    [Analytical Perspectives]
    [Budget Reform Proposals]
    [15. Budget Reform Proposals]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 211]]

                           15. BUDGET REFORM PROPOSALS

      The budget process should be transparent, accountable, and orderly.
    The current budget process could benefit from reforms that help achieve
    these goals. No one change can fix the budget process, and process alone
    cannot address important fiscal issues. Nevertheless, process changes
    can be a key factor in the effort to control spending. Starting with A
    Blueprint for New Beginnings and continuing with subsequent budgets,
    this Administration has consistently proposed changes to the budget
    process that are designed to improve budget decisions and outcomes. This
    chapter updates the Administration's proposals and describes additional
    reforms proposed by the Administration.

              Controlling Entitlements and Other Mandatory Spending

      Mandatory Spending Control.--The Administration proposes to require
    that all legislation that changes mandatory spending, in total, does not
    increase the deficit. The five-year impact of any proposals affecting
    mandatory spending would continue to be scored. Legislation that
    increases the current year and the budget year deficit would trigger a
    sequester of direct spending programs. The proposal does not apply to
    changes in taxes and does not permit mandatory spending increases to be
    offset by tax increases. Table 15-1 displays the President's mandatory
    spending proposals.

                                                                Table 15-1.  MANDATORY PROPOSALS
                                                            (Cost/Savings (-) in millions of dollars)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                     Total,
                                                                                    2006       2007       2008       2009       2010       2011     2006-11
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Medicare...................................................................  .........     -2,452     -5,485     -7,948     -9,343    -10,663    -35,891
    Pension Benefit Guaranty Corporation Reform................................  .........  .........     -4,195     -4,181     -4,164     -4,140    -16,680
    Outlay Effects of Tax Proposals \1\........................................  .........        532        871      1,243      1,375      1,519      5,540
    Commodity Program Changes..................................................  .........     -1,081     -1,079       -945       -965       -917     -4,988
    Arctic National Wildlife Refuge, Lease Bonuses.............................  .........  .........     -3,502         -2       -503         -3     -4,010
    User Fee Proposals.........................................................  .........       -315       -488       -610       -614       -718     -2,745
    Grants to States for Chronically Ill.......................................  .........        250        375        493        506        523      2,146
    Unemployment Insurance Integrity Legislation...............................  .........  .........       -482       -515       -365       -376     -1,738
    Temporary Assistance for Needy Families....................................  .........         40        149        425        473        488      1,575
    Federal Employee Health Benefits Program...................................  .........        -34       -134       -231       -306       -367     -1,072
    Medicaid/State Children's Health Insurance Program.........................  .........        504       -190       -523       -691       -567     -1,467
    Cover the Kids.............................................................  .........        100        100        100        100        100        500
    Other Proposals............................................................         69         84       -143       -115       -284       -362       -751
                                                                                ----------------------------------------------------------------------------
        Total..................................................................         69     -2,372    -14,203    -12,811    -14,781    -15,843    -59,580

      Total, 2006 and 2007.....................................................  .........     -2,303  .........  .........  .........  .........  .........

    Memorandum: Further Hurricane Response
      National Flood Insurance (emergency).....................................      5,040        560  .........  .........  .........  .........      5,600
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Affects both receipts and outlays. Only the outlay effect is shown here.

      Long-term Unfunded Obligations.--The Administration proposes new
    measures to address the long-term unfunded obligations of Federal
    entitlement programs. As discussed in Chapter 13 of this volume,
    ``Stewardship,'' spending by the Government's major entitlement
    programs, particularly Social Security and Medicare, is projected to
    rise in the next few decades to levels that cannot be sustained, either
    by those programs' own dedicated financing or by general revenues. The
    Administration's proposed measures are designed to begin addressing
    these challenges.
      In the Medicare Modernization Act (MMA) of 2003, Congress provided for
    a more comprehensive review of the Medicare program's finances and
    required the Medicare trustees to issue a warning when general revenue
    Medicare funding is projected to exceed 45 percent of Medicare's total
    expenditures. The President's Budget proposes to build on this reform by
    requiring an automatic reduction in the rate of Medicare growth if the
    MMA threshold is exceeded. The reduction would begin as a four-tenths of
    a percent reduction to all payments to providers in the year the
    threshold is exceeded, and would grow by four-tenths of a percent every
    year the shortfall continued to occur. This provision is designed to
    encourage the President and the Congress to reach agreement on reforms
    to slow Medicare spending and bring it back into line with the threshold
    established by the MMA.
      In addition to this Medicare-specific control mechanism, the
    President's Budget proposes to establish a broader enforcement measure
    to analyze the long-term

