U.S. GOVERNMENT PRINTING OFFICE

70–194cc WASHINGTON : 2001

FRESHMAN MEMBERS DAY

HEARING

BEFORE THE

COMMITTEE ON THE BUDGET

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

HEARING HELD IN WASHINGTON, DC, FEBRUARY 7, 2001

Serial No. 107–1

(

Printed for the use of the Committee on the Budget

(II)

COMMITTEE ON THE BUDGET

JIM NUSSLE, Iowa, Chairman

JOHN E. SUNUNU, New Hampshire

Vice Chairman

PETER HOEKSTRA, Michigan

Vice Chairman

CHARLES F. BASS, New Hampshire

GIL GUTKNECHT, Minnesota

VAN HILLEARY, Tennessee

MAC THORNBERRY, Texas

JIM RYUN, Kansas

MAC COLLINS, Georgia

ERNIE FLETCHER, Kentucky

GARY G. MILLER, California

PAT TOOMEY, Pennsylvania

WES WATKINS, Oklahoma

DOC HASTINGS, Washington

ROB PORTMAN, Ohio

EDWARD SCHROCK, Virginia

JOHN CULBERSON, Texas

HENRY E. BROWN, Jr., South Carolina

ANDER CRENSHAW, Florida

ADAM PUTNAM, Florida

MARK KIRK, Illinois

[Vacancy]

[Vacancy]

[Vacancy]

JOHN M. SPRATT, Jr., South Carolina,

Ranking Minority Member

JIM MCDERMOTT, Washington,

Leadership Designee

BENNIE G. THOMPSON, Mississippi

KEN BENTSEN, Texas

JIM DAVIS, Florida

EVA M. CLAYTON, North Carolina

DAVID E. PRICE, North Carolina

EDWARD J. MARKEY, Massachusetts

GERALD D. KLECZKA, Wisconsin

BOB CLEMENT, Tennessee

JAMES P. MORAN, Virginia

DARLENE HOOLEY, Oregon

RUSH D. HOLT, New Jersey

JOSEPH M. HOEFFEL III, Pennsylvania

TAMMY BALDWIN, Wisconsin

[Vacancy]

[Vacancy]

[Vacancy]

[Vacancy]

PROFESSIONAL STAFF

RICH MEADE, Chief of Staff

THOMAS S. KAHN, Minority Staff Director and Chief Counsel

(III)

C O N T E N T S

Page

Hearing held in Washington, DC, February 7, 2001 ............................................ 1

Statement of:

Hon. Edward Schrock, a Representative in Congress from the State of

Virginia .......................................................................................................... 1

Hon. Anibal Acevedo-Vila, the Resident Commissioner of Puerto Rico ....... 5

Hon. Henry E. Brown, Jr., a Representative in Congress from the State

of South Carolina .......................................................................................... 8

Hon. Jeff Flake, a Representative in Congress from the State of Arizona .. 12

Hon. Adam H. Putnam, a Representative in Congress from the State

of Florida ....................................................................................................... 15

Hon. Steve Israel, a Representative in Congress from the State of New

York ................................................................................................................ 27

Hon. Rick Larsen, a Representative in Congress from the State of Washington ............................................................................................................. 30

Hon. Adam Schiff, a Representative in Congress from the State of California .................................................................................................................. 32

Hon. Todd Akin, a Representative in Congress from the State of Missouri 35

Hon. James Langevin, a Representative in Congress from the State of

Rhode Island .................................................................................................. 38

Prepared statement of:

Mr. Schrock ....................................................................................................... 3

Hon. Felix J. Grucci, Jr., a Representative in Congress from the State

of New York ................................................................................................... 7

Mr. Brown ......................................................................................................... 9

Mr. Flake ........................................................................................................... 13

Mr. Putnam ....................................................................................................... 17

Hon. Mike Pence, a Representative in Congress from the State of Indiana .................................................................................................................. 23

Hon. John Culberson, a Representative in Congress from the State of

Texas .............................................................................................................. 26

Mr. Israel .......................................................................................................... 28

Mr. Larsen ........................................................................................................ 31

Mr. Schiff ........................................................................................................... 33

Hon. Dennis Moore, a Representative in Congress from the State of

Kansas ........................................................................................................... 35

Mr. Akin ............................................................................................................ 37

Mr. Langevin ..................................................................................................... 40

Hon. Rob Simmons, a Representative in Congress from the State of

Connecticut .................................................................................................... 42

(1)

FRESHMAN MEMBERS DAY

WEDNESDAY, FEBRUARY 7, 2001

HOUSE OF REPRESENTATIVES, COMMITTEE ON THE BUDGET, Washington, DC.

The committee met, pursuant to call, at 11:03 a.m. in room 210,

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

committee) presiding.

Members present: Representatives Nussle, Sununu, Gutknecht,

Fletcher, Schrock, Culberson, Brown, Crenshaw, Putnam, Pence,

Spratt, Hooley, McCarthy, and Flake.

Chairman NUSSLE. The committee will come back into order,

please.

Today we will be having the first of a series of hearings involving

budget and budget priorities. Today we have invited freshman

Members of the 107th Congress to come before us to testify on behalf of themselves, their districts, some of the priorities that maybe

they have heard about as they campaigned over this last campaign

season.

I think oftentimes in the Budget Committee and other committees of Congress we tend to rely on some celebrity-type witnesses

who are often requested to come and give us their opinions, and we

forget that within our own conferences and caucuses we have Members with a vast array of experiences from a number of different

industries and career backgrounds as well as perspectives that they

share with us from their constituents. So we wanted today to invite

the freshman Members of the 107th Congress class to come before

us and to present testimony.

The first witness today will be the Honorable Ed Schrock from

Virginia, a member of this committee and president of the freshman class for the Republicans of this year. Welcome both to the

committee and to our witness table. Your entire statement will be

part of the record without objection, and you have 5 minutes to

summarize your testimony, Mr. Schrock.

STATEMENT OF HON. EDWARD SCHROCK, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF VIRGINIA

Mr. SCHROCK. Thank you, Mr. Chairman, and members of the

committee that are still here. It is an honor for me to be here to

detail the priorities shared by the 28 Republican freshman Members of Congress.

As you know, the budget resolution frames our agenda and priorities on both taxes and spending for the coming fiscal year and beVerDate 11-MAY-2000 18:13 Mar 02, 2001 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 H:\DOCS\HEARINGS\107\107-1\HBU038.002 HBUDGET1 PsN: HBUDGET1
2

yond. I will first discuss our priorities on tax relief for every American.

In our view, President Bush’s tax relief promoting is fair, respon- sible and allows the typical American family to keep at least $1,600

more of their own money. The President’s tax proposal will cut

taxes for everyone who pays income taxes, will spur economic

growth, and tear down the high tax barriers that keep low-income

Americans from accessing the middle class.

Specifically, we support the following provisions: Replace the current five-rate tax structure with four lower rates—10, 15, 25 and

33 percent; double the child tax credit to $1,000; eliminate the marriage penalty; eliminate the death tax; expand the charitable deduction to include those who file with a 1040 EZ, or short form;

and make the research and development tax credit permanent.

We strongly support the President’s tax plan because low- and

middle-income families are the biggest winners. For instance, one

in five taxpaying families with children will no longer pay any tax

at all, completely removing 6 million American families from the

tax rolls. A family of four making $35,000 would get a 100 percent

Federal income tax cut. A family of four making $50,000 a year

would receive a 50 percent cut, receiving at least $1,600. The marginal income tax rate on low-income families will fall by more than

40 percent.

There is no doubt that American families need a tax cut. Indeed,

the reason we are enjoying surpluses is that we are taxing too

much. We simply must cut taxes for the following reasons:

The current Tax Code is unfair. Under the current system, a sin- gle mom making $22,000 a year pays a higher marginal tax rate

than someone making $200,000 a year.

Federal taxes are the highest ever during peacetime. Americans

pay more in taxes than they spend on food, clothing, and housing

combined. Americans work more than 4 months per year just to

pay their tax bills. Recent layoffs by businesses of every size prove

that the American economy needs a boost and quickly.

Many of us also support other tax cuts, including education expense tax credits, expanding Medicare savings accounts, medical

savings accounts, IRA expansion of pension reform, repeal of the

Spanish-American War phone tax, small business tax cuts and tax

cuts in the capital gains rates.

But, to reiterate, we unanimously support President Bush’s tax

proposal.

At this point in my remarks I would like to turn to our priorities

on Federal spending. For many of us, our highest spending priority

is national defense. The Congress of the United States is constitutionally charged with providing for the common defense, raising

and supporting armies, and providing and maintaining a navy. In

our view, spending on national defense must be increased to provide for pay raises for all military personnel, force modernization

and maintenance, overseas deployments, and the acquisition of

modern weapons systems that will maintain our military supremacy on seas, on land, and in the air.

Social Security and Medicare must be financially secured for future current and future generations. We support securing Social

Security and Medicare surpluses so that these funds cannot be

3

used on general appropriations. However, there is a tremendous

concern about the Department of Health and Human Services’ Office of Inspector General report that disclosed waste, fraud and

abuse totaling $13.57 billion, over 8 percent, of the amount spent

on fee-for-service reimbursements at the Health Care Financing

Administration. In order to maintain the integrity of Medicare and

Social Security, strong and successful efforts must be undertaken

by all appropriate Federal agencies to ensure that Medicare and

Social Security fraud is eliminated.

Furthermore, it appears to us that entitlement reform is critical

to the long-term financial viability of the United States Government. Social Security, Medicare, Medicaid, welfare, and other mandatory Federal entitlements now total more than $1 billion per

year. Because of our aging population, the projected growth rate of

these entitlement programs is staggering. Congress must work in

a bipartisan manner with the President to reform these entitlements before they consume even more of our tax dollars and make

tax increases inevitable.

In the area of education spending, we support local control of

schools. Federal education spending should require accountability

measures at the State level. However, Federal education dollars

otherwise should come with little or no strings attached. As a

former State legislator, I know parents, teachers and local schools

can determine what is best for their own community. While we

support increased education spending at the Federal level, these

new funds should not be accompanied by new mandates that stifle

creativity and burden our local schools.

Finally, I would like to discuss the Federal debt. We applaud

Congress’ record of paying down $625 billion in debt over the past

4 years. The Republican freshman class is strongly committed to

continuing these efforts to reduce the Federal debt in a responsible

manner. The near elimination of the Federal debt will result in

lower interest rates and would provide, in essence, another tax cut

for families who mortgage homes and finance the purchase of cars.

In conclusion, Mr. Chairman, we stand ready to work with you

and this committee to develop a budget resolution that provides tax

relief for every American family and a spending blueprint that will

strengthen America’s military, improve education for our children,

pay down the national debt, and protect Social Security and Medicare.

Thanks for this opportunity to appear before you.

[The prepared statement of Congressman Schrock follows:]

PREPARED STATEMENT OF HON. EDWARD SCHROCK, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF VIRGINIA

Mr. Chairman, members of the committee, it is a tremendous honor to be here

today to detail the priorities shared by the 28 Republican freshmen Members of

Congress.

As you know, the Budget Resolution frames our agenda and priorities on both

taxes and spending for the coming fiscal year and beyond.

I will first discuss our priorities on tax relief for every American.

In our view, President Bush’s tax relief proposal is fair, responsible and allows

the typical American family to keep at least $1,600 more of their own money.

The President’s tax proposal will cut taxes for everyone who pays income taxes,

spur economic growth and tear down the high tax barriers that keep low income

Americans from accessing the middle class.

Specifically, we support the following provisions:

4

• Replace the current five rate tax structure with four lower rates—10, 15, 25 and

33 percent.

• Double the child tax credit to $1,000.

• Eliminate the marriage penalty

• Eliminate the death tax

• Expand the charitable deduction to include those who file with a 1040 EZ or

Short form.

• Make the research and development tax credit permanent.

We strongly support the President’s tax plan because low and middle-income families are the biggest winners.

For instance,

• One in five taxpaying families with children will no longer pay any income tax

at all—completely removing 6 million American families from the tax rolls.

• A family of four making $35,000 would get a 100 percent Federal income tax

cut.

• A family of four making $50,000 a year would receive a 50 percent cut—receiving at least $1,600.

• The marginal income tax rate on low-income families will fall by more than 40

percent.

There is no doubt that American families need a tax cut. Indeed, the reason we’re

enjoying surpluses is that we are taxing too much. We simply must cut taxes for

the following reasons:

• The current Tax Code is unfair. Under the current system, a single mom making $22,000 a year pays a higher marginal tax rate than someone making $200,000

per-year.

• Federal taxes are the highest ever during peacetime.

• Americans pay more in taxes than they spend on food, clothing and housing

combined.

• Americans work more than 4 months per year just to pay their tax bills.

• Recent layoffs by businesses of every size prove that the American economy

needs a boost—quickly.

Many of us also support other tax cuts including education expense tax credits,

expanding Medical Savings Accounts, IRA expansion and pension reform, repeal of

the Spanish American War phone tax, small business tax cuts and cuts in the capital gains tax rates. But to reiterate, we unanimously support President Bush’s tax

proposal.

At this point in my remarks I would like to turn to our priorities on Federal

spending.

For many of us, our highest spending priority is national defense. The Congress

of the United States is constitutionally charged with providing for the common defense, raising and supporting armies, and providing and maintaining a Navy.

In our view, spending on national defense must be increased to provide for pay

raises for all military personnel, force modernization and maintenance, overseas deployments, and the acquisition of modern weapons systems that will maintain our

military supremacy on the seas, on land and in the air.

Social Security and Medicare must be financially secured for current and future

generations. We support securing Social security and Medicare surpluses so that

these funds cannot be used on general appropriations.

However, there is tremendous concern about a Department of Health and Human

Services Office of Inspector General report that disclosed waste, fraud and abuse totaling $13.5 billion, or about 8 percent, of the amount spent on fee for service reimbursements at the Health Care Financing Administration.

In order to maintain the integrity of the Medicare and Social Security systems,

strong and successful efforts must be undertaken by all appropriate Federal agencies to ensure that Medicare and Social Security fraud is eliminated.

Furthermore, it appears to us that entitlement reform is critical to the long-term

financial viability of the United States government. Social Security, Medicare, Medicaid, Welfare and other mandatory Federal entitlements now total more than $1

trillion per year.

Because of our aging population, the projected growth rate of these entitlement

programs is staggering. Congress must work in a bipartisan manner with the President to reform these entitlements before they consume even more of our tax dollars

and make tax increases inevitable.

In the arena of education spending, we support local control of schools. Federal

education spending should require accountability measures at the state level; however, Federal education dollars otherwise should come with little or no strings attached.

5

As a former state legislator, I know that parents, teachers and local schools can

determine what is best for their own community. While we support increased education spending at the Federal level, these new funds should not be accompanied

by new mandates that stifle creativity and burden our local schools.

And finally, I would like to discuss the Federal debt. We applaud Congress’s

record of paying down $625 billion in debt over the past 4 years. The Republican

freshman class is strongly committed to continuing these important efforts to reduce

the Federal debt in a responsible manner.

The near elimination of the Federal debt will result in lower interest rates and

would provide, in essence, another tax cut for families who mortgage homes and finance the purchase of automobiles.

In conclusion, Mr. Chairman, we stand ready to work with you and this committee to develop a budget resolution that provides tax relief for every American family

and a spending blueprint that will strengthen America’s military, improve education

for our children, pay down the national debt and protect Social Security and Medicare.

Thank you, Mr. Chairman for the opportunity to address the Budget Committee.

