimated or how benefits are 

estimated, for that matter particularly when the benefits are things 

like human lives or IQ points or a pristine environment. Those are 

things that are monetized, and I think it is troublesome sometimes 

when it happens. 

But I do think if you take a look, for instance, at the regulatory 

impact assessments that are done by agencies for significant rules, 

they are very, very deep in the details of how benefits are calculated if one is interested in that. And when you get to the point 

where you find that benefits are 7 to 25 times the costs, that gets 

you to a number, I think, where it is beyond funding, right? Where 

when something is 25 times more than another thing, it is hard to 

say, oh, well, you know, they rounded it wrong or they dropped a 
231 

decimal point somewhere. That is usually an indication that there 

is really something that is desirable for society. 

The other time, though, that Congress, I think—and what I am 

talking about is agencies, but Congress can really look at this, too, 

and they do every time they pass a statute. Every time a statute 

is passed, or least an expensive one, the CBO will come out with 

an estimate of what it is going to cost, what kinds of benefits will 

be, and so on. And so the idea, I think, that we need a separate 

law to spur Congress to think about the costs and benefits of statutes is wrong. They have already done it when they enact the statutes. And for parties that would like them to do it again every 

year, that is just looking for another bite at the apple at something 

that they have already done. If Congress says we want statutes 

that protect people from such-and-so, presumably they have already done the economic work to decide that that is something that 

needs to be done. 

Chairman ENZI. Anybody else want to comment on that? 

Mr. GRAHAM. I just want to clarify that oftentimes Congress 

passes general regulatory authority, for example, for the safety of 

cars, but they do not know at the time that they pass that what 

the total economic burdens or benefits will be over the life of that 

program. So it is not unreasonable for Congress to also want to 

look into whether the overall cost of the program should be limited. 

So the general regulatory authority does not mean that they have 

done the economic analysis up front. 

Chairman ENZI. And our government performance and results 

expert here. 

Mr. ELLIG. Yes, I have spent 15 years complaining about the 

quality of information that agencies have and produce about the results of Federal programs and regulations. That does not mean I 

am against the idea of having a Federal budget that only considers 

tax dollars. What it means is we need better information about results, and we need to consider that information when we make decisions that lead to the expenditure of tax dollars or the expenditure of private dollars when we are dealing with regulation. 

So, yeah, there is a big need to improve. I think what our experience has shown is just that exhortation does not work. Just putting 

something in a law or an Executive order does not necessarily 

work. There seem to be two kinds of things that will encourage better information about the results of programs. One is as if the information is actually used by decisionmakers, either at agencies or 

if we see a congressional commitment, to use that information in 

budgeting decisions, authorizing decisions, reauthorization decisions, because, quite frankly, especially under GPRA, I noticed a 

number of agencies just treat it as a paperwork exercise because 

they presume, well, yeah, it is in the law, but committees in Congress are not going to really use this, and they are going to make 

decisions based on other criteria anyway, so we will do the minimum we have to do to claim that we complied. Now, to get real 

agency commitment, if they knew that the information was going 

to be used, that might be a different story. 

Secondly, what you need is enforcement. As I said in my testimony, regulations do not enforce themselves. Neither do analytical 

requirements. We have seen evidence through our regulatory re-
232 

port card that OIRA review of regulations and regulatory impact 

and all this analysis does help improve the quality. We have seen 

for certain kinds of regulations where there are statutory requirements that certain types of benefits and costs must be considered 

by the agency, those types of regulations tend to do somewhat better analysis of the types of benefits and costs that are mentioned 

in statute, particularly the Department of Energy energy efficiency 

regulations. There are other problems in the analysis of those, but 

they have more detailed analysis of benefits and costs than other 

regulations, and I think part of the reason is because the statute 

lays out specific benefit and cost criteria that the Department of 

Energy has to consider. 

You know, the other potential incentive is some type of budgetary consequences based on the quality of analysis about results 

that the agencies produce. If you do not have solid evidence-based 

analysis of results, then, you know, maybe we should say, well, 

maybe we should not be spending so much money on some of those 

things. 

Finally, I would take issue with one comment you made about 

costs being relatively easy to identify, and we hear this a lot in the 

regulatory debate, that costs are very easy to estimate, but benefits 

are nearly impossible and that is why we should not try and broad 

values should always trump costs. 

I think that is inaccurate, and it reflects a difference between 

kind of the average person’s understanding of costs and the economist’s understanding of really what social cost is or opportunity 

cost. It can be easy to count up money that regulated entities— 

business firms, State governments, local governments, tribal government—it can be easy to count up the money that they spend on 

compliance. But that is not the full social cost of regulation. The 

full social cost is what does society give up as a result of the regulation, and the best example of that that I have is something that 

probably everybody here is familiar with: airport security. 