    [[Page 212]]

    impact of legislation on the unfunded obligations of major entitlement
    programs and to make it more difficult to enact legislation that would
    expand the unfunded obligations of these programs over the long-run.
    These measures would highlight proposed legislative changes that appear
    to cost little in the short run but result in large increases in the
    spending burdens passed on to future generations.
      First, the Administration proposes a point of order against
    legislation which worsens the long-term unfunded obligation of major
    entitlements. The specific programs covered would be those programs with
    long term actuarial projections, including Social Security, Medicare,
    Federal civilian and military retirement, veterans disability
    compensation, and Supplemental Security Income. Additional programs
    would be added once it becomes feasible to make long-term actuarial
    estimates for those programs.
      Second, the Administration proposes new reporting requirements to
    highlight legislative actions worsening unfunded obligations. These
    requirements would require the Administration to report on any enacted
    legislation in the past year that worsens the unfunded obligations of
    the specified programs.
       Budget Discipline for Agency Administrative Actions.--A significant
    amount of Federal policy is made via administrative action, which can
    increase Federal spending, often on the order of tens of billions of
    dollars in entitlement programs such as Medicare or Medicaid. Although
    known costs are incorporated into the budget baselines of various
    programs, agencies frequently initiate unplanned for and costly
    proposals. Often, these costs are not reflected in the baseline, or are
    not accompanied by other actions that would pay for the proposed change.
    This results in increased spending and deficits.
      Controlling these costs is integral to the Administration's commitment
    to reducing the deficit and enforcing fiscal discipline. Toward that
    end, the Director of the Office of Management and Budget issued on May
    23, 2005 a memorandum to all Executive Branch agencies implementing a
    budget-neutrality requirement on agency administrative actions affecting
    mandatory spending. Discretionary administrative actions in entitlement
    programs, including regulations, program memoranda, demonstrations,
    guidance to States or contractors, and other similar changes to
    entitlement programs are generally required to be fully offset.
    Exceptions to this requirement are only provided in extraordinary or
    compelling circumstances.

                                     Table 15-2.  DISCRETIONARY CAPS AND ADJUSTMENTS
                                            (Amounts in billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                          2006 \1\    2007      2008      2009      2010      2011
    ----------------------------------------------------------------------------------------------------------------
    Proposed Discretionary Spending Categories:

      Discretionary Category:

        Defense Category (Function 050):
          Budget authority..............................     432.4     459.7     482.1        NA        NA        NA
          Outlays.......................................     502.2     468.4     467.9        NA        NA        NA

        Nondefense Category:
          Budget authority..............................     411.0     410.4     412.6        NA        NA        NA
          Outlays.......................................     456.9     452.3     436.6        NA        NA        NA

          Proposed Cap Adjustments:
            SSA Continuing Disability Reviews:
              Budget authority..........................        NA     0.201     0.213        NA        NA        NA
              Outlays...................................        NA     0.201     0.213        NA        NA        NA

            IRS Tax Enforcement:
              Budget authority..........................        NA     0.137     0.207        NA        NA        NA
              Outlays...................................        NA     0.129     0.203        NA        NA        NA

            Health Care Fraud and Abuse Control:
              Budget authority..........................        NA     0.118     0.183        NA        NA        NA
              Outlays...................................        NA     0.118     0.183        NA        NA        NA

            Unemployment Insurance Improper Payments:
              Budget authority..........................        NA     0.040     0.040        NA        NA        NA
              Outlays...................................        NA     0.034     0.040        NA        NA        NA

        Subtotal, Nondefense Category, with Adjustments:
          Budget authority..............................     411.0     410.9     413.3        NA        NA        NA
          Outlays.......................................     456.9     452.7     437.3        NA        NA        NA

        Discretionary Category:
          Budget authority..............................        NA        NA        NA     916.6     928.4     940.5
          Outlays.......................................        NA        NA        NA     916.1     979.1     992.5

      Highway Category:
        Outlays.........................................      33.5      37.1      38.7      39.9        NA        NA

      Mass Transit Category: \2\
        Outlays.........................................       5.8       7.3       8.5       9.3        NA        NA

    Total, All Discretionary Categories:
      Budget authority..................................     843.3     870.7     895.4     916.6     928.4     940.5
      Outlays...........................................     998.3     965.6     952.3     965.3     979.1     992.5

    Project BioShield Category:
      Budget authority..................................  ........  ........  ........       2.2  ........  ........