Chairman NUSSLE. Thank you, Mr. Schrock. Are there questions

for this witness from members of the committee?

If not, thank you very much for your attendance and for your testimony.

The next witness—and I may ask you for a little help with the

pronunciation; we have not met before, and this is one of the advantages of having a hearing such as this—the Honorable Anibal

Acevedo.

Mr. ACEVEDO-VILA. That’s fine.

Chairman NUSSLE. And do you add the Vila at the end?

Mr. ACEVEDO-VILA. That is the way we do it down in Puerto

Rico, but it is fine if it is only Acevedo.

Chairman NUSSLE. We appreciate your coming before us today.

You are obviously from Puerto Rico, as you stated. We appreciate

your attendance and your testimony. Your written statement, without objection, will be made part of the record and you may summarize for the 5 minutes. Welcome.

STATEMENT OF HON. ANIBAL ACEVEDO-VILA, THE RESIDENT

COMMISSIONER OF PUERTO RICO

Mr. ACEVEDO-VILA. I would like to thank the chairman, the

ranking member, and the members of the Budget Committee for

this opportunity to testify here today.

As the new Resident Commissioner from Puerto Rico, I am

pleased to offer some ideas on the budget for fiscal year 2002. This

is a moment of great challenges and, at the same time, great opportunities for this Congress and the Nation. We have a balanced

budget and a surplus which provide new alternatives that some

years ago were not available. On the other hand, there are clear

indications of an economic slowdown that has to be remedied by

Congress.

There is a consensus that it is time to use this surplus to reward

taxpayers with a tax cut. The issue is how much to cut and how

it should be done to forge real economic growth. As the representative of Puerto Rico before Congress, I am here today to work in a

bipartisan fashion to guarantee that the 2002 budget will help the

4 million U.S. citizens living in Puerto Rico. We have before us a

unique opportunity to use the current budgetary circumstance as

a tool for economic development through the creation of jobs and

investment in businesses in Puerto Rico.

6

During the period of 1993 to 1996, Congress took the necessary

steps to balance the budget and eliminate the deficit. Puerto Rico

paid substantially during this process. In 1993, Congress passed

the Omnibus Reconciliation Act, which included a provision that

substantially curtailed the tax incentives provided by Section 936

of the Internal Revenue Code to U.S. companies doing business in

Puerto Rico.

In 1996, Congress enacted another set of amendments that eliminated all incentives for new or expanded business operations and

investment in Puerto Rico. Congress carved out a separate section

of the Internal Revenue Code, Section 30A, for the possession’s tax

credit, which is applicable only to corporations with operations in

Puerto Rico during the phase-out periods. As of today, Puerto Rico

has no Federal incentive to create new jobs, and those that apply

to companies already doing business in the island are set to expire

in the year 2005.

The negative consequences of the decisions taken in 1993 and

1996 are clear. The phase-out of these incentives is having disastrous effects on the Puerto Rican economy. In the last 4 years,

more than 17,000 jobs have been lost in the manufacturing sector

as a direct result of the phase-out, and Puerto Rico has not been

able to attract significant new economic investment to build upon.

Many of these jobs are moving out of U.S. jurisdiction to countries

like Malaysia and Singapore. Employment and wages by American

companies are a critical part of Puerto Rico’s manufacturing sector,

and the manufacturing sector is the most important sector of Puerto Rico’s economy.

The results are clear. Today, we enjoy a balanced budget and a

rather large surplus. But my people don’t have the jobs. While the

taxpayers in the U.S. have earned tax relief, so too have Puerto

Ricans who sacrificed during efforts to balance the budget and

grow the Federal budget surplus. It is time to provide my constituents with tax relief through incentives for job creation in the Tax

Code.

Congress has been there for Puerto Rico in the past. In 1976,

Congress enacted the special tax exemption under Section 936 of

the Internal Revenue Code. This was part of an effort to attract

U.S. companies to Puerto Rico to create jobs for the island’s residents. At the time, Puerto Rico’s economy was suffering an economic slowdown, amidst recession, and unfavorable tax changes in

the United States. Unemployment rates started to increase to

alarming levels. A number of foreign countries became more attractive to U.S. businesses because they offered lower wage rates and

more favorable local tax incentives. Section 936 was an attempt to

reverse that trend, and it worked. During the 1980’s and early

1990’s we were able to strengthen Puerto Rico’s economy thanks in

great part to the jobs created by 936 companies.

As I mentioned earlier, one of the reasons to eliminate tax incentives for U.S. companies in Puerto Rico was to balance the budget.

Now we are faced with a surplus. I will not ask this Congress to

reenact Section 936. What I am asking is to work toward new and

creative incentives to promote job creation and investment in Puerto Rico. If there are no new jobs and the companies that we have

depart for foreign destinations, our best resource also, our people,

7

will be wasted. Clearly this would be a setback for both Puerto Rico

and the U.S.

As Congress did during the economic downturn in the 1970’s, I

urge you to consider new and creative ways to foster the economic

development of Puerto Rico and make them part of the 2002 budget. The new administration in Puerto Rico is crafting this new alternative that will be presented to the President and Congress in

the coming weeks. I have already discussed this priority with influential Members of this body and the Senate, and enjoyed a recent

conversation with President Bush about this important issue. Our

proposals will be supported by all the economic sectors on the island, be fiscally responsible, simple and targeted to promote competition with foreign jurisdictions. For now, I ask you to be open

to these kinds of incentives that are so necessary for our economy

as a whole and for the creation of sustainable and decent-paying

jobs for Puerto Rico.

Again, thanks, Mr. Chairman, ranking member and other members.

Chairman NUSSLE. Thank you very much for your testimony.

Are there questions for our colleague? If not, thank you.

The next witness who was scheduled to testify today is the Honorable Felix Grucci from New York. It is our understanding that

his mother-in-law passed away and, as a result, he will not be here

to testify today. Our thoughts and prayers are certainly with the

entire Grucci family and with his wife’s family.

Without objection, his testimony will be submitted for the record

at this point.

[The prepared statement of Congressman Grucci follows:]

PREPARED STATEMENT OF HON. FELIX J. GRUCCI, JR., A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEW YORK

Mr. Chairman, ladies and gentlemen of the House Budget Committee, thank you

for giving me the opportunity to submit this written statement on behalf of the citizens of the First Congressional District of New York. Unfortunately, I am unable

to attend today’s proceedings, due to the death of my mother-in-law.

Our Nation is at a critical juncture. Over the last several years, small business

owners, entrepreneurs, and hard working middle class families fostered a strong national economy, and created a historic tax surplus projected by the Congressional

Budget Office to be an estimated $5.6 trillion.

However, economic storm clouds are on the horizon. Storm clouds that threaten

the economic viability of hundreds of business and thousands of jobs and opportunities.

Our mission is certain.

While our small business owners, high-tech industry leaders, manufacturers,

farmers and hard working families do their part day in and day out, from sunrise

to sunset, to sustain a vibrant economy, it is up to their government—this Congress—to proactively implement reasonable tax relief, reduce our national debt, and

protect critical programs like the Social Security Trust Fund.

We must prioritize the allocation of Federal funds to where they will best serve

our citizens. We need additional resources to improve our education system, protect

our environment, improve our infrastructure, strengthen our national defense, and

enact a Medicare Lock Box that ensures affordable health care is available to each

and every senior citizen.

As a locally elected town supervisor, I saw first hand how tax cuts and controlled

spending helped spur our local economy in the First District of New York. By placing the taxpayers money back where it belongs—in their pockets—we were able to

create more than 20,000 new jobs on Eastern Long Island.

The time is now to give the taxpayers back their money. They created the tax surplus. They should have it returned. And in the process, we should once and for all

8

eliminate unfair taxes that penalize middle class working families, small business

owners, farmers and our newest entrepreneurs.

The time is now to repeal the marriage penalty tax, which would save the average

working family about $1,400 per year. The time is now to protect farmers and small

business owners from being taxed twice by finally eliminating the death tax.

And the time is now to remove obstacles from young entrepreneurs who emerge

from colleges, universities, and trade schools with bright ideas and the business

ventures for the 21st Century.

This surplus belongs to the people. They created it. It’s responsible and the right

thing to do to return it to them.

We can do more. We can provide reasonable tax relief, and take the necessary actions of protecting the Social Security Trust Fund, by locking it away from bureaucrats who, would rather use the people’s money on wasteful programs, and ensuring

it is there for seniors today, and the retirees of tomorrow.

We can take this opportunity to improve the educational system in our nation so

no child is left behind. With additional resources to our schools, we will be able to

reduce class size and put our parents, school boards and teachers back in charge

of the classroom.

Our national surplus affords this Congress the unique opportunity to enter into

public/private partnerships to protect and preserve our environment. By working

hand in hand with property-owners, and State and local governments, we can pool

our resources to acquire more open space from Long Island to the pacific coast.

It’s a successful formula that has worked to protect our drinking water on Eastern

Long Island, and one that will prove beneficial throughout all of the communities

and neighborhoods of our great nation.

With a commitment to take these critical steps today, in this Congress—the people’s House—in conjunction with the Senate and President Bush, will jump-start our

economy, decrease unemployment, create jobs as well as new opportunities. Put

more money in the hands of the taxpayers, because they know better than any government bureaucrat how best to spend it. Foster an environment where ideas grow

into successful new businesses, new jobs, and new opportunities.

By taking these steps now, we will successfully meet the challenges we all face.

It will be a journey along a path of new promise, new hope, and a strong vibrant

economy.

Mr. Chairman, ladies and gentlemen of the House Budget Committee, and my fellow colleagues, thank you for this opportunity.

Chairman NUSSLE. The next witness is a colleague from the committee, Mr. Henry Brown from South Carolina, who, as I stated

earlier, was the former chairman of the Ways and Means Committee which handled budget issues in South Carolina. I certainly

hope that he will be able to share with us some of the wisdom of

the States. We often look to States as the laboratories.

We are certainly honored to have you in the Congress and on

this committee and look forward to your testimony. Your entire testimony will be made a part of the record and you may summarize.

Mr. Brown.

STATEMENT OF HON. HENRY E. BROWN, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH CAROLINA

Mr. BROWN. Thank you very much, Mr. Chairman and Mr.

Spratt. It is certainly a pleasure and a special honor for me to

serve on this committee.

It was a significant time in my life to have the privilege to chair

the Ways and Means Committee for South Carolina for 5 years. We

found South Carolina in a state of flux. We had lost our triple A

credit rating. We were having mid-year budget cuts. The economy

was going great, but the government was spending more than the

revenue coming in, so we were in a state of real confusion.

It is a real pleasure to come and try to address some of those

same needs here at the Federal level. Because we did regain our

triple A credit rating, we were able to balance the budget and, at

9

the same time, we were able to make tax cuts. And I think that

is significant as we take a look at the budget process here.

I am pleased that we will be able to send back some of those revenues that those taxpayers have sent to us in excess of the amount

that is needed to fund government. I am pleased, Mr. Chairman,

to work with you to try to make some of those things happen.

Our freshman president summed up a lot of the priorities that

we established in the freshman class. I won’t belabor the committee

by going through this again; neither will I present my formal presentation, which I submitted in writing earlier, but I did want to

come just to say that I am pleased to be a part of this process, and

I recognize that there are a lot of issues that we need to deal with,

like the marriage penalty tax, the inheritance tax, and the death

tax.

Also, I would hope that the committee would look at the process

of returning some of the monies back to the taxpayers—that tax increase that was imposed upon the seniors which taxed 85 percent

of their Social Security proceeds. I would hope this committee

would take a look at trying to repeal that or at least go back to

1993, where 50 percent of those proceeds were taxed.

With that, Mr. Chairman, I am open for any questions.

[The prepared statement of Congressman Brown follows:]

PREPARED STATEMENT OF HON. HENRY E. BROWN, JR., A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF SOUTH CAROLINA

Mr. Chairman, I appreciate this opportunity to share with you and this committee

the legislative priorities of my constituents in the First District of South Carolina.

Just a few years ago, our Federal Government was facing huge annual budget deficits and an ever increasing national debt. Because of the hard work and productivity

of millions of Americans and fiscal discipline of recent Congresses, we are looking

at an unprecedented level of surplus revenues.

First, let me state that my constituents in South Carolina’s Low Country expect

this Congress to continue to spend their hard earned tax dollars wisely and responsibly. This is not the time to reverse course and embark upon another spending

spree that would jeopardize the progress we have made in paying down our national

debt and strengthening the foundations of our economy.

There is no question we have serious challenges before us, improving the quality

of education throughout this land, safeguarding Medicare and Social Security for today’s senior citizens and future generations, and rebuilding our military. It is my

view, Mr. Chairman, we can meet these challenges without risking a repeat of budget deficits and a national debt out of control. I am also convinced we owe our fellow

citizens a more effective, responsive Federal Government, and finally, long overdue

tax relief.

As a former Chairman of South Carolina’s House Ways and Means Committee,

I have seen first hand that it is possible to deliver substantial tax relief without

compromising the quality of much needed government services and programs. With

the Congressional Budget Office projecting total surpluses of $5.6 trillion over the

next 10 years, I believe this Committee has an opportunity to take the first steps

toward reducing individual income taxes which are at the highest level ever. The

fact is that my constituents’ taxes are growing faster than our economy. According

to the CBO, tax revenues increased by 10 percent last year while our economy grew

at 5 percent. No doubt we have Federal programs and services that will require additional resources. It is difficult to explain why Americans are continuing to pay

record high taxes at a time of peace and prosperity.

Like many of my colleagues, I believe we have a great opportunity to reduce the

tax burden and work for more fairness in our tax code. Let’s finish the job that was

begun in the last Congress to eliminate the marriage penalty. As Congressman

Schrock mentioned earlier, this change ought to be one of our highest priorities.

Also, the death tax needs to be buried once and for all * * * why should we penalize

the millions of small business owners and farmers who have worked hard all their

lives? Finally, Mr. Chairman, I want to work with you and my colleagues in taking

a hard look at repealing the 1993 tax increase on Social Security benefits. It seems

10

to me that this is another example of our Federal Government discouraging hard

work and initiative.

Once again, Mr. Chairman, thank you for this time for me share my views. I look

forward to working with you and the other members of this committee in fashioning

a responsible and forward looking budget.

Chairman NUSSLE. I thank you. Are there questions for this witness?

Mr. SUNUNU. Mr. Chairman.

Chairman NUSSLE. Yes, Mr. Sununu.

Mr. SUNUNU. Congressman, can you talk a little more about the

scope of the tax cut that was put into place in South Carolina,

what the implications of that tax relief were when it went into

place, how revenues changed in the years following the tax relief,

and an assessment of the current state of the budget in South

Carolina?

Mr. BROWN. We took a look at the total tax system and we felt

like one of the erroneous taxes we had was the school operating

property tax, particularly as it impacted the senior citizens. So the

first rush of returning some of the taxpayers’ money was to give them relief. For the first $100,000 of the assessed value of their

home, we would return back to those locals the tax equivalent of

$100,000, which the first year was like $202 million and last year,

$264 million. That was the first cut.

Then, of course, we had several other cuts we made through that

5-year period when I chaired the committee. One was to raise the

tax relief on senior citizens at 65, that they would not have to pay

income tax on the first $15,000 of their income, which was a real

boost to that segment of the society.

We also did something with the child tax credit; we doubled that.

Anyway, there were several initiatives, and it really did spur the economy because all of a sudden the taxpayers had $200 million

more they could spend to stimulate the economy, to enhance the

economy, rather than go into the growth of, say, government. So it

was a boom.

