[Senate Hearing 114-343]
[From the U.S. Government Publishing Office]



                                                     
                                                         
                                                        S. Hrg. 114-343
 
     SENATE BUDGET COMMITTEE MID-SESSION HEARINGS FISCAL YEAR 2016

=======================================================================

                                HEARINGS

                               before the

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________


       May 19, 2015-OVERSIGHT OF THE CONGRESSIONAL BUDGET OFFICE

    June 17, 2015-THE COMING CRISIS: CBO'S ANALYSIS OF THE FEDERAL 
                GOVERNMENT'S DEEPENING FISCAL CHALLENGES

  October 21, 2015-REFORMING THE FEDERAL BUDGET PROCESS: THE NEED FOR 
                                 ACTION

   November 4, 2015-REFORMING THE FEDERAL BUDGET PROCESS: A BIENNAL 
                      APPROACH TO BETTER BUDGETING

 December 9, 2015-MOVING TO A STRONGER ECONOMY WITH A REGULATORY BUDGET
 
 
 
 
 
 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]  






                               _________ 

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                        COMMITTEE ON THE BUDGET

                   MICHAEL B. ENZI, WYOMING, Chairman

CHARLES E. GRASSLEY, Iowa            BERNARD SANDERS, Vermont
JEFF SESSIONS, Alabama               PATTY MURRAY, Washington
MIKE CRAPO, Idaho                    RON WYDEN, Oregon
LINDSEY O. GRAHAM, South Carolina    DEBBIE STABENOW, Michigan
ROB PORTMAN, Ohio                    SHELDON WHITEHOUSE, Rhode Island
PATRICK TOOMEY, Pennsylvania         MARK R. WARNER, Virginia
RON JOHNSON, Wisconsin               JEFF MERKLEY, Oregon
KELLY AYOTTE, New Hampshire          TAMMY BALDWIN, Wisconsin
ROGER F. WICKER, Mississippi         TIM KAINE, Virginia
BOB CORKER, Tennessee                ANGUS S. KING, JR., Maine
DAVID A. PERDUE, Georgia


                 Eric Ueland, Republican Staff Director

                Warren Gunnels, Minority Staff Director
                
  


                                  (ii)


                            C O N T E N T S

                               __________

                                HEARINGS

                                                                   Page

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

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

              October 21, 2015-Reforming the Federal Budget 
                Process: The Need for Action                         71

              November 4, 2015-Reforming the Federal Budget 
                Process: A Biennal Approach to Better Budgeting     137

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


                    STATEMENTS BY COMMITTEE MEMBERS

Chairman Enzi ......................................... 1,31,71,137,189
Ranking Member Sanders ................................ ......  3,34,73
Senator King .....................................................  140
Senator Whitehouse...............................................   191





                               WITNESSES

William G. Batchelder, III, Edwin Meese III Distinguished Fellow, 
  The Buckeye Institute, Columbus, Ohio, and Former Speaker, Ohio 
  House of Representatives ...................................     160,162
Robert L. Bixby, Executive Director, The Concord Coalition....     166,168
Thomas R. Carper, A United States Senator from the State of 
Delaware .....................................................     145,148
Jerry Ellig, Ph.D., Senior Research Fellow, Mercalus Center,
George Mason University ......................................     199,201
John D. Graham, Ph.D., Dean, Indiana University School of Public 
and Evironmental Affairs .....................................     192,195
Keith Hall, Ph.D., Director, Congressional Budget Office ...     5,8,37,40
Douglas Holtz-Eakin, Ph.D., President, American Action Forum, and 
Congressional Budget Office Director (2003-2005)..............     100,102
Johnny Isakson, A United States Senator from the State of Georgia. 141,143
Michael Peterson, President and Chief Executive Officer, Peter G. 
Peterson Foundation ...........................................      77,80
David E. Price, A Representative in Congress from the State of 
North Carolina ................................................    151,154
Robert R. M. Verchick, Gauthier-St. Martin Chair in Environmental 
Law, Loyola University New Orleans ............................    206,208
Deborah Weinstein, Executive Director, Coalition on Human Needs..  109,111




                         QUESTIONS AND ANSWERS

Questions and Answers ...........................................  61,220





              OVERSIGHT OF THE CONGRESSIONAL BUDGET OFFICE

                              ----------                              - 


                         TUESDAY, MAY 19, 2015

                              United States Senate,
                                   Committee on the Budget,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:34 a.m., in 
Room SD-608, Dirksen Senate Office Building, Hon. Michael B. 
Enzi, Chairman of the Committee, presiding.
    Present: Senators Enzi, Sessions, Toomey, Perdue, Sanders, 
Whitehouse, Warner, and Kaine.
    Staff Present: Eric Ueland, Republican Staff Director; and 
Warren Gunnels, Minority Staff Director.

               OPENING STATEMENT OF CHAIRMAN ENZI

    Chairman Enzi. Since it is after the hour of 10:30, I am 
going to go ahead and gavel this in, and Senator Sanders can 
speak after me when he gets here. So I will call the meeting to 
order.
    Good morning, colleagues, and welcome to this oversight 
hearing of the Congressional Budget Office. If what I said 
sounds strange to everyone, it should. No Chair of the Senate 
Budget Committee has welcomed colleagues to an oversight 
hearing on CBO since 1982. I have been complaining about other 
committees not doing their oversight. I thought we probably 
ought to do ours as well.
    Even so, the Congressional Budget Act of 1974 clearly gives 
us the authority to hold such hearings. Section 102(a) of the 
act amends the Standing Rules of the Senate to give the Budget 
Committee the ``duty to review on a continuing basis the 
conduct by the Congressional Budget Office of its functions and 
duties.'' A similar duty is given to the House Budget Committee 
in Section 101.
    Our research indicates the Committee executed this 
responsibility for several years after CBO's founding in 1975. 
Specifically, the Committee held oversight hearings in 1975, 
1976, 1977, and then in 1982. These hearings examined the 
agency's operations, staff, travel, models, outside contacts, 
and other aspects of the CBO's work.
    I doubt that the authors of the Budget Act had in mind 
``every 33 years'' when they gave the Committee the power to 
review CBO on a continuing basis. So today we are resetting our 
oversight relationship with the CBO. Let me assure the new 
Director and his staff that we will henceforth hold hearings on 
a continuing basis with the goal of helping CBO be an even 
better organization than it is today.
    Congressional oversight of an office like CBO should always 
aim at clarifying the office's mission and improving its 
operation. The growth and development of any organization often 
challenges it to maintain a consistent mission and frequently 
degrades efficient operations. Nonprofit and for-profit boards 
of directors probably focus more on the challenges posed by 
growth and development than on any other topic. Indeed, 
successful companies often have a harder time with mission and 
operations than the less successful ones. Staying focused on 
what we do really well while expanding in size and influence is 
tricky, and it is helpful to have a group like this Committee 
to advise and broadly guide the organization as it develops.
    What does this guidance mean, however? Guidance means 
helping CBO stay focused on its core mission, suggesting and 
overseeing the implementation of basic management processes in 
the office's execution of its primary duties. Let me briefly 
elaborate on each of these oversight elements.
    Each CBO Director from Alice Rivlin to you, Dr. Hall, 
conceives and executes changes to CBO in many important ways. 
We know from the early CBO oversight hearings that
    Dr. Rivlin spoke with the Committee on CBO's mission, and 
subsequent Directors have informally engaged Committee members 
on that topic frequently.
    That said, it is crucial that CBO keep firmly in mind its 
mission. The Budget Act clearly lays out that mission in 
Section 202 where you can read, ``It shall be the primary duty 
and function of the office to provide to the Committees on the 
Budget of both Houses information which will assist such 
committees in the discharge of all matters within their 
jurisdictions.''
    Throughout this important section, that refers as well to 
the other House and Senate committees. You often read about 
CBO's role in assisting and supporting the committees and 
members in the execution of their duties, and it is always 
helpful to remember that CBO exists solely for this purpose.
    Second, the Budget Committee's oversight duties clearly 
extend to assuring the rest of Congress that this vital 
organization is operating with excellent management practices 
in place. There is no partisan divide when it comes to ensuring 
that CBO be the best analytical organization possible in 
Washington. Thus, the Committee should be focused on such 
fundamental management policies as the existence and growth of 
its disclosure and transparency, the role of its advisory 
panels, the implementation of its conflict of interest policy, 
its personnel retention and succession planning policies, and 
the office's continuity of operation practice. The Committee 
does not create these policies and practices, but it is our 
duty to make sure they exist, are robust and effectively 
implemented.
    The Committee also is interested in helping the office 
resolve barriers that others might create to its effectiveness, 
as well as challenges that any broad, new legislation would 
present. As well, the Committee should take an interest and 
provide guidance to the CBO as its duties change and evolve. 
The budget resolution Congress recently adopted has several new 
requirements for CBO, and I was pleased how well we worked with 
you and your team, Dr. Hall, in conceiving and drafting those 
provisions. I look forward to continuing our conversations with 
you about how best to carry out these new responsibilities.
    Finally, the Committee's basic duty is to provide 
appropriate oversight of the operations of CBO. I think CBO 
management and the Committee could develop a set of metrics and 
reports that would allow the Committee to be assured that the 
resources are utilized effectively, that CBO has the tools it 
needs to do the work at a high level of effectiveness, and that 
appropriate investments are made in CBO personnel.
    I look forward to working with CBO management in the 
development of these metrics and reports. I believe I speak for 
all of my colleagues when I say that we want a great 
Congressional Budget Office. We want its focus to be sharpened 
and its effectiveness increased. Pursuing these goals for an 
organization that already owns a high reputation should assure 
everyone who cherishes CBO that this Committee has its best 
interests in mind and that, going forward, CBO builds on its 
solid foundation from its first 40 years with oversight from 
the Senate Budget Committee.
    When Senator Sanders arrives, we will--right now what we 
will do is go to Dr. Hall's testimony, and then if Senator 
Sanders is here, he can do his statement. Then we will go into 
the questions.
    Our witness today is Dr. Keith Hall, the recently appointed 
Director of the Congressional Budget Office. It is my 
understanding that this is Dr. Hall's first testimony given as 
CBO Director. On behalf of my colleagues in the Senate, let me 
welcome you to a place at the table that will soon become all 
too familiar.
    Prior to his appointment as CBO Director on April 1st, Dr. 
Hall served as the Chief Economist and Director of the Office 
of Economics at the U.S. International Trade Commission. Hall 
has over 20 years of Federal service with the Department of the 
Treasury, the International Trade Commission, the Department of 
Commerce, the Executive Office of the President, and the Bureau 
of Labor Statistics. In 2007, President George W. Bush 
nominated Dr. Hall to be the 13th Commissioner of the Bureau of 
Labor Statistics. Before becoming Bureau of Labor Statistics 
Commissioner, he served as the Chief Economist for the White 
House Council of Economic Advisers, where he analyzed a broad 
range of fiscal, regulatory, and macroeconomic policies, and 
directed a team that monitored the state of the economy and 
developed economic forecasts.
    Dr. Hall has held numerous academic posts. He received his 
Bachelor of Arts degree in Economics from the University of 
Virginia and his Master's and Ph.D. in Economics from Purdue 
University.
    For the information of colleagues, Dr. Hall will take 7 
minutes for his opening statement, and then--since Senator 
Sanders is here, even after that introduction, we will go ahead 
with Senator Sanders' statement.

              OPENING STATEMENT OF SENATOR SANDERS

    Senator Sanders. Thank you, Mr. Chairman, and my apologies 
for being late. And, Dr. Hall, welcome. Thanks for being here.
    Mr. Chairman, thanks for holding this important hearing. 
Though you and I certainly have our disagreements about policy 
and about the budget, we can most certainly agree that it is 
absolutely essential for the CBO to provide us with 
independent, nonpartisan, and unbiased scores or projections to 
inform the decisions that we make, and that has been the 
history of the CBO, and we look forward to Dr. Hall continuing 
in that tradition.
    Mr. Chairman, we are here this morning to conduct oversight 
over the Congressional Budget Office, and that means making 
sure CBO sticks to its core mission of providing us with 
objective information about how legislation will impact the 
deficit in an unbiased manner.
    In my view, it is essential that the information that CBO 
provides Congress is as accurate as possible and as nonpartisan 
as possible.
    Director Hall, I recognize that you have been on the job 
for a very short time, but I am sure you already realize how 
important CBO's nonpartisan reputation is for maintaining its 
ability to help us do our job. We need objective information 
regardless of one's political views.
    CBO, like all agencies, depends on its people for its 
success. The agency's ability to attract and maintain talented 
individuals is critical to what it does. It is also important 
to us since we and our staffs make countless requests of CBO 
each year. You know that you are running one of the most 
important agencies in this Congress.
    Like the rest of the Government, CBO has had to do more 
with less under sequestration. The cuts required to make the 
Budget Control Act caps have meant that CBO has shed employees 
and seen a shrinking budget. For fiscal year 2016, CBO's 
funding request to Congress would provide a budget that is only 
slightly higher than the agency's funding level was in fiscal 
year 2010. However, even if that funding level were provided, 
CBO would still have 5 percent fewer employees than it did in 
2010. Relative to GDP, CBO's budget has fallen by nearly half 
since its high point in 1977. And yet the fiscal year 2016 
budget resolution conference report includes several additional 
requirements for CBO, including analysis on macroeconomic 
effects or dynamic scoring, so-called fair value estimates, and 
new requirements for longer-term estimates.
    Director Hall, I would like to be clear that several of 
these new requirements I believe are nothing more than a back-
handed way to make it easier to cut taxes for those who have 
benefitted greatly over the past several years and to make it 
harder to assist those who have not. In other words, I am not a 
great fan of so-called dynamic scoring.
    Of course, these requirements are brand new, and we will 
have to wait and see what CBO produces as a result. I sincerely 
hope that in complying with these new requirements, you will 
maintain CBO's standard for unbiased analysis. I know that the 
staff of CBO will do its very best to meet these requirements 
in a timely fashion. However, I question the wisdom of piling 
on these responsibilities with what seems to be little thought 
to the agency's ability to absorb this new workload while 
carrying out its ongoing responsibility.
    So the bottom line is you have less money; you have been 
asked to do more. There are some of us who want to make sure 
you continue to do your work in the traditional nonpartisan, 
objective way, and with that, we wish you the best of luck in 
your new task.
    Chairman Enzi. Thank you, Senator Sanders.
    Since I have done the introduction, we will go to Dr. Hall.

STATEMENT OF KEITH HALL, PH.D., DIRECTOR, CONGRESSIONAL BUDGET 
                             OFFICE

    Mr. Hall. Great. Thank you. Chairman Enzi, Ranking Member 
Sanders, and members of the Committee, I appreciate the 
opportunity to come before you today to discuss the work of the 
Congressional Budget Office. We are pleased to discuss our 
accomplishments, which we believe are substantial, but we also 
welcome the feedback that you can provide about ways in which 
we can do our job better.
    In my short time at CBO, it has become very clear to me 
that the agency is blessed with a staff that is knowledgeable, 
highly skilled, very hardworking, and dedicated to providing 
the best possible objective and impartial analysis to Congress. 
And CBO has consistently been rated one of the best places to 
work in the Federal Government. But we are not perfect, of 
course. No economists, analysts, or forecasters are. So we 
welcome thoughtful assessment of our work and of ways to 
improve it.
    The Congressional Budget Act of 1974 created this 
Committee, the House Budget Committee, and the Congressional 
Budget Office. CBO's work follows processes specified in that 
law or developed by the agency in concert with the Budget 
Committees and the congressional leadership. The agency's chief 
responsibility is to help the Budget Committees with the 
matters under their jurisdiction. Also under law, it supports 
other congressional committees, particularly the 
Appropriations, Ways and Means, and Finance Committees.
    At CBO, we are committed to providing information that is 
objective, insightful, timely, and clearly presented and 
explained. In keeping with CBO's mandate to provide analysis 
that is objective and impartial, the agency makes no policy 
recommendations. Instead, it strives to present fully and 
fairly the likely consequences of alternative proposals being 
considered by Congress.
    For fiscal year 2016, CBO has requested an appropriation of 
$47.3 million, an increase of $1.6 million from last year. 
About one-quarter of the requested increase would fund three 
new positions, bring the agency's staffing to 238. These new 
positions would be devoted to analyzing the economic effects of 
Federal tax and spending policies, including conducting dynamic 
analysis of certain legislation as specified in the budget 
resolution, and analyzing health care issues.
    Focusing for a moment on those two topics, we have devoted 
significant effort to developing analytical tools that enable 
us to assess the macroeconomic effects of fiscal policies. 
Recent reports incorporating such analyses include several on 
the macroeconomic effects of alternative budgetary paths, 
including those specified in the recently passed congressional 
budget resolution. We expect to devote considerable attention 
to further developing our capacity to conduct dynamic analysis 
in the coming year and have already shifted some resources 
towards that end.
    Interest in legislative proposals related to health care--
on the part of the committees of jurisdiction, the 
congressional leadership, and the Budget Committees--remains 
very high. We continue to analyze proposals to modify the 
Affordable Care Act and the forthcoming Supreme Court decision 
regarding that act that could require significant changes to 
baseline projections and could lead to significant legislative 
activity.
    We are in the process of analyzing various aspects of the 
health care system and enhancing our analytical capability to 
assess the effects of future legislation on that system and on 
the Federal budget.
    On a broader scale, in carrying out our mission of serving 
the Congress during 2015 and 2016, we will focus on meeting 
three goals.
    The first is to continue to provide Congress with budget 
and economic information that is objective, insightful, and 
timely. In the coming year, we expect to provide a wide variety 
of estimates and other analysis to Congress. They include: 
about 20 reports representing an assessment of budgetary 
developments during the current fiscal year, the outlook for 
the budget and the economy, analyses of the President's budget, 
long-term budget projections, and options for reducing budget 
deficits.
    We will also produce more than 500 formal cost estimates, 
mostly for bills reported by committees. In addition to formal 
cost estimates, we will have about ten times as many 
preliminary, informal cost estimates, mostly to aid committees 
in the drafting of legislation.
    We will produce about 120 scorekeeping tabulations for 
appropriations acts, and we will produce roughly 85 analytical 
reports and other publications generally required by law or 
prepared in response to requests from the Chairman and Ranking 
Members of committees.
    All of our estimates and reports are reviewed internally 
for objectivity, analytical soundness, and clarity. That 
rigorous process involves multiple people at different levels 
in the organization. In addition, we will consult with numerous 
outside experts who represent a variety of perspectives.
    A continuing challenge is how to respond in a balanced way 
to requests from both the majority and minority of multiple 
committees in both the Senate and the House. We regularly 
consult with the committees and the congressional leadership to 
ensure that we are focused on the work that is of the highest 
priority to Congress.
    Our second goal is to continue to present and explain the 
methodology and results of analyses clearly. We make our work 
widely available to Congress and the public by releasing 
publicly all formal cost estimates and analytic reports. The 
input from outside experts and extensive external review will 
remain an important component of our transparency. Also, we 
will continue to have our documents and related information 
provide explanations that go well beyond just the presentation 
of results.
    In addition, CBO analysts will regularly explain details 
underlying the agency's estimates and other analyses to 
interested Hill staff. They will present their work at 
professional conferences to promote discussion among experts in 
the field.
    The transparency of our work is very important, and 
enhancing it is one of my prime objectives. We will look 
forward to the Budget Committees and other congressional users 
of our analysis to provide us feedback on the appropriate type 
and level of explanation of our methodology to be the most 
effective in supporting our work.
    Our third goal is to continue to improve our internal 
management. At CBO, we will continue to face considerable 
competitive pressures in attracting and retaining highly 
educated and skilled employees that we need. More than two- 
thirds of the staff consists of economists and budget analysts. 
Talented people with those backgrounds are highly sought by 
other agencies, private analytic organizations, universities, 
and private companies. The gap between compensation that we 
provide and the compensation that people with such backgrounds 
can receive elsewhere is increasing. For example, in the past 
17 years, the average inflation-adjusted annual salary paid to 
professors of economics has risen by 47 percent while the 
highest inflation-adjusted annual salary paid at CBO has fallen 
by 7 percent. With current limits in salaries that CBO can pay, 
hiring and retaining strong performers will be difficult in the 
long term.
    In closing, I would like to emphasize how much we at CBO 
have relied on the oversight of the Budget Committees and their 
help in explaining and communicating to others in Congress 
about our role in the complex Federal budget process. We rely 
on your constructive feedback and guidance on important 
legislative developments and congressional priorities. We are 
grateful for the support and guidance you have provided 
throughout the 40 years of CBO's existence and look forward to 
continuing that constructive relationship for many years to 
come.
    Thank you.
    [The prepared statement of Mr. Hall follows:] 
    