    Memorandum: 2006 Enacted Emergency Supplementals
      Budget authority..................................      58.4  ........  ........  ........  ........  ........
    ----------------------------------------------------------------------------------------------------------------
    \1\ The discretionary emergency budget authority provided in Division A, Title IX, and in Division B of the
      Department of Defense Appropriations Act, 2006 (P.L. 109-148) for: Defense contingency operations related to
      the Global War on Terror, response to the Gulf Coast Hurricanes, and pandemic influenza preparedness is
      displayed separately on a memorandum line.
    \2\ Includes outlays from discretionary budget authority.

                       Controlling Discretionary Spending

      Discretionary Caps.--The Administration proposes to set limits for
    2006 through 2011 on net discretionary budget authority and outlays
    equal to the levels proposed in the 2007 Budget. Legislation that
    exceeds the discretionary caps would trigger a sequester of non-exempt
    discretionary programs. Table 15-2 displays the total levels of
    discretionary budget authority and outlays proposed for 2006 through
    2011. This approach would put in place a budget framework for the next
    five years that ensures constrained, but reasonable growth in
    discretionary programs. For 2006 through 2008, separate defense
    (Function 050) and nondefense categories would be enforced. For 2009-
    2011, there would be a single cap for all discretionary spending. In
    addition, a separate category for transportation outlays financed by
    dedicated revenues would be established for 2006 through 2009 at levels
    consistent with those enacted in the Safe, Accountable, Flexible,
    Efficient, Transportation Equity Act: A Legacy for Users (SAFETEA-LU).
       Program Integrity Cap Adjustments.--An improper payment occurs when
    Federal funds go to the wrong recipient, the recipient receives an
    incorrect amount of funds, or the recipient uses the funds in an
    improper manner. Approximately 86 percent of improper payments are
    overpayments. The Administration has made the elimination of improper
    payments a major focus. Federal agencies have aggressively reviewed
    Federal programs to evaluate the risk of improper payments and have
    developed measures to assess the extent of improper payments. Processes
    and internal control improvements have been initiated to enhance the
    accuracy and integrity of payments and to report the results of these
    efforts, pursuant to the Improper Payments Information Act of 2002 (P.L.
    107-300).
      The results of the agency assessment have been aggregated into a
    Government-wide report entitled Improving the Accuracy and Integrity of
    Federal Payments. (The full text of the report can be found at http://
    www.whitehouse.gov/omb/financial/fia--improper. html.) In 2005, the
    agencies reported a total of $37.3 billion in improper payments. This
    represents a 3.3 percent improper payment rate. Nearly 80 percent of
    those improper payments are in four programs: Medicare, Earned Income
    Tax Credit, Old-Age, Survivors, and Disability Insurance, and
    Unemployment Insurance.
      In the context of the Administration's efforts to eliminate improper
    payments, the Administration is proposing adjustments for spending above
    a base level of funding within the discretionary levels for several
    program integrity initiatives, specifically for continuing disability
    reviews (CDRs) in the Social Security Administration, Internal Revenue
    Service (IRS) tax enforcement, the Health Care Fraud and Abuse Control
    Program (HCFAC) in the Centers for Medicare and Medicaid Services and
    Unemployment Insurance improper payments in the Department of Labor.
    These cap adjustments provide an effective way to ensure that limited
    resources are applied to activities that reduce errors and generate
    program savings.
      In the past decade, there have been a variety of successful efforts to
    ensure dedicated resources for program integrity efforts. These efforts
    include cap adjustment funding for Social Security continuing disability
    reviews and integrity efforts associated with the Earned Income Tax
    Credit (EITC). These initiatives have led to increased savings for the
    Social Security and Supplemental Security Income programs and an
    increase in enforcement efforts in EITC. For example, the Social