I will have to report though that this year South Carolina is

faced with a budget shortfall for the first time in probably 7 or 8

years. So I am real pleased to be up here where there is lots of

money.

Congressman Spratt, down in South Carolina, now is a good time

to leave.

Mr. SPRATT. You left town just in time.

Mr. BROWN. Yes, sir, I think so.

Mr. SPRATT. Listen, what is the problem in South Carolina? Is

it because of tax cuts that there is a diminishment of revenues, or

is there a downturn in the economy that is causing this fall-off in

revenues in South Carolina? Our State legislator right now, Henry,

is glad to be here because we are coping with the problem of 15

percent across-the-board cuts as we speak.

Mr. BROWN. I think what happened is we had gotten too complacent in our good economy, Congressman Spratt. We were having

surpluses of a couple hundred million dollars; every year we would

have to make supplemental appropriations to be able to spend

those surplus items. And I think what happened, the legislature

got caught in the thought that we were always going to have $200

million worth of surplus each year, so they started spending recurVerDate 11-MAY-2000 18:13 Mar 02, 2001 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 H:\DOCS\HEARINGS\107\107-1\HBU038.002 HBUDGET1 PsN: HBUDGET1
11

ring revenue in one-time appropriations. And I think this is where

we have come to.

We actually have now about $500 million worth of those recurring items that is built into the base of government, which is not

really recurring each year. I think that is the real shortfall in the

process. It is—the lack of budget restraints is what has actually

brought us into this position.

Chairman NUSSLE. Mr. Gutknecht.

Mr. GUTKNECHT. Could I tag onto that? I was reminded, though,

of the story of the old Indian chief who once said the effectiveness

of a rain dance is determined largely by the timing.

Mr. BROWN. That is a good saying.

Mr. GUTKNECHT. As the former chairman of the Ways and Means

Committee down in South Carolina, how much did you allow the

total State budget to increase by in those years? Do you remember

the numbers or the percentage?

Mr. BROWN. Probably somewhere in the 6 percent range.

Mr. GUTKNECHT. Per year?

Mr. BROWN. Yes.

Mr. GUTKNECHT. Because I have this crazy notion that government’s budget should not grow any faster than the average family

budget.

Mr. BROWN. That’s correct, 3 percent. I think we were growing

faster than the CPI.

Mr. GUTKNECHT. That is something I hope we can—as members

of this committee, can get back on course. Because for several years

this committee did a pretty good job of reining in some of our

friends on other committees as well as some of our colleagues in

the other body. The last couple of years we have slid backwards

just a bit.

It seems to me this committee ought to sort of hoist that banner

high, that there is no reason the Federal budget ought to grow any

faster than the average family budget.

Thank you.

Mr. BROWN. I think that is the exciting thing about this budget

process here. We actually can now, by reducing the tax tables, require less income coming in so that we can adjust that exceeding

growth.

Chairman NUSSLE. Thank you.

Any other questions for members?

I have a question. I was just curious how you handle emergencies

in South Carolina? Do you have a rainy day account? Some States

do that. And what would be your advice with regards to handling

of emergencies?

Mr. BROWN. We have two trust funds we set up. One we call the

capital reserve fund, which is 2 percent of the revenue from last

year. The other is a general reserve fund, which is 3 percent. And

those monies are held in trust in case there is a shortfall.

We have a balanced budget amendment, which means we are required to balance that budget each year. This prevents any shortfall that might come. We attach those trust funds before we actually make the budget cuts.

Chairman NUSSLE. What are the safeguards on the general fund,

emergency funds? In what ways do you either define emergencies,

12

in order to prevent raiding of that fund; or how is it managed so

that it is not just dipped into without discretion?

Mr. BROWN. The general reserve fund is pretty restricted. You

can only qualify to spend those monies if in fact there is a midyear

cut.

The capital reserve fund is a different item. It is 2 percent money

we set aside. In fact, if we don’t have a shortfall in that particular

budget year, then we are able to appropriate those items at the end

of the year, call them capital reserve, which means they should

only be spent for capital items.

But this is the problem—in answer to Mr. Spratt’s question earlier, this is a problem we have gotten ourselves into. We did not

adhere to the rules of that fund, so they started spending those; instead of on one-time items, capital items, they started spending

them on recurring items, and this is where we got ourselves into

trouble.

Chairman NUSSLE. Any other questions for this witness?

Thank you very much for your testimony and for your service on

the committee. We look forward to that.

Mr. BROWN. Thank you. My pleasure.

Chairman NUSSLE. Because of Mr. Grucci’s cancellation, and one

other, we are waiting for a couple of members that are on their

way, and as soon as they arrive, we will accept their testimony.

[Brief pause.]

Good morning.

Mr. FLAKE. Good morning.

Chairman NUSSLE. The next witness before the committee is the

Honorable Jeff Flake from Arizona. We appreciate your coming before the committee to give us your thoughts about budget priorities

for the year. Your entire testimony will be submitted for the record,

and without objection you may use your time to summarize what

you would like to tell us.

So welcome to the Budget Committee. We look forward to your

testimony.

STATEMENT OF HON. JEFF FLAKE, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF ARIZONA

Mr. FLAKE. Well, thank you very much. I really appreciate the

opportunity. I was just elected this past year, and so I think what

the voters and Americans need is fresh in my mind.

Certainly, in this case, I think that we are standing on the verge

of great opportunity concerning fiscal policy. We need dramatic and

substantial tax reform and relief, and I believe that the President’s

package is a great place to start.

I think the President is right when he says that all Americans

who pay income taxes ought to get tax relief. I think that is a

statement that we can all live with. It certainly cuts across the

class warfare that will certainly come as these budget priorities are

discussed. Federal tax revenues consume more than 20 percent of

the economy’s output. That is the highest since World War II. We

are certainly in line for tax relief.

Also, if we look across the country—and this is true in my district in Arizona as it is elsewhere—companies are laying off workers. We are in a downturn here, and we need substantial tax relief,

13

not just because it is not right for government to take 40 percent

of one’s income, but because giving people some of their money

back is the best way to jump-start the economy. So I am definitely

in favor of that as the highest budget priority, to actually return

money into the taxpayer’s pocket.

There will doubtless be people who say we cannot afford to do

this. I think if we cannot afford to now, there will never be a time

when we can afford to cut taxes. The planets are aligned just right.

We need employers to employ, investors to invest and consumers

to consume, and the best way to do that is to return money. We

have a projected surplus of $5.6 trillion over the next 10 years and

that begs for substantial relief.

I encourage you to follow the lead of the American people. When

they set their household budgets, they say, we need relief here and

relief there and we have these priorities. I think our priorities

ought to be the same. We ought to pay off debt when we can, and

we also ought to put money aside, and we also ought to do those

things we know are going the start the economy. I hope that this

committee considers as it prepares the budget that we need to

leave room for this substantial tax cut.

This morning, along with a number of my colleagues, we

launched an initiative to actually have a bill much larger than the

President’s tax cut. I think that the President’s tax cut is a great

place to start, but that we shouldn’t stop there. An area that could

use some relief is in the area of capital gains. We learned in 1997

that when we cut capital gains rates then the economy is spurred,

and it doesn’t have a negative impact on revenue coming in for government.

I would just summarize by asking the committee to support this

kind of tax policy as it sets the spending limits for the coming year,

and I appreciate this opportunity. Thank you again.

[The prepared statement of Congressman Flake follows:]

PREPARED STATEMENT OF HON. JEFF FLAKE, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF ARIZONA

Mr Chairman, I am pleased to speak to you and the rest of the committee as you

consider the policies and priorities that will guide the shaping of the Federal budget.

I believe this country is standing at the verge of a great opportunity concerning

fiscal policy. We have the opportunity as a Congress to reverse and undo some of

the most stifling policies in our Nation’s history.

I’m referring of course to our tax code. Mr. Chairman it is clear to me that the

American people are taxed far too much.

Federal tax revenues consume more than 20 percent of the economy’s output.

This is the highest percentage of taxation the country has ever had in peacetime.

There will doubtless be objections to even the idea of cutting taxes, with one of

the cries heard in these halls being ‘‘we can’t afford to cut taxes.’’

Leaving aside the obvious fact that this is just another way of saying ‘‘We don’t

want to spend less money,’’ as we move into what is undoubtedly a period of economic slowdown, the clear answer to that cry is

‘‘We can’t afford not to cut taxes.’’

We need to empower employers to employ, investors to invest and consumers to

consume.

There is nothing about having more money in the Federal coffers that helps the

economy grow.

With a projected surplus of 5.6 trillion dollars over the next 10 years, it would

be criminal not to enact a substantial, across-the-board tax cut.

We must cut taxes because we can, and because we should. It truly is, the right

thing to do by our economy.

14

I wanted to make this presentation to the House Budget Committee because of

the crucial role you play in setting the tone for this process.

Mr. Chairman, I respectfully encourage you to follow the lead of the American

people when they set their household budgets.

Our constituents don’t determine how much money they want to spend, and then

go out and try to generate the income to match it. They look at their income level

and then determine how much they can spend.

Of course, the added rub of this is that the ‘‘income’’ we get is taken straight from

the labors of the American people, and the more we take, the less they are able to

do the things that drive our national economic state.

I hope the committee will consider this as it prepares the budget, and that the

revenue allocations you allot will reflect the need for a major tax cut.

Our national economy is crying out for a large, pro-growth tax cut.

This morning I have, along with a number of my colleagues, announced the drafting of such a bill. It protects Social Security and Medicare and is fair, comprehensive and substantial.

Most importantly, it is needed.

I ask that the committee support this kind of tax policy as it sets spending levels

for the coming fiscal year. Thank you.

Chairman NUSSLE. Thank you very much.

In addition to taxes, do you have any advice for us on priorities

when it comes to programmatic changes or priorities for either additional spending or reforms that you would like to point out from

your testimony?

Mr. FLAKE. I certainly think that the area of defense and the

military needs to be strengthened. I think it has been discussed in

the Conference and in just about every forum I have been in that

we need to make that a priority, of strengthening the military and

making sure our men and women in service are treated fairly. So

I would certainly think that is a priority.

In the area of education, I would hope that the priority isn’t so

much to see where we can spend extra money, but actually to see

where we can increase flexibility for the States as they carry out

their own priorities in education. So education is a major area.

I would also like to see, as we move forward with some of the

entitlement programs, that we leave room to get a start on what

President Bush talked about during the campaign; that we actually

move toward allowing Americans to invest some of their own savings in personal retirement accounts. So to the extent we need to

set aside money to jump-start that process, I certainly think that

is a great place to start.

Chairman NUSSLE. Coming from Arizona, you have a lot of folks

from Iowa that went down there to retire. You have more than we

would like to send you, I might add. We would like to keep a few

of them in the State, but your weather is slightly better than we

have, during this time of year in particular.

Do you have any advice for us in the areas of Social Security and

Medicare? Clearly you have a constituency there that I would suspect would be concerned about those two programs as we move forward. Do you have any advice for us in those areas?

Mr. FLAKE. Sure. I think the budget priorities that have been

outlined so far, that we protect the Social Security surplus and use

it only for Social Security, and the same with Medicare, I think

that is something that ought to be honored.

My constituents, a number of whom are your constituents part

of the year, and many other Members of Congress here, certainly

have voiced that to me throughout the campaign; and I continue

to hear that. So, yes, that is a priority.

15

Chairman NUSSLE. Thank you.

Are there any other members who have questions?

We appreciate your testimony and welcome to the Congress. We

look forward to working with you as we try to formulate our priorities.

Mr. FLAKE. Thank you.

Chairman NUSSLE. Thank you very much.

Our next witness is a new member—not only a new Member of

Congress, but a new member of the committee from the State of

Florida, Adam Putnam.

And we not only welcome you to the Budget Committee as a

member, but we welcome you here as a witness to give us your

thoughts on budget priorities for the year. Your entire testimony

will be made part of the record, and you may proceed during your

5 minutes as you would like. Welcome.

STATEMENT OF HON. ADAM H. PUTNAM A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF FLORIDA

Mr. PUTNAM. Thank you, Mr. Chairman, ranking member, and

fellow members of the committee. I really am old enough to be

here, I promise you.

Mr. SPRATT. I just said, Mr. Putnam, to the chairman that either

we’re getting older or they’re getting younger; I’m not sure which.

But welcome.

Mr. PUTNAM. Well, the view from this witness table is no different than it is from the freshman spot on the committee. It is a

long way up there.

I thank you for providing me this opportunity to share my interests and priorities for this committee with you. Put simply, my priority is not a request for any new program but a request that we

begin a process, the fruits of which may not be seen for decades.

Just as we seek a bipartisan consensus on critical budget issues,

such as the use of the existing tax surplus to fund national priorities, tax reform and reduction, and keeping Social Security and

Medicare solvent and relevant, so we should also seek a

generational consensus on these same issues.

We particularly need to seek this consensus on Medicare and Social Security because together they consume 33 percent of the Federal budget and constitute the largest and most comprehensive

public program in the United States. Social Security is part of

nearly every American’s life and an important source of income for

most of today’s older Americans. It provides more than half of the

total income of two-thirds of today’s retirees. Social Security provides nearly all of the income of one-third of the elderly. The Social

Security Administration estimates that, without benefits, 47 percent of individuals 65 and older would live in poverty, four times

as are in poverty today.

My concern for developing this new consensus on Social Security

and Medicare goes beyond the issue of a generational wealth transfer and straight to the heart of a relationship between a democratic

government and the people. Pundits and politicians alike wonder

at the decline in political participation and the rise in cynicism

about government among today’s young people. Let me suggest

that a significant factor in this cynicism and lack of interest in poVerDate 11-MAY-2000 18:13 Mar 02, 2001 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6602 H:\DOCS\HEARINGS\107\107-1\HBU038.002 HBUDGET1 PsN: HBUDGET1
16

litical participation among young people—and baby boomers, too,

for that matter—is a belief that government is incapable of fulfilling its responsibilities to programs like Social Security and Medicare because we in the Congress are incapable of moving beyond

the polarizing rhetoric of campaigns to address the root of the problem: making Social Security and Medicare solvent and relevant beyond the 10-year projection.

We can change that if together we seek and find a bipartisan and

cross-generational consensus on reforms to the funding mechanisms for these programs. As a first step in that process, allow me

to outline a few points where I think we can and should reach a

consensus:

First, let us agree that the surest way to secure Social Security

and Medicare benefits for existing and future beneficiaries is to

boost economic growth. Surely there is already a consensus among

us that if the economy is larger, the unavoidable burden of supporting benefits for ever-larger numbers of retirees will be more feasible, economically and politically.

Let us agree on the timing. I believe that we can reach a bipartisan and cross-generational consensus on these issues if, as we deliberate on the budget, we will commit ourselves to look beyond the

next fiscal year and consider the next 50 years as well. We have

an obligation to act now before the cash flow into the system turns

negative, to put the system on a more economically and actuarially

sound basis, to allay the fears of those who are counting on its benefits.

Third, we must agree that we will review previously authorized

programs for efficiency, effectiveness and relevance. Surely there

can be a consensus among us that if government is efficient and

economical in discretionary spending, it will free up resources for

the nondiscretionary spending required to provide benefits to the

growing numbers of retirees leaving the work force.

Fourth, let us agree that as we seek to allay the fears of existing

beneficiaries we will also act now to allay the fears of those just

entering the work force as well. We can do that by seeking a bipartisan cross-generational consensus on reforms that will provide opportunities for a fairer return on contributions, while still preserving the traditional safety net features of the present system for existing beneficiaries and those who may prefer that system in the

future.