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    Chairman Enzi. Thank you. We appreciate the information and 
realize that you have not been there very long--yet. We will 
have questions, 5 minutes for each Senator, in the order of 
their arrival but alternating back and forth between the 
Republicans and the Democrats.
    Director Hall, I recognize that you have only been the 
Director for 59 days. In fact, I think today is the 59th day. 
But I suspect you have begun to reflect on the goals of your 
tenure in office and can tell that from your statement. Could 
you please take a minute or two to tell us what your midterm 
goals are for the CBO under your leadership--in other words, 
what accomplishments you would like to be able to talk about in 
6 months and what objective measures we could have to determine 
if those have been achieved?
    Mr. Hall. Well, part of my initial impression is that the 
CBO is running and working very well. They have an excellent, 
well-deserved reputation for quality of the work, and I 
certainly did not come into the job with the idea that large 
changes were needed at all.
    Two things, though, that come to mind since I have been 
with CBO, and one is an interest I have had even before coming 
to CBO, and that is, providing transparency with what we do. 
You know, I think it is vitally important that the work of CBO 
is credible. The value to you is that our work is credible. It 
needs to be objective and independent. And people have to 
believe that we have made an honest effort at it, and part of 
that, I think, is being transparent--being transparent with 
what we have done, how we have done it, and being able to 
communicate it.
    In fact, I think transparency has two really important 
roles: one is the credibility; but, second, by being more 
transparent, I hope that we get feedback on what we are doing. 
So if we provide an estimate and somebody thinks it is too 
high, it is not helpful if all they can say is, ``It is too 
high.'' If we provide an estimate and explain how we got it and 
you think there are problems with our methodology or some of 
the estimates that we have made, you can say that, and that is 
something that we can talk about and we can make improvements 
on.
    So one thing I think is definitely with transparency, 
certainly with dynamic scoring, I think we have got some 
transparency there and sort of making clear how we are going to 
do our work. And I think we also need to make some effort to 
make sure we are working with economic consensus on dynamic 
methods.
    One of the things I think that we are starting to do now--
in fact, we just did it last week. We had our Director of 
Macroeconomic Analysis present at the Conference of Business 
Economists about dynamic scoring, and the slides are now 
available online. It has provided some detail. She is going to 
make a similar talk to our panel of economic advisers in a 
month or so. And then starting fairly soon with a long-term 
budget analysis and the President's budget, the economic 
effects of the President's budget later this year, we are going 
to try to improve our presentation of dynamic results and try 
to improve the transparency. That is one place where I hope you 
will see a difference going forward.
    The other thing is the development of health care models. 
We are doing work on health care, and it has been a real 
challenge for CBO, in large part because all we had was theory. 
And our modeling was based on theory, and we were doing our--
CBO did its best to estimate the effects of the ACA based on 
what economic theory suggests. But now we are starting to get 
some experience with the ACA. We are starting to get some data, 
and we are going to need to adapt our methodology as we get 
more data and as more research is done.
    So one of the things I would like to do in the near term is 
starting to encourage, maybe trying to be more transparent 
about the sort of economic research that we would like to see 
from the private sector or elsewhere on how to improve our 
modeling of the health care.
    Chairman Enzi. Thank you. I appreciate that, and 
particularly your comments during your testimony about the 
disclosure of your methodology, too, which will help for people 
to have a better understanding of how you got there and whether 
they think it was right or not. And hopefully we will have 
constructive suggestions for ways to improve that.
    Now, your predecessor's submission to the Appropriations 
Committee earlier this year--and I do mention that it was your 
predecessor--asked for authorizing provisions in the 2016 
appropriations bill. CBO requested permission to hire employees 
with non-immigrant visas for difficult-to-fill positions and to 
keep half of the unused appropriations in fiscal year 2016 for 
use in fiscal year 2017.
    It is my understanding that the House Committee on 
Appropriations, which reported its legislative branch 
appropriations last week, did not include these requested 
authorization changes. Do you know why CBO sought those 
provisions through the appropriations process rather than with 
changes in the authorizing statute through the Budget 
Committee? And is there a list of administrative provisions 
that have been adopted in the appropriations bill that affect 
how the agency conducts it, share with the Senate and the House 
Budget Committees? If not, please prepare such a list and 
submit it to the Senate and House Budget Committees. That is a 
pretty long question.
    Mr. Hall. Well, I think I can give you kind of a short 
answer, because I was not involved and I do not know why the 
submission was made through the appropriations. I do know that 
generally the interest of increasing our ability to hire is a 
concern. It actually is a concern throughout the Federal 
Government that some skilled positions like economists and 
finance and some of those high areas, it is very hard to hire 
them, and it is very hard to pay those salaries. So I think 
there was some interest in expanding our capability to hire 
some non-citizens.
    And the other stuff, I will be happy to follow up. I do not 
know a lot about it at this point.
    Chairman Enzi. And it would be helpful to maybe have some 
comparisons. You mentioned professors went up by 47 percent, 
but 47 percent of what? So it would be helpful to see what some 
of the dollar numbers are as well.
    My time has expired. Senator Kaine?
    Senator Kaine. Thank you, Mr. Chair, and thank you, Dr. 
Hall.
    Dr. Hall, I am interested in one kind of metric question. I 
understand that it is not your office's job to offer policy, 
but here is a metric question that has bothered me since I came 
into the Senate, and it is a question over what is an 
acceptable level of debt and what is a dangerous level of debt. 
We had a hearing in this Committee a couple months back, and I 
think the title of it was, ``America's Dangerous Debt.'' We had 
three witnesses, and I asked them--and I think I may have been 
the last questioner that day: ``Describe what is a dangerous 
level of debt.''
    One witness said that he actually did not like the way we 
calculate debt, and so any debt-to-GDP ratio he thought was 
meaningless. He did not really offer--I do not think he offered 
us a great alternative, but he at least candidly said, ``I do 
not think debt-to-GDP ratios is a meaningful number.''
    The second witness said that she did not feel 
professionally qualified to offer an opinion about a metric for 
distinguishing acceptable debt from dangerous debt.
    And the third witness gave the most elegant 5-minute non-
answer that I have heard on this Committee.
    So no one would say here is what the metric is. And, you 
know, early in my time in the Senate, the Rogoff- Reinhart 
study came out that, you know, tried to say here is acceptable 
and here is dangerous, and there was a lot of critiquing of 
that. And as I followed this in 2-1/2 years in the Senate, I 
have been struck by how different it is from being a Governor. 
We had debt ratios that we used that were bipartisan, that, you 
know, Democratic and Republican Governors and Democratic and 
Republican legislative bodies generally followed, with plenty 
of controversy about how to manage to the ratio. You know, how 
do you construct the expenditure side or the revenue side to 
manage to the ratio? But we used total debt as a percentage of 
State GDP and debt service as a percentage of the State general 
fund budget as our ratios. When I was mayor of a city, we used 
similar ratios. We did not have a number for debt, but we had 
ratios for debt.
    I wonder, you know, what is your particular opinion, your 
office's opinion, or what you think is an economic consensus, 
to the extent that there is one, about what is an appropriate 
way to measure sort of appropriate debt versus dangerous debt. 
And then we would have all the controversies about how to, from 
a policy standpoint, manage to that. But I would love to hear 
your thoughts on the metric itself.
    Mr. Hall. Sure. Well, first of all, the idea of debt- to-
GDP is helpful in that it gives you some idea of the ability to 
pay it back, right? So, you know, if a small business owes 
$1,000 or Starbucks owes $1,000, those are two different 
situations. So it does help to put it in some perspective with 
GDP, its ability to pay it back. And then, of course, there is 
sort of the time value of money. GDP grows, prices grow, the 
debt grows. It helps to give you some idea, again, about how 
that works.
    One of the things that CBO has done a fair amount of that I 
think is really useful is to make projections, long- term 
projections, under different scenarios. So you have a debt-to-
GDP, and we can give you some idea of what could be the case in 
10 years, in 25 years, under different scenarios with respect 
to productivity growth, et cetera. So you get some idea of 
worst-case scenarios, best-case scenarios in that respect.
    And then I think probably one of the most helpful things--
and I think we are going to continue to try to do this--is give 
you some idea of what it would take to get rid of the current 
level of debt, you know, what sort of cutbacks in either 
spending or taxes that would eliminate debt, and that will give 
you some perspective as to how hard it will be to get away, 
just how big that problem is. That is probably as good a way as 
any.
    As far as a level, you know, it is hard to say a level that 
is a dangerous level.
    Senator Kaine. And just to follow up on that--and this is 
helpful--even recommendations about what it would take to get 
rid of the current level of debt, I mean, I do not think any of 
us around the table feel like we are going to be as a Nation 
just debt free. The idea would be to get rid of debt that could 
be unproductive or a challenge and to have an appropriate level 
of debt. But I just wonder whether you think in the province of 
the office is some advising of us about, you know, what are 
appropriate versus dangerous levels. Again, we have to manage 
the policy--we have to grapple with the policy choices about 
how to get to the metric. But is that something that you think 
is in the province of your office? Or is that more of just a 
hotly contested, you know, economic theory that you guys will 
be agnostic on?
    Mr. Hall. No, actually I think it is something that we can 
look at and think about, ways of sort of giving you perspective 
on just how big a debt is, how much trouble you can be in with 
it. I think that is a difficult thing because there is so much 
uncertainty and providing these sort of point estimates where 
there is lots of uncertainty, when you know that under some 
scenarios that debt could be much worse than it looks. I think 
it would be helpful for us to think about that. We could 
probably do a little work.
    Senator Kaine. Great. Thank you very much.
    Thanks, Mr. Chairman.
    Chairman Enzi. Thank you.
    Senator Perdue?
    Senator Perdue. Thank you, Mr. Chairman. And, Dr. Hall, I 
am a fan. I have watched your work at the Council of Economic 
Advisers. I welcome you to your new role, and thank you for 
being willing to step up and help us.
    This is a great conversation. I want to follow up on 
Senator Kaine's direction. Obviously, we have just gone through 
a budget cycle. I do not think anybody on this Committee is 
really ecstatic about the process. Our Chairman and Ranking 
Member did a great job with a budget, but the long-term thing 
that really concerns me is our ability to address this debt. 
And I want to follow up on Senator Kaine. I think he is headed 
in the right direction, and I want to commend him on the 
nonpartisan approach I think a lot of people are taking in this 
Committee with regard to the question.
    You did not mention interest rate models, and obviously the 
uncertainty around interest rates have a large impact on what 
happens with how we manage the debt. But I am really interested 
how you can help us look at the alternatives we have to address 
the debt issue. Like Senator Kaine says, we will deal with the 
policy issues, but one of those is particularly of interest to 
several of us here, and I know I have heard Senator Whitehouse 
talk about this, and a few others on the other side, and that 
is, redundant agencies, agencies that are actually totally 
duplicative of other agencies.
    The GAO comes out with a report. They quantify some, they 
do not quantify others. And I know that they cannot really 
estimate savings without some help from the CBO or some reports 
from the CBO. Can you address how you are looking at maybe 
interfacing with some of these other agencies in terms of 
helping us answer some of the questions we are dealing with, 
specifically with regard to the debt?
    Mr. Hall. So you are talking about looking at sort of what 
they are saying about the debt?
    Senator Perdue. Yes, and what would be the potential models 
around reduction or elimination of some of these--or changes 
really in mandates around some of these duplicative agencies 
that the GAO estimates or identifies every year?
    Mr. Hall. Yes, well, certainly the sort of thing that we 
can do is look at the possible effects of doing some of that 
work, the effect on the budget of eliminating some of this 
overlap. That is the sort of thing that I think is sort of in 
our wheelhouse so we get an idea perhaps of some specific ideas 
on that that we could do some work on that.
    Senator Perdue. Let us go to dynamic scoring then. What are 
the risks--and I know this is one of several measures that you 
would use in evaluating any change. Talk to us about how we 
should be thinking about that relative to looking at ways to 
reduce the debt with regard specifically about growing the 
economy and doing some things on the public side--or the 
private side that would help generate growth in the economy.
    Mr. Hall. Well, sure. Certainly that is one of the things 
about the macroeconomic work that we have been doing, is sort 
of looking at the possible macroeconomic effects of some policy 
spending or taxation. You know, it is the sort of thing where 
it is very difficult to make these estimates. There is a lot of 
uncertainty. But there actually is pretty good consensus on 
some of these issues that there is some macroeconomic effect, 
there are some growth effects going forward. And it is 
certainly true if you are looking at Federal debt, a Federal 
budget deficit, there is sort of three things that are 
important there: it is spending, it is revenues, but it is also 
economic growth. So that is sort of a third thing that we are 
trying to take into account with a dynamic aspect.
    It is just a difficult thing to do for policies, but it is 
certainly an important thing. And you will see that actually in 
our forecast, especially our long-term forecasting, how much if 
we change some of the assumptions in something like 
productivity growth, how much that makes a difference in the 
debt going forward.
    Senator Perdue. Thank you. That is very helpful.
    Switching over to just an oversight question, you mentioned 
that you were pleased with what you found so far coming in 
after 59 days. Give us a sense operationally of how you think 
we should think about CBO's effectiveness in terms of dealing 
with new things that we are asking you to do, like dynamic 
scoring and others, given the organization, the people you 
have, the challenges you have of retention, and the things that 
you have already mentioned. But going forward, as we look at 
dealing with this debt over the next few years, what do we need 
to be thinking about relative to CBO's resources, capabilities, 
and what we are asking you to do? Do we need to look at 
priorities? Or are we asking too many things?
    Mr. Hall. Well, certainly one important thing for a place 
like CBO is to always have a certain amount of their time and 
resources set aside for developing new methodologies, and right 
now I think the two things I mentioned--dynamic scoring and 
especially health care--those are really new areas. And so for 
a lot of the CBO work, we are sort of taking the consensus of 
economic science and applying that. And something like health 
care, we are sort of creating, we are on the frontier of that. 
So we have got to spend a considerable amount of time ourselves 
trying to develop the modeling and such and just having some 
resources where we can do that and vet that work is very 
important.
    And then, of course, just setting priorities for us. You 
know, one of the things that this really clears, we get more 
requests than we could possibly handle at times, and having 
some guidance as to which ones we should move on first is very, 
very helpful for us.
    Senator Perdue. Thank you.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you.
    Senator Whitehouse?
    Senator Whitehouse. Thank you, Chairman.
    Mr. Hall, welcome. I think a lot of us are concerned about 
where this dynamic scoring issue goes. As you just pointed out, 
it is a new frontier for CBO, and you will be responsible for 
setting the kind of behind-the-scenes ground rules for the 
application of the rule. And my concern is that in setting the 
ground rules for the application of dynamic scoring, you might 
be inclined to set it up in such a way that it favors things 
that the majority party likes, like big tax cuts for wealthy 
people, and produce dynamic scoring results that show that that 
is such a wonderful thing, and not things that they do not like 
so much, like the Clean Air Act. So the Clean Air Act, 
according to EPA, for every dollar that the polluting utilities 
have had to spend to clean up the air has paid back more than 
$30 in public benefit. A lot of that is in health savings. A 
lot of that comes back through the federally supported health 
care system.
    Are things like the savings from clean air and clean water 
likely to be picked up in the way that you will organize the 
dynamic scoring? Or is it just going to be taxation and the 
things our friends like so much? Will you treat us fairly in 
setting up this rule so that it falls on the just and unjust 
alike, as some would say?
    Mr. Hall. Well, I think as I said before, I think the 
credibility of what CBO does is important to us, but it is 
important to you on both sides, that we do not have any value 
probably for you if what we do is not credible and is not 
objective and independent.
    With respect to something like dynamic scoring, CBO has 
already been using dynamic scoring. You can sort of see how it 
has been implemented. But that is a big part to me of 
transparency, is making clear how we are going to do the 
dynamic scoring, what models we are going to use, what 
estimates we are going to use.
    Senator Whitehouse. And in making those selections, will 
you be sure that it can apply fairly to all results, no matter 
what the desired policy outcome might be by certain interests?
    Mr. Hall. Absolutely. As I say, that is part of the 
transparency. You know, for example, we have an economic 
advisory panel, and we are going to vet our methodology at our 
next meeting, in fact. We are going to talk in some length 
about our dynamic methodology and get some feedback from those 
folks. And as I say, when we increase our transparency, we are 
going to open ourselves up to criticism and comments if we are 
not doing a fair job. And I think that is the only way for us 
to remain credible and also improve on what we are doing. And 
the goal is, like I say, to do this in a way that represents 
sort of the state of economic science, and we are trying to 
look for consensus as much as possible in what we do.
    Senator Whitehouse. You come to us from, among other 
places, the Mercatus Center, which is very heavily funded by 
polluting interests and has, from my view, an unfortunate 
record of attacking the Clean Air Act, pretending that the 
science of climate change is not real and in general supporting 
the industry antagonism towards doing anything about carbon 
pollution. And that would not, I hope you will agree, be an 
appropriate set of points of view to be bringing with you into 
your new position at CBO. Is that correct?
    Mr. Hall. Absolutely. The goal of CBO and my goal is to 
maintain what I think is an excellent reputation of CBO for 
doing independent and objective work, and we will continue to 
do that.
    Senator Whitehouse. So the policy goals that Mercatus 
Center sought to achieve on behalf of its big funders are 
things that we need not worry about infiltrating your work as 
CBO Director?
    Mr. Hall. Yeah, I cannot--to be honest, I could not tell 
you offhand what their policy goals are, but absolutely.
    Senator Whitehouse. All right. Delivery system reform is an 
area in the health care system where there is a lot of 
bipartisan support. Are there any provisions of the Affordable 
Care Act right now that you can say have led to health care 
savings?
    Mr. Hall. You know, I am pretty new on the job, and I do 
not want to talk too much about CBO's work because I have not 
been involved in it. You know, certainly one of the things that 
has already happened at CBO was some of the early modeling of 
the ACA, like I say, was based on theory. And as we are 
starting to get some experience, the results are going to 
change a little bit based on an experience like that.
    So if what you say is true, we find that is true, it will 
be reflected in our modeling going forward.
    Senator Whitehouse. Well, my time is up. I look forward to 
working with you, Mr. Hall, and I welcome you to CBO.
    Mr. Hall. Thank you.
    Chairman Enzi. Thank you.
    Senator Sessions?
    Senator Sessions. Thank you. Thank you, Mr. Hall, and we 
are glad to have you on board.
    Mr. Hall. Thank you.
    Senator Sessions. And you will be challenged, and I think 
Dr. Elmendorf did a pretty good job, and a lot of times he was 
under intense political pressure, and I think in general he 
produced reports that were objective and respected on both 
sides. And you will be under pressure, too, and I hope you will 
adhere to what you just said. You are going to give the facts 
as you see them.
    Senator Kaine asked about debt and dangerous levels. 
Professor Kotlikoff from Boston University was here, and he 
gave us, I think, almost a passionate but objective analysis of 
our long-term unfunded liabilities that he said put us on a 
path to disaster. And he indicated that perhaps a better way to 
judge our financial condition rather than whether we have a 
budget that balances or not is whether we are adding to or 
reducing our long-term unfunded liabilities.
    Do you think that would be a valuable way, one valuable way 
to analyze the debt course of America?
    Mr. Hall. Well, certainly that is what CBO I think is 
already doing for you with some of the long-term forecasts and 
talking about some of the things that will impact those long-
term budgets going forward.
    Senator Sessions. Now, Dr. Elmendorf said that even though 
we have seen some reductions in our deficits, we are under $500 
billion presumably this year--hopefully we will be--that we 
will begin a relentless climb in those numbers in the years to 
come, reaching $900 billion or more 10 years from today, and he 
asserted that was an unsustainable future, that it presented 
unacceptable risks to our financial future. Would you agree 
with that?
    Mr. Hall. I absolutely agree with CBO's assessment then, 
and I think it will continue that way for a little while.
    Senator Sessions. Now, one of the most unusual things that 
happens here to me is to some degree our lack of understanding 
of the huge numbers that we deal with. I am not raising this to 
attack Obamacare, but I want to talk about it. On the eve of 
the vote, December 23rd, I pressed Mr. Elmendorf to give a 
report on the action that was proposed by that legislation, and 
it was going to reduce spending and produce savings in Medicare 
by $400 billion, as I recall. And that money was going to be 
used to fund the new program, Obamacare, and it was asserted 
that these reductions in spending in Obamacare--in Medicare 
would strengthen Medicare, put it on a sounder footing, and 
also provide money to the new program.
    Now, if we were dealing with a small amount of money, $500, 
people would obviously see the danger in this analysis. And so 
I said, ``Isn't this double counting? And I want a letter from 
you on it.'' And he wrote me a letter, and he said, ``You 
cannot spend the same money twice.''
    ``You cannot spend the same money twice. And it is double 
counting''--he used those words--and he said, ``Though the 
conventions of accounting might suggest otherwise,'' was what 
his written statement to me was. Well, by then, it was too 
late. The bill passed and we never analyzed that.
    So have you thought about--and am I correct to say that we 
have a trust fund for Medicare, trustees that manage that fund, 
and when we reduced the payments to Medicare providers and 
saved $400 billion, that was a savings that accrued to the 
trustees for the Medicare beneficiaries. It did not provide any 
extra cash for the Treasury of the United States to fund 
Obamacare with. And, in fact, the Treasury of the United States 
borrowed the money or, in effect, counted that savings 
improperly because the money belongs to the trustees of 
Medicare.
    Am I wrong about that? And it is a pretty big issue, 
wouldn't you think, $400 billion? Can we agree on that?
    Mr. Hall. Well, I do not want to agree purely because I 
have not had enough experience and looked at this enough. I am 
happy to go back and take a look at Doug's letter and sort of 
get an idea of, a better understanding of the issue.
    Senator Sessions. Well, you need to--we need to understand 
this. This is huge, because we have a unified budget. It 
ignores in that process the trust funds. It assumes that we 
just have all money coming into the Federal Government and all 
money going out of the Federal Government, and w have trustees 
of Medicare, and they claim it is--and it is their money that 
was saved, and it did not provide the money for Obamacare. It 
really in a sense was all borrowed eventually by the Treasury 
of the United States to the extent that it produced costs.
    My time is up. Thank you, Mr. Chairman.
    Chairman Enzi. Dr. Hall, that gives you a little indication 
of some of the written questions that you might get now, which, 
of course, you will have a little longer time to think about 
before you respond to us. But I would mention that any of my 
colleagues that have some additional questions, they are due by 
6:00 p.m. today, the hard copy delivered to the Committee Clerk 
in Dirksen 624. And then we would hope that you would respond 
within 7 days from the receipt of the questions.
    I have a number of questions. Most of them have to do with 
numbers, and I learned a long time ago in the Senate that if 
you ask the number questions, at least the people in the 
audience fall asleep, even though you and I might be intensely 
interested in the details of those. So you can probably expect 
some more detailed questions that we would be interested in.
    So I thank you for being--
    Senator Kaine. Mr. Chairman?
    Chairman Enzi. Yes?
    Senator Kaine. Would it be possible to ask one more?
    Chairman Enzi. You have waited. Certainly.
    Senator Kaine. Thank you.
    Dr. Hall, one question I wanted to get to and did not, when 
we have had testimony from your predecessor, one of the things 
that interests me is looking at certain spending categories to 
GDP and how they are trending. So our defense spending as a 
percent of GDP is going down. Our nondefense discretionary 
spending as a percent of GDP is going down. Social Security as 
a percent of GDP is going up. Other health care, kind of 
combined Medicaid, Medicare, probably VA health care-related, 
going up. Tax expenditures as a percentage of GDP, growing 
pretty significantly.
    As we analyze expenditure categories kind of for the arc of 
going the right way, going the wrong way, should we look at tax 
expenditures sort of as a spending item?
    Mr. Hall. You mean in terms of the trend and the share of 
GDP?
    Senator Kaine. Yes.
    Mr. Hall. Sure. It sounds like that is a useful way of 
looking at it.
    Senator Kaine. And I guess one of the challenges on the 
dynamic scoring is that, you know, you can reduce an 
expenditure that will have, you know, minimal kind of extra 
economic consequence or you can reduce an expenditure like an 
infrastructure expenditure that could have significant economic 
consequence, and similarly on the tax side, whether it is a 
rate or a tax expenditure, you might make a move up or down 
that would have minimal kind of ripple effect, or you might 
make a move that would have maximum ripple effect and what 
dynamic scoring, done well, should enable us to understand a 
little bit is what the magnitude of the sort of ripple effects 
are.
    Mr. Hall. Yeah, I think that is right, and I think that is 
why we have to be very careful and transparent about exactly 
how we have analyzed things, especially with the dynamic 
scoring.
    Senator Kaine. Great. Thank you.
    Thank you, Mr. Chairman. I appreciate it.
    Chairman Enzi. Certainly, and I appreciate your comments on 
that. And as another former mayor, we did our budgeting a 
little bit differently, and consequently we had one of the few 
debt-free cities in the Nation, I think. So we did not worry 
about what the percentage was of GDP. We worried about whether 
we were paying all our bills or not.
    I am going to have some more detailed questions on if the 
hiring of the non-immigrant visas for the difficult-to-fill 
positions saves money and also some other places where we are 
interested, since we are putting quite a burden on the other 
committees to come up with some savings to see if there are not 
some places where we can come up with some savings as well.
    Chairman Enzi. So thank you very much for being here at 
this first oversight hearing in 33 years. Thank you for your 
answers.
    Mr. Hall. Thank you.
    [Whereupon, at 11:26 a.m., the Committee was adjourned.]