    [[Page 213]]

    Security Administration reports that every $1 expended on CDRs has
    produced a $10 return to taxpayers. The Administration's proposed
    adjustments for program integrity activities will total $496 million in
    budget authority in 2007 and $643 million in budget authority in 2008.
       Transportation Category.--The Administration's proposal for
    discretionary caps includes separate outlay categories for spending on
    Federal Highway and Mass Transit programs that are consistent with the
    funding levels enacted in SAFETEA-LU. The transportation levels will be
    financed by dedicated revenues through 2009. Table 15-3 shows the
    levels, taking into account the revenue aligned budget authority (RABA)
    adjustment as authorized in SAFETEA-LU. The RABA adjustment is
    calculated based on changes in estimated Highway Trust Fund receipts,
    and results in either an increase or decrease in the Highway Category
    funding level enacted in SAFETEA-LU. For 2007, the RABA adjustment is a
    positive $842 million.

                       Table 15-3.  TRANSPORTATION CATEGORY FOR HIGHWAYS AND MASS TRANSIT SPENDING
                                            (Amounts in billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                2006      2007      2008      2009
    ----------------------------------------------------------------------------------------------------------------
    Transportation Category: \1\

      Highways: \2\
        Obligation Limitations..............................................      36.8      40.4      40.9      42.6
        Outlays.............................................................      33.5      37.1      38.7      39.9

      Mass Transit:
        Obligation Limitations..............................................       6.9       7.3       7.9       8.4
        Outlays \3\.........................................................       5.8       7.3       8.5       9.3

    Memorandum:
      Discretionary budget authority for Mass Transit included in the
       Nondefense Category:
        Budget authority....................................................       1.6       1.6       1.9       2.0
    ----------------------------------------------------------------------------------------------------------------
    \1\ The SAFETEA-LU levels enacted for Highway and Mass Transit programs apply through 2009.
    \2\ Includes adjustments to levels authorized in SAFETEA-LU of $842 million in 2007 for revenue aligned budget
      authority (RABA) calculation and $122 million in FY 2007-2009 for National Highway Traffic Safety
      Administration (proposal to fund NHTSA completely from the Highway Trust Fund instead of portion from General
      Fund, as authorized in SAFETEA-LU).
    \3\ Includes outlays from discretionary budget authority.

       Advance Appropriations.--An advance appropriation becomes available
    one or more years beyond the year for which its appropriations act is
    passed. Budget authority is recorded in the year the funds become
    available and not in the year of enactment. Too often, advance
    appropriations have been used to expand spend

    [[Page 214]]

    ing levels by shifting budget authority from the budget year into the
    subsequent year and then appropriating the budget authority freed up
    under the budget year discretionary cap to other programs. The effect of
    these advance appropriations is to limit the amount of discretionary
    budget authority available in subsequent years, thereby reducing future
    funding options available to both Congress and the President. From 1993
    to 1998, an average of $2.3 billion in discretionary budget authority
    was advance appropriated each year. In 1999, advance appropriations
    totaled $8.9 billion and increased to $23.4 billion in 2000.
      Because this budget practice distorts the debate over Government
    spending and misleads the public about spending levels in specific
    accounts, the President's budget proposals and the 2002 Congressional
    Budget Resolution capped advance appropriations at the amount advanced
    in the previous year. By capping advance appropriations, increases in
    these and other programs can be budgeted and reflected in the year of
    their enactment. For 2008, the Administration proposes a cap on advance
    appropriations of $23,715 million, which includes the Department of
    Energy's FutureGen project and an already enacted advance appropriation
    for the Corporation for Public Broadcasting.
      In addition, the Administration proposes to score the second year
    effect of appropriations language that delays obligations of mandatory
    budget authority as advance appropriations that count against the
    discretionary caps. Appropriations acts often include provisions that
    delay obligations of mandatory BA from one year to the next. The first
    year is appropriately scored as a discretionary savings because it is
    included in an appropriations act and it reduces spending in that year.
    However, this is usually a temporary delay, and the funds become
    available for spending in the second year. Under this proposal, the
    second year impact would be treated as an advance appropriation and
    scored against the discretionary caps. This would correct an
    inconsistency in the current practice where savings are scored in the
    first year, but the second year impact is reclassified in the subsequent
    budget as mandatory and not scored against the discretionary caps.
      To enforce the level of advance appropriations, the discretionary cap
    proposal provides that total funding for advance appropriations
    (including obligation delays) provided in an appropriations act for 2008
    that is in excess of the Administration's limit on advance
    appropriations of $23,715 million in 2008 will count against the
    discretionary cap in the year enacted, not against the year the funds
    first become available.
       Federal Pell Grants.--To ensure funding shortfalls do not accumulate
    in the Pell Grant program in future years, the 2006 Congressional Budget
    Resolution adopted the Administration's proposal to score appropriations
    at the amount needed to fully fund the award level set in appropriations
    acts, beginning with the 2006-2007 school year, if the amount
    appropriated is insufficient to fully fund all awards. The
    Administration proposes to continue this scoring rule. Under this rule,
    the amount scored would be increased to cover any cumulative funding
    shortfalls from previous years and reduced by any surpluses carried over
    from previous years, beginning with any shortfalls or surpluses from the
    2006-2007 school year. If the amount appropriated exceeds the estimated
    full cost, the amount appropriated would be scored against that year,
    and the surplus would carry over as a credit against the following
    year's cost estimate. In the 2007 Budget, the Department of Education
    estimates that a cumulative $273 million surplus will be carried into
    the 2007-2008 academic year. For scoring purposes, the funding needed to
    fully fund all awards for 2007-2008 is reduced by the amount of this
    surplus.
       Project BioShield Category.--The Administration proposes a separate
    BEA category for budget authority