And finally, let us agree to tone down the rhetoric and be honest

with each other and the American people. Honestly spoken, the

challenge of dealing with Social Security and Medicare is a challenge too easily put off because it is a challenge that most of the

people in this room will never have to face—present company excluded, of course.

We all know that although outlays will begin exceeding receipts

as early as 2013, depending on which projection you accept, the

present system can serve unchanged until at least 2030, long past

the political and actuarial lifetime of most of today’s voters and

beneficiaries, if not their children. Thus, it is our challenge to act

now to reach across the aisle and the generations to ensure that

30 years from now the government’s commitment to future retirees

17

is relevant and the system for making good on that commitment

is solvent.

If we work together, I am confident we can reach a bipartisan

and generational consensus that will restore the faith of the American people that their tax dollars are wisely invested for their future retirement and that their government wisely anticipates and

solves future problems on their behalf.

Thank you, gentlemen.

[The prepared statement of Congressman Putnam follows:]

PREPARED STATEMENT OF HON. ADAM PUTNAM, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF FLORIDA

Mr. Chairman, Mr. Ranking Member and fellow members of the House Committee on the Budget, thank you for providing me with this opportunity to share my

budget interests and priorities with you. Put simply, my priority is not a request

for a new program, but a request that we begin a process, the fruits of which may

not be seen conclusively for decades. Just as we seek a bipartisan consensus on critical budget issues, such as use of the existing tax surplus to fund national priorities,

tax reform and reduction, and keeping Social Security and Medicare solvent and relevant, so we should also seek a generational consensus on these same issues.

We particularly need to seek this generational consensus on Medicare and Social

Security because together they consume about 33 percent of the Federal budget and

constitute the largest and most comprehensive public program in the United

States1. Social Security is part of nearly every American’s life and an important

source of income for most of today’s older Americans. Social Security provides more

than half of the total income of two-thirds of today’s retirees. Social Security provides nearly all of the income of one-third of the elderly. The Social Security Administration estimates that, without Social Security benefits, 47 percent of individuals

aged 65 and older would live in poverty, four times as many as are in poverty

today.2

Just as importantly we need to seek this generational consensus on Social Security and Medicare because for the first time in the history of these programs, significant populations from five generations of Americans have a claim on program benefits.

CHART OF NOVEMBER 1, 2000, FIVE–YEAR AGE GROUPS

[Total population 276,059,000]3

Age group Population

Under 5 years ....................................................................................................................................................... 18,945,000

5 to 9 years .......................................................................................................................................................... 19,681,000

10 to 14 years ...................................................................................................................................................... 20,017,000

15 to 19 years ...................................................................................................................................................... 19,894,000

20 to 24 years ...................................................................................................................................................... 18,693,000

25 to 29 years ...................................................................................................................................................... 17,625,000

30 to 34 years ...................................................................................................................................................... 19,564,000

35 to 39 years ...................................................................................................................................................... 22,044,000

40 to 44 years ...................................................................................................................................................... 22,769,000

45 to 49 years ...................................................................................................................................................... 20,059,000

50 to 54 years ...................................................................................................................................................... 17,626,000

55 to 59 years ...................................................................................................................................................... 13,425,000

60 to 64 years ...................................................................................................................................................... 10,757,000

65 to 69 years ...................................................................................................................................................... 9,414,000

70 to 74 years ...................................................................................................................................................... 8,758,000

75 to 79 years ...................................................................................................................................................... 7,425,000

80 to 84 years ...................................................................................................................................................... 4,968,000

85 to 89 years ...................................................................................................................................................... 2,734,000

90 to 94 years ...................................................................................................................................................... 1,196,000

95 to 99 years ...................................................................................................................................................... 369,000

100 years and over .............................................................................................................................................. 68,000

Today, there are over 45.6 million Americans aged 60 and older, and over 1.5 million Americans aged 90 and over—including my grandfather, Dudley A. Putnam.

Many Americans who are now retired, or who plan to retire in the near future, fear

18

that benefits will be reduced, or the retirement age raised, because there are not

enough young workers entering the work force to fund Social Security and Medicare

through a ‘‘pay as you go’’ payroll tax based system.

As one assesses the impact on the system as members of the ‘‘Baby Boom Generation’’ stop paying payroll taxes and start claiming benefits it is clear that their fears

are not unjustified. Over 76.5 million Americans belong to the Baby Boom Generation, that’s almost one-third of our present population of 270 million and the core

of our work force.4 Needless to say, as the Baby Boomers begin to retire the impact

on the economy and Social Security and Medicare will be staggering. Without immediate action on our part, Social Security and Medicare, as now funded, are not sustainable.

In 1945 the ratio of workers to beneficiaries was 41.9 to 1.

By 1950 it had decreased by more than half to 16.5 to 1.

By 1960 it had again decreased by more than two thirds to 5.1 to 1.

By 1975 the ratio had decreased down to 3.2 workers for each beneficiary.

The ratio of workers to recipients has held fairly steady since the mid-1970’s. Currently the ratio stands at about 3.4 workers to each recipient. As the Baby Boom

Generation begins to retire this ratio will continue to decrease, eventually reaching

a level of two workers for each recipient by approximately 2030.5

Just as many older Americans look upon the retirement of the Baby Boomers and

fear benefit reductions or an increase in the retirement age, so many Americans of

my generation look at the retirement of the Baby Boomers and rightly doubt the

future viability of a ‘‘pay as you go’’ system. Many younger workers question the

fairness of a retirement system where three out of every four dollars that they and

their employers send in go to pay for their parents’ and grandparents’ benefits.6

Workers aged 22 to 34 already pay the highest Social Security tax rates, an effective

rate of over 10 percent in some cases,7 yet they do not receive a market-based return on their contributions. Is there any wonder that they doubt the relevance of

a system that taxes them at 10 percent, yet produces a declining rate of return on

their cash contributions that is far lower than they could earn through investing

their contributions in a simple certificate of deposit?

Indeed, young workers can expect future returns from Social Security of from only

0.58 percent (for high-wage earners) to 2.93 percent (for low-wage workers) if the

system somehow manages to pay all future benefits without raising taxes8 and

young workers rightly fear that to fund a pay as you go system, payroll taxes will

be raised to ruinous levels as the ratio of workers to beneficiaries decreases. As the

following chart illustrates, their fears are not unjustified because, as might be expected, as the ratio of workers to recipients has fallen, the tax rates paid by workers

have risen.

In 1945 the FICA tax rate was 1 percent.

By 1950 it had risen to 1.5 percent.

By 1960 it had doubled to 3 percent.

By 1975 it stood at 4.95 percent.

Since 1975 the tax rates paid by individuals for Social Security have risen to 6.2

percent, plus an additional 6.2 percent paid by their employers, making a total of

12.4 percent. Perhaps even more importantly, the taxable earnings bases have also

risen steadily since the inception of Social Security, from a low of $3,000 to the current high of $80,400.9

When the ratio of workers to beneficiaries was over 40 to 1, and the tax rate was

1 percent on the first $3,000 of income, a pay as you go system was a viable option.

When the ratio of workers to recipients approaches 2 to 1 and the effective tax rate

is at 10 percent and rising, the need for a new consensus is clear.

My concern for developing this new consensus on Social Security and Medicare

goes beyond the issue of a generational wealth transfer and straight to the heart

of the relationship between a democratic government and the people. Pundits and

politicians alike wonder at the decline in political participation and the rise in cynicism about government among today’s young people. Let me suggest that a significant factor in this cynicism and lack of interest in political participation among

young people—and Baby Boomers too for that matter—is a belief that government

is incapable of fulfilling its responsibilities to programs like Social Security and

Medicare because we in the Congress are incapable of moving beyond the polarizing

rhetoric of campaigns to address the root of the problem—making Social Security

and Medicare solvent and relevant beyond the 10 year projection. We can change

that if together we seek, and find, a bipartisan and cross-generational consensus on

reforms to the funding mechanism for Social Security and Medicare.

As a first step in the consensus building process, please allow me to outline a few

points where I believe we can and should reach consensus.

19

First, let us agree that the surest way to preserve Social Security and Medicare

benefits for existing and future beneficiaries is to boost economic growth. Surely

there is already a consensus among us that if the economy is larger, the unavoidable burden of supporting benefits for ever larger numbers of retirees will be more

feasible economically and politically.10

Second, let us agree on the timing. I believe that we can reach a bipartisan and

cross-generational consensus on these important issues if, as we deliberate on the

budget, we will commit ourselves to look beyond the next fiscal year and consider

the next fifty years as well. We have an obligation to act now—before the cash flow

into the system turns negative—to put the system on a more economically and actuarially sound basis to allay the fears of those who are counting on its benefits.

Third, we must review previously authorized programs for efficiency, effectiveness

and relevance. Surely there can be a consensus among us that if government is efficient and economical in discretionary spending it will free up resources for the nondiscretionary spending required to provide benefits to the growing numbers of retirees leaving the work force.

Fourth, let us agree that as we seek to allay the fears of existing beneficiaries

we will also act now to allay the fears of those just entering the work force, too.

We can do that by seeking a bipartisan and cross generational consensus on reforms

that will provide opportunities for a fairer return on contributions while still preserving the traditional safety net features of the present system for existing beneficiaries and those who may prefer that system in the future.

Finally, let us agree to tone down the rhetoric and be honest with each other and

the American people; honestly spoken, the challenge of dealing with Social Security

and Medicare is a challenge too easily put off, because it is a challenge that most

of the people in this room will never have to face.

We all know that, although outlays will begin exceeding receipts as early as 2013,

depending on which projection you accept, the present system could serve unchanged until at least 2030, long past the political and actuarial lifetime of most

of today’s voters and beneficiaries—if not their children. Thus it is our challenge to

act now to reach across the aisle, and the generations, to ensure that 30 years from

now the government’s commitment to future retirees is relevant and the system for

making good on that commitment is solvent. If we work together I am confident we

can reach a bipartisan and generational consensus on Social Security and Medicare

that will restore the faith of the American people that their tax dollars are wisely

invested for their future retirement, and that their government wisely anticipates

and solves future problems on their behalf.

FOOTNOTES

1. CBO estimate for fiscal year 2000 (Social Security + Medicare = $622 billion)

2. Thomas F. Siems, senior economist and policy advisor, Federal Reserve Bank

of Dallas, January 23, 2001 for the CATO Institute

3. Population Estimates Program, Population Division, U.S. Census Bureau,

Washington, D.C. 20233

4. US Census Bureau, Characteristics of Baby Boomers

5. Office of the Chief Actuary, Social Security Administration, June 16, 1998 (historical data), April 9, 1999 (projected data)

6. Robert D. Reischauer (Director of CBO 1989 to 1995) in AARP Bulletin Online,

January 2000

7. The Heritage Foundation, Average Effective Social Security Tax Rates, 1999:

Note the average effective OASDI tax rate is total OASDI taxes divided by total income. This differs from the OASDI statutory tax rate of 12.4 percent on earned income below the taxable wage cap ($76,200 in 2000) because the share of earned income to total income can differ from worker to worker. Likewise, not all workers

are subject to the OASDI tax, so the average effective Social Security tax rate can

vary significantly from worker to worker. Other sources of income, besides wages

and salaries, include public assistance, Social Security, private pensions, alimony

and child support, interest, rent and dividends, all of which affect the average effective OASDI tax rate.

8. Thomas F. Siems, senior economist and policy advisor, Federal Reserve Bank

of Dallas, January 23, 2001 for the CATO Institute

9. Social Security Bulletin, Annual Statistical Supplement, 1999

10. Robert D. Reischauer (Director of CBO 1989 to 1995) in AARP Bulletin Online, January 2000

Chairman NUSSLE. Thank you.

Are there questions for this witness?

20

Mr. SPRATT. Mr. Putnam, we have a surplus according to CBO of about $5.6 trillion; 2.5 of that is Social Security and another

$400 billion is Medicare. Do you think that the non-Social Security,

non-Medicare surplus ought to be apportioned so maybe a third of

it at least is set aside in some kind of strategic reserve, in some

kind of fund for the eventual use of Social Security and Medicare’s

long-term solvency? Is that unreasonable?

Mr. PUTNAM. Well, without assigning a specific number to it, I

think it is reasonable for us to set aside dollars to ensure that

those programs are solvent and relevant. But I think that the past

recent history of this body shows us that it is also important that

we contain spending, and the best way to do that is to take the

money out of Washington and put it back in the hands of the consumers, families, the workers; and I think that responsible tax cuts

are a way to do that.

But, clearly, we also have an obligation to ensure that the debt

reduction scenarios continue to play out and we will indeed be on

course to eliminate that debt which is redeemable; and that we will

also continue to have reserves for Social Security and Medicare in

the sense that those will continue to be solvent.

Mr. SPRATT. OK.

Chairman NUSSLE. Mr. Sununu.

Mr. SUNUNU. Thank you, Mr. Chairman.

Congressman, as someone who has been campaigning recently

and sort of for the first time, I think there is no question that in

an initial congressional campaign you approach it without any biases, I think in many respects, on issues; and maybe your ear is

a little more closely attuned to voters and constituents.

I am curious to know what your impression was on taxes in particular when you spoke to voters and potential constituents during

the campaign. What was highlighted as being a priority, not just

for tax relief, but also for tax reform or simplification? In other

words, what elements of the Tax Code do you think engendered the

most frustration from taxpayers that you would highlight as a priority to try to address in a broad tax relief proposal to eliminate

some of the frustration with the unfairness in the code?

Mr. PUTNAM. Thank you, Mr. Vice Chairman. There were a number of issues that came up that—let me describe for you my district

to sort of set the stage.

I represent central Florida. I don’t have any part of the coast. It

is an interior district, predominantly rural, suburban, large agricultural holdings. The death tax, the estate tax, probably engenders

the most concern among small farms, particularly as the older generation is approaching the point at which they are incapable of

managing the day-to-day affairs of their business, their farm, their

grove operation, their ranch; that they are looking for ways to pass

that on to their heirs in a way that they will be able to continue

in that business. With the inflated land prices in Florida, the combination of capital gains, and the death tax is the single greatest

killer of small agriculture in my State.

But you also raise an important point that I heard an awful lot

about on the campaign trail, that is tax simplification. There is a

tremendous frustration with government when you can take 10 of

the best CPAs money can buy that present the same tax question

21

to them that get 7, 8, 9 different answers from 10 different CPAs;

or you can call the IRS hotlines several times in a row and get a

different answer to the same question.

The frustration is that when the code has become so complex

that the very agents who are employed to enforce it aren’t in agreement on how to enforce it, that when our professionals who are

paid to consult us on how to present our taxes are not in agreement on it, then we have a major problem that undermines people’s faith in the system. It undermines people’s belief in the fairness of the law, that it forces ordinary, hard-working law-abiding

citizens to come afoul of the law—in other words, to be criminals.

That is a very, very frustrating predicament that a lot of those

folks find themselves in.

So the combination of the estate tax and a call for some tax simplification were the two most frequent things I heard on the trail.

Mr. SUNUNU. Thank you.

Chairman NUSSLE. Thank you very much for your testimony. We

appreciate your testimony here today and we look forward to your

service on the committee. We understand you also will be serving

on the Agriculture Committee.

Mr. PUTNAM. I will.