THE COMING CRISIS: CBO'S ANALYSIS OF THE FEDERAL GOVERNMENT'S DEEPENING 
                           FISCAL CHALLENGES

                              ----------                              - 



                        WEDNESDAY, JUNE 17, 2015

                              United States Senate,
                                   Committee on the Budget,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:01 a.m., in 
Room SD-608, Dirksen Senate Office Building, Hon. Michael B. 
Enzi, Chairman of the Committee, presiding.
    Present: Senators Enzi, Grassley, Sessions, Toomey, Corker, 
Perdue, Sanders, Stabenow, Whitehouse, Warner, Kaine, and King.
    Staff Present: Eric Ueland, Majority Staff Director; and 
Warren Gunnels, Minority Staff Director.

               OPENING STATEMENT OF CHAIRMAN ENZI

    Chairman Enzi. I will call this hearing to order. Good 
morning, Senator Sanders. Good morning, colleagues, and welcome 
to this hearing on the Federal Government's long-run fiscal 
challenges.
    Today the Senate Budget Committee will focus on the 
Congressional Budget Office's newly released publication on 
this vital topic while across the Capitol our colleagues on the 
House Budget Committee are discussing the need to act on these 
critical issues by balancing our budget. Together, the two 
Budget Committees are devoted to restoring order to our fiscal 
books.
    I both shudder and rejoice each year when the CBO publishes 
its long-term budget outlook. On the one hand, I am always 
amazed at the enormity of the fiscal problems our current 
policies have built and the calamity ahead of us unless we act. 
On the other hand, I am always grateful to CBO for telling us 
their accounting of where we will stand without a change in 
course.
    The 535 sitting Members of Congress are better positioned 
than any of the 330 million fellow countrymen to do something 
that avoids this dismal future. And what is it exactly that we 
have been hearing from CBO each year?
    Let us see. I want to congratulate Dr. Hall on this report. 
I found it to be fascinating reading. Maybe that is because I 
am an accountant. But I did get the point that raising taxes is 
a drag on the economy, increasing the debt is a drag on the 
economy, so cutting spending is the only thing that increases 
the economy, and a 1-percent increase in GDP is equal to about 
$300 billion in additional tax revenue without raising taxes. 
If we send out signals of actions, that also stimulates the 
economy, and I am particularly fascinated with Appendix A which 
goes into the difficulty of making projections. And I am 
reminded of Yogi Berra who said, ``The future is hard to 
predict, especially since it is about the future.''
    It goes into the demographics that are involved in it and 
also the economic variables that can cause a problem. And it is 
very clear to me that the longer we delay, the less options 
that we have.
    So the message has remained remarkably consistent over the 
past generations. Let me quote briefly from testimony provided 
by the CBO's Deputy Director, James Blum, in 1997. He had been 
invited by this Committee to testify on the long-term budget 
outlook and options, and he said, ``Just over the horizon is 
the retirement of the large Baby Boom generation. That 
retirement will drive up the costs of three important 
Government programs: Social Security, Medicare, and Medicaid. 
If the resulting budget pressure from both demographics and 
health spending is not relieved, deficits will mount and 
seriously erode future economic growth.''
    We have done little to relieve this pressure since then and 
a good deal more to make it worse. Opportunities have come and 
gone over the intervening 20 years to reform Social Security 
and Medicare. We have failed to replace our broken and top-
heavy tax system with one that supports a more vigorous 
economy. When the economy fell into recession in late 2007, we 
chose again to ignore much needed reforms and instead vastly 
expanded spending programs. We are left today with enormous 
debt, a crawling economy, and little evidence that we are 
prepared at all for the future that CBO has been warning us 
about for 20 years, and that future comes closer and closer 
every year. The Federal Government's deficit in 2007 was just 3 
percent of GDP. By 2009, it had grown to 10 percent. Deficits 
from 2009 through 2012 exceeded $1,000 billion each year.
    As you can see on the screen--as you cannot see on the 
screen. At any rate, the total debt held by the public grows by 
81 percent between the end of calendar years 2008 and 2012. 
Today publicly held debt stands 105 percent above its level at 
the close of 2008. So you kind of have 105 percent plus 105 
percent, which comes to about 210 percent.
    Now our fiscal future is not worsening because we are 
starving the Federal Government for resources. Congress is 
already spending more tax revenue than at any point in history. 
Currently, Government's revenues equal more than 17.5 percent 
of our GDP, and that percentage is growing while outlays more 
than revenues equal 20.3 percent of GDP.
    Even so, our books are not what they need to be as the Baby 
Boom generation moves into the rapid phase of retirement. About 
10,000 Baby Boomers reach 65 each day, and nearly 4,000 of 
those retire each day. Fortunately, some are not. Both of those 
numbers will accelerate in the future. This enormous 
demographic shift will cause a vast expansion in the cost of 
Social Security, Medicare, and Medicaid, as well as a host of 
related programs.
    Last year, CBO estimated that Federal spending on these 
programs would double by 2039. Unless we choose to cancel all 
the rest of Federal spending, most of this additional spending 
will be funded through debt. That means, again, according to 
CBO, in 2014 a doubling in the interest expenses of the Federal 
Government.
    Let me direct your attention to the graph that is in the 
book on page 6. It shows CBO's projection of future publicly 
held debt as a percent of GDP if we continue on our current 
path. Debt rises from about 74 percent of GDP today to nearly 
245 percent of GDP by 2039, or 24 years from now. If CBO's debt 
warnings are not enough to get our attention, well, here is one 
that might. It might be worthwhile to remind my colleagues of 
remarks made by Admiral Michael Mullen, former Chairman of the 
Joint Chiefs of Staff, ``A Nation with our current levels of 
unsustainable debt cannot hope to sustain for very long its 
superiority from a military perspective or its influence in 
world affairs.''
    Admiral Mullen understands that if our debt continues to 
grow unchecked, our Nation will be hobbled as it tries to fund 
programs that are critical to military and diplomacy.
    Some of my colleagues argue that growing debt is not a 
problem, that expanding debt in periods of slow or no growth is 
just what is needed to boost the economy. Hardworking taxpayers 
and millions of Americans who are out of work or underemployed 
have not benefitted from these types of policies over the last 
6 years.
    Indeed, recent research from the International Monetary 
Fund finds a negative relationship between high debt and 
growth. In a report released earlier this month, the IMF 
authors conclude, ``Higher public debt leads to lower 
investment, slower transitional growth or recovery from a 
recession, and a lower long-run level of output. Debt is bad 
for growth.''
    Since high and growing public sector debt is bad for 
economic activity and rapid debts in our future, with the cause 
of that rapid buildup of debt currently unsustainable 
retirement and health programs, then, colleagues, I think it is 
well past time for us to reform the programs that drive up the 
debt, boost our economic growth, and provide a future that is 
secure for retirees and workers alike, as well as for the 
generations yet to come. Taking action now can help boost the 
economy and expand opportunity for each and every American. A 
boost in economic growth means more real jobs from the private 
sector and small businesses across the Nation.
    It is important to note that when we talk about boosting 
economic growth, we are talking about growth from the private 
sector. Government spending does not contribute to this growth.
    As my fellow Budget Committee member and businessman 
Senator Perdue notes, expanding Government does not help grow 
the economy.
    When is the right time to take action? As President John F. 
Kennedy once said, ``The best time to fix the roof is when the 
sun is shining.'' We are going to have to hurry. That same 
logic should be applied to boosting our economy and addressing 
our long-term fiscal challenges. Instead of waiting for another 
crisis or recession or watching our debt grow, we should take 
action on these critical fiscal challenges facing our Nation 
now. By working together on real reforms and real solutions, we 
can achieve real results, which is what hardworking American 
families want and what they deserve.
    Senator Sanders?