If we try to figure out the cost of airport security regulations, the 

first thing that would occur to you is, well, you have to pay TSA 

agents and you have to pay for equipment in the airport and the 

airlines have to pay for that, and they pass that on to the passengers in the form of a fee on your airline tickets. And that is true 

enough, and that is several billion dollars a year. But that is nowhere near the entire cost to society of airport security screening. 

Using the Department of Transportation’s own rule-of- thumb 

figures for the value of passengers’ time—DOT is actually reasonably good about these kind of things in its analysis—there are several billion dollars more of social costs that are a result of the time 

passengers spend standing in line at security checkpoints. 

We also have a reduction in the amount of air travel because 

some passengers, myself included, on shorter trips say, ‘‘The heck 

with flying, it is too much of a hassle. I am going to drive.’’ There 

is a loss of value to consumers there. And there is a paper published in the Journal on Law and Economics by some economists 

at Cornell University who calculated the number of additional 

deaths on the Nation’s highways we have because a number of people who were traveling decided that, ‘‘Using the airports is too 
233 

much of a hassle, and I am going to drive instead of fly.’’ And, statistically, driving is more dangerous than flying. 

So we have the costs of passengers’ time, lost output, increased 

highway deaths, which are also costs of airport security regulation, 

and those are costs that are just as difficult to estimate as benefits 

of regulation are. 

Now, does that mean airport security is a bad idea? Of course 

not. I do think, though, that if the social costs of airport security 

had been fully recognized and accounted for right after 9/11 when 

the system was changed, maybe the system would have been designed with a little more sensitivity to those costs to try to reduce 

them. And I was going to say I am not blaming the man who was 

OIRA Administrator at the time. I am sure behind the scenes he 

probably tried to make some of those arguments. But, in any case, 

that is just one example of how costs of regulation are much fuller 

and more significant than simply counting up some dollars that 

you see regulated entities spending. 

Mr. GRAHAM. Just a quick comment. It took more than 10 years 

to get the PreCheck in. So, you know, once you establish a regulation, you incur all those burdens to try to gradually just kind of rationalize a little bit. It takes a long time, and it is very hard. 

Chairman ENZI. And it goes back to my comment about we do 

not usually go back and look at the old stuff. We like to kind of 

promote the new stuff. 

Dr. Verchick, did you have an additional comment? 

Mr. VERCHICK. Just a short response to Dr. Graham, who is exactly right that often or at least sometimes statute are passed 

without an understanding of what the complete expanse will be. 

But, for instance, if a court were to order an agency to start regulating or expand its regulation in a certain area—they have done 

that with EPA, for example, or courts have ordered EPA to lower 

standards or raise health standards, which increase costs. If those 

things are unpredicted by Congress and they are undesirable in the 

understanding of Congress, then it seems to me that the right answer is for Congress to look at that particular statute and to say, 

‘‘Oh, wait, it has gone off the tracks. Let us fix that.’’ That seems 

to me more accountable than saying to agencies generally through 

a budget, ‘‘Go back and find things you want to fix.’’ 

It seems if there is a problem with the statute and it really is 

too expensive or more expensive than Congress envisioned, then 

the answer is that Congress should revisit it and change it. 

Chairman ENZI. Well, I have greatly exceeded my time. I will go 

back to Dr. Whitehouse again for his turn. 

Senator WHITEHOUSE. I am the only one who is not a doctor here. 

Mr. Chairman, I would— 

Chairman ENZI. No, no. There are two of us that are not a doctor. 

[Laughter.] 

Senator WHITEHOUSE. Okay. I would say that as we are sitting 

here in Congress waiting for the annual tax extenders negotiation 

to reach its conclusion, and waiting for the annual appropriations 

process to reach its conclusion, it might not be a bad idea to try 

to put together a regulatory housekeeping annual proposal. And I 

would suspect that you would find that there are a considerable 
234 

number of things that both sides could agree on as being unnecessary, burdensome, or obsolete if we did it as a package and tried 

to put it all together. The danger, of course, is that the big, powerful groups that throw their weight around here would try to co-opt 

that process so that it once again became the Wall Street and Big 

Polluter Free Ride Act of whatever year it was in. But if we could 

steer away from that, I bet that there is a big area of bipartisanship that could be done, and if it became a regular routine, maybe 

the Budget Committee could be the focus or the forum for trying 

to pull that together, and I would be happy to participate in such 

an effort. 