    [[Page 215]]

    for Project BioShield, which received an advance appropriation for 2005
    of $2.5 billion and for 2009 of $2.2 billion in P.L. 108-90, the 2004
    Department of Homeland Security Appropriations Act. Because the success
    of this program in providing for the development of vaccines and
    medications for biodefense depends on an assured funding availability,
    it is critical that this funding not be diverted to other purposes. The
    Administration's proposal to create a separate category will help ensure
    that funding for this program is not reduced and used as an offset for
    other discretionary spending.

         Include Stricter Standard For Emergency Designation in the BEA

      When the BEA was created, it provided a ``safety valve'' to ensure
    that the fiscal constraint envisioned by the BEA would not prevent the
    enactment of legislation to respond to unforeseen disasters and
    emergencies such as Operation Desert Storm, the terrorist attacks of
    September 11, 2001, or Hurricane Katrina. If the President and the
    Congress separately designated a spending or tax item as an emergency
    requirement, the BEA held these items harmless from its enforcement
    mechanisms. Initially, this safety valve was used judiciously, but in
    later years its application was expanded to circumvent the discretionary
    caps by declaring spending for ongoing programs as ``emergencies.''
      The Administration proposes to include in the BEA a definition of
    ``emergency requirement'' that will ensure high standards are met before
    an event is deemed an ``emergency'' and therefore exempt. This
    definition should include the following elements: the requirement is a
    necessary expenditure that is sudden, urgent, unforeseen, and not
    permanent. These elements, all of which would be used for defining
    something as an emergency, are defined as follows:
        necessary expenditure--an essential or vital expenditure,
              not one that is merely useful or beneficial;
        sudden--quickly coming into being, not building up over
              time;
        urgent--pressing and compelling, requiring immediate action;
        unforeseen--not predictable or seen beforehand as a coming
              need (an emergency that is part of the average annual level of
              disaster assistance funding would not be ``unforeseen''); and
        not permanent--the need is temporary in nature.
      This definition codifies the criteria for an emergency that have been
    the standard for a number of years. It is designed to preclude funds
    from being declared an emergency for events that occur on an annual or
    recurring basis. For example, even though it is not possible to predict
    the specific occurrence of fires, tornados, hurricanes, and other
    domestic disasters, it is reasonable to assume that a combination of
    domestic disasters will occur in any given year that require funding
    equal to a multi-year average for disaster relief. Funding at an
    average, therefore, should not be considered an emergency under this
    definition. On the other hand, an average level of funding for domestic
    disasters will not accommodate the level necessary to address a large
    and relatively infrequent domestic disaster, such as Hurricane Katrina.
    Under this definition for emergencies, spending for extraordinary events
    could be classified as emergency funding. In the end, classification of
    certain spending as an emergency depends on common sense judgment, made
    on a case-by-case basis, about whether the totality of facts and
    circumstances indicate a true emergency.
      In addition, the Administration proposes that the definition of an
    emergency requirement also encompass contingency operations that are
    national security related. Contingency operations that are national
    security related include both defense operations and foreign assistance.
    Military operations and foreign aid with costs that are incurred
    regularly should be a part of base funding and, as such, are not covered
    under this definition.
      The Administration proposal also would require that the President and
    Congress concur in designating an emergency for each spending proposal
    covered by a designation. This would protect against the ``bundling'' of
    non-emergency items with true emergency spending. If the President
    determines that specific proposed emergency designations do not meet
    this definition, he would not concur in the emergency designation and no
    discretionary cap adjustment or mandatory spending control exemption
    would apply.