              OPENING STATEMENT OF SENATOR SANDERS

    Senator Sanders. Thank you very much, Mr. Chairman. Dr. 
Hall, thanks for being with us. Thanks for your work.
    Mike Enzi and I are good friends. We like each other. But I 
think it is fair to say we look at the world a little bit 
differently.
    The deficit and the debt are obviously very serious issues 
that we have to address, but I think it would be helpful to 
begin to understand maybe how we got to where we are today and 
what a fair and sensible approach to the problem is and to put 
the issue of debt in a broader economic context.
    For a start, here is some good news, and that is that when 
President Bush left office, our deficit was $1.4 trillion. 
Today that deficit has been reduced by more than two-thirds. It 
is now $483 billion. $483 billion is a lot of money, but that 
is progress over a period of years.
    Second of all, there is a lesson that I am afraid some of 
us have not yet learned, but one of the causes of our debt and 
our deficit are wars that were fought in Iraq and Afghanistan. 
So we do not want to get into those wars right now. Whether we 
should have gotten into Iraq is not for this discussion here. 
But I think it is fair to say--and I have a hard time 
understanding how some of my conservative friends do not accept 
this. You talk about spending and spending and spending, and 
you want to cut food stamps, you want to cut programs for 
hungry kids, and you want to cut Medicare, and you want to cut 
Medicaid. But how come you went to war in Iraq and Afghanistan 
and chose not to pay for those wars? If you spend money to feed 
a hungry child, that is an expense. If you spend money on a war 
in Iraq, that is an expense. Why do we pick and choose?
    And then apparently the lesson is not learned because we 
are on the floor right now with the Defense Authorization Act, 
and there is another--what is it?--$38 billion to be put into 
the deficit for so-called emergency, which everybody knows is 
nothing more than a budgetary trick. Everybody knows that.
    So I guess when we spend money on wars, that does not 
really count. When you spend money on infrastructure, health 
care, the needs of our children, ah, that is a serious problem. 
Well, we have a difference of opinion on that.
    But it is not only wars that were not paid for. And, by the 
way, the wars in Afghanistan and Iraq are estimated, by the 
time we take care of our last veteran 50, 60 years from now, to 
cost between $4 and $6 trillion, all put on the credit card.
    Second of all, when we talk about how we got to where we 
are, everybody in this room understands that we have a massive 
level and a grotesque level of income and wealth inequality. I 
do not think anyone debates that. The Republican solution to 
that over the years has been to give even more tax breaks to 
the wealthiest people in this country. Less revenue comes in. 
Now, I understand there is this trickle-down theory that if you 
give tax breaks to billionaires and large corporations, they 
are going to invest in America, they are going to create jobs. 
It is a theory that most economists no longer believe has any 
credibility at all. And in this very budget passed out of this 
Committee, what the Republicans propose--this is part of 
deficit reduction--is to give over $200 billion over a 10-year 
period in tax breaks going to the top two-tenths of 1 percent 
by completely repealing the estate tax. Now, how that helps us 
with deficit reduction, I am not quite aware of.
    Under President Bush, Republicans for political reasons 
passed a Medicare Part D prescription drug benefit. I think 
seniors desperately need help with prescription drugs. But you 
have got to figure out a way to pay for it. They did not.
    And last, but not least, when we talk about where we are, 
part of this deregulatory philosophy that my Republican 
colleagues talk about--and, by the way, was bipartisan; 
certainly Democrats were involved in that discussion--had to do 
with the deregulation of Wall Street. What a wonderful idea. 
Let us allow commercial banks, investment banks, and insurance 
companies to merge because, as Alan Greenspan just told us, 
they will always do the right thing. Well, it turns out that it 
did not quite happen that way. Their greed, their recklessness, 
their illegal behavior resulted in the worst economic crash 
since the Great Depression, also adding to our deficit and our 
national debt.
    So those are, I think, some of the causes of why we are 
where we are today and why we have an $18 trillion debt that we 
might want to look at.
    Now, where do we go from here? What is a sensible and fair 
approach that is good for the American people? Well, if you are 
going to approach figuring out ways how you grow the economy, 
which I think all of us want to do, and at the same time also 
deal with the deficit and the national debt, you have to know 
the context in which you are operating. So what is the economic 
context of today?
    Well, the economic context is that for a variety of reasons 
the top 1 percent now earns more income than the bottom 50 
percent. And since the Wall Street crash of 2008, more than 99 
percent of all new income goes to the top 1 percent. CEOs of 
large corporations now earn nearly 300 times what their workers 
make. You have the wealthiest family in this country, one 
family, the Waltons, owning more wealth than the bottom 42 
percent of the American people. So you have a grotesque level 
of income and wealth inequality in America.
    Now, what is the rational solution? Do you really go to the 
people who are hurting? Do you go to the families where median 
family income has gone down by $5,000 since 1999? Do you really 
want to balance the budget by cutting education, by cutting 
health care, by cutting nutrition? Or maybe, just maybe, we 
might want to ask the wealthiest people and the largest 
corporations who are doing phenomenally well to start paying 
their fair share of taxes.
    You know, I know that my Republican colleagues talk a lot 
about their fears of redistribution of wealth. It gets them 
very nervous. And yet since 1985, we have had a massive 
redistribution of wealth in this country. Unfortunately, it has 
gone from the middle class to the top one-tenth of 1 percent. 
That is just a fact. And if you want to deal with the unmet 
needs of this country, rebuilding our infrastructure, making 
sure that our young people can get to college, dealing with the 
horrendous situation of child care in this country, making 
public education strong, all of the unmet needs that we have as 
a Nation, climate change and so forth, you know what? We are 
going to have to ask the billionaire class to pony on up. If 
they to accept the benefits of being Americans, they are going 
to have to accept their responsibilities as well. You cannot 
run away from that. You cannot keep attacking a middle class 
which is disappearing.
    From 1985 until 2013, the share of the Nation's wealth 
going to the bottom 90 percent of Americans has gone down from 
35 percent to just 22.8 percent. Meanwhile, over that same 
period, the top one-tenth of 1 percent saw its share of the 
Nation's wealth more than triple from 7 percent in 1985 to 22 
percent today. That is the reality. The very, very rich get 
richer, the middle class shrinks. The Republican solution: Let 
us attack the middle class and working families.
    Well, I respectfully disagree. We need to have a tax system 
which ends the enormous loopholes that currently exist. We lost 
$100 billion every year by corporations stashing their money in 
the Cayman Islands, Bermuda, and other tax havens. We have an 
individual tax rate such that hedge fund managers are paying a 
lower effective tax rate, as Warren Buffett tells us, than 
working people are. That is wrong.
    So, Mr. Chairman, I look forward to working with you. I 
know the people on our side of the aisle do. But the economic 
realities that we face now as a country have got to be very 
seriously considered before we go forward.
    Thank you very much.
    Chairman Enzi. Thank you. And I do have to make one comment 
on that. I would like to debate a number of pieces of that, but 
my one comment is on the--and this is very important for the 
debate we are having on the floor right now. On the overseas 
contingencies that are in the budget, that is to keep from 
breaking the BCA cap which results in a sequester across the 
board for everybody. But it is covered in the balanced budget 
numbers. It does not add to the debt. We had to make other 
corrections in order to make sure that it did not add to the 
debt. That is very important.
    Senator Sanders. Well, if I could just very briefly add, 
Mr. Chairman, I think that some of your conservative economists 
out there regard this as--to say the word kindly--``gimmickry'' 
``Budget gimmickry.'' I think that is a fair statement.
    Chairman Enzi. Well, I am just hoping there is less 
gimmickry in this one than we have had in any of the past. I am 
interested in any ideas you have for eliminating gimmickry, 
because that has got to be one of our goals as well because, 
otherwise, we will wake up one day in the midst of a financial 
crisis that the CBO has been telling us about for a long time. 
And every day that goes by, we have less choices for fixing 
what is wrong. So this will be a very important hearing.
    Our witness this morning is Dr. Keith Hall, the recently 
appointed Director of the Congressional Budget Office. It is my 
understanding this is Dr. Hall's first testimony given as--no, 
it is the second one give as CBO Director because he has been 
before us before. On behalf of my colleagues in the Senate, let 
me welcome you to a place at the table that will soon become 
all too familiar.
    Prior to his appointment as CBO Director on April 1st, Dr. 
Hall served as Chief Economist and Director of the Office of 
Economics at the U.S. International Trade Commission. Hall has 
had over 20 years of Federal service with the Department of the 
Treasury, the International Trade Commission, the Department of 
Commerce, the Executive Office of the President, and the Bureau 
of Labor Statistics.
    In 2007, President George Bush nominated Dr. Hall to be the 
13th Commissioner of the Bureau of Labor Statistics. Before 
becoming the Bureau of Labor Statistics Commissioner, he served 
as the Chief Economist for the White House Council of Economic 
Advisers, where he analyzed a broad range of fiscal, 
regulatory, and macroeconomic policies and directed a team that 
monitored the state of the economy and developed economic 
forecasts.
    Dr. Hall has held numerous academic posts. He received his 
Bachelor of Arts degree in economics from the University of 
Virginia and his Master's and Ph.D. in economics from Purdue 
University.
    For the information of colleagues, Dr. Hall will take about 
7 minutes for his opening statement, and that will be followed 
by questions.
    Dr. Hall, please begin.

    TESTIMONY OF THE HONORABLE KEITH HALL, PH.D., DIRECTOR, 
                  CONGRESSIONAL BUDGET OFFICE

    Mr. Hall. Chairman Enzi, Ranking Member Sanders, and 
members of the Committee, thank you for the opportunity to 
testify on the Congressional Budget Office's most recent 
analysis of the outlook for the Federal budget over the long 
term.
    The long-term outlook for the Federal budget has worsened 
dramatically over the past several years in the wake of the 
Great Recession and slow recovery. Financial turmoil and a 
severe drop in economic activity, combined with various 
policies implemented in response to those conditions, sharply 
reduced Federal revenues and increased spending. As a result, 
budget deficits rose, and the Federal debt held by the public 
soared, nearly doubling since 2007. Debt is now equivalent to 
about 74 percent of the economy's annual output, a higher 
percentage than at any point in U.S. history except one.
    If current law remained generally unchanged and the 
economic recovery continued, this debt would decline slightly 
but remain very high over the next few years. After that, 
rising Federal Government spending, mainly caused by the aging 
of the population and rising health care costs, would push debt 
back to, and then above, its current high level. The deficit 
would grow from less than 3 percent of GDP this year to over 6 
percent in 2040. At that point, 25 years from now, Federal debt 
held by the public would exceed 100 percent of GDP.
    In particular, over the next 25 years, spending for Social 
Security and the Government's major health care programs would 
rise sharply, reaching 14 percent of GDP. This would occur 
because of the aging of the population, growing in per capita 
spending on health care, and to a lesser extent, an increase in 
the number of recipients of exchange subsidies and Medicaid 
benefits attributable to the Affordable Care Act.
    In addition, net outlays for interest on the debt would 
grow to more than 4 percent of GDP, while in contrast, all 
other Federal spending would decline to just 7 percent of GDP, 
a very low level by historical standards. Current law would 
also raise Federal revenues to a historically high level 
relative to GDP, but at a much slower pace than the rise in 
Federal spending.
    So what consequences would a large and growing Federal debt 
have?
    First, the large amount of Federal borrowing would draw 
money away from private investment and productive capital over 
the long term. The result would be a smaller stock of capital 
and, therefore, lower output and income than would otherwise 
have been the case.
    Second, Federal spending on interest payments would rise, 
thus requiring the Government to raise taxes, reduce spending 
for benefits and services, or both, to achieve any targets that 
it might choose for budget deficits and debt.
    Third, the large amount of debt would restrict 
policymakers' ability to use tax and spending policies to 
respond to unexpected challenges, such as economic downturns or 
financial crises.
    And, last, the rising debt would not be sustained 
indefinitely. Although there is no identifiable tipping point 
in the debt-to-GDP ratio to indicate that a crisis is likely or 
imminent, the larger a government's debt, the greater the risk 
of such a fiscal crisis.
    So how large would policy changes need to be to lower the 
trajectory of Federal debt? Because under current law debt is 
projected to rise continuously relative to the size of the 
economy in the long term, the policy changes needed to reduce 
debt to any given level would become larger and larger over 
time.
    To put the Federal budget on a sustainable path for the 
long term, you would have to make significant changes to tax 
and spending policies by reducing spending for large benefit 
programs below the projected amounts, letting revenues rise 
more than they would under current law, or adopting some 
combination of these approaches.
    The size of such changes would depend upon the amount of 
Federal debt you considered appropriate. We have illustrated 
two possible goals in one of the figures from the written 
testimony that we have distributed to you.
    One possible target would be to cut debt roughly in half as 
a share of GDP, reducing it to about the average over the past 
50 years. Doing so by 2040 would require an increase in 
revenues and/or a reduction in non-interest spending totaling 
2.6 percent of GDP every year. That would come to almost $500 
billion in 2016, with greater amounts each year after that.
    If all the change was made on the revenue side of the 
ledger, the average middle-income household would have to pay 
about $1,700 more in Federal taxes in 2016 and larger amounts 
in subsequent years. If all of the change was achieved by 
cutting non-interest spending across the board, that would 
reduce initial annual Social Security benefits for an average 
65-year-old in the middle of their earnings distribution by 
about $2,400 in 2016 and by larger amounts thereafter.
    In deciding how quickly to carry out policies to put 
Federal debt on a sustainable path, regardless of the chosen 
goal for debt, you would face several difficult tradeoffs. The 
sooner significant deficit reduction was implemented, the 
smaller the Government's accumulated debt would be, the smaller 
the policy changes would need to be to achieve the chosen goal, 
and the less uncertainty there would be about what policies 
might be adopted.
    However, waiting for some time before reducing spending or 
increasing taxes would result in a greater accumulation of 
debt, which would represent a greater drag on output and income 
in the long term and increase the size of the policy changes 
needed to reach the chosen target for debt.
    Thank you. I am happy to answer any questions.
    [The prepared statement of Mr. Hall follows:] 
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
        