Chairman NUSSLE. And as you pointed out—and it is true for my

district; I know also for Ranking Member Spratt’s district, a number of others—agriculture is going to be a key priority and issue

we are going to have to discuss this year. So we appreciate your

service and look forward to your advice on that as well.

Mr. PUTNAM. Thank you, Mr. Chairman and Mr. Ranking Member.

Chairman NUSSLE. Thank you.

The next witness we will hear from today is a colleague from Indiana, a new member, Mike Pence. And we welcome you to the

Budget Committee. We would like to incorporate your testimony in

its entirety in the record, and during your 5 minutes we would invite you to summarize and give us your advice on budget priorities

for this fiscal year.

Mr. PENCE. Thank you very much, Chairman Nussle, and senior

members of the committee. It is quite an honor for a small-town

boy and a member of the freshman class to be able to address this

committee.

Mr. SPRATT. You are talking to someone from York, South Carolina, so we come from the same background.

Mr. PENCE. I want to indicate that I am part of the gray hair

caucus in the freshman class. My predecessor and colleague is holding forth on the good looks and the youthfulness. But it is an honor

to be here before you to share my thoughts on the budget for the

coming fiscal year.

As hundreds of layoffs in my Indiana district attest, this economy, in my judgment, Mr. Chairman, is listing badly under the

weight of 8 years of increased taxes and regulation. I come to the

committee today to urge the Republican Congress to become the

Congress of economic recovery by passing tax relief, significant tax

relief, quickly for the American people.

As President Bush has argued in his tax proposal and as others

and I have argued in the Economic Growth and Recovery Act, a tax

22

reduction will allow families, small businesses and family farms to

exercise the entrepreneurial spirit that is imperative to restoring

the economic vitality of east central Indiana and the country as a

whole. It is appropriate that the revival of that spirit begin here

in this committee where tax relief will be reflected in the next

budget.

If Congress is to repeal the death tax and the marriage penalty

and enact marginal rate reductions, the new budget must reflect

the fiscal discipline that is necessary for such cuts. The $5.7 trillion

surplus that CBO has projected must not be the victim of Members

of Congress eager to appease special interest groups. Rather, Congress should follow the lead of President Bush and begin the

charge to trust the people with their money. After saving Social Security, Congress should pass a substantial—in my judgment, in ex- cess of $2 trillion—tax cut. A failure to cut taxes by Congress

would not only be a lost investment in the long-term economic success of the United States, it would bequeath future generations a

legacy of irresponsibility. We must set a new precedent in a time

of unprecedented surpluses.

As I mentioned earlier, the zero growth economy has already

begun to disrupt the lives and businesses of east central Indiana’s

businesses, Mr. Chairman. Cummins Engine Company in my

hometown of Columbus, Daimler Chrysler in Newcastle, Indiana,

have both, as major employers, announced layoffs that not only affect the lives of the companies’ workers but the small businesses

whose economic success hinges on the health of the local economy.

For that reason, I feel that any action taken by Congress must foment economic recovery in our local communities by enacting tax

reductions quickly and completely.

Budget spending should in turn reflect this goal. Any marginal

tax rate reduction that Congress enacts should be across the board

and, in my judgment, retroactive to 2001, January 1. Additionally,

the marriage penalty and death tax reduction should be more inclusive and phased in sooner than even what our President has requested.

Such a tax cut may be attacked as too risky or irresponsible, yet

a $2 trillion tax cut would represent only 1.5 percent of GDP. Opponents of a significant tax cut do not recognize that the current

tax rate on work, savings and investment penalizes productive behavior and impedes economic growth. At the same time, the growing budget surplus represents lost investment that would undoubtedly cause economic growth.

Anti-tax cut proponents, Mr. Chairman, argue that cutting taxes

will signal the return of deficits, a premise contradicted by the

Clinton administration’s own budget documents. In early 1995,

nearly 18 months after enactment of the 1993 tax increase, the Office of Management that Budget projected budget deficits of more

than $200 billion for the next 10 years.

Critics also argue that a big tax cut would make it harder to reform Medicare or modernize Social Security by allowing younger

workers to shift some of their payroll taxes into personal retirement accounts. Given the magnitudes of the projected budget surpluses, there is no conflict between those goals. Moreover, entitlement reform would be desirable even without a budget surplus beVerDate 11-MAY-2000 18:13 Mar 02, 2001 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 H:\DOCS\HEARINGS\107\107-1\HBU038.002 HBUDGET1 PsN: HBUDGET1
23

cause it would significantly reduce the long-run unfounded liability

of both programs. Large projected surpluses simply make it easier

for legislators to implement the necessary policies.

Finally, Mr. Chairman, as I said today, with friends gathered

around the endorsement of the Economic Recovery and Growth Act

in the sunshine at the foot of the steps of the House of Representatives, I simply believe that it is morally wrong for the Federal Government to become wealthy while some Americans are becoming

poor.

In summary, I urge the committee to set revenue levels that assume a substantial tax cut like the one offered by the President

and that is crafted in the Economic Recovery and Growth Act from

my friend, the distinguished gentleman from Pennsylvania, Representative Pat Toomey. In addition, it is my hope that the Budget

Committee resolution will include a reconciliation instruction for

the Ways and Means Committee to report out a bill that will keep

our promise to significantly cut taxes for all Americans.

[The prepared statement of Congressman Pence follows:]

PREPARED STATEMENT OF HON. MIKE PENCE, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF INDIANA

Thank you Chairman Nussle for inviting my freshman colleagues and me here

today to share our thoughts on the budget for the coming fiscal year. As hundreds

of layoffs in my Indiana district attest, this economy is listing badly under the

weight of eight years of increased taxes and regulation. I come to the committee

today to urge the Republican Congress to become the Congress of economic recovery

by passing tax relief. As President Bush has argued in his tax proposal, and as others and I have argued in the Economic Growth and Recovery Act, a tax reduction

will allow families, small businesses and family farms to exercise the entrepreneurial spirit that is imperative to restoring the economic vitality of east central Indiana

and the country. It is appropriate that the revival of that spirit will begin here in

this committee where tax relief will be reflected in the next budget.

If Congress is to repeal the death tax and the marriage penalty and enact marginal rate reductions the new budget must reflect the fiscal discipline that is necessary for such cuts. The $5.7 trillion surplus that the CBO has projected must not

be the victim of members of Congress eager to appease special interest groups.

Rather, Congress should follow the lead of President Bush and begin the charge to

trust the people with their money. After saving Social Security, Congress should

pass a substantial $2.2 trillion tax cut. A failure to cut taxes by Congress would

not only be a lost investment in the long term economic success of the United States

it would bequeath future generations a legacy of irresponsibility. We must set a new

precedent in a time of unprecedented surpluses.

As I mentioned earlier, the zero growth economy has already begun to disrupt the

lives and businesses of East Central Indiana’s residents. Cummins Engine and

Daimler Chrysler have already announced layoffs that not only affect the lives of

the company workers, but the small businesses whose economic success hinges on

the health of the local economy. For that reason, I feel that any action taken by

Congress must foment economic recovery in our local communities by enacting tax

reductions quickly and completely. Budget spending should in turn reflect this goal.

Any marginal tax reduction Congress enacts should be across the board and retroactive to January 1, 2001. Additional, the marriage penalty and death tax reductions should be more inclusive and phased in sooner than what President Bush has

requested.

Such a tax cut may be attacked as too risky or irresponsible, yet a $2.2 trillion

tax cut would represent only 1.5 percent of GDP. Opponents of a significant tax cut

do not recognize that the current tax rate on work, savings, and investment penalizes productive behavior and impedes economic growth. At the same time, the growing budget surplus represents lost investment that would undoubtedly cause economic growth.

Anti-tax cut proponents argue that cutting taxes will signal the return of deficits,

a premise contradicted by Clinton Administration budget documents. In early 1995,

nearly 18 months after enactment of the 1993 tax increase, the Office of ManageVerDate 11-MAY-2000 18:13 Mar 02, 2001 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6621 H:\DOCS\HEARINGS\107\107-1\HBU038.002 HBUDGET1 PsN: HBUDGET1
24

ment and Budget projected budget deficits of more than $200 billion for the next

10 years.

Critics also argue that a big tax cut would make it harder to reform Medicare or

modernize Social Security by allowing younger workers to shift some of their payroll

taxes into personal retirement accounts. Given the magnitude of the projected budget surpluses, there is no conflict between these goals. Moreover, entitlement reform

would be desirable even without a budget surplus because it would significantly reduce the long-run unfounded liability of both programs. Large projected surpluses

simply make it easier for legislators to implement the necessary policies.

In summary, I urge the committee to set revenue levels that assume a substantial

tax cut like the one offered by the President and our colleague Rep. Pat Toomey

of Pennsylvania. In addition, it is my hope that the Budget Committee resolution

will include a reconciliation instruction for the Ways and Means Committee to report out a bill that will keep our promise to significantly cut taxes for all Americans.

Chairman NUSSLE. Thank you.

Are there questions for this witness?

If not, thank you very much for your testimony and we look forward to working with you.

Mr. PENCE. Thank you, Mr. Chairman.

Chairman NUSSLE. The next witness is also from this committee,

the gentleman from Texas, Mr. Culberson, who is a new member

of the Budget Committee and who I have had an opportunity to already get to know and to work with in the early transition of this

committee.

We would invite you to the witness table and we will have your

testimony as part of the record, without objection, and you may use

your 5 minutes to summarize your testimony before the committee.

Mr. CULBERSON. Thank you, Mr. Chairman it is an honor for me

to be here today, and I want to especially thank you, Mr. Chairman, Ranking Member Spratt, for giving each member of the freshman class of the 107th Congress this marvelous opportunity to

speak to you and to all the committee members, to share our ideas

with you based on our own personal experience in the election campaigns we have all just come through.

I have provided the committee with copies of my testimony, as

well as some exhibits I would like you to look at as well to support

the testimony I will be giving here today, and I do intend to be

brief.

I am especially privileged to be here as only the third Congressman from Texas’s District Seven in Houston. The only other Congressmen to ever represent this district have been George Bush

and Bill Archer. George Bush served two terms and Chairman Archer served our district for 30 years before retiring in the last election cycle. These two great men have genuinely created a very special legacy of principled honorable leadership in our district that I

will do my very best to uphold.

This special legacy, combined with the length of Bill Archer’s

service and the large number of talented, motivated, and well-educated citizens in our district, created a very competitive election

campaign and a field of eight candidates last year, which made this

campaign especially vivid and fresh in my mind, as are the voices

and opinions of our voters and my predecessors.

My experience in this campaign and the advice that I have obtained from my predecessors, and my own experience in the legislature, has given me a lot of valuable insight into the question Chairman Nussle has asked us to answer today: What budget reforms

25

would I and the voters of District Seven like to see the Congress

enact?

District Seven’s highest budget priority is to preserve and protect

America’s balanced Federal budget through ongoing fiscal discipline, tax cuts to reduce the tax surplus and, above all, by approving a balanced budget amendment to the United States Constitution.

We know these principles work in Texas because we have proven

them and tested it repeatedly in our State government. I have just

completed 14 years of service to 150,000 of District 7’s residents as

their State representative. Over the last 6 years I served alongside

Governor Bush and his staff in helping them enact the key elements of his legislative program in Texas, public education reform,

criminal justice reform, tort reform, and tax cuts to strengthen our

economy and reduce Texas’s record tax surpluses.

We were successful on every count in Texas, and the voters in

Texas measured the legislature and the Governor against this

record to make Governor Bush the first Governor to be reelected

to a full 4-year term in 1998.

Therefore, Mr. Chairman, I can testify from personal experience

that statutory and constitutional balanced budget requirements

have a very healthy effect on every detail of the appropriations

process and impose fiscal discipline on legislators, regulators, public employees, and public agencies.

Based on this experience, I also want to suggest that Congress

enact two other proven budget reforms. I am not sure exactly what

form this would take in the Federal Government, but I could point

you first for guidance to Article 8, Section 22 of the Texas Constitution and Chapter 316 of the Texas Government Code, which are included in the exhibits I provided to the committee. These are speed

governors on spending, which have had a very healthy effect on our

State budget in Texas. The core of both of these provisions essentially provides that, quote, ‘‘the rate of growth of appropriations

from State revenues not dedicated by the constitution shall not exceed the estimated rate of growth of the State’s economy,’’ essentially limiting spending increases to no more than is brought in by

natural growth in the State’s economy.

I believe Florida has similar language in your constitution, Congressman, by the way, and we visited about that before, and I

know has worked well in your State as well.

Again, I am not sure what form that would take in the Federal

law, but one that I hope we will all work on together to implement

after we get our budget resolution done.

Secondly, I would like to direct the committee’s attention to the

performance-based budgeting process we have used in Texas very

successfully for a number of years. I have attached several exhibits

which give you some perspective on the opinion of members of the

legislature on the effectiveness of performance-based budgeting,

and these exhibits show that it is the consensus of every member

of the legislature overwhelmingly that the adoption of performancebased budgeting has improved the accountability and efficiency of

State agencies and employees, saved taxpayers a great deal of

money, and made the entire—all of State government more accountable to both the legislature and to the taxpayers.

26

These are the most important budget reforms that I and the people of the District 7 would suggest to you here today to ensure that

we preserve and protect our balanced budget, balanced Federal

budget, reduce the tax surplus and strengthen our Nation’s economy.

As I learn more about the Federal budget process, other ideas

based on my experiences in Texas will undoubtedly come to mind.

In the meantime, I look forward to working with you, Chairman

Nussle, and with the entire committee to complete our budget resolution in a timely manner so we can then move on to a detailed

discussion of budget reform ideas that I and my freshman colleagues have presented here today. I genuinely want to thank you

for allowing us who are on the freshman campaign trail this opportunity to speak to the committee and offer our best ideas. Thank

you very much.

Mr. SUNUNU [presiding]. Thank you very much, John. Any questions from your committee members? Thank you for your time and

your presentation.

[The prepared statement of Congressman Culberson follows:]

PREPARED STATEMENT OF HON. JOHN CULBERSON, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF TEXAS

Mr. Chairman, Ranking Member Spratt, thank you for giving us this valuable opportunity to share our ideas with you and the Budget Committee.

I am privileged to be here today as the third congressman from Texas’ District

7 in Houston. The only other congressmen to represent our district were George

Bush and Bill Archer. George Bush served two terms, and Chairman Archer served

our district for 30 years before retiring. These two great men have created a special

legacy of principled, honorable leadership in our district that I will do my best to

uphold. This special legacy, combined with the length of Bill Archer’s service and

the large number of talented, motivated and well educated citizens in District 7 created an extremely competitive election campaign among a field of eight candidates

last year.

This campaign is very fresh and vivid in my mind, as are the voices and opinions

of our voters and my predecessors on the question that Chairman Jim Nussle has

graciously asked us to answer today: What budget reforms would I and the people

of District 7 like to see the Congress enact?

District Seven’s highest budget priority is to preserve and protect America’s balanced Federal budget through ongoing fiscal discipline, tax cuts to reduce the tax

surplus, and above all, by approving a balanced budget amendment to the United

States Constitution. We know these principles work because we have proven them

and tested them repeatedly in our state government in Texas.

I have just completed 14 years of service to 150,000 of District Seven’s residents

as their state representative. Over the last six years, I served alongside Governor

George W. Bush and worked hard to help him enact the key elements of his legislative program: public education reform, criminal justice reform, juvenile justice reform, tort reform, and tax cuts to strengthen our economy and reduce Texas’ record

tax surpluses. We were successful on every count, and voters measured us against

this record to re-elect George Bush as Governor in 1998.