                                    Baseline

      The Administration proposes several changes to Section 257 of the BEA,
    which establishes the requirements for the baseline:
        Assume extension of all expiring tax provisions in the
              Economic Growth and Tax Relief Reconciliation Act of 2001 and
              certain provisions in the Jobs and Growth Tax Relief
              Reconciliation Act of 2003. This proposal is consistent with
              the BEA baseline rules for expiring mandatory spending and for
              excise taxes dedicated to a trust fund. Except for a few
              relatively small mandatory programs, the BEA assumes that
              mandatory spending and excise taxes dedicated to a trust fund
              will be reauthorized and extends them in the baseline. The
              2001 Act and 2003 Act provisions were not intended to be
              temporary, and not extending them in the baseline raises
              inappropriate procedural road blocks to extending them at
              current rates.
        Add a provision to exclude discretionary funding for
              emergencies from the baseline. Instead, the baseline would
              include emergency funding only for the year in which it was
              enacted. The current requirement is for the discretionary
              baseline estimates for the budget year and the outyears to
              assume the current year appropriated level, adjusted for
              inflation. This is reasonable for ongoing programs, where the
              need is expected to continue

    [[Page 216]]

              into the future. For emergencies, since the need should be for
              a short duration, the baseline rules build unnecessary funding
              into the baseline estimates for the years after the need has
              been addressed and passed. In effect, the current rule biases
              the baseline in favor of higher discretionary spending.
        Correct the overcompensation of baseline budgetary resources
              for pay raise-related costs due to the way in which these
              costs are inflated. The current requirement, which provides a
              full year's funding for pay raises in the budget year and
              beyond, was written when Federal pay raises were scheduled to
              take effect on October 1, at the start of each fiscal year.
              However, this requirement is now inappropriate because the
              effective date for pay raises is now permanently set by law as
              the first pay period in January. By treating pay raises that
              begin on January 1 as if they take effect for the entire
              fiscal year, the baseline overstates the cost of providing a
              constant level of services.
        Eliminate the adjustments for expiring housing contracts and
              social insurance administrative expenses. Most multi-year
              housing contracts have expired or have been addressed since
              the BEA was first enacted in 1990, so the adjustment is no
              longer needed. The adjustment for social insurance
              administrative expenses is also inconsistent with the baseline
              rules for other accounts that fund the costs of
              administration. These programs should not be singled out for
              preferential treatment.

                                 Line-Item Veto

      A perennial criticism of the Federal Government is that spending and
    tax legislation contain too many provisions benefiting a relative few
    which would likely not become law if considered as a stand-alone bill.
    The persistence of special interest items diverts resources from higher
    priority programs and erodes the confidence of citizens in Government.
    Appropriations bills, especially those considered at the end of the
    congressional session, often attract special interest spending items
    that could not be enacted on their own.
      The President proposes that Congress correct this state of affairs by
    providing him and future presidents with a line item veto that would
    withstand constitutional challenge. From the Nation's founding,
    presidents have exercised the authority to not spend appropriated sums.
    However, Congress sought to curtail this authority in 1974 through the
    Impoundment Control Act, which restricted the President's authority to
    decline to spend appropriated sums. Although the Line Item Veto Act of
    1996 attempted to give the President the authority to cancel spending
    authority and special interest tax breaks, the U.S. Supreme Court found
    that law unconstitutional. The President's proposal would correct the
    constitutional flaw in the 1996 Act.
      Specifically, the President proposes a line-item veto linked to
    deficit reduction. This proposal would give the President the authority
    to defer new spending whenever the President determines the spending is
    not an essential Government priority. All savings from the line-item
    veto would be used for deficit reduction, and they could not be applied
    to augment other spending.