    Chairman Enzi. Thank you, Dr. Hall.
    We will turn to questions. Let me remind the members of the 
process before we start. Each member will have 5 minutes for 
questions, beginning with myself and then Senator Sanders. Then 
following the two of us, we will alternate questions between 
the Republicans and the minority. All members who were in 
attendance when the hearing began will be recognized in order 
of seniority. For those who arrived after the hearing began, 
you will be on the list in order of arrival. If you are not 
here when it is your turn, you will be put to the bottom of the 
list. And when everyone is done, then you will get a chance.
    With that, Dr. Hall, thank you for your testimony, and I do 
have a few questions. Am I correct in my reading of your report 
that nearly half of health care program costs are expected to 
come from excess cost growth? It seems to show about one-third 
of the increase will be due to provisions in Obamacare. I 
thought the Affordable Care Act was supposed to reduce the 
growth in health care costs. Did I read your document 
correctly?
    Mr. Hall. Well, that is right, but we have done analysis of 
repealing the ACA, and we found that doing so would actually 
increase deficits somewhat over 10 years, and the difference is 
the savings from repealing coverage provisions if you repealed 
the ACA would be outweighed by the costs of repealing other 
provisions, including those that reduced Medicare's payment 
updates.
    Chairman Enzi. Okay. Thank you.
    Your report contains estimates of what a delay in 
addressing our rising debt would cost us if we delay 5 years in 
taking action and if we delay 10 years. Please review these 
costs and give us your thoughts on the benefits of taking 
action now rather than much later.
    Mr. Hall. Well, sure. In the example I gave you, we would 
need--if we started immediately, we would need a drop of--we 
would need to cut either spending or raise taxes by about 2.6 
percent of GDP every year if we started now. If we waited just 
5 years, that would go up to 3.2 percent. And if we waited 10 
years, that would go up to 4.2 percent. So even with just 5 or 
10 years' delay, the policy change would be pretty 
significantly increased.
    Chairman Enzi. Okay. The long-term projections you released 
give a worse outlook for Social Security, which you kind of 
covered. In last year projections, it looks that nearly one-
quarter of all Federal spending will be devoted to Social 
Security with increases on the way. Can you review some of the 
reasons for that worsening outlook?
    Mr. Hall. Well, sure. The main big reason, the main reason 
is the aging population. That is a big contributor. Then, of 
course, just generally rising health care costs also contribute 
to that. And that is stuff that has been there for a long time. 
It has been part of our long-term budget outlook forecast for a 
long time, so that really has not changed.
    Chairman Enzi. The future of your report portrays one where 
the Federal Government's borrowing requirements would probably 
depress long-term national savings and income, and that would 
have a negative effect on the economy's growth rate, again, in 
the long term. You also indicate that the rapid growth in debt 
would increase pressure for tax increases and reduce the 
ability to respond to domestic and international problems, 
including future financial crisis.
    Can you walk us through the likely economic and social 
costs contained in this future? Specifically, how will this 
fiscal scenario likely affect the prospects of young people 
just starting their working lives?
    Mr. Hall. Well, sure. One of the aspects of this, of 
course, is, as you say, the growing debt winds up being a drag 
on economic growth. But, also, there is the issue of delay. The 
longer you delay, there really is maybe a generational impact 
here. The longer you delay fixing this problem, the more you 
push the cost of fixing the problem back to later and later 
generations. So I think that is an important consideration 
here.
    In fact, right now we are doing a little work looking at 
sort of the generational impact of fixing this problem now 
versus later and to give you some idea of the sort of tradeoffs 
we have in delaying like that with respect to generations.
    Chairman Enzi. Yes, we have watched with Social Security 
the options that we had in 1998 when I was first here and the 
options that we have available now.
    Your long-term outlook report contained two budget 
projections, one that you called the ``extended baseline 
projection,'' which is the current law, and another you called 
the ``extended alternative fiscal scenario,'' which allows 
certain programs and policies to continue past their expiration 
date. I guess you could say that the alternative scenario is 
one Ronald Reagan has in mind when he suggested there is 
nothing more permanent than a Government program, and there are 
260 programs that have expired. Under the alternative scenario, 
the deficit is a good deal worse by 2025, and especially 2040.
    How much deficit reduction do we have to do over the next 
several years to avoid higher deficits and bring our debt and 
deficit levels back to historical averages?
    Mr. Hall. Well, to get back to something like historical 
averages, actually that handout that I gave you gives you an 
idea of that. The scenario on the left in that handout, where 
you are aiming for getting debt down to 38 percent of GDP, 
which is the long-run average, would require a change of 
either--excuse me, a rise in revenue of either 14 percent or a 
cut in spending of 13 percent, or some combination of that. So 
that is pretty significant. And what that amounts to is if you 
did that every year for 25 years with that as the target, it 
would cost us about $480 billion, which winds up being about 
$1,450 per person, which is pretty significant. And, of course, 
if you wait, that number goes up quite a bit.
    Chairman Enzi. Thank you. My time has expired.
    Senator Sanders?
    Senator Sanders. Thank you, Mr. Chairman.
    Director Hall, thanks in part, I believe, to work of 
members of this Committee, I see that the CBO has begun to 
study the impacts that climate change may have on the Federal 
budget, and this is a welcome development, and I thank you for 
your interest in that. Your team has begun looking at the 
impacts of increased hurricane activity and intensity due to 
climate change, and the results clearly are not good. Even over 
just the next 10 years, you forecast billions of dollars in 
extra damages due to the effects of climate change, and that is 
just over the next 10 years and just from hurricanes.
    I suspect that if you added to it the impact of drought in 
the West and what that means for agricultural output, et 
cetera, the numbers would be a lot higher than that.
    But my question is: Would it be fair to say that climate 
change is having a very significant impact on the economy and 
on our deficit? And would you expect these costs to go up as 
climate changes further and its impacts become worse?
    Mr. Hall. Sure. Well, our expertise does not lie actually 
in climate change and the effects of climate change, so what we 
have done is we have taken some estimates of some other folks 
about the effects of climate change on things like the 
frequency of hurricanes and such. So I cannot tell you what the 
effects of climate change are going to be, but I can tell you 
that if we do get an increased number of hurricanes and a 
number of things like that, it would have a significant--
    Senator Sanders. Well, that is kind of common sense, and, 
again, if you throw in the impact of drought that we are seeing 
in the West, I think it is very hard for anybody to not 
understand that climate change is going to have an impact on 
all of our lives, and certainly on the budget as well. And I am 
glad that you are beginning to consider that.
    Let me ask you another question. I think everybody in this 
room understands that our infrastructure, our roads, bridges, 
water systems, wastewater plants, rail are crumbling. The IMF 
tells us that investing in infrastructure would grow the 
economy without increasing our debt burden, especially when 
interest rates are as low as they are today. Other economists 
have made similar conclusions.
    In your view, would it grow the economy and help the budget 
if we invested more in infrastructure?
    Mr. Hall. Well, we have not done the sort of analysis about 
the actual investment, what levels, and then, of course, what 
effect it would have on the debt, because that would have sort 
of the opposite effect. But certainly if we do a dynamic 
analysis, look at the macroeconomic effects, investment in 
certain things would, in fact, have a positive effect outside 
of what the cost would be.
    Senator Sanders. Right, and is it fair to say that we are 
spending less on construction, on infrastructure construction 
at the Federal, State, and local level, which is just 1.5 
percent of GDP combined, than we have in decades? Bottom line 
is we are spending substantially less in rebuilding our 
infrastructure than we have in the past. Is that a fair 
statement?
    Mr. Hall. Yeah, I am not sure of the exact numbers, but I 
do think that is right. And let me say that the scenario that 
we went through, Federal spending on anything except Social 
Security and health care and those things goes down to very low 
levels over the next 25 years. So that is part of this story.
    Senator Sanders. Thank you.
    There was a report that came out from the Center for 
American Progress last year which made a very interesting 
observation when we talk about Social Security, and that is, 
the impact of income inequality on Social Security. And what 
they pointed out is that because wages were stagnant and we had 
more inequality so that more people were above the cap, which 
is now $118,000, their point was that if we had maintained the 
same level of income inequality back in 1983, Social Security 
would have $1.1 trillion more in the trust fund and would be 
solvent for another 20 years.
    Am I right in saying that income inequality not only is a 
problem unto itself but has impacted the solvency of Social 
Security?
    Mr. Hall. Yeah, the part where it particularly impacts what 
we are doing here is that the income inequality, because its 
growth in income above the taxable maximum, that has affected 
our forecast, and that is part of our forecast that this is--
this issue does reduce revenues for Social Security and does 
create more of a problem.
    Senator Sanders. And the other half of that is that if 
incomes for somebody making $50,000 do not go up, they are 
contributing less into the fund as well. True?
    Mr. Hall. That is right.
    Senator Sanders. Okay. Thank you very much.
    Chairman Enzi. Senator Grassley.
    Senator Grassley. Welcome to your new job.
    Question number one: Some individuals in recent months--and 
I will not name those individuals--and some people have been 
saying this for years that we have declared our debt problem 
solved. Looking at CBO's long-term outlook, it is clear that 
that is nowhere near the case, so I hope you will give me a 
short answer. Is there anything to suggest that we are 
currently on a sustainable fiscal path?
    Mr. Hall. I think it is safe to say that we are on an 
unsustainable path right now.
    Senator Grassley. Okay. Questions number two: When it comes 
to making difficult fiscal decisions, we hear a lot about 
economic harm done to this population or that population, 
depending upon whatever fiscal austerity you are talking about. 
However, I believe the debt burden that we are placing on our 
children and grandchildren and the negative economic impact 
that debt burden will have is a great moral tragedy that gets 
little attention. In other words, we tend to talk economics in 
this town, and there is a moral aspect of it.
    Can you talk about the economic harm that we are causing to 
future generations by ignoring the long-term debt situation? 
And let me quickly follow that up: Are we jeopardizing economic 
opportunities for future generations by ignoring long-term debt 
burden?
    Mr. Hall. Well, one of the things that is clear in our 
analysis is that the growing long-term debt is a drag on 
economic growth. So we do actually have--it actually really is 
a serious issue here in terms of economic growth and incomes 
going forward, and then, of course, just the debt service 
itself. Right now we are paying about 1.3 percent of GDP just 
paying for the debt with interest payments. In 25 years, at our 
current pace that is going to go up to 4.3 percent, which is a 
very high level. And so this is going to be an issue going 
forward.
    And let me also say one thing, too. Our little scenario 
here that takes us out 25 years, one of the big problems is not 
where we get to then, but it is also we are on a trajectory for 
worse numbers. And that is going to play in here in terms of 
future generations.
    Senator Grassley. Okay. To harm future generations.
    Mr. Hall. That is right.
    Senator Grassley. Okay. Question number three: Much of the 
growth in spending between now and 2040 is due to major health 
care programs. Non-interest spending as a percentage of the 
economy actually decreases. Social Security increases somewhat. 
Net interest costs will triple. But the real driver is health 
care--and if I am wrong on that, you can correct me--which has 
averaged 2.5 percent of the economy and will grow to 8 percent 
by 2040.
    If Congress were to attempt to increase revenues to meet 
the higher level of spending, do you have an estimate of the 
amount of revenue that we need to collect as a percentage of 
the economy?
    Mr. Hall. Well, the major health care programs, at the rate 
we are going they are going to--the cost is going to increase 
about 8 percent of GDP by 25 years. I do not actually have a 
raw number on that, but that is a pretty significant number. 
That is a very large number.
    I think right now at the moment, individual income taxes 
are about 8 percent of GDP, so you get 25 years out from now, 
that 8 percent is going to be going to major health care 
programs.
    Senator Grassley. Okay. We have averaged around 17.5 
percent of GDP on taxes. What level of revenue would be 
necessary--well, you talked about the income tax, so you have 
answered that question at 8 percent, right?
    Mr. Hall. Right.
    Senator Grassley. But I would like to follow up. What 
impact would that have on the economy and economic growth?
    Mr. Hall. Of an increase in revenues to cover that?
    Senator Grassley. Yes.
    Mr. Hall. Well, I can tell you right now in our scenario, 
because we are looking at current law, the tax rates actually 
are going up in our scenario, so we actually do have an 
increase in tax revenue. We go up from about 17.7 to about 
19.4.
    When we did our alternate scenario and we did not raise 
taxes, and we also kept spending at a flatter level, we got 
ourselves into a much worse situation where about 175 percent 
of GDP is in debt versus our forecast now of about 107. So that 
is a really significant number, and we are talking about, gosh, 
I guess the difference is--like I say, it is about 8 percent of 
GDP, so that is going to have an impact on economic growth 
probably more than we have got in our current scenario.
    Senator Grassley. Thank you very much.
    Chairman Enzi. Senator Whitehouse.
    Senator Whitehouse. Thank you, Mr. Chairman. Thank you, Dr. 
Hall, for being here.
    Could I ask that you run your projection changing one 
variable? In the projection that you have presented to us, you 
presume an increase of health care expenditure as a proportion 
of GDP from 16 percent to 25 percent?
    Mr. Hall. I am just looking here to sort of see what we 
have got. On the major health care programs?
    Senator Whitehouse. Yes.
    Mr. Hall. I think that is right. I do not have the number 
in front of me.
    Senator Whitehouse. Just for modeling purposes, could you 
let me know what would happen if over the forecasted period we 
were able to keep that flat at 16 percent? And could you let me 
know what would happen if that 16 percent could actually be 
reduced to the level of the least efficient OECD country that 
we compete with, which is around 12 percent? You could use 12 
percent as a proxy or you could use the least efficient OECD 
number. I think that is a pretty easy run to make, and for the 
record, I would like to ask that question, if I may. Thank you.
    Senator Whitehouse. Second, thank you for addressing the 
climate change issue. You point out that hurricane damage is 
expected to increase over time because climate change is 
projected to lead to rising sea levels, which will tend to 
increase damage from storm surges when hurricanes occur. It 
goes without saying, does it not, that that damage will be 
experienced primarily by the coastal States?
    Mr. Hall. That is right. If hurricane frequency went up, 
that is right.
    Senator Whitehouse. So coastal States like Rhode Island 
would take the hit.
    Mr. Hall. I believe that is right.
    Senator Whitehouse. And when you say that climate change 
may increase the occurrence of the most intense storms in the 
North Atlantic Basin leading to more damage in the United 
States, again, that damage would fall on the coastal Atlantic 
States, correct?
    Mr. Hall. Yes, let me just be clear, because it is not our 
expertise. We do not estimate that climate change will have 
these effects. What we are looking at is we are looking at 
the--that if these effects occur, what would be the economic 
impact?
    Senator Whitehouse. No, you are--
    Mr. Hall. The answer is yes.
    Senator Whitehouse. --reflecting conclusions--
    Mr. Hall. Reflecting somebody else's--
    Senator Whitehouse. --of people who know what they are 
talking about that these will be the effects. If they were not 
realistic effects, you would not have bothered to model them, 
would you?
    Mr. Hall. Well, I do not know how realistic they are. I am 
just trying to be fair here, that that it is not our work--
    Senator Whitehouse. Are there any other scenarios that you 
model in here that you have no opinion as to whether they are 
realistic or not? Do you just flagrantly pick topics to model 
without any realistic basis for the concern?
    Mr. Hall. No, these were estimates--these were legitimate 
estimates.
    Senator Whitehouse. Very good. Okay.
    Mr. Hall. These are not--I am just trying to be clear that 
that is not our--
    Senator Whitehouse. This is not your voice speaking. You 
are doing the mathematics.
    Mr. Hall. That is right.
    Senator Whitehouse. Somebody else has decided what the risk 
is.
    Mr. Hall. That is right. So, really, if you think about it, 
our question was: If this occurs, what would be the economic 
impact?
    Senator Whitehouse. Got it. And the economic impact would 
fall primarily on Atlantic coastal States like mine.
    Mr. Hall. That is right.
    Senator Whitehouse. Okay. I would appreciate if at some 
point--you say you have not undertaken a full analysis of the 
budgetary costs stemming from climate change because of 
uncertainties. I think it would be helpful if you could do like 
a ranging exercise. What is the scope of the risk? Is it zero 
to a billion dollars a year? Is it zero to $100 billion, over 
what period of time? If you would consider doing that, I would 
appreciate it.
    Mr. Hall. Okay.
    Senator Whitehouse. The last thing that I will mention is 
that I just cannot help but acknowledge what our Ranking Member 
has said, and that is that Republican concern about the debt 
and the deficit seems to vary considerably depending on the 
program at issue. If it is Pell grants, for instance, then the 
Ryan budget would love to slaughter them. When it is defense 
spending and the benefit of defense contracts to big 
contractors, well, then, my friends happily walk down the OCO 
path and use funny money to deficit spend. And I think if we 
are going to address this problem, we need to stop playing 
favorites and, in particular, we need to stop playing favorites 
by looking only at spending and not at tax spending. Once 
again, we have more money, as of 2014, going out the back door 
of the Tax Code in tax spending than we spend on Social 
Security, than we spend on Medicare and Medicaid together. It 
is about twice what defense discretionary spending is. It is 
more than twice what nondefense discretionary spending is. And 
there is not a tax loophole that it appears our colleagues are 
willing to address. Oil companies have never made more money, 
but can we take away their subsidies? Oh, no. Oh, no, that is 
way less important--it is more important to protect the subsidy 
than it is to do anything about the deficit. Similar for 
carried interest. On and on and on and on and on.
    The Tax Code is rigged and riddled with this nonsense, and 
at some point I think we really have to look at that. And with 
that, I will yield.
    Chairman Enzi. Senator Sessions.
    Senator Sessions. Thank you, Mr. Chairman. I appreciate the 
hearing.
    I would note with regard to global warming, we have had a 
rather dramatic decline in hurricane activity in the United 
States over the last decade. I live on the gulf coast. I saw 
Frederic and Katrina that impacted my area, and it has been 
remarkable. So the projections of tornadoes and hurricanes have 
been much higher than have occurred, and it raises some doubt 
about that, and also other--we know that the temperature 
increase did not occur as projected. So it is okay to do those 
studies, and I appreciate you doing that, but I think that is 
important to acknowledge.
    And with regard to income inequality, I am concerned, and 
the real concern is we have not had enough growth in working 
people's salaries. It is not so much inequality. We need more 
growth in the incomes of people who go to work every day. And I 
am concerned about that.
    Dr. Hall, with regard to the potential possible fiscal 
crisis that might occur, would you say that the risk of that 
increases with the increase in debt and that the severity of it 
and the ability of the country to work its way out of any 
crisis is more difficult with a high debt hanging over our 
heads?
    Mr. Hall. Well, that is absolutely right. Not only is it a 
drag on growth in incomes, but it does create an increased risk 
of another crisis, another recession or something that would 
have considerable harm.
    Senator Sessions. I would like to talk about the growth in 
income and growth in the economy. Our good economist Mr. Beach 
has done some research over the last several years, and I would 
just like to ask a few questions about it, because if this is 
correct--and I believe it is-- then we need to have an 
additional intensity of interest in stopping the increase in 
debt.
    The International Monetary Fund published a report in June 
of 2015 that finds a strong correlation between high and 
growing debt levels and reductions in economic growth. The IMF 
concluded, ``Higher public debt leads to lower investment, 
slower transitional growth or recovery from a recession, and a 
lower long-term level of output. Debt is bad for growth.''
    Do you agree with that?
    Mr. Hall. I do.
    Senator Sessions. Also, Rogoff and Reinhart--Mr. Rogoff has 
testified before this Committee, and Dr. Reinhart has, too. 
They found a distinct tendency for slower economic growth once 
total or gross debt approached and exceeded an amount equal to 
about 90 percent of GDP. So we are at 74 percent gross debt, 
public debt today?
    Mr. Hall. That is correct.
    Senator Sessions. And for developed economies, they found, 
``Gross debt in excess of 90 percent of GDP has typically been 
associated with mean growth of 1.7 percent versus 3.7 percent 
growth when debt is low, under 30 percent.'' Do you think that 
is a valid concern? Would you be in general support of that 
analysis?
    Mr. Hall. Yeah, I do not know what the consensus is on that 
work, but that certainly seems like reasonable work, and I do 
support the idea that higher debt slows economic growth.
    Senator Sessions. And they went on to find that the drag on 
economic growth increases as the debt grew greater. And the 
economist at the Bank of International Settlements observed, 
``Our results support the view that beyond a certain level, 
debt is bad for growth. For government debt, the number is 
about 85 percent of GDP.'' Is that consistent with your 
concerns about debt?
    Mr. Hall. That is right. I do not have sort of a magic 
number in mind about how big it gets before it is too large, 
but there is a ``too large'' there somewhere.
    Senator Sessions. Well, the International Monetary Fund 
also found a connection between growing debt and slowing 
economic activity, finding, ``On average, a 10- percentage-
point increase in the initial debt-to-GDP ratio is associated 
with a slowdown in annual real per capita GDP growth of around 
0.2 percentage points per year, with the impact being smaller 
on advanced economies.''
    Is that also consistent with the concerns of debt and slow 
growth?
    Mr. Hall. Yes.
    Senator Sessions. And the European Central Bank found that 
high debt slows the economy: ``For high debt-to-GDP ratios 
above 95 percent, additional debt has a negative impact on 
economic activity.''
    So if our concern is to help the American people do better 
and to deal with our debt crisis that we face, aren't these 
studies consistent with the idea that we have got to confront 
the debt path we are on?
    Mr. Hall. Yes, and that is one of our messages for today, 
that we are on an unsustainable path at the moment.
    Senator Sessions. Thank you, Mr. Chairman.
    Chairman Enzi. Senator Warner?
    Senator Warner. Thank you, Mr. Chairman. And, Dr. Hall, 
thank you for your very good work.
    Mr. Chairman, I have enormous respect for you and your 
background as an accountant. I do have to say, as somebody, 
like Senator Corker and Senator Perdue, who spent a whole lot 
of time in business, I could not imagine any of us using an OCO 
account, financial finagling that would pass any kind of FASB 
muster. And, again, let me acknowledge both sides have used it, 
but the sooner we get rid of these gimmicks the better.
    I also, Mr. Chairman, really appreciate the fact that you 
quoted Admiral Mullen about the challenge of the debt. I agree 
with Senator Sessions' and Dr. Hall's comments. I would 
simply--I think we need to make sure the record includes all of 
Admiral Mullen's statement: ``No partisan ideology is worth the 
cost to our Nation.'' Then it goes on further to say: ``So as 
eventually to bring the budget into balance, this framework 
must include tax reforms to raise more revenue, encourage 
growth, and enhance progressivity.'' So I hope the record will 
reflect all of Admiral Mullen's comments.
    I would also like to make sure--Dr. Hall, I know that this 
is not in your report, and I think your slides are quite good. 
A couple of comments.
    One, you probably have seen some of the things that we
    look at in the Finance Committee on our tax structures. You 
may not have this knowledge at your fingertips, but I would 
like to insert into the record that actually America, in terms 
of the 40 top OECD nations in terms of total revenue raised, is 
37th. I think Korea and Turkey raise a little less revenue. So 
countries like Singapore and others that we say have growth 
patterns, you know, actually raise more revenues. They do it 
with a more efficient system. I would be the first to grant you 
that. But would you contradict--I mean, because I have got a 
couple other comments, but do you have any reference to kind of 
how we rank vis-a-vis the rest of the world?
    Mr. Hall. I do not.
    Senator Warner. Well, I will get that for you.
    One of the things I also really appreciate you pointing out 
was, you know, oftentimes our colleagues sometimes on the other 
side of the aisle cite historic revenue run rates of about 17.4 
percent, which you show their average, 65 in 2014. I think it 
is helpful to note that we have never balanced the budget on 
that revenue run rate--with the exception, I would add, of the 
late 1990s when our revenue run rate--and I know CBO has 
changed the analysis--was closer to about 19.5 percent. Is that 
correct?
    Mr. Hall. Yes.
    Senator Warner. Thank you, sir. So, you know, obviously we 
do have to bring down our spend, and there are a group of us on 
this side of the aisle that have taken some heat for laying out 
ways to rein in our entitlement costs. But I have not seen any 
realistic passed at least my smell test approach that does not 
include some increase in revenues. We can debate about how we 
get them. I do not think they can come from magic growth alone 
or simply cutting taxes to gain more revenues. I think those 
theories have been debunked in the past. But I think you have 
really laid out some great data for us to go through.
    One of the things I have tried to urge my colleagues to 
look at, you know, our deficit on an annual basis is really 
much higher, I would argue, than is reflected, although I am 
not sure $450 billion in the hole would be something to 
celebrate on the private sector side, because of, one, 
extraordinarily low interest rates; two, one-time payments from 
the Fed that last year averaged about $90 billion and had been 
for some time; and, three, an issue that Senator Corker and I 
have spent a lot of time working on, the extraordinarily kind 
of, again, one-time or couple-year profits from Fannie and 
Freddie. Is that accurate to reflect? If you took those--if you 
took traditional interest rates and got rid of the Fed payments 
and the Fannie and Freddie payments, our deficits, do you want 
to estimate how they would look?
    Mr. Hall. It would look much worse, and one of the things 
that we have done is look at different interest rate tracks in 
the future. That has a really big impact on the accumulation of 
debt going forward. If we do not get a rise in--sorry, if we 
get too large a rise in--
    Senator Warner. Right. I have seen a number--you may not 
have it at your fingertips--that a 100-basis-point increase in 
interest rates adds $120 billion a year on an annual basis in 
debt payments.
    Mr. Hall. Yeah, I do not know.
    Senator Warner. That I can point to my colleagues is much 
larger than the Department of Homeland Security spending alone. 
So I guess--and one other item I am working Senator Isakson on 
an issue--and I think, again, there is a lot of bipartisan 
interest on this--on chronic care. The remarkable thing is that 
32 percent of our Medicare fee-for-service population which 
have only zero or one chronic condition only account for 7 
percent of Medicare spending; the 14 percent that have more 
than six chronic care issues account for about half our 
Medicare spending, something that we hopefully can find some 
commonality on.
    So, Mr. Chairman, I appreciate this. I look forward to 
working with you and everybody else, and I will be willing to 
take on the entitlement issue. But we cannot get there without 
additional revenues.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you.
    Senator Corker?
    Senator Corker. Thank you, Mr. Chairman. And, Dr. Hall, 
thank you again for your service. You did not, I do not think, 
answer the question that Chairman Enzi asked in the way he 
wanted you to answer it on the ACA thing, but could you just 
spend maybe 30 seconds talking about why deficits would 
increase if ACA was repealed.
    Mr. Hall. Well, sure. Our analysis has been that the other 
provisions in ACA, those that reduce Medicare's payment 
updates, that that outweighs the spending on coverage 
provisions. But it is absolutely true, though, that our 
estimate of that depends--the fact that it really depends upon 
reducing Medicare's payment updates. So that is a big part of 
uncertainty, I think, in our estimate of the impact of the ACA.
    Senator Corker. And Congress' likely inability to keep 
those in place, is that what you are saying?
    Mr. Hall. Well, I think it is just what sort of experience 
we are going to have going from. Will, in fact, those reduced 
payments materialize?
    Senator Corker. The question came up earlier about the 