I have been a regulator. I have been an advocate before regulatory agencies. I suppose I have been the subject of regulation as 

a candidate. And it is clear that there can—I tell you what. Anybody who has been through Union Station knows that there are 

times when regulation does not make sense. There is that guy out 

front, and there are 50 taxicabs waiting, and there are 50 people 

waiting for taxicabs, and they have managed to manufacture a 

chokepoint so that you have a line of 50 people; whereas, if that 

individual were dedicated to helping people who needed help into 

cabs and everybody else could just go to one, it would be very efficient, and you would have less people wasting time, to Dr. Ellig’s 

point. 

So I do not want to put myself—I think it is important that we 

defend regulation where it makes sense because I think it is essential to civilized society, but that does not mean it cannot get stale 

or it cannot become obsolete, particularly as technologies change. 

And if this Committee becomes a place where we start to look at 

that in a thoughtful way, then I am all for that. And I appreciate 

your attention to this question, Mr. Chairman. 

Chairman ENZI. As usual, you have an outstanding suggestion, 

too, and we will take a look at that as we go through some of the 

reform and see what responsibilities the Budget Committee actually ought to have that can actually accomplish something. And 

what you suggest is also a way of getting us to look at some of the 

old things that might be on the books that are not being used anymore. 

I always mention that I discovered that there is a certain rule 

to passing bills, and that is, if it is worth regulating, it is worth 

overregulating. We always do things kind of in the crisis. The airport security is one of those things that happened in the crisis. We 

needed to do something immediately. We did something immediately. Then I did not realize that it took 10 years to get PreCheck 

through, but I can tell you that in D.C. the PreCheck line is longer 

than the regular line. 

[Laughter.] 

Chairman ENZI. Because everybody here deserves PreCheck. 

Senator WHITEHOUSE. One interesting example, Mr. Chairman, 

is hospital quality reporting. Hospitals have to report on quality— 

I do not have the numbers handy because I was not prepared to 

talk about this, but dozens and dozens of reports to multiple different agencies, and the effect of that is twofold: First, an enormous amount of time is wasted on these reports. And, second of all, 

the effect of having a bad quality report is diminished because 
235 

there is some other report where they can say, ‘‘Well, we did well 

on this one.’’ And so you end up with what is intended to be a signal to the public to drive consumer behavior to pressure hospitals 

to make sure they avoid hospital-acquired infections and so forth. 

And we manage to mute that message by layering on so many different reports that it becomes a big Tower of Babel, a big muddle. 

So it is kind of the worst of all worlds. You do not really get the 

signal when a hospital has a bad safety record, and at the same 

time, everybody is complying like crazy with dozens of different 

quality reports, each of which is very well intended. But when you 

look at the whole system globally, it ends up just being a clutter 

out of which no serious consumer message emerges. 

So that is just one that we have been facing off on trying to deal 

with in my office, and I am sure there are a gazillion others. 

Chairman ENZI. Very good. I get calls from businessmen all the 

time who wonder if they ought to fill out this report they just got 

from one or another Government agency, and my first question always is: Is it mandatory? They usually cannot tell from the wording. It sounds very mandatory. So we checked on it, and often they 

are not mandatory. And I always suggest that they never fill out 

one of the non-mandatory reports because they will get consistently 

asked for additional reports. But I think that maybe we could make 

it a little clearer on that. 

I know in the bill that we just passed on elementary education, 

we eliminated a bunch of reports, and we are going to start on 

higher education next. And Lamar was a college president, and he 

brought in a stack of the reports that he had to file, and I think 

it was about 9 feet tall. So I suspect we will eliminate a few there, 

too. But I appreciate your— 

Senator WHITEHOUSE. I hope so. Rhode Island is a very big higher education State, and I hear from a lot of very capable college 

presidents, not so much that—I guess it is the same issue. They 

have to report on a million different things, and the result in terms 

of a signal to prospective students, to consumers, to parents, is 

completely lost in the muddle. You cannot find it. There are so 

many reports that there is no place for a consumer to go. And if 

you were to actually create a dashboard of consumer information 

that was really relevant and important and then strike everything 

that was not necessary to the dashboard, you would actually have 

a far better regulatory service provided to the public. 

Chairman ENZI. Very good. Well, I thank the panel for all of 

their great comments, and particularly the excellent testimony that 

you provided, too, with some excellent suggestions, and we will see 

where this can all go. So thank you, and, again, you may get questions from people that were at the gun control hearing. 

Mr. GRAHAM. Thank you, Mr. Chairman. 

Mr. ELLIG. Thank you 

Mr. VERCHICK. Thank you 

Chairman ENZI. The meeting is adjourned. 

[Whereupon, at 11:59 a.m., the Committee was adjourned.] 

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