Therefore, Mr. Chairman, I can testify from personal experience that statutory

and constitutional balanced budget requirements have a very healthy effect on every

detail of the appropriations process, and impose fiscal discipline on legislators, regulators, public employees and public agencies.

Based on this experience, I also want to suggest that Congress enact two other

proven budget reforms. The first is a ‘‘speed governor’’ on spending similar to Article

8, Section 22 of the Texas Constitution and Chapter 316 of the Texas Government

Code which state: ‘‘the rate of growth of appropriations from tax revenues not dedicated by [the] constitution [shall not] exceed the estimated rate of growth of the

state’s economy.’’

Second, I hope the Congress will enact Performance Based Budgeting as the foundation for our budget and appropriations process. As the attached exhibits show,

27

Performance Based Budgeting has improved the accountability and efficiency of

state agencies, according to an overwhelming majority of Texas state leaders.

These are the most important budget reforms that I and the people I represent

would suggest that the Congress enact to ensure that we preserve and protect our

balanced Federal budget, reduce the tax surplus and strengthen our nation’s economy. As I learn more about the Federal budget process, other ideas based on my

experiences in Texas will undoubtedly come to mind. In the meantime, I look forward to working with you, Chairman Nussle, to complete our Budget Resolution in

a timely manner so we can then move on to a detailed discussion of the budget reform ideas that I and my freshman colleagues have presented today.

Again, thank you for the opportunity to testify before the committee today.

Mr. SUNUNU. Our next witness is a new member, of course, from

New York, the Honorable Steve Israel.

Welcome, Congressman.

STATEMENT OF HON. STEVE ISRAEL, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEW YORK

Mr. ISRAEL. Thank you very much. Let me thank the chairman

and the ranking member and all members of this committee for affording freshmen the opportunity to be heard. I especially want to

thank Chairman Nussle for using his first hearing as budget

Chairman to listen to new members.

Before coming to the House, I served as town councilman in

Huntington, Long Island. In my town I led the successful effort to

reduce and stabilize property taxes for 7 consecutive years, slash

our debt payments virtually in half, and meet the critical needs of

our time from child care, to senior care, to the environment. And

although Huntington’s $145 million budget is a minute fraction of

the Federal Government’s budget, the same responsible fiscal philosophies have to apply: paying down our debt, offering sustained

and consistent tax relief, and meeting the immediate needs of our

citizens.

I have spoken to thousands of my constituents in New York’s

Second Congressional District, and when I ask them how should we

budget, they tell you what you would expect to hear: Run it like

a business. Just as a small business owner would use common

sense in running a business, so, too, should we use common sense

in running our government. They say we have to live within our

means, pay our debts, and invest in our future. Just as in a business if there is a surplus, a real surplus, it should be returned to

the shareholders, and in this case the American people, returned

to the American people by shoring up Social Security and Medicare

and providing common-sense tax relief.

Here is how I believe we should do it: First, thousands of working families in my district need relief from the marriage tax penalty, a perverse effect of the Tax Code that makes a married couple

pay more in taxes than if they were two single people. We need to

repeal the marriage penalty.

Secondly, small business owners need relief from estate taxes,

taxes that make it virtually impossible to pass along a lifetime of

work to the next generation. Nationally approximately 70 percent

of family-owned business are not kept in the family once a parent

dies.

Third, we can and should reduce marginal tax rates progressively and fairly. These reductions must provide maximum relief to

28

hard-working, middle-class families, who are the backbone of our

economy.

And fourth, we should continue to pare down our debt.

Overall I am encouraged by the Federal Reserve Chairman’s recent comments about the state of our economy. He indicated that

the current budget surpluses are large enough to accommodate

both the gradual elimination of the national debt and a significant

reduction in Federal taxes. Paying down our debt means lower inflation and lower interest rates for everyone. That is like a tax cut

for everyone who has a mortgage, a small business, a car loan or

student loan.

In the words of my local newspaper, Newsday, we should focus

on those elements that have, quote, ‘‘strong bipartisan support,

eliminating the marriage penalty and a cut in the marginal rate for

lower and middle-income tax brackets. The result would be meaningful cuts for a broad swath of taxpayers.’’ .

Above all, Mr. Chairman and Ranking Member and all members,

Democrats and Republicans can agree on this: Discipline is vital.

I commend the President for understanding that we have to assess

the spending side of the ledger as part of any comprehensive tax

relief plan. At the end of the day, the linchpin to any economic

blueprint is a balanced budget. That is how any household operates, how any business operates. That is how my town operated.

And that is why any bipartisan fiscal plan must include vigilance:

a rigorous annual assessment of our ability to sustain tax cuts, provide adequate investments and eliminate our debt.

We must continue the economic formula that created the long

boom of the 1990’s: fiscal discipline and investment in the knowledge and skills of the American people. Sensible use of the surplus

will ensure that our Nation reaps the economic benefits of both national debt reduction and tax relief for working families. And I

thank you for your consideration.

Mr. SUNUNU. Thank you very much.

[The prepared statement of Congressman Israel follows:]

PREPARED STATEMENT OF HON. STEVE ISRAEL, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NEW YORK

Mr. Chairman, before coming to the House, I served as a town councilman in

Huntington, Long Island. In my town, I led the successful effort to reduce and stabilize property taxes for 7 consecutive years, slash our debt payments virtually in

half, and meet critical needs from child care to senior care to the environment. Although Huntington’s $145 million budget is a minute fraction of the Federal Government’s budget, the same responsible budgeting philosophies apply: paying down

the debt, offering sustained and consistent tax relief, and meeting the immediate

needs of our citizens.

Now we have an opportunity to apply those principles here in Washington. In the

words of Federal Reserve Chairman Alan Greenspan, ‘‘The time has come, in my

judgment, to consider a budgetary strategy that is consistent with a preemptive

smoothing of the glide path to zero Federal debt or, more realistically, to the level

of Federal debt that is an effective irreducible minimum.’’

We ought to be running the government like a business. Just as a small business

owner uses common sense in running a business, so too should we use common

sense in running the government. We have to live within our means, pay our debts,

and invest in our future. And just as in a business, if there’ is a surplus—a real

surplus—it should be returned to the shareholders, in this case the American people. It can be returned to the American people by shoring up Social Security and

Medicare and providing common sense tax relief.

Here is how:

29

First, thousands of working families in my district need relief from the marriage

tax penalty a perverse effect of the tax code that makes a married couple pay more

in taxes than if they were two single people. According to the Congressional Budget

Office, more than 21 million married couples have fallen victim to the marriage penalty, at an average of $1,400 per year.

Second, small business owners need relief from estate taxes—taxes that make it

impossible to pass along a lifetime of work to the next generation. Nationwide, approximately 70 percent of family-owned businesses are not kept in the family once

a parent dies.

Third, we can and should reduce marginal tax rates progressively and fairly.

These reductions must provide maximum relief to hard working middle class families who are the backbone of our economy.

Fourth, we must continue to pay down our debt. Overall, I am encouraged by the

Federal Reserve Chairman’s recent comments about the state of our economy. He

indicated that the current budget surpluses are large enough to accommodate both

the gradual elimination of the national debt and a significant reduction in Federal

taxes. Paying down the debt means lower inflation and lower interest rates for everyone. That’s a tax cut for anyone who has a mortgage, a small business, a car

loan, or a student loan—in effect, everyone.

In the words of my local paper Long Island Newsday, we should focus on those

elements that have ‘‘strong bipartisan support * * * eliminating the marriage penalty (and) a cut in the marginal rate for lower and middle-income tax brackets * * *

the result would be meaningful cuts for a broad swath of taxpayers.’’

Above all, Mr. Chairman, Democrats and Republicans can agree on this: discipline

is vital. I commend President Bush for understanding that we have to assess the

spending side of the ledger as part of any comprehensive tax relief plan. At the end

of the day, the linchpin to any economic blueprint is a balanced budget. That is how

any household operates, how any business operates, and that is how my town operates. And that is why any bipartisan fiscal plan must include vigilance: a rigorous

annual assessment of our ability to sustain tax cuts, provide adequate investments,

and eliminate our debt.

We must continue the economic formula that created the long boom of the

1990’s—fiscal discipline and investment in the knowledge and skills of the American

people. Sensible use of the surplus will ensure our nation reaps the economic benefits of both national debt reduction and tax relief for working families.

Mr. SUNUNU. Any questions?

I have a brief question. You talked about cutting marginal rates,

and the top marginal rate is 40 percent—a 40-percent personal income tax rate. If we are going to cut marginal rates in the various

brackets—the President has proposed cutting the 28 percent bracket down to 25, the 15 percent bracket down to 10—why not provide

some relief for the 40 percent marginal rate bracket, which is obviously a pretty big disincentive to productivity when your next dollar, not quite, but nearly half of it is going to go to the Federal

Government? Why not cut the top—are you opposed to cutting the

top marginal bracket? I guess that is the question.

Mr. ISRAEL. In my view nothing is off the table so long as we

have the ability to sustain those reductions and not return to the

days of roller coaster tax increases. So I would consider virtually

everything that is on the table including reducing that level of taxation.

Mr. SUNUNU. Thank you. Thank you very much.

We go to the other side of the country for our next witness from

the great State of Washington, Rick Larsen. Welcome, Congressman. We will include all of your written testimony into the record.

And if you feel free, take the 5 minutes to go over the details or

to summarize as appropriate.

30

STATEMENT OF HON. RICK LARSEN, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF WASHINGTON

Mr. LARSEN. Thank you very much, Mr. Chairman. Thank you

for the opportunity to comment today before the House Budget

Committee. Thank you as well to Ranking Member Spratt.

My purpose today is to convey the comments that I have heard

from my district’s constituents regarding the prospects of tax cuts

in the relation to Congress’s work on the budget. Just recently I

met with a group of small business owners, bankers and farmers

in Mount Vernon, Washington, which is in the heart of my district.

The purpose of the meeting was to hear how the slowing economy

was affecting their businesses and to tap into local thoughts and

feelings about how best to stimulate our economy. The results

were, in fact, enlightening.

First, there seems to be general support for a tax cut, but not

support yet for any specific tax package of tax cuts, and the larger

the proposed tax cut package, the more skepticism there is about

the ability from their perspective of Congress to put together a responsible budget. Why was this, I asked.

The reason for their skepticism was fairly simple. Constituents

in my district are skeptical about the real size of the surplus. Their

skepticism seems to be borne out by the most recent Congressional

Budget Office report which shows that over the next 10 years the

surplus could range anywhere from 2.6 trillion to minus $50 billion, that is depending upon various assumptions. They don’t seem

to trust Congress to hold the line, period, either on tax cuts or on

spending.

As a result, the message from constituents that I received is this:

Treat the surplus conservatively and make a tax cut affordable.

How to do that? The answer is in the second message from constituents, and that message is this: Show us the budget. Families

living in my district would not so much as buy school clothes for

their kids or order out for pizza without looking at their budget.

Similarly, talking tax cuts before talking budget runs counter to

how families in my district would approach their own budgets. The

best method, in my view and their view, seems to be to gain support for tax cuts is to show our constituents exactly how much we

have to work with, again by showing them the budget first.

Finally, I want to address unfinished business, the unfinished

business of the debt. In our meeting one local banker said in relation to a tax cut package, the public doesn’t need another political

bill. The public wants a practical bill. Practicality suggests that

Congress should finish the unfinished business of paying down the

debt, and this year’s budget should contain a real commitment to

this goal of fiscal responsibility.

How do we meet the goal of paying down the debt while taking

into account the varying ranges of surplus estimates and the public

skepticism about Congress’s ability to be fiscally prudent? Three

steps. First, again, show the public the budget. They need to know

exactly how much is at stake and how much we can realistically

commit to a tax cut.

Next, keep tax cuts affordable. Americans, at least in my district,

don’t want a tax cut necessarily if it means a sky-high national

debt. So keeping that in balance.

31

And third, I would suggest that we should be conservatives and

not liberals with estimates of this surplus. Let us not spend money

that we really do not have. Spending the surplus is a one-shot deal,

and then it is gone. So let us act responsibly, keep tax cuts affordable and maintain the commitment to paying down the debt. We

owe that at the very least to our constituents and to the country.

Thank you very much, Mr. Chairman.

Mr. SUNUNU. Thank you very much, Mr. Larsen.

[The prepared statement of Congressman Larsen follows:]

PREPARED STATEMENT OF HON. RICK LARSEN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF WASHINGTON

Mr. Chairman, thank you for the opportunity to testify before the House Budget

Committee this morning. My purpose today is to convey the comments I have heard

from district constituents regarding the prospect of tax cuts and their relation to

Congress’s work on the budget.

Just recently I met with a group of small business owners, bankers and farmers

in Everett, Washington, the heart of my district. The purpose of the meeting was

to hear how the slowing economy was affecting their businesses and to tap into local

thoughts and feelings on how best to stimulate our economy.

The results were enlightening. First, there seems to be general support for a tax

cut, but not support of any specific package. And the larger the proposed tax cut

package, the more skepticism there is about the ability to put together a responsible

budget. Why?

The reason for this skepticism is simple: constituents in my district are skeptical

about the real size of the surplus. Their skepticism is borne out by the most recent

Congressional Budget Office report, which shows that over the next ten years, the

surplus could range from $2.6 trillion to ¥$50 billion, depending upon various assumptions. They don’t trust Congress to hold the line. Period. On tax cuts or on

spending.

As a result, the message from constituents is this: Treat the surplus conservatively and make a tax cut affordable.

How to do that? The answer is in the second message from constituents. That

message is this: Show us the budget.

Families living in my district would not so much as buy school clothes for their

kids or order out for pizza without looking at their budget.

Similarly, talking tax cuts before talking budget runs counter to how families in

my district approach their own budgets. The best method to gain support for tax

cuts, it seems to me, is to show our constituents exactly how much we have to work

with: again, Show us the Budget.

Finally, I want to address unfinished business—the unfinished business of the

debt. In our meeting, one local banker said in relation to a tax cut package, ‘‘The

public doesn’t need another political bill, the public wants a practical bill.’’

Practicality suggests that Congress should finish the unfinished business of paying down the debt. This year’s budget should contain a real commitment to this goal

of fiscal responsibility.

How do we meet the goal of paying down the debt, while taking into account the

varying ranges of surplus estimates and the public’s skepticism about Congress’s

ability to be fiscally prudent?

This involves three key steps.

First, show the public the budget. They need to know exactly how much is at

stake here and how much we can realistically commit to a tax cut. Show us the

budget.

Next, keep tax cuts affordable. Americans don’t want a tax cut if it means skyhigh national debt.

And finally, be conservatives, not liberals with estimates of the surplus. Let’s not

spend money that we don’t really have.

Spending the surplus is a one shot deal and then it is gone. Let’s act responsibly.

We owe it to our constituents and to our country.

Mr. SUNUNU. Any questions?

Thank you.

Our next witness is Congressman Adam Schiff of California.

Welcome, Mr. Schiff. We appreciate your taking the time.

32

Belated congratulations for all our new members in winning your

elections.

Please feel free to take the 5 minutes to summarize your testimony or highlight any important points. The entire written testimony will be included in the record.

STATEMENT OF HON. ADAM SCHIFF, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA

Mr. SCHIFF. Thank you, Mr. Chairman and ranking member. We

very much appreciate the invitation you have extended to all the

freshmen to have a chance to come and share our budget priorities.

We recognize how extraordinary it is for you to invite us this way

and very much appreciate it and hope it is repeated frequently by

other committees.