Highway Trust Fund, and you mentioned that investment in 
infrastructure certainly creates growth in the economy.
    Mr. Hall. Right.
    Senator Corker. But it depends on how you actually pay for 
that, I think is your comment. What is the most efficient way--
it has been paid for as it is a trust fund, or kind of. It has 
been a trust fund where a user fee has paid for those 
expenditures. What is the best way for us-- you know, it is the 
ultimate malpractice that we have continued to deal with the 
Highway Trust Fund the way that we have. What would be the very 
best way to fund that in a manner that does not slow the 
economy or has the least negative impact?
    Mr. Hall. You know, I am not sure I can tell you that. I am 
not sure I know enough about it to tell you that. I think I can 
maybe get back to you. I think we have done a little work on 
some of the Highway Trust Fund.
    Senator Corker. That would be good. It would be very 
helpful. I think we are actually beginning to look at that 
right now. I think it obviously expires here in the next 6 
weeks, and so it is the beginning time for us to look at it, 
unfortunately.
    Senator Corker. Let me ask you this: The growth in incomes 
issue, the inequality component of that, are you aware of 
policies that Congress has put in place that have exacerbated 
that? Or is it something to do with just the way society is and 
technology and the ability to make things happen so much more 
quickly than in the past and those with resources are able to 
multiple those resources even more rapidly? Or is it things 
that we have actually done here that have created that 
disparity?
    Mr. Hall. I think there is not really--there is not 
consensus among economists as to why the income inequality has 
been growing and continues to grow like it has. In fact, that 
was a challenge I thought for us in our forecast, because we 
simply forecast that the income inequality was going to 
continue in the same path it has been. But I do not know that 
we really understand what has been causing that.
    Senator Corker. Would that be something that your area 
should look at?
    Mr. Hall. Yeah, we can look at that. I think--yeah, we can 
get back with you. I can give you some idea what we have looked 
at with that.
    Senator Corker. I mean, I do not think there is any 
question there is a serious amount of income disparity, and I 
think, you know, folks like Senator Perdue and myself and 
Senator Warner and others, you know, we do have the ability, 
when we are not serving in the Senate, you know, to increase 
incomes, and I do find a lot of people in the middle-income 
area no doubt are having significant struggles, and I think it 
would be really good for you guys to look at, you know, why 
that is taking place and are there policies that we are putting 
in place that are making that more difficult? Or is this just 
some kind of macro societal change that is occurring? I think 
that would be very helpful to us.
    There is no question you have mentioned that increased 
taxes slow growth, so you have to be very careful when you deal 
with that issue, and that increased debt--obviously, debt 
burdens lower the standard of living. Would you agree with 
that?
    Mr. Hall. Yes.
    Senator Corker. And I think you would say that at present 
our Nation is really not prepared for another financial crisis 
or crisis of any kind. Is that correct?
    Mr. Hall. Well, absolutely correct, and I think all you 
need to do is look at what happened to debt. It almost doubled 
since 2007 from that crisis, and now if we would have another 
one, with debt being as high as it is now, we would have real 
trouble responding to it.
    Senator Corker. And so the alternative scenario that you 
lay out is really the scenario that is more realistic, is it 
not, than if you go by law--
    Mr. Hall. Right.
    Senator Corker. --obviously we tend to have tax extenders 
that we extend every year. There are policies that Congress 
just cannot get away from. And so the alternative scenario is 
actually the real scenario in all likelihood based on past 
behavior. Is that correct?
    Mr. Hall. Well, yeah, we hate to predict what Congress is 
going to do, but based on past actions, that seems more 
realistic.
    Senator Corker. It is likely that Congress will continue to 
not make difficult decisions. Would you agree?
    Mr. Hall. Well, if they do not, this would be the scenario.
    Senator Corker. So, in essence, what you are saying is--
and, by the way, let me ask you this: Do you know of anybody 
here in Congress today or any committee that is actually 
working to change previous behavior? Are you aware of any 
policy changes that may be under way to change the alternative 
scenario?
    Mr. Hall. I am not.
    Senator Corker. So if I could, I would just say that I 
really appreciate your report. It seems to me that where we are 
is that our Nation is much worse off than your projections are, 
that there are difficult decisions that are not being made. The 
longer we put those decisions off, the more difficult they 
become and the worse off our Nation is. And you are not aware 
of any effort under way whatsoever in Congress today to deal 
with this crisis that is brewing. Is that correct?
    Mr. Hall. Yeah, I do not want to hold myself up as an 
expert in what is happening in Congress right now, but--
    Senator Corker. Well, I would not want to either. I am not 
aware of any, though. So I would just say that we have a lot of 
work to do. Mr. Chairman, I thank you for the time, and I would 
say that passing a budget is interesting, but actually enacting 
policies that put us in a better place is the most important 
work, and I am unaware of that taking place today.
    Thank you.
    Chairman Enzi. Senator King.
    Senator King. Thank you, Mr. Chairman. I would begin by 
acknowledging that debt is a problem and it is a serious 
problem, and it is only going to get worse. ```My other piece 
of advice, Copperfield,' said Mr. Micawber...[is that] `Annual 
income twenty pounds, annual expenditure nineteen nineteen six, 
result happiness. Annual income twenty pounds, annual 
expenditure twenty pounds ought and six, result misery.''' 
Charles Dickens had it right, and we are in that situation 
today where we have chronically been spending more than we take 
in.
    I think the question is: How do we get out of this 
situation? And I want to commend you. The graphics and the 
presentation in your report I think is very good, very clear 
and helpful.
    I think one of the most important points--and it goes to 
what Senator Corker was just saying--is the sooner we do it, 
the better. The difficult decisions today will be impossible 10 
years from now. That is one of the central realities. Every day 
that goes by, the difficult decisions become harder and harder 
to the point where it is almost impossible. So the choices, it 
seems to me, go from difficult to impossible, and if we do not 
start acting now-- and I believe you have testified to this.
    I think it is also your testimony that the deficits are not 
being driven by what are sort of nondefense and defense 
discretionary spending, but by health care and demographics. Is 
that correct?
    Mr. Hall. That is right.
    Senator King. It is Social Security, Medicare, Medicaid, 
health care. That is what is driving the deficit. And, in fact, 
discretionary spending is actually declining somewhat 
significantly in terms of a share of GDP.
    Mr. Hall. That is right, under current law.
    Senator King. And they are, in fact, headed for historic 
lows, as I recall, the lowest in something like 70 years for 
both defense and nondefense.
    Mr. Hall. That is right.
    Senator King. So that gets me to the point that targeting 
our budget-balancing efforts on discretionary spending, whether 
it is defense or nondefense, is really missing the big picture, 
which is health care and entitlement programs.
    Mr. Hall. Well, certainly those are the things that are 
creating the problem. You know, it is up to you to decide how 
they are going to contribute to the solution.
    Senator King. But the salient point you just made is those 
are the things that are creating the problem.
    The truth is, if you carry the projections out far enough, 
those nondefense--I am sorry, nondiscretionary expenditures 
plus interest rates essentially will drive everything else down 
to--it could be nothing or certainly much lower. I mean, that 
is what is happening, correct?
    Mr. Hall. Yes.
    Senator King. The X factor in all of this, it seems to me, 
is growth, and the question is: How do we--all of these 
problems would go away, we would not be having this hearing if 
we were growing at 4 percent a year instead of 1.8 or 2.1. The 
question is: How do we get there? And I am not being 
argumentative or partisan here. I am being genuinely curious, 
and perhaps you would want to take this question for the 
record.
    It is an article of faith around here that tax cuts 
stimulate growth and that tax increases drive growth down. I am 
interested, is there any economic literature that substantiates 
that sort of article of faith?
    Mr. Hall. Well, yes, when, for example, we do our 
macroeconomic effects and we look at the effects of taxes, we 
are basing that on research and estimates of the likely effect.
    Senator King. And it shows a direct correlation between 
reductions in taxes and economic growth?
    Mr. Hall. That is right. But just to be fair, we are also 
talking about literature that shows the effect of Government 
spending, particularly investment side spending that actually 
can increase productivity and raise growth as well. So it is--
    Senator King. Well, you anticipated my next point, because 
I would argue that the two most successful economic development 
projects, if you will, over the last 50 years are the 
Interstate Highway System and the GI bill after World War II, 
both of which were expenditures. They were investments. So you 
have got to have both of those. It seems to me you have to look 
at both sides of the ledger if you are talking about 
stimulating economic growth.
    Mr. Hall. Right, and let me just say our biggest challenge 
in economic growth is not--is really from demographics. That is 
actually part of the aging population issue. And when you look 
at our GDP growth forecast, that is in large part due to the 
aging population.
    Senator King. Is there any data on--I mean, Senator Sanders 
made a strong point about income inequality, and you cannot 
argue that it has happened. The question is: What is the 
impact? Is there any data on the actual impact of growing 
income inequality in terms of economic growth?
    Mr. Hall. You know, there is some recent research looking 
at that. I do not think there is a consensus on that yet. And I 
do not know how that research is holding up in terms of 
additional work on that.
    Senator King. I will submit a question for the record on 
that.
    Mr. Hall. Okay.
    Senator King. Because, clearly, if the middle class has 
more money to spend, that is economic--and Henry Ford figured 
that out 100 years ago when he doubled his workers' salaries so 
they could buy his cars. I mean, if the middle class has more 
money in a consumer-driven economy--70 percent of our economy 
is driven by consumer spending--it just seems to me logical 
that more money for the middle class equals greater economic 
growth. But I would appreciate getting your reaction for the 
record.
    Senator King. Thank you, Mr. Chairman.
    Chairman Enzi. Thank you.
    Senator Perdue?
    Senator Perdue. Thank you, Mr. Chairman. And, Dr. Hall, it 
is good to see you again.
    I for one am excited that you are in your new role. You and 
I are taking on our responsibilities at a similar time, and I 
look forward to working with you. I have got several questions 
relating to this debt and the long-term forecast that you are 
working on. And I really would look forward to working with you 
on that because I think getting accurate information in this 
town is really hard. Getting objective information is even 
harder.
    There are divergent views on where we are, how we got here, 
and what we need to do. To me it is very simple. I just think 
that this debt crisis already is past the tipping point in 
several areas.
    First of all, I would like to qualify--or quantify, rather, 
what this debt really is. We talk about the public debt being 
about $13.5 trillion today. The number I use is about $18 
trillion because we have got those interdepartmental numbers in 
there. And I do want to have some clarification of that, and I 
really want us to get on the same page, because we are still 
talking about public debt as the $13.5 trillion. But when you 
talk about ultimate responsibility, the interdepartment that we 
borrowed the money from, that is a liability there, too. Social 
Security has got a problem. If we had a surplus there, I would 
not be making this comment.
    But if interest rates today alone were at their 30-year 
historical average, if you use the $18 trillion number, now we 
are approaching $1 trillion in interest alone, either current 
interest payments or deferred interest payments that go as an 
accrual. That is unsustainable. It is twice what we spend on 
our military. That is one issue.
    The second tipping point are these future unfunded 
liabilities, driven, as we have said, by Social Security, 
Medicare, pension benefits for Federal employees, and the 
interest on the debt. It is a self-fulfilling prophecy. If we 
do not solve it today, it is not going to get solved in the 
future.
    But then I think the third tipping point is Social Security 
and Medicare. Not only is a long-term debt crisis, we have a 
program that right now we will not be able to meet the 
commitments that we have been making over the last 100 years, 
and that is a critical crisis, in my mind.
    I just want to point out I think there is a lot of, you 
know, partisan opinion and comment on this Committee and so 
forth, and that is all well and good. There is also a lot of 
nonpartisan--not bipartisan--nonpartisan opinion in here. 
Senator Warner made several comments. Even the Ranking Member 
and I agree on some things. There is no argument about the 
growth in income inequality. I know Senator Kaine and I and 
Senator King and I have talked several times about there are 
things that we agree on. There are obviously things we disagree 
on, but one of the things I am putting in the record right now 
is that there are no innocent parties up here, Mr. Chairman. 
And, Dr. Hall, I for one, I want you to hear me say that. This 
is not about how we got here. But I think it is informative 
because to determine where we go, we have to look at the 
mistakes we made in getting here.
    First of all, the Social Security and Medicare are major 
commitments that we made. We have known since 1949 or somewhere 
in that period of time that we had a baby boom coming. But we 
had comments even in the 1960s made, ``Well, we know that is 
coming. We will deal with that in the future.''
    If you look at the last 100 years, we have had three 
political super majorities. The first gave us the New Deal; the 
second gave us the Great Society; and the third has given us 
Obamacare and Dodd-Frank. And I would argue that a lot of this 
fiscal catastrophe that we have right now, Mr. Chairman, can be 
laid at the feet of those three super majorities.
    Now, the Ranking Member is accurate in saying that in 2000 
we had $6 trillion of public debt. That compares to the $18 
trillion. That is all debt, private and--or public debt and the 
interdepartmental debt, $6 trillion. At the end of the Bush 
administration, 2008, we had $10 trillion. So we added $4 
trillion pretty much on the back of two wars that were not paid 
for outside the line items of the budget.
    Since then, we have doubled down, and we spent--in the last 
6 years, we have spent $21.5 trillion, I think, running the 
Federal Government. We borrowed $8 trillion of that. Therein 
lies the problem. We all talk about growth. I have spent my 
life in difficult situations in the business community dealing 
with how to work out situations very similar to this--not with 
numbers this large, I will say. But we never were able to cut 
our way out, and we were never able to raise prices enough--or 
raise taxes, in this analogy. We had to grow the business, and 
that means that we had to become more important to our 
customers. We had to educate our workforce. We had to grow our 
workforce.
    There are ways that we can do this. It seems to me pretty 
simple, Mr. Chairman. We have got choices to make, hard choices 
to make relative to our spending. We need to cut overhead in 
D.C.--not the programs. I mean, we get accused of wanting to 
cut programs all the time. I want to cut the overhead here. 
Delivery of these safety net programs is really critical. We 
have got to grow the economy. There are simple ways to do that. 
Lee Kuan Yew talked about the--somebody mentioned the Singapore 
example earlier. They invested in water; they invested in cheap 
power; they invested in infrastructure; they invested in 
educating their workforce. And they created an economic 
miracle. In all four of those counts today, America is lagging 
the world, and I am going to come to you and ask for some 
modeling on what would it look like if we invested in some of 
those things and actually got results.
    But it takes priorities. We have got a lot of spending in 
Social Security and Medicare right now, and yet both of those 
trust funds go to zero in the next 15 to 18 years. We have got 
to change the budget process, Mr. Chairman. I know you and I 
have talked about that; other members on both sides of the 
aisle are talking about that. I believe that gimmicks have to 
be dealt with. We have got to do away with the artificial sense 
of security that we build up through the budgeting process, 
through the use of corporation timing shifts, SNRFs, DNRFs. We 
need to look at these one-time funding issues with the Fed, 
with Fannie and Freddie. That has already been mentioned today. 
I will not take time and do that.
    But, lastly, I think honestly this crisis has risen to a 
point that we are so far past getting political oneupsmanship 
on each other, that this is going to require all of us to make 
tough decisions about priorities and how do we dig out of this 
with regard to getting the economy growing.
    Let me say one last thing, Mr. Chairman. I know I am over 
my time, but I think it is important to counter an argument 
that has been made in here repeatedly, and that is, income 
inequality is not a Republican-generated issue. There are no 
innocent parties on this issue. In my mind, one of the largest 
contributors to income inequality today in the middle class--
and I think it is there--is the fact that we have fewer people 
working as a percentage of our workforce than we have had since 
1978. Middle-class net worths are down 19 percent, and in the 
last 6 years alone, we have allowed 4 million women to fall 
into poverty.
    So if we focused on getting our people back to work, that 
alone would help us grow this economy. Thank you.
    Chairman Enzi. Senator Kaine.
    Senator Kaine. Thank you, Mr. Chair. This has been a great 
hearing, and I want to commend Dr. Hall. Your opening page is 
just a great bit of data. I mean, I think there is so much good 
data here that we are going to go back and study it. But I will 
kind of gig you just a little bit.
    I think you are already adopting the ways of a Senator or a 
Member of Congress, because I look at your opening page, and 
you talk about how we would--if we wanted to stay on an 
appropriate path, and you can put an asterisk by what is an 
appropriate path, debt to GDP, how we would get there, and then 
you talk about, you know, what we would have to do to increase 
revenue or cut spending--increase revenue or cut spending. And 
I think we all know the answer is both, and if you did both, 
then the magnitude of the changes to revenue and spending are a 
good bit smaller in the percentages under either scenario.
    One of the things that I just have found sort of 
frustrating over 2-1/2 years is an unwillingness to contemplate 
doing a little bit of both rather than a whole lot of either. 
And so, you know, one side generally does not want to do 
anything on the revenue side, and one side generally does not 
want to do anything on the spending side, especially when it 
comes to programs that, you know, we would call Medicare, 
Medicaid, or Social Security.
    But if you had a balanced package where you did a little 
bit of both, where you do tax reform that increases revenue, 
and when you tackle some of the challenges, especially Medicaid 
and Medicare, some of these long-term programs driven by health 
care and demographics, I do not agree--I agree with Senator 
King on virtually everything. He said if we wait, it goes from 
difficult to impossible. I do not think it is that difficult. I 
think the deal has been apparent to anybody who has looked at 
this for probably 5 years, and if you do some mixture of it and 
each side has to give a little bit, okay, well, we do not want 
to do this, but we will--you know, we will concede a little bit 
if you will concede a little bit. I think it is actually not 
that hard to do.
    You know, we are not a Japan with the debt-to-GDP at 200 
percent. It gets bad if we do not touch it for a while. But I 
think we are in a good place right now to do something. It is 
just my hope Senator Corker is right. It does not seem like 
there is real discussions going on now about the solution. I 
just do not think it is that hard. And the inability thus far 
to get to it is troubling to me.
    I want to ask you about one answer that you gave to Senator 
King. He has pointed out a long time that, to the extent we 
have spending challenges, it is not spending generally. It 
really is--and I think your phrase was ``health care and 
demographics.'' And even those two are not independent, because 
a lot of health care is a demographic issue.
    I pulled up on my iPhone here--Mr. Chair, I was not just 
doing e-mails during the hearing; I was really doing research--
Time magazine's February cover with the little baby on it: 
``This baby could live to be 142 years old.'' A lot of our 
challenges are not driven because Democrats and Republicans 
have done horrible things. They are driven because, thank God, 
we are living longer. It is great. The average life expectancy 
of a human being on the planet Earth was 30 in 1990, and it was 
30 in 2000 B.C. But it has gone from, you know, 30 to nearly 
80, and it is growing even more. But the consequence of the 
good news--and it is good news. We should celebrate the good 
news. It is a triumph of American ingenuity and global 
ingenuity in medical care. My kids know all four of their 
grandparents. I did not know my four grandparents. Two of them 
had died by the time I was born.
    So it is great that we are living longer, but that seems to 
be the thing that, you know, we can say it is good news, but it 
really poses these challenges for us.
    What assumptions did you make going forward about life 
expectancy as you were looking at this, at all your 
projections?
    Mr. Hall. Sure. A lot of what we relied on certainly on 
that one is current trends, trends over the past 50 years, 
something like that. We do know that that is one of those 
unknown things, and, in fact, if you look back, we have a 
chapter on uncertainty. One of the things we do is we vary the 
mortality rate pretty significantly to see what kind of effect 
that has on our numbers. That will give you a feel for how much 
this contributes to it and how much of a budget problem it 
creates if you have the good news about mortality rates going 
down.
    Senator Kaine. So I would suspect in your answer to the 
earlier question that Senator Whitehouse asked you about why 
did you have kind of the medical cost as a percent of GDP going 
from 16 to 25, it is not just because, you know, a procedure 
costs more, but you were probably--that is probably affected to 
some degree by your trend lines about life expectancy and just 
people living longer, and then more years of actually consuming 
health care. That is probably one of the reasons you have that 
going on.
    Mr. Hall. It is one of the reasons, but there has been a 
trend of rising health care costs. That is part of that as 
well.
    Senator Kaine. So you capture both factors in there.
    Mr. Hall. Yes.
    Senator Kaine. Well, I am going to encourage the Aging 
Committee that I am on to have a hearing on this longevity 
stuff because--it was Senator Warner who first pointed this out 
to me a number of years ago, Mr. Chair. Policymakers do not 
have their arms around the consequences of growing longevity. 
And it is a good thing, but everything from how long people 
should get driver's licenses to what our policy should be about 
how we pay for programs and the Tax Code, I mean, it is so 
massive, and we are not really thinking about it. The good news 
is it is good news. But it puts a burden on our shoulders to be 
more thoughtful about the policy.
    Thank you, Mr. Chairman.
    Chairman Enzi. Senator Toomey?
    Senator Toomey. Thank you, Mr. Chairman. And, Dr. Hall, 
thanks for joining us. I do want to respond--I wish the Ranking 
Member were still here for this because he gave an impassioned 
argument about income inequality, and it is real, and it is 
something I think we ought to be concerned about. But I think 
it is necessary to observe that over the last 6 years, 
certainly, the policies that this Federal Government has 
pursued have not exactly been at the top of, say, my priority 
list. We have seen huge tax increases, massive net tax 
increases, big stimulus spending, huge bailouts, massive 
deficits and debt, an unprecedented wave of regulation between 
Obamacare, Dodd-Frank, EPA--really across the economy, the 
level of regulation is, I think, at an all-time high--a zero 
interest rate policy.
    Our friends on the other side really got all the policies 
that they wanted when they had the opportunity to get them, and 
now we are living with the consequences, which include the 
slowest economic growth after a major recession that we have 
ever had and rising income inequality. So I think it is worth 
pointing that out.
    We have also had this discussion about how revenue needs to 
be part of some kind of solution, so I want to talk about that 
a little bit. Our figures for this year show that revenue is 
already 17.7 percent of GDP. Is that correct, Dr. Hall?
    Mr. Hall. That is right.
    Senator Toomey. And the historic average, around about 50 
years, has been 17.4.
    Mr. Hall. Yes.
    Senator Toomey. Next year it goes to 18.4. And by 2040, it 
is up, under your projections, to 19.4.
    So we are already operating where the amount of money we 
are taking out of the private sector that the Government is 
consuming is greater than its historical average, and it is 
going to get greater and greater still under your projections.
    So to suggest that somehow we have to agree to part with 
more revenue is a little hard to take, because it is already 
there. We have had a huge tax increase. We are already 
operating year in and year out--in fact, isn't it true that 
every single year of your projections, the projected revenue 
number is above what the historic average has been for the last 
several decades?
    Mr. Hall. I think that is right.
    Senator Toomey. So, I mean, the way I look at this, this 
tax increase that my friends on the other side want, they have 
gotten. It is there. It is in the numbers.
    Now let us look at the spending side. Spending this fiscal 
year is currently about 20.5 percent of GDP, correct?
    Mr. Hall. Yes.
    Senator Toomey. And that, too, is higher than the 
historical average. Over this roughly comparable period of 
time, the historical average is about 20.1 percent. So spending 
is already higher than it has historically been. It rises to 22 
percent by 2025 and to 25 percent of GDP by 2040. And we know 
there are a lot of reasons why, but the reality is if you are 
looking at historical averages, if you are looking at where we 
have come from, it seems to me in disputable that the source of 
the increasing deficits and corresponding debt are the 
increases in spending. It cannot be--it is not the case that we 
have less revenue than we had before, right?
    Mr. Hall. That is right, although I will say that spending 
on Social Security and major health care programs are 
dominating.
    Senator Toomey. So let us talk about that. So your GDP 
growth forecasts about 4.3 percent per year over the next 10. 
That is the nominal growth.
    Mr. Hall. Right.
    Senator Toomey. Three categories of Federal spending-- the 
Social Security program, mandatory health care, and interest on 
our debt, just those three--they grow at 7 percent per year. 
And they are projected, just those three, by 2025 to consume 81 
percent of all the revenue that you are expecting us to take, 
which is a record high level of revenue. It goes up to 95--by 
2040, these three categories- -Social Security, mandatory 
health care, and interest--by 2040 consume 95 percent of all 
the revenue that we are projected to take in, and we are 
projected to take in more than we used to.
    It seems to me--well, let me ask the question this way: Is 
it fair to say that major Government programs cannot be 
considered sustainable if they are growing faster than nominal 
GDP indefinitely?
    Mr. Hall. Yeah, that is right.
    Senator Toomey. Right. And you cannot fix that phenomenon 
by raising someone's taxes. Taxes do not change that 
fundamental dynamic, right?
    Mr. Hall. Right.
    Senator Toomey. Then the last thing I want to touch on--
well, I am kind of running out of time here, but the last thing 
I do want to touch on briefly is the reduction that you have 
made in our economic growth forecasts, because this is a very 
big deal. Our average historical growth over these same time 
periods we are talking about is a little over 3 percent, 3.1. 
Now we are talking about real, not nominal. And your numbers 
suggest that our potential for growth now is only 2.2 percent. 
That may sound like a very small difference to people. Nine-
tenths of 1 percent, you know, doesn't that sound small? Here 
is what that adds up to. That means in 2023 we are going to 
have a $1.5 trillion smaller economy than we would have had 
based on your forecast--not yours, but CBO's forecast just 2 
years ago. that is $4,000 per person less. Is that about right? 
Does that sound--I know that is a lot of math to do in your 
head. If it is $4,000 per person, doesn't that mean a 
significantly lower standard of living for average Americans? I 
mean, isn't that what we are talking about? Even what might 
seem nominally to be a small difference in the rate of growth, 
I guess my point is over time doesn't that end up having a very 
big impact on the standard of living of ordinary Americans?
    Mr. Hall. Yes.
    Senator Toomey. Thank you.
    Thanks, Mr. Chairman.
    Chairman Enzi. Thank you.
    That concludes our questions. Director Hall, thank you for 
your testimony today. We appreciate your time here with us and 
your service to Congress.
    I want to remind colleagues that questions for the record 
are due no later than 6:00 p.m. today, with a hard copy 
delivered to the Committee clerk in Dirksen 624. Under our 
rules, Director Hall will have 7 days from receipt of the 
questions to respond with answers.
    With no further business before the Committee--well, before 
I say that, I am going to mention that one of the questions 
that I will be submitting will be one that deals with how much 
revenue increases--because we have talked about revenue 
increases quite a bit--how much revenue increases will happen 
with a decrease in the rate of regulation that we are having. 
Regulations affect a lot of things, and I will have a more 
properly phrased question, of course, that we will be 
submitting in writing.
    [The questions follow:]
    / COMMITTEE INSERT
    Chairman Enzi. With no further business to come before the 
Committee, the hearing is adjourned.
    [Whereupon, at 11:32 a.m., the Committee was adjourned.]



