[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]





                          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


                                 ______

                   U.S. GOVERNMENT PRINTING OFFICE
70-194cc                   WASHINGTON : 2001



                        COMMITTEE ON THE BUDGET

                       JIM NUSSLE, Iowa, Chairman
JOHN E. SUNUNU, New Hampshire        JOHN M. SPRATT, Jr., South 
  Vice Chairman                          Carolina,
PETER HOEKSTRA, Michigan               Ranking Minority Member
  Vice Chairman                      JIM McDERMOTT, Washington,
CHARLES F. BASS, New Hampshire         Leadership Designee
GIL GUTKNECHT, Minnesota             BENNIE G. THOMPSON, Mississippi
VAN HILLEARY, Tennessee              KEN BENTSEN, Texas
MAC THORNBERRY, Texas                JIM DAVIS, Florida
JIM RYUN, Kansas                     EVA M. CLAYTON, North Carolina
MAC COLLINS, Georgia                 DAVID E. PRICE, North Carolina
ERNIE FLETCHER, Kentucky             EDWARD J. MARKEY, Massachusetts
GARY G. MILLER, California           GERALD D. KLECZKA, Wisconsin
PAT TOOMEY, Pennsylvania             BOB CLEMENT, Tennessee
WES WATKINS, Oklahoma                JAMES P. MORAN, Virginia
DOC HASTINGS, Washington             DARLENE HOOLEY, Oregon
ROB PORTMAN, Ohio                    RUSH D. HOLT, New Jersey
EDWARD SCHROCK, Virginia             JOSEPH M. HOEFFEL III, 
JOHN CULBERSON, Texas                    Pennsylvania
HENRY E. BROWN, Jr., South Carolina  TAMMY BALDWIN, Wisconsin
ANDER CRENSHAW, Florida              [Vacancy]
ADAM PUTNAM, Florida                 [Vacancy]
MARK KIRK, Illinois                  [Vacancy]
[Vacancy]                            [Vacancy]
[Vacancy]
[Vacancy]

                           Professional Staff

                       Rich Meade, Chief of Staff
       Thomas S. Kahn, Minority Staff Director and Chief Counsel




                            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



 
                          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 beyond. I will first discuss our priorities on tax 
relief for every American.
    In our view, President Bush's tax relief promoting 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, 
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 
single 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 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:
     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.
    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 
ico, 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.
    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, 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 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 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 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 recurring 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, 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, 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.
    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.
    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 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 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 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 States\1\. 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 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 taxes\8\ 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.
    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 non-
discretionary 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?
    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 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 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 excess 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 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.
    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 Management 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 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 performance-based 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.
    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, 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 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:
    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.

  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.
    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 sky-high 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.
    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 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 spiraling 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:]

 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.
    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-a-year 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.
    [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 
having 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.
    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 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 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 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 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.]