We are at an extraordinary juncture, having the surpluses that

we do, and I think my luck has been good. I entered the State legislature 4 years ago at a time when we first began surpluses in

California, and I arrived here for record surpluses as well. It is an

incredible opportunity, and we have been the beneficiaries of an extraordinary economy over the last 8 years. But it is also an important responsibility that we take actions now to foster the continued

success of this economy and that we don’t squander the opportunities that have presented.

When times are difficult, there is an incentive to spend to stimulate the economy. It is difficult to continue attacking the problem

of national debt. When times are good, it is also a time where there

is a strong incentive to spend either in the form of tax expenditures

or enough spending and also put pressure on our ability to attack

the national debt. I think we have to keep first and foremost in

mind that I think probably the most successful thing that we have

done over the last year in terms of government policy has been a

vigorous attack on the national debt.

We are limited in our ability to affect the economy. Small business in particular is the engine of growth in the economy and more

determinative of our success or failure economically probably than

anything else. But to the degree the government can influence the

economic cycles, I think probably the single most important thing

we have done over the last 8 years is to get our fiscal house in

order, to continue to aggressively paying down our debt, to keep interest rates low. I would hate to see us in this time of surplus go

back to policies that will take us into deficit spending and increasing national debt all over again. That would be a tragic mistake to

make.

And so I think what we need to do, given that we simply cannot

rely on fiscal projections, budgetary projections 5 to 10 years from

now, and that is when the strong majority of the surplus is anticipated, it would be most prudent to look at the near term and not

rely on rosy economic assumptions about what the economy is

going to be doing 5 to 10 years from now, what the surpluses are

going to be 5 to 10 years from now.

When we hear figures bandied about about surpluses in the

neighborhood of $5 to $6 trillion, and we consider half of that is

Social Security and Medicare and should be off the table; when we

consider that those figures don’t even take into consideration tax

33

cuts that are set to sunset, and that if we assume that they will

be extended, as is the likelihood they will be, it further reduces the

available surplus; when we consider that even dedicating Social Security and Medicare surpluses to Social Security, Medicare, we still

have enormous unfunded liabilities we haven’t figured out how to

wrestle with, to talk about enormous surplus is really somewhat illusory. I think we have to keep that in mind, otherwise we are

going to be headed back down the path of deficits.

I think we ought to take a very strong look at tax cuts that are

triggered to a sustained economic growth, to reaching debt targets.

This is a technique that we employed in California where we had

an enormous tax cut, predominantly in the vehicle license fees.

Those were targeted to growth in the economy such that if the

economy grew at a certain level, subsequent tax cuts would automatically kick in. As luck would have it, and it was very good luck

indeed, the economy was strong, and stronger, in fact, than we expected, and we were able to pass successive legislation accelerating

the tax cuts. We didn’t even need to wait for the triggers to apply.

We were able to accelerate further tax cuts. That was very easy to

do. If the projections turn out to be correct or they are even better

than we anticipate, it is very easy to accelerate the timetable of

further rounds of tax cuts.

On the other hand, if you do not estimate correctly, you estimate

much better projections than materialize, dealing with that problem, as you can imagine, is incredibly difficult, and I would urge

us to give serious consideration, as difficult as it is, to pegging subsequent rounds of tax cuts, the ultimate size of the tax cut, to significant targets on debt reduction and pick a mechanism that we

can assure to the maximum degree possible that those numbers

will not be manipulated by whatever agency is given responsibility

for coming up with those debt targets.

I would just in closing emphasize that we don’t want to find ourselves a few years from now back in deficits. We have an extraordinary opportunity to meet our responsibilities on prescription drug

medication, on education, on military defense, and to give a very

large tax cut to the American people, which we should do. But let’s

do it sensibly. Let’s keep our fiscal house in order.

I want to thank you for this time.

Mr. SUNUNU. Thank you very much, Congressman.

Mr. SPRATT. Thank you very much.

[The prepared statement of Congressman Schiff follows:]

PREPARED STATEMENT OF HON. ADAM SCHIFF, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CALIFORNIA

Chairman Nussle, Ranking Member Spratt, and members of the committee, I appreciate the opportunity to testify before your committee today as a member of the

freshman class of the 107th Congress.

We are at a critical juncture in our nation’s history. The last 8 years have brought

enormous prosperity to this country. We have had some of the lowest unemployment

in decades, the highest rate of home ownership, the longest period of uninterrupted

growth—the list of superlatives goes on and on.

The benefits of this economy did not reach everyone, but they nearly did. More

effective than any government program, the nation’s bustling growth meant the annual ‘‘Misery Index’’ of unemployment and inflation combined was lower than at any

point since the 1960’s.

Not only did the prosperity mean a higher standard of living for most Americans,

it meant that our nation got its fiscal house in order. We went from a period of spiVerDate 11-MAY-2000 18:13 Mar 02, 2001 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6621 H:\DOCS\HEARINGS\107\107-1\HBU038.002 HBUDGET1 PsN: HBUDGET1
34

raling deficits, poor market confidence and crushing debt service to the unthinkable—surpluses.

Well-respected budget analysts who wrote books just a short time ago with titles

like ‘‘Why We Will Never Balance the Budget’’ suddenly found themselves changing

the titles of the reprints, not to mention the text.

No one predicted the dramatic growth in our economy. No one foresaw the size

of our surplus. Even a year ago, the Congressional Budget Office projected a 10-year

surplus of $3.15 trillion. Now the figure is $5.5 trillion.

And this is precisely the problem: Who can really say whether the surpluses will

continue for the next five or 10 years? And yet many in Washington would have

us bet the farm that they will.

Whether it is mammoth new spending, or mammoth new tax cuts, or a combination of the two, any expenditure plan that presupposes a robust economy and ever

larger surpluses over the next decade is almost certain to send us back to the days

of deficit spending and fiscal irresponsibility.

In the late 1980’s and early 1990’s, when deficits were high and the debt service

was enormous, it was difficult to muster the political will to control spending and

aggressively pay down the national debt. Even with enormous discipline, government’s ability to influence economic cycles has its limitations—the private sector is

the true determinant of growth.

But if any change in governmental policy can be attributed to hastening the end

of the last recession and spurring our present success, it was the decision of Congress and the last administration to balance our books and pay our bills.

Now that we are in an era of surpluses—may they last forever—it is no less difficult and no less important to maintain our fiscal discipline and continue paying

down our debt. We can and should return a portion of our surplus to taxpayers

through tax cuts that will stimulate our economy and eliminate the inequities of the

marriage penalty and estate taxes. We can and should make a greater investment

in education and health care and strengthen our national defense. But we must

make these expenditures in a balanced and thoughtful way that maintains our fiscal

discipline, continues to pay down our debt and does not rely on rosy and unrealistic

long-term projections.

I am proud to have joined the Blue Dogs, a group that has never lost sight of

the importance of a strong fiscal policy. I support the Blue Dog philosophy of advocating a hawkishness on the debt and a 50-25-25 budget framework that allocates

50 percent of the surplus to attacking the national debt and the remaining 50 percent to equal division between tax cuts and new investment. This framework reassures financial markets of the nation’s resolve to maintain fiscal discipline; preserves the resources to strengthen Social Security and Medicare; and provides flexibility in the event of emergencies or should projected surpluses prove illusory.

One method of further assuring that our expenditures do not put us on the path

back to deficit spending would involve phasing in a long-term tax plan or spending

measure, or pegging its growth to surplus or debt targets. This approach, suggested

by Federal Reserve Chairman Alan Greenspan in recent testimony before the Senate Budget Committee, is not unlike that adopted by California. Legislation I coauthored in Sacramento last session enacted major cuts to the vehicle license fee and

pegged additional cuts to the growth in revenues. When revenues grew even faster

than contemplated by the bill, we passed subsequent legislation to accelerate the tax

cuts further.

I look forward to working with our new President on a budget that meets the

country’s needs for investment and tax relief and one that keeps the economy prospering with a sensible fiscal policy.

The Blue Dogs have reached out to the President in an effort to work on these

issues in a bipartisan way—and he has reached back. But in the process we would

be well-advised to keep Greenspan’s caution in mind and ‘‘resist those policies that

could readily resurrect the deficits of the past and the fiscal imbalances that followed in their wake.’’

Mr. Chairman, once again, I appreciate the opportunity to testify today, and I am

happy to answer any questions the committee may have.

Mr. SPRATT. Mr. Chairman, Dennis Moore was to testify, but he

had to be at a committee hearing. I would like to ask unanimous

consent to submit his statement for the record.

Mr. SUNUNU. Without objection.

[The prepared statement of Congressman Moore follows:]

35

PREPARED STATEMENT OF HON. DENNIS MOORE, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF KANSAS

Mr. Chairman, last week the Congressional Budget Office (CBO) issued budget

surplus projections that will play an important role in the upcoming budget debate

in this committee.

The facts remain, however, that budget projections are often inaccurate, that

spending caps are set to expire in fiscal year 2002, and Social Security and Medicare

trust funds continue to be counted as general fund revenue—even though large majorities of both parties have agreed to protect these funds.

We must be conservative in using the projected surplus for either tax cuts or new

spending. We should continue to make paying off the debt our highest priority for

the projected surplus. And, we need to remember that these projected surpluses are

exactly that—projections.

Federal Reserve Chairman Alan Greenspan recently warned the Senate Budget

Committee that ‘‘* * * the risk of adverse movements in receipts is still real, and

the probability of dropping back into deficit as a consequence of imprudent fiscal

policies is not negligible.’’

Even CBO acknowledges that there is tremendous uncertainty in their baseline

figures over long periods, and economic circumstances could quickly change projections from surpluses to deficit. If we rush to commit all of the projected surplus

funds to tax cuts or new spending measures and the surplus does not materialize,

we will be forced to abandon our balanced budget and fall back into deficit spending.

We cannot afford to let that happen.

Mr. Chairman, I would like to submit for the record a January 23, 2001, article

from the Kansas City Kansan, a January 24, 2001, article from the Salina Journal,

and a February 3, 2001, article from the Kansas City Star. Each highlights the dangers of relying on optimistic economic budget forecasts to make long-term budget decisions. Indeed, we do not need to rely on CBO projections, or Federal Reserve

Board proclamations, we need only to take a look at states across our nation to see

the empirical evidence that the decisions we make today could have drastic economic effects tomorrow.

Mr. Chairman, before this committee begins to develop the annual budget resolution we must agree on reasonable surplus figures that will keep us on the track of

fiscal discipline and to prevent the errors of our states. When we craft the budget,

we all need to work off of the same page. The following principles are very basic

assumptions, already agreed to at various times by the leadership of both parties,

on which I hope this committee will follow in crafting the budget resolution:

1. Long-term economic forecasts are inherently uncertain;

2. The size of the available surplus must exclude the Social Security and Medicare

trust funds;

3. Realistic assumptions for the growth in discretionary spending must be properly accounted;

4. Surplus projections should incorporate the costs of policies that Congress historically reauthorizes;

5. The baby-boom retirement will place sizable future obligations on the Federal

budget, and we must recognize that the surplus totals include funds generated by

retirement trust funds (such as the military retirement trust fund), which are already committed to future obligations.

If this committee takes a balanced and prudent approach to managing the surpluses now, our nation will have the economic benefits of tax cuts, national debt reduction, and common sense investment priorities.

Mr. SUNUNU. Our next witness is Congressman Todd Akin, new

Member from Missouri. Welcome.

Mr. SPRATT. Mr. Akin, I am sorry I can’t stay to hear your testimony, but I have to go to another meeting myself, but I will take

a copy of it with me. Thank you very much for appearing.

STATEMENT OF HON. TODD AKIN, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MISSOURI

Mr. AKIN. Mr. Chairman and Ranking Member and members of

the committee, for the record my name is Todd Akin, Congressman

from Missouri, Second Congressional District. That is the St. Louis

area.

36

I know that the committee and this Congress must balance a lot

of competing priorities; however, there are two priorities that I believe must receive our highest attention. The first priority must be

an immediate tax decrease. First of all, America has a tax surplus.

A surplus comes from a direct tax rate on the average American

family that is greater than the cost of food and clothing and shelter

and transportation all combined. We have a tax surplus. It is time

to give the money back where it belongs, and that is to the people.

In addition, the American economy is in need of immediate attention. Our economy reacts to a number of forces, including the

high taxes and nonexistent energy policy, a troubled stock market.

Now it is time to provide solutions to that slumping economy.

In fact, Federal Reserve Chairman Alan Greenspan has forcefully

weighed on this question with two decreases in our interest rates.

He went further to support tax cut to jump-start the economy.

The solution is straightforward. We must continue to protect Social Security and Medicare and return the tax surplus through cuts

designed to stimulate critical sectors of our economy. If we were to

accelerate the President’s package to $2 trillion, the overall cut

would still be smaller than the tax cuts that were passed during

President Kennedy’s and President Reagan’s administrations. In

fact, the President Reagan package in today’s dollars would be a

$5 trillion package. President Bush’s tax cut proposal is a modest

approach, but I believe we need to accelerate his plan.

We can’t let politics get in the way of economics. A strong economy is like sunshine. It is kind to all, and it brings hope of a new

day and a promise of yet more American dreams that can become

reality.

The second priority, Mr. Chairman, I would suggest is that we

must pay attention to our national defense. Through the decades

and centuries, in fact, America has a perfect track record of not

being prepared for military conflict, starting with the War of Independence and then the War of 1812, World War I, World War II.

You take any of our major conflicts and we have never historically

been prepared. In an era of deadly weaponry, a lack of preparedness can come at a tragic cost.

Specifically I believe we should pass a limited supplemental defense appropriations bill for fiscal year 2001 at about the $9- to

$10-billion level to meet funding shortfalls this year.

Secondly, the defense budget for fiscal year 2002 must be adequately funded and must adequately fund national defense. The

Congressional Budget Office has identified a $40- to $50-billion-ayear shortfall. If these steps are not taken, I believe we will see

lack of combat preparedness. The ability to shoot, move and communicate will continue to deteriorate. The flying proficiency of our

pilots will deteriorate. Our stockpiles of precision-guided munitions,

that are already at half of their level, will continue to drop, and

the highly skilled midcareer officers and noncommissioned officers

will continue to depart the force. If we don’t support defense, why

should they?

In summary, I believe we must accelerate the tax cut and provide for adequate defense. I thank the committee for your attention.

Mr. SUNUNU. Thank you very much, Mr. Akin.

37

[The prepared statement of Congressman Akin follows:]

PREPARED STATEMENT OF HON. TODD AKIN, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF MISSOURI

Mr. Chairman, ranking member, members of the committee. For the record, my

name is Todd Akin, Congressman for Missouri’s second congressional district in the

St. Louis area.

I know that the committee and this Congress must balance many competing priorities. However, there are two priorities that I believe must receive our highest attention.

The first priority must be an immediate tax decrease.

America has a tax surplus. The tax surplus comes from a direct tax rate on the

average American family greater than the cost of food, clothing, shelter, and transportation combined. We have a tax surplus; it is time to give the money back where

it belongs—to the people.

The American economy is in need of immediate attention. Our economy reacts to

a number of forces including high taxes, a non-existent energy policy and a troubled

stock market. Now is the time to provide solutions to our slumping economy.

Federal Reserve Chairman Alan Greenspan has forcefully weighed in on this

question with two decreases in interest rates. He went further in supporting a tax

cut to jump-start the economy.

The solution is straightforward. We must continue to protect Social Security and

Medicare and return the tax surplus through cuts designed to stimulate critical sectors of the economy.