       REFORMING THE FEDERAL BUDGET PROCESS: THE NEED FOR ACTION

                              ----------                              


                      WEDNESDAY, OCTOBER 21, 2015

                              United States Senate,
                                   Committee on the Budget,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:30 a.m., in 
Room SD-608, Dirksen Senate Office Building, Hon. Michael B. 
Enzi, Chairman of the Committee, presiding.
    Present: Senators Enzi, Sessions, Crapo, Toomey, Ayotte, 
Corker, Perdue, Sanders, Murray, Whitehouse, Baldwin, Kaine, 
and King.
    Staff Present: Eric Ueland, Majority Staff Director; and 
Warren Gunnels, Minority Staff Director.

               OPENING STATEMENT OF CHAIRMAN ENZI

    Chairman Enzi. I call this hearing to order. Good morning, 
and welcome to the first in a series of hearings this Committee 
will hold on reforming the Federal budget process. We are 
meeting here today to discuss America's challenging fiscal 
future and our outdated budget process that is ill equipped to 
deal with it.
    According to the Congressional Budget Office, Federal 
spending is set to rise rapidly in the coming decades based 
solely on growth in a few of the largest Federal programs and 
debt interest costs. It is an unsustainable course that 
threatens the solvency of critical programs that serve our most 
vulnerable citizens. Our balanced budget resolution met this 
challenge head on, but there has been very little progress 
since.
    The American public knows that Congress is not doing its 
job, and the institution's approval rating has plummeted as a 
result. Generally, a well-functioning budget process 
strengthens democracy by giving citizens a better idea of 
Government's role and provides them with the knowledge that 
their tax dollars are being spent wisely. When the process 
breaks down, so does the people's faith in Government and their 
elected officials.
    Congress and the President have ignored this most basic of 
governing and have decimated the faith and trust of hardworking 
Americans who yearn for a Government that is both accountable 
and effective. That is why budget process reform is critical.
    While the nuances of budget law may be overly complicated, 
the basic elements of a strong budget process are clear: It 
must encourage regular order, predictability, require 
legislative review, and provide transparency and accurate 
information for lawmakers and the public. These elements are 
critical to ensuring an effective and accountable Government, 
and our current process has failed on all three fronts.
    First and foremost, Congress must be able to do its job and 
enact its budget and appropriations on time and in a deliberate 
manner. I have long spoken on the merits of considering bills, 
amending bills, and passing bills under regular order. It is a 
process that our constituents demand, and it is one that makes 
the Senate a healthier institution. This is especially true for 
the budget and appropriations bills that set our Government's 
priorities and allocate taxpayers' hard-earned dollars.
    Earlier this year, we took the first step by passing a 
balanced budget that would serve as a fiscal blueprint for 
lawmakers to authorize and appropriate funding. But, once 
again, the progress has ground to a halt. Regular order has 
been increasingly rare in the budget process.
    Congress' first job in the annual process is to pass a 
budget resolution, but Congress has passed budget resolutions 
in less than half of the last 15 fiscal years. Prior to this 
year's balanced budget resolution, the last time we passed a 
10-year balanced budget was 2001. Once the resolution 
establishes top-line spending levels, Congress must enact 12 
annual spending bills before the start of the next fiscal year.
    If you look up on the screen, you will see a chart showing 
how the appropriations process has functioned since the Budget 
Act took effect. The bars show the number of appropriations 
bills enacted on time for each fiscal year. You will see that 
in the last 40 years, all appropriations bills have been 
completed on time in only four fiscal years. The red bars show 
you when at least one appropriations bill was signed into law. 
But in most years, Congress did not even come close to enacting 
all the annual spending bills. In 15 of those years, not even 
one appropriations bill was enacted on time. Instead, since 
1977, Congress enacted 173 short-term spending bills--we call 
them ``continuing resolutions''--to prevent a Government 
shutdown, and the Government operated under a short-term 
spending bill for an average of 186 days per year. That is over 
half the year.
    The power of the purse is one of the most important 
constitutional roles of Congress. Its authority to tax and 
spend must be exercised by the representatives of the people so 
that Americans can hold Government accountable. The Founders 
knew that without legislative oversight, the bureaucracy would 
run amok. Congress, therefore, has a constitutional duty to use 
its regular deliberative process to exercise the power of the 
purse and provide constant review, not forfeit that power to 
the executive branch.
    There are many signs of Congress' failure to effectively 
oversee Government budgets, the most obvious being our 
unsustainable overspending and explosive debt. Since the 
Congressional Budget Act was passed 40 years ago, the Federal 
Government has spent more money than is coming in about 90 
percent of the time. And the national debt as a share of the 
economy has almost tripled.
    Duplication, fraud, waste, and spending with no current 
authority is also rampant across Government. But the Government 
Accountability Office's annual list of offending programs has 
yet to force meaningful legislative action. Program authority 
or congressional committees' review programs for validation, 
transparency, and measurable goals are often ignored. Last 
year, the Government spent $293.5 billion on 260 expired 
programs, according to the Congressional Budget Office. One 
obvious problem is that the composition of Federal spending has 
changed dramatically, and the budget has not kept pace.
    The chart on the screen shows the share of total Federal 
spending that falls under the annual appropriations process, 
which is called ``discretionary spending.'' That is the 
spending where we actually get to make decisions.
    In 1974, when the modern budget process was created, 
discretionary spending accounted for 60 percent of the budget. 
Forty years later, discretionary spending has increased 
dramatically in terms of dollars spent, but it now accounts for 
just one-third of all spending. We keep making more programs 
mandatory. That is because permanent or mandatory spending has 
grown to take its place, as the red line in the chart shows.
    Over 40 years, Congress enacted many new programs that 
spent automatically or mandatorily. Without further 
congressional action or review, mandatory spending now accounts 
for two-thirds of the total Federal spending.
    Despite the growing share of our budget devoted to 
mandatory spending, our current budget process still forces 
Congress to spend the majority of its time each year worrying 
about annual appropriations that now account for a much smaller 
portion of Federal spending. While each of the appropriations 
bills must travel through the normal legislative process each 
year, mandatory programs continue to spend and grow. Unless 
Congress musters its political will and decides to vote 
otherwise, the budget process must change to keep up with the 
new composition of Federal spending.
    Finally, outdated budget rules mean Congress is not even 
given the accurate information it needs to conduct oversight 
and make rational budget decisions. The last Government 
commission to conduct a comprehensive review of Federal budget 
concepts concluded its work in 1967. That is 50 years ago. As 
such, many of the rules governing the Federal budget today are 
outdated and have not kept up with advances in finance, 
economics, or accounting. Nor have they provided the best tools 
for controlling spending. This deprives Congress of the most 
accurate information with which to make budget decisions and 
determines budget enforcement rules meant to keep Congress 
honest.
    The first step to correcting Government spending and trust 
deficits is to put in place a process that encourages regular 
order, increases legislative oversight, and provides accurate 
information to Congress--all critical ingredients to 
strengthening our democracy and reducing our Nation's 
unsustainable spending and debt.
    Senator Sanders?

