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



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                       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

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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

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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

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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

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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

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          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

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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.