If we were to accelerate the President’s package to $2 trillion, the overall cut

would still be smaller than the tax cut during President Kennedy’s and President

Reagan’s administrations. In fact, President Reagan’s package in today’s dollars

would be $5 trillion. President Bush’s tax cut proposal is a modest approach, but

I believe we must accelerate his plan.

We must not let politics get in the way of economics. A strong economy is like

the sunshine. It is kind to all, and brings hope of a new day—the promise of yet

more dreams that become reality.

The second top priority that must receive attention is defense.

Through the decades and centuries America has a perfect track record of not

being prepared for military conflict—War of Independence, War of 1812, World War

I, World War II, Korea, etc. We have been very poor at preparedness.

In an era of more deadly weaponry, a lack of preparedness can come at a tragic

cost.

Specifically, I believe we should pass a limited Supplemental Defense Appropriations bill for fiscal year 2001 at about the $9 to 10 billion level to meet funding

shortfalls this year.

Secondly, the defense budget for fiscal year 2002 must adequately fund national

defense. The Congressional Budget Office has identified a $40 to 50 billion per year

shortfall.

If these steps are not taken we will see:

1. Combat preparedness—the ability to shoot, move and communicate—will continue to deteriorate;

2. The flying proficiency of our pilots will continue to decline;

3. Our stockpiles of precision-guided munitions, already at one-half their required

inventories, will drop lower;

4. Highly skilled mid-career officers and noncommissioned officers will continue

to depart the force. If we won’t support national defense, why should they?

In summary, I believe we must accelerate the tax cut and provide for adequate

defense.

I thank the committee for your attention.

Mr. SUNUNU. We have one more Member that wishes to present

testimony. We will recess briefly so that he has a chance to arrive

and then take his testimony.

[Recess.]

Mr. SUNUNU. The committee will come to order.

Good morning. Welcome, Congressman Langevin. We appreciate

your taking the time to be here. We have, as you well know, taken

testimony from a number of your colleagues, Democrats and Republicans, new Members of Congress, to get their perspective havVerDate 11-MAY-2000 18:13 Mar 02, 2001 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 H:\DOCS\HEARINGS\107\107-1\HBU038.002 HBUDGET1 PsN: HBUDGET1
38

ing come really fresh from the campaign trail and being in the

great position of coming to Congress without a lot of preconceived

notions about what is and isn’t achievable, but focusing more on

what seems to make sense to your constituents and the citizens

that elected you.

Without objection, all of your written testimony will be included

in the record, and we would like to take your testimony and allow

you the opportunity to highlight important points in your written

testimony or to summarize. You have the floor for 5 minutes.

Thank you for being here.

STATEMENT OF HON. JAMES LANGEVIN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF RHODE ISLAND

Mr. LANGEVIN. Thank you, Mr. Chairman, Ranking Member

Spratt and members of the committee. Thank you for giving to me

and my fellow members of the freshman class, the opportunity to

testify before you today. I am honored to be here and to be participating for the first time in the formation of the Federal budget resolution.

As you know, the budget decisions we make this year will have

an enormous impact on the lives of Americans for years to come,

and I am grateful for the committee’s efforts to solicit input from

the newest Members of the House during this critical process.

Let me start by saying that what is most important to me is that

out of this process comes a disciplined approach to spending, a

strong focus on and commitment to paying down the national debt,

and a responsible approach to tax relief.

Imposing this type of fiscal discipline is not a new one to me.

When I entered the Rhode Island Legislature in 1989, our State

was spending 100 percent of its revenue and saving nothing to

guard against a possible downturn. Unfortunately, Rhode Island,

like many States, was thrown into a recession where we faced annual deficits of 100- to $200 million annually on an approximately

$2 billion annual budget.

The State was forced to drastically cut spending on critical programs and devote its energies and resources to managing a fiscal

crisis for much of a decade. Ultimately my colleagues and I were

obligated to reevaluate our fiscal policy and adopt a more responsible budget strategy.

I was the chief architect of a plan which limited State spending

to 98 percent of estimated revenues and required that 2 percent of

incoming tax dollars be placed into a budget reserve and cash stabilization account, otherwise known as a rainy day fund. Now

Rhode Islanders can take comfort in knowing that the State’s budget will only grow as fast as the State’s economy, that they have

protection against future recessions, and that they boast a bond

rating that is among the best in the country.

Because of my experience in the legislature, I feel particularly

fortunate to have entered Congress at a time when the tough

choices made by my colleagues and predecessors who balanced the

budget in 1997 are yielding tangible results. I now strongly believe

that it is my duty to maintain the fiscal responsibility that led us

here and even to ensure that we do not recreate massive deficits

like those that we have just escaped.

39

As rosy as the budget surplus projections look right now, it is important to remember that they are, in fact, only that, projections.

We have no choice but to rely on them to a certain extent in order

to set priorities and make long-term fiscal policy decisions; however, we must be wary of assuming that these projections guarantee a decade of more windfall revenues. If this proves not to be the

case, we will all suffer as our debt spirals further out of control,

funding is scarce for some of the basic Federal programs, and the

solvency of Social Security and Medicare becomes a goal that is no

longer in reach.

Let us not forget that it was only until very recently that we struggled with annual budget deficits of $200 billion, a national

debt of $5.6 trillion, and interest only payments on that debt of

$300 billion annually. To put it into perspective, those interest payments represented more than we were spending on Medicare and

almost as much as we were spending on the entire national defense

budget.

Therefore, I hope this Congress will not act hastily on individual

elements of the budget, but will instead wait until we have agreed

upon an overall budget framework within which to make decisions.

I intend to ensure that there is room for a range of priorities in

our budget picture before I decide to support use of the surplus for

any one major initiative.

Retiring the national debt is a paramount concern and should inform every aspect of our budget policy. I want to be secure in the

knowledge that our debt will continue to be reduced and that our

children and grandchildren will not have to shoulder the burden of

recklessness. In addition, paying down the debt will result in the

one of the best tax cuts that we can provide to American working

families. Reduction and elimination of the debt will ensure low-interest rates and a sound long-term economic future for the Nation.

Furthermore, I believe that we should use or current prosperity

to enhance those Federal programs relied upon by some of the most

vulnerable members of our society. First and foremost, of course,

our senior citizens as well as younger generations looking toward

their eventual retirement deserve to know that the Social Security

System will be strong and viable whether they need it now or in

20 years. Likewise, we must reform and strengthen Medicare without slashing benefits or increasing costs for seniors, and provide a

prescription drug component so that no one is forced to choose between medicine and groceries or heat for their home.

We must also set aside a sufficient portion of the budget for

other critical needs, including reform of our elementary and secondary education system, provision of the benefits and care America’s

veterans have earned and deserve, and maintenance of a strong national defense with soldiers who receive a fair wage for their service to our country.

Mr. Chairman, would it be your preference that I finish?

Mr. SUNUNU. Without objection, feel free to take as much time

as you need.

Mr. LANGEVIN. Thank you, Mr. Chairman.

Also as a former Rhode Island secretary of state who presided

over a wholesale reform and modernization of the State’s antiquated voting system, I am also very concerned about election reVerDate 11-MAY-2000 18:13 Mar 02, 2001 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6602 H:\DOCS\HEARINGS\107\107-1\HBU038.002 HBUDGET1 PsN: HBUDGET1
40

form. Specifically I believe our budget must reflect the importance

of this issue by including sufficient funding to ensure every precinct in this country is equipped with modern voting equipment

that is reliable and accessible to all voters.

I will be working with many of my colleagues to make progress

on this issue well in advance of the next Federal election. Knowing

that there is a place in our budget framework for meaningful action

on electoral reform will make the road ahead much smoother.

Finally, we all want to reward hard-working families by returning some of their tax dollars, but this cannot come at the expense

of our Nation’s future fiscal stability. Therefore, I strongly recommend that any tax relief supported by this Congress be phased

in and contingent upon two important conditions: First, the reality

of our annual revenues must meet expectations created by current

projections. Second, we must have a defined plan for paying down

the national debt, and the targets laid out in this plan must be

met.

In other words, I support tax relief that is triggered only when

those two critical goals are met. I would also favor a tax cut that

is limited to a certain percentage of the Federal surplus so that if

surpluses are lower than projected, we will not find ourselves

trapped by promises it is no longer responsible to keep.

These precautions will ensure that lower tax rates do not come

at the expense of fiscal discipline and will encourage Members

eager to give something back to their constituents to channel their

energies into a responsible course of debt reduction and long-term

fiscal responsibility.

Again, Mr. Chairman, thank you for allowing me to be part of

this important discussion. There are many tough challenges ahead,

but I believe that with cooperation and an eye toward operating

within a responsible framework, this Congress can develop a budget that will ensure America’s needs are met and hard-working taxpayers are given the relief they deserve. I thank you for your time.

Mr. SUNUNU. Thank you, Mr. Langevin. I appreciate your time

and your testimony.

[The prepared statement of Congressman Langevin follows:]

PREPARED STATEMENT OF HON. JIM LANGEVIN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF RHODE ISLAND

Mr. Chairman, Ranking Member Spratt and members of the committee, thank

you for giving me and my fellow Members of the freshman class the opportunity to

testify before you today. I am honored to be here and to be participating for the first

time in the formation of the Federal budget resolution. As you know, the budget decisions we make this year will have an enormous impact on the lives of Americans

for years to come, and I am grateful for the committee’s efforts to solicit input from

the newest members of the House during this critical process.

Let me start by saying what is most important to me is that out of this process

comes a disciplined approach to spending, a strong focus on and commitment to paying down the national debt, and a responsible approach to tax relief.

Imposing this type of fiscal discipline is not a new concept to me. When I entered

the Rhode Island Legislature in 1989, the state was spending 100 percent of its revenue and saving nothing to guard against possible downturns. Unfortunately, Rhode

Island, like many states, was thrown into a recession where we faced annual deficits

of $100 million to $200 million on an approximately $2 billion annual budget. The

state was forced to drastically cut spending on critical programs and devote its energies and resources to managing a fiscal crisis for close to a decade.

Ultimately, my colleagues and I were obligated to re-evaluate our fiscal policy and

adopt a more responsible budget strategy. I was the chief architect of a plan which

41

limited state spending to 98 percent of estimated revenues and required that 2 percent of incoming tax dollars be placed in a rainy day fund. Now Rhode Islanders

can take comfort in knowing that the state’s budget will only grow as fast as its

economy, that they have protection against future recessions, and that they boast

a bond rating that is among the best in the country.

Because of my experience in the Legislature, I feel particularly fortunate to have

entered Congress at a time when the tough choices made by my colleagues and

predecessors who balanced the budget in 1997 are yielding tangible results. I now

strongly believe that it is my duty to maintain the fiscal responsibility that led us

here and ensure that we do not recreate massive deficits like those we’ve just escaped.

As rosy as the budget surplus projections look right now, it is important to remember that they are in fact only that: projections. We have no choice but to rely

on them to a certain extent in order to set priorities and make long-term fiscal policy decisions. However, we must be wary of assuming that these projections guarantee a decade or more of windfall revenues. If this proves not to be the case, we will

all suffer as our debt spirals further out of control, funding is scarce for some of

the most basic Federal programs, and the solvency of Social Security and Medicare

becomes a goal that is no longer in reach.

Let us not forget it was only very recently that we struggled with annual budget

deficits up to $290 billion, a national debt of $5.6 trillion, and interest-only payments on that debt of $300 billion annually. Put into perspective, those interest payments represented more than we were spending on Medicare, and almost as much

as our entire national defense budget.

Therefore, I hope this Congress will not act hastily on individual elements of the

budget, but will instead wait until we have agreed upon an overall budget framework within which to make decisions. I intend to ensure that there is room for a

range of priorities in our budget picture before I decide to support the use of the

surplus for any one major initiative.

Retiring the national debt is a paramount concern that should inform every aspect

of our budget policy. I want to be secure in the knowledge that our debt will continue to be reduced and that our children and grandchildren will not have to shoulder the burden of our recklessness. In addition, paying down the debt will result

in one of the best tax cuts we can provide to America’s working families. Reduction

and elimination of the debt will ensure low interest rates and a sound long-term

economic future for the nation.

Furthermore, I believe we should use our current prosperity to enhance those

Federal programs relied upon by some of the most vulnerable members of our society. First and foremost, of course, our senior citizens, as well as younger generations

looking toward their eventual retirement, deserve to know that the Social Security

system will be strong and viable, whether they need it now or in 20 years. Likewise,

we must reform and strengthen Medicare, without slashing benefits or increasing

costs for seniors, and provide a prescription drug component so that no one is forced

to choose between medicine and groceries or heat for their home.

We must also set aside a sufficient portion of the budget for other critical needs,

including reform of our elementary and secondary education system, provision of the

benefits and care America’s veterans have earned and deserve, and maintenance of

a strong national defense with soldiers who receive a fair wage for their service to

our country.

As a former Rhode Island Secretary of State who presided over a wholesale reform

and modernization of the state’s antiquated voting system, I am also very concerned

about electoral reform. Specifically, I believe our budget must reflect the importance

of this issue by including sufficient funding to ensure every precinct in this country

is equipped with modern voting equipment that is reliable and accessible to all voters. I will be working with many of my colleagues to make progress on this issue

well in advance of the next Federal election. Knowing that there is a place in our

budget framework for meaningful action on electoral reform will make the road

ahead much smoother.

Finally, we all want to reward hard-working families by returning some of their

tax dollars, but this cannot come at the expense of our nation’s future fiscal stability. Therefore, I strongly recommend that any tax relief supported by this Congress

be phased in and be contingent upon two important conditions. First, the reality of

our annual revenues must meet the expectations created by current projections. Second, we must have a defined plan for paying down the national debt, and the targets laid out in this plan must be met.

In other words, I support tax relief that is triggered only when these two crucial

goals are met. I would also favor a tax cut that is limited to a certain percentage

42

of the on-budget surplus, so that if surpluses are lower than projected, we will not

find ourselves trapped by promises it is no longer responsible to keep.

These precautions will ensure that lower tax rates do not come at the expense

of fiscal discipline, and will encourage members eager to give something back to

their constituents to channel their energies into a responsible course of debt reduction and long-term fiscal responsibility.

Again, Mr. Chairman, thank you for allowing me to be a part of this important

discussion. There are many tough choices ahead, but I believe that with cooperation

and an eye toward operating within a responsible framework, this Congress can develop a budget that will ensure America’s needs are met and hardworking taxpayers

are given the relief they deserve.

Mr. SUNUNU. With that, the committee is adjourned. Thank you.

[The prepared statement of Congressman Simmons follows:]

PREPARED STATEMENT OF HON. ROB SIMMONS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CONNECTICUT

In addition to the priorities mentioned by freshman class president Schrock, I

would add the following items:

• A Federal prescription drug subsidy for State-based programs.

• Getting military personnel off food stamps and improving the quality of life.

• Prioritizing the disposal of our Nation’s high-level nuclear waste by allowing for

its transport to a designated site at Yucca Mountain.

In conclusion, I look forward to working with you and other members of the committee on crafting a budget resolution that:

• provides tax relief for working families;

• strengthens our military and removes personnel from food stamps;

• improves educational opportunities for all children;

• addresses the issue of nuclear waste;

• pays down the national debt; and

• protects Social Security and Medicare.

Thank you, Mr. Chairman for giving me the opportunity to address the Budget

Committee.

[Whereupon, at 12:40 p.m., the committee was adjourned.]

Æ