                          Other Budget Reform Proposals

       Joint Budget Resolution.--A joint budget resolution would set the
    overall levels for discretionary spending, mandatory spending, receipts,
    and debt in a simple document that would have the force of law. Under
    the current process, the Congress annually adopts a ``concurrent
    resolution,'' which does not require the President's signature and does
    not have the force of law.
      A joint budget resolution could be enforced by sequesters requiring
    automatic across-the-board cuts to offset any excess spending, similar
    to the BEA. It would bring the President into the process at an early
    stage, encourage the President and the Congress to reach agreement on
    overall fiscal policy before individual tax and spending bills are
    considered, and give the budget resolution the force of law.
       Biennial Budgeting and Appropriations.--Only once in the last 25
    years have all appropriation bills been enacted by the beginning of the
    fiscal year. Because Congress must enact these bills each year, it
    cannot devote the time necessary to provide oversight and fully address
    problems in Federal programs. The preoccupation with these annual
    appropriations bills frequently precludes review and action on
    authorization legislation and on the growing portion of the budget that
    is permanently funded under entitlement laws. According to the
    Congressional Budget Office, the Congress has appropriated about $159
    billion for 2006 for programs and activities whose authorizations of
    appropriations have expired.
      In contrast, a biennial budget would allow lawmakers to devote more
    time every other year to ensuring that taxpayers' money is spent wisely
    and efficiently. In addition, Government agencies would receive more
    stable funding, which would facilitate longer range planning and
    improved fiscal management. Under the President's proposal for a
    biennial budget, funding decisions would be made in odd-numbered years,
    with even numbered years devoted to authorizing legislation.
       Government Shutdown Prevention.--In the 24 out of the past 25 years
    in which Congress has not finished appropriation bills by the October
    1st deadline, it has funded the Government through ``continuing
    resolutions'' (CRs), which provide temporary funding authority for
    Government activities, usually at current levels, until the final
    appropriations bills are signed into law.
      If Congress does not pass a CR or the President does not sign it, the
    Federal Government must shut down. Important Government functions should
    not be held hostage simply because of an impasse over temporary funding
    bills. There should be a back-up plan to avoid the threat of a
    Government shutdown, although the expectation is that appropriations
    bills still would pass on time as the law requires. Under the

    [[Page 217]]

    Administration's proposal, if an appropriations bill is not signed by
    October 1 of the new fiscal year, funding would be automatically
    provided at the lower of the President's Budget or the prior year's
    level.
       Results and Sunset Commissions.--The Federal Government's ability to
    serve the American people is often hampered by poorly designed programs
    or uncoordinated, overlapping programs trying to achieve the same
    objective. Today, almost 30 percent of assessed programs have been
    determined to be either ineffective or unable to demonstrate results.
    And the problem of overlapping programs exists in many areas where the
    Government is trying to serve.
      From the 1930s through 1984, presidents were permitted to submit plans
    for reorganizing Federal agencies to Congress that would become
    effective unless the plan was disapproved by either House of Congress.
    After the Supreme Court decision in INS v. Chadha (462 U.S. 919), the
    authority granted to presidents for submitting reorganization plans
    under the Reorganization Act (5 U.S.C. 903) was limited by the
    requirement of congressional approval through a joint resolution and by
    the scope of what could be proposed. This authority was no longer
    available to the President after 1984.
      Today, proposals to restructure or consolidate programs or agencies so
    they can perform better require a change in law and often face long odds
    of being enacted due to a cumbersome process that requires approval from
    multiple congressional committees.
      To address this problem, last year the Administration transmitted the
    Government Reorganization and Program Performance Improvement Act, which
    would establish bipartisan Results Commissions and a Sunset Commission.
    Results Commissions would consider and revise Administration proposals
    to restructure or consolidate programs or agencies to improve their
    performance. The Sunset Commission would consider Presidential proposals
    to retain, restructure, or terminate agencies and programs according to
    a schedule set by the Congress. Agencies and programs would
    automatically terminate according to the schedule unless reauthorized by
    the Congress.