              OPENING STATEMENT OF SENATOR SANDERS

    Senator Sanders. Mr. Chairman, thank you very much.
    Before I get into the thrust of my remarks, let me put your 
discussion of the financial situation of the Government in a 
broader context. Obviously, that is a usually important issue, 
but it has to be put into the context about what is happening 
in our economy in general. And what is happening in our economy 
in general is that, for the last 30 years, there has been a 
massive transfer of wealth from the middle-class and working 
families of this country--we are talking about many, many 
trillions of dollars--to the top one-tenth of 1 percent. So 
when we talk about budget priorities and budget process, we 
have to look at the broader picture of what is happening in 
America. We cannot forget that.
    So we are living in a situation now where, unbelievably, 
the top one-tenth of 1 percent now owns almost as much wealth 
as the bottom 90 percent. We are looking at a situation where 
one family, the wealthiest family in America, owns more wealth 
than the bottom 40 percent. We are looking at a situation today 
where people in the State of Vermont, and I suspect in Wyoming, 
are working longer hours for lower wages, millions of people 
working two or three jobs, and yet 58 percent of all new income 
is going to the top 1 percent.
    So to begin this discussion about budget without looking at 
the reality of what is happening in America, which is that for 
40 years the middle class of this country has been 
disappearing, looking at a country today which has 47 million 
people living in poverty, looking at a nation which has the 
highest rate of childhood poverty of almost any major country 
on Earth, looking at a country which has more income and wealth 
inequality than any other major country, and worse here today 
than at any time since 1928--if we do not take those factors 
into consideration, we are missing, I believe, the most 
important point. And that takes us to where we are right now.
    Just a couple of weeks ago, we started a new fiscal year 
without eliminating sequestration. I think that was a serious 
mistake. These arbitrary, across-the-board budget cuts are 
damaging the economy and are hurting millions of the most 
vulnerable people in our country, especially the children, the 
very old, the sick, and the poor. Are those the people we 
really want to go after at a time when we have massive income 
and wealth inequality?
    Adding insult to injury, we are also less than 2 weeks ago 
from hitting the debt ceiling. If we do not act by November 
3rd, we will default on our bills for the first time in our 
Nation's history.
    Mr. Chairman, you talked about people's faith in Government 
diminishing. Well, let me tell you something. If the United 
States Government under Republican leadership in the House and 
the Senate does not pay its bills, you ain't seen nothing in 
terms of people's faith in Government diminishing.
    Mr. Chairman, let us be clear. Defaulting on our debt would 
be a disaster. I hope and expect there is not a lot of 
disagreement on that. It would precipitate a national and 
international financial crisis. If a default occurs, interest 
rates will spike for home mortgages, car loans, student loans, 
and credit cards. Millions of Americans can lose their life 
savings and pensions. Millions of veterans, senior citizens, 
our brave men and women in our armed forces, young children who 
depend on food stamps, and our entire economy would be put at 
risk.
    I hope my Republican colleagues will not allow that to 
happen and will do what we have done throughout the history of 
this country: pay our bills.
    Mr. Chairman, it would be wrong for my Republican 
colleagues to attempt to shut down the Government or threaten 
the full faith and credit of the United States Government, as 
they have done in the past, because of their dislike of 
Obamacare or Planned Parenthood or because of their desire to 
cut Social Security, Medicare, and Medicaid. You have your 
opinions. That is fine. But you talked about regular order. 
Fine, let us debate those issues. We have a budget process. Do 
not shut down the Government because people disagree with what 
Planned Parenthood does. I think they do a great job. You may 
not. Do not shut down the Government because of that issue.
    I hope everybody in this room would agree that that is 
wrong. A democratic Government cannot function when a small 
faction chooses to hold the American people hostage in hopes of 
cutting programs that, in fact, the vast majority of the people 
in this country actually support.
    I understand that my Republican colleagues are concerned 
about the deficit, which, by the way--and I think it is 
important to throw this on the table. Is the deficit today a 
serious issue? Yes, it is. But let us not forget that that 
deficit has been reduced by more than two-thirds in the last 6 
years--not an inconsequential effort. And when we talk about 
the deficit and when we talk about an $18.4 trillion national 
debt, let us not forget--but apparently it is a lesson that 
some of my Republican colleagues have forgotten--that a lot of 
this deficit and debt has a lot to do with wars in Iraq and 
Afghanistan which we have not paid for.
    And I do find it always remarkable that many of my 
Republican colleagues feel we have to cut Medicare and Medicaid 
and nutrition programs for hungry children. We just have to pay 
for those things. But apparently when you go to wars, you can 
put that on the credit card.
    The national debt is an issue that all of us are concerned 
about, but where we disagree is how you address the deficit and 
the debt. And we feel strongly that from a moral perspective 
and from an economic perspective, you do not balance the budget 
on the backs of the elderly, the children, the sick, and the 
poor. When you have massive income and wealth inequality, you 
do not balance the budget on the backs of the most vulnerable 
people in this country.
    Today, as I think most people know, major corporation after 
major corporation pays in a given year zero--nothing--in 
Federal income taxes. Profitable corporations like GE, Verizon, 
and Boeing have not only paid nothing in Federal income taxes 
in a given year, they actually got rebates from the IRS. So 
maybe we want to take a look at that issue before we cut the 
WIC program, which provides assistance to low-income pregnant 
women and their babies.
    According to a report from the Congressional Research 
Service, each and every year profitable corporations are 
avoiding about $100 billion in taxes by stashing their profits 
in the Cayman Islands and other offshore tax havens. In 1952, 
corporations contributed about 32 percent of all Federal 
revenue; today they contribute about 11 percent-- one-third of 
what they did in 1952.
    In terms of individual tax rates, we have a situation where 
hedge fund managers on Wall Street who make hundreds of 
millions of dollars a year pay an effective tax rate lower than 
a truck driver or a nurse. Yet my Republican colleagues have 
been absolutely determined to make certain that the wealthy and 
large corporations not contribute one penny more for deficit 
reduction and that all of the sacrifice comes from the middle-
class and working families in terms of cuts to Social Security, 
Medicare, Medicaid, LIHEAP, community health centers, 
education, Head Start, nutrition, affordable housing, et 
cetera, et cetera.
    Mr. Chairman, here are just a few examples of what will 
happen if we do not eliminate sequestration this year.
    At a time when real unemployment is over 10 percent, 
800,000 fewer jobs will be created; 2 million young Americans, 
dislocated workers, and veterans will not get the job training 
they need; 620 community health centers will not open their 
doors, which would reduce access to primary care for more than 
2.6 million Americans; 144,000 young children will not be able 
to enroll in Head Start; 430,000 Americans will not get the 
comprehensive family planning and preventative health services 
they need; and 20,000 veterans will not get the medical care 
they need through the VA.
    Mr. Chairman, I would hope that all of us would agree that 
this is unacceptable. At a time of massive wealth and income 
inequality, let us work together on a budget that is fair, that 
does not go after the most vulnerable in our country. At the 
very least, I hope we can all agree right now that the United 
States Government should pay its bills on time, and that we 
will not allow the U.S. to become a deadbeat Nation.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you, Senator Sanders. I hope I am not 
oversummarizing by saying that we must need some budget reform 
and some appropriations reform. But instead of pushing forward 
for reform, we are kind of mired in negotiations right now over 
spending that should have been set months ago and will expire 
in less than a year. So how can--
    Senator Sanders. Well, Mr. Chairman--
    Chairman Enzi. --we competently exercise this power of the 
purse?
    Senator Sanders. Yes, we do need reform, and I think we do 
need to be involved. But I hope you will agree with me that we 
should not be shutting down the United States Government 
because some people dislike Planned Parenthood.
    Chairman Enzi. That is an oversummarization of my opinion.
    Senator Sanders. And I was not just focusing on you, but 
there are people in your party who hold that point of view.
    Chairman Enzi. Well, that is a discussion that will be held 
outside of budget reform, I am sure. And I hope that we can 
come up with some suggestions for an accurate, transparent, 
deliberative process that will get us out of this kind of a 
situation in future years, that will allow us to make those 
spending things with a lot more looking at the details rather 
than doing these omnibuses where we do not get to really see or 
talk about what is in them or make amendments to them in case 
there are things that offend us, or that we think need to be 
done differently.
    So that is why we have this outstanding panel today, and 
our first witness is Michael Peterson, who is the president and 
chief executive officer of the Peter G. Peterson Foundation, an 
organization dedicated to increasing public awareness of the 
nature and urgency of key fiscal challenges threatening 
America's future and urging action. He oversees the strategic 
direction of the foundation, guiding policy and shaping its 
major initiatives, partnerships, and long-term objectives.
    Our second witness is very familiar to us, Douglas Holtz-
Eakin, the president of the American Action Forum. Dr. Holtz-
Eakin has a distinguished record as an academic, policy 
adviser, and Government administrator. During his career in 
Government service, Dr. Holtz-Eakin was the sixth Director of 
the Congressional Budget Office and twice served on the 
President's Council of Economic Advisers, first as a senior 
economist and later as the chief economist. A lot of experience 
there.
    Our third witness is Deborah Weinstein, the executive 
director of the Coalition on Human Needs since 2003. She was 
previously director of the Family Income Division of the 
Children's Defense Fund and executive director of the 
Massachusetts Human Services Coalition, a nonprofit advisory 
organization made up of human service providers, religious 
organizations, labor, and advocacy groups.
    I want to thank you all for joining us today and to share 
your expertise on this very important subject, and we will 
begin with you, Mr. Peterson.

 STATEMENT OF MICHAEL PETERSON, PRESIDENT AND CHIEF EXECUTIVE 
             OFFICER, PETER G. PETERSON FOUNDATION

    Mr. Peterson. Thank you. Good morning, Chairman Enzi, 
Ranking Member Sanders, and members of the Committee. Thank you 
for the opportunity to appear before you today to discuss how 
budget process reform can help secure a brighter fiscal and 
economic future for our Nation.
    The Peterson Foundation is a nonpartisan organization. Our 
mission is to increase awareness and accelerate action on 
America's long-term fiscal challenges because we believe that 
our unsustainable fiscal outlook is a serious threat to our 
future. Our foundation works with policy experts from across 
the political spectrum to educate and engage Americans and 
build support for solutions.
    Today's hearing is important because the current budget 
process hinders our ability to address these challenges. While 
process alone is not responsible for our growing debt, the 
current Federal budget process keeps policy focused on the 
short term, reinforces the tendency to go from crisis to 
crisis, and diverts attention from the key drivers of the 
budget long term.
    Let me begin by providing some context. Current annual 
deficits are down from $1.4 trillion at the height of the Great 
Recession to $440 billion today. Even though that is still a 
large deficit, that is a great improvement.
    However, the more significant problem is the trajectory of 
debt over the long term. The Congressional Budget Office 
projects that within 25 years, debt held by the public could 
climb to more than 100 percent of GDP under current law, and to 
a staggering 175 percent of GDP under less optimistic 
assumptions. By any definition, the fiscal path we are on is 
unsustainable and dangerous.
    We need a more effective, forward-looking budget process 
because there are severe consequences of our current fiscal 
path. Most directly, interest costs will consume a huge amount 
of the Federal budget. Over the next 10 years alone, CBO 
projects that interest costs will be more than $5 trillion 
under current law.
    Under CBO's alternative fiscal scenario, interest costs 
will become the third largest category of the budget in 2023, 
the second largest category in 2032, and the single largest 
category by 2040. With our many important budget priorities, 
none of us wants interest to become the largest Government 
program.
    Higher interest costs would crowd out important public 
investments that can fuel economic growth. Discretionary 
spending is already on a path to fall to well below historical 
averages. And a Nation saddled with debt will have even less to 
invest in its own future.
    In addition, growing Federal debt reduces the amount of 
private capital for investments, which hurts economic growth 
and wages.
    Furthermore, this fiscal path would lower income levels. 
CBO projects that our debt will reduce incomes by $6,000 per 
person in 2040. We are all very concerned about the lack of 
growth in low and median incomes and the growing disparities in 
income and wealth. At the very least, the Federal Government 
should not let its own budget imbalances contribute to these 
very harmful trends.
    In addition, on our current path, we are at greater risk 
for a fiscal crisis, and it leaves us with much less fiscal 
flexibility to deal with future economic crises. If we faced 
another major recession like 2008, we may not be as able to 
work our way out.
    Lastly, and in many ways most importantly, this high level 
of debt imperils the safety net and the most vulnerable in our 
society. If our Government does not have the resources and the 
stability of a sustainable budget, these essential programs, 
and those who need them most, are put in jeopardy. We cannot 
let that happen.
    The good news is that there are plenty of solutions to 
choose from. One of the Peterson Foundation's most important 
projects is the Solutions Initiative, which brings together 
policy organizations from across the political spectrum to 
develop long-term fiscal plans.
    Experts from five leading think tanks participated: the 
American Action Forum, led by Dr. Holtz-Eakin; the American 
Enterprise Institute; the Bipartisan Policy Center; the Center 
for American Progress; and the Economic Policy Institute. Each 
of these organizations developed specific, ``scoreable'' 
proposals. And I am very proud to report that all of them 
successfully stabilized the debt as a share of the economy over 
the long term.
    While these very different organizations have a wide range 
of priorities, their plans demonstrate that comprehensive 
solutions do exist.
    Finally, let me close with a brief discussion of budget 
process.
    While budget process reforms alone cannot solve our fiscal 
challenges, there are various changes that would better 
encourage long-term fiscal planning. Let me discuss three key 
principles for you to consider.
    First, look further into the future. The current 
Congressional budget window looks out only 10 years. We would 
recommend increasing that to 25 years. If we do not look 
further out, then there is no meaningful discussion of long-
term trends, there is no visible information about long-term 
effects, and there is no credit given for long- term 
improvement. This is perhaps the single most important change 
that would encourage better long-term budgeting.
    Secondly, set goals. Requiring Congress and the President 
to set medium- and long-term fiscal goals, and then report on 
progress annually, would improve accountability and 
transparency.
    Lastly, improve enforcement. Adding new or strengthening 
existing enforcement measures would help lawmakers meet budget 
targets. Of course, measures should be flexible enough to 
accommodate changing conditions, but they should be strong 
enough to reinforce the commitment to long-term fiscal 
sustainability.
    In summary, we have a long-term fiscal challenge that could 
do great damage to our Nation's economy and role in the world. 
We know the causes, and we know the range of solutions. All it 
takes is leadership, commitment, honesty, and cooperation. The 
Peterson Foundation is committed to helping our Nation, and 
both political parties, to address the challenge successfully.
    Thank you for your invitation to participate in this 
important discussion. I would be happy to answer any questions 
you may have, and with your permission, Mr. Chairman, I would 
like to submit this testimony and our Solutions Initiative 
plans for the record.
    [The prepared statement of Mr. Peterson follows:] 
    
    
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    Chairman Enzi. Thank you, and they will be a part of the 
record, as will your full statements from everybody.
    [The plans follow:] 
    
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    Chairman Enzi. Dr. Holtz-Eakin

 STATEMENT OF DOUGLAS HOLTZ-EAKIN, PH.D., PRESIDENT, AMERICAN 
 ACTION FORUM, AND CONGRESSIONAL BUDGET OFFICE DIRECTOR (2003-
                             2005)

    Mr. Holtz-Eakin. Chairman Enzi and members of the 
Committee, thank you for the chance to be here today. You have 
my written statement. Let me make three simple points, and then 
I look forward to answering your questions.
    The first, as everyone has noted, is that the Federal 
budget is in serious jeopardy. There are lots of ways to 
characterize this, but I think one of the most telling is that 
if you look at the CBO baseline for 2025, 10 years from now, if 
we remain on autopilot, the CBO projects a deficit of $1 
trillion. So we are back to $1 trillion deficits. Of that $1 
trillion deficit, $755 billion is interest on previous 
borrowing. So we as a Nation are perilously close to borrowing 
solely for the purpose of paying off previous borrowing. The 
U.S. is entering into a debt spiral in a very predictable, 
mechanical fashion. It is an untenable situation for us to be 
in. If left on that path, the only question is when the crisis 
happens, not whether a crisis happens. And so that trajectory 
is extremely damaging and would threaten the very foundations 
of our economy.
    At the heart of that explosive debt is the rise in 
mandatory spending, the large Federal health programs, 
Medicare, Medicaid, the Affordable Care Act, the Social 
Security program, and other elements of the mandatory spending, 
are driving these ever larger borrowing and debt and deficits.
    That is bad enough, but those programs are also not 
functioning very well. Social Security promises a 25- percent 
cut across the board in 20 years. Medicare offers substandard 
care for the dollars that we plow into it for our seniors. The 
Medicaid program sends those with Medicaid to ERs at greater 
rates than those who are uninsured. These are all programs that 
should be improved so that our safety net is both financially 
more secure, but also delivers higher-quality service.
    Now, in terms of supporting these programs and reforms of 
these programs, the current budget process is transparently 
broken. There is no single document on which the House, the 
Senate, and the executive branch agree on the level of revenue 
and the level of spending in any year. So the U.S. Government 
does not have a budget. It has budgetary outcomes, usually bad, 
and that is a piece of the record that the Chairman showed.
    Often, as the Chairman outlined, the budget resolution is 
not done. The appropriations process is not completed. There is 
a heavy reliance on continuing resolutions and omnibus 
appropriations. And I do not think anyone can make the case 
that the budget process is working well.
    So in thinking about budget process reforms, I would 
encourage the Committee to think hard about this, but also 
think about some fairly large reforms. As some of the research 
outlined in my written testimony has shown, there is a great 
value to fiscal rules in solving problems like this. In Sweden 
and the Netherlands, adopting what would effectively be 
constitutional rules for the maximum amount of spending as a 
fraction of GDP or a balanced budget amendment or a debt-to-GDP 
rule have effectively brought back into alignment things which 
were previously not working very well.
    That might be a bridge too far. But if you do start looking 
at real changes, I think a good lesson would be to focus on the 
problem and make changes in the area of the biggest problem, 
and that is mandatory spending.
    To date, we have only one piece of the budget process that 
focuses on mandatory spending, and that is reconciliation. 
Reconciliation has not done its intended job of making it 
easier to reform mandatory spending programs and control the 
growth in spending. So other approaches, whether it is capped 
allotments for those programs run by the States or whether it 
is changing the form of Medicare to be much more of a defined 
contribution than a defined benefit, all things which have been 
explored but have not been really pursued very hard, I think 
that should be at the center of the agenda for the Committee in 
thinking about process reform.
    So I really appreciate the chance to be here today. I am 
happy to answer your questions. I think this is a topic that is 
of paramount importance. But it is important to remember that 
in the end the problem is not the process. The problem is the 
problem, and these programs needs to be reformed. And the 
budget process can help in that effort, but it will not solve 
it by itself.
    I thank the Chairman and look forward to the questions.
    [The prepared statement of Mr. Holtz-Eakin follows:] 
    
    
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    [Applause.]
    Chairman Enzi. Thank you.
    Mr. Holtz-Eakin. All my years, that is the first time 
anyone ever applauded.
    [Laughter.]
    Mr. Holtz-Eakin. Thank you, sir.
    Chairman Enzi. I think I had some notes here for what I am 
supposed to do if that happens, too.
    [Laughter.]
    Chairman Enzi. Mrs. Weinstein?

 STATEMENT OF DEBORAH WEINSTEIN, EXECUTIVE DIRECTOR, COALITION 
                         ON HUMAN NEEDS

    Ms. Weinstein. Thank you, Chairman Enzi, members of the 
Senate Committee. Thanks very much for the opportunity to 
testify about ways the Federal budget can better fulfill its 
primary purpose: to serve as a blueprint for meeting the 
Nation's needs.
    It should be a first principle that poor people must be 
protected from efforts to reduce deficits and debt. This was 
understood to be important by Bowles and Simpson as the Nation 
struggled to free itself from the Great Recession. But the 
impacts of the recession are long lasting.
    More than 40 percent of families with children headed by 
young parents are living in poverty. And it would take 25 years 
to cut poverty in half if the recent gains continued year after 
year; and to get child poverty to the same point, 35 years.
    A second point. Programs do work to lift people out of 
poverty. It is simply unacceptable for a Nation as wealthy as 
ours to fail to speed up poverty reduction when we know how to 
do it. We need to protect low-income tax credits because they 
lift 10 million people out of poverty. SNAP or food stamps 
lifts 4.7 million people; Social Security, 26 million.
    We must stop the cuts to domestic appropriations, cuts that 
are taking all those programs--education, housing, Head Start, 
so many more--to their lowest share of GDP in 50 years.
    Now, the sequestration cuts occurring in fiscal year 2013 
hit harder, caused 57,000 children to be denied Head Start, 
lost rental housing vouchers to 100,000 households, reduced the 
number of meals provided to seniors by about 5 million. A lot 
of those reductions were restored as part of the agreement in 
fiscal years 2014 and 2015, but we still have a long way to go 
for rental housing vouchers and senior meals.
    Cuts over the past few years have affected both 
discretionary and mandatory programs. Most painfully, Congress 
cut SNAP, the benefits per meal from $1.70 to $1.40 per person. 
It is important for you to know, as you construct a budget, 
that these kinds of reductions hurt people. Researchers found 
that babies and toddlers in households that experienced that 
cut were more likely to be at risk for bad health and education 
outcomes. The loss of benefits hurts, but the other side of the 
coin is that the presence of benefits like SNAP and WIC can set 
children on the path out of poverty.
    Rental housing vouchers are another case in point. If the 
Senate Transportation, HUD appropriations bill were to become 
law, not only would we continue to lose 70,000 vouchers that 
have not been restored, we will lose another 50,000. Housing 
subsidies lift 2.8 million people out of poverty, and children 
who are in that kind of housing are more likely to go to 
college and raise their children out of poverty. Instead, if 
sequestration returns, fewer will get help. You can say the 
same of Head Start and other preschool programs.
    But my third key point, congressional budget practices are 
slanted against funding for these effective programs and other 
programs like transportation funding which spur economic growth 
and jobs. If these kinds of programs need increases, Congress 
is resolute in requiring cuts elsewhere. Congress even changed 
the rules this year for the highway bill, now forcing all money 
taken from the general fund to be offset by other cuts or 
savings, and that did not used to be the case and will force 
competition over those offsets, those were envisioned to help 
pay for sequester relief. While antipoverty programs are cut, 
Congress is evading caps on Pentagon spending through the use 
of the uncapped overseas contingency operations account.
    A fourth key point: We cannot meet our people's needs and 
put Federal spending on a sustainable path without increased 
revenues. We can afford to meet our needs. Income and wealth 
has been increasing for decades, but most of these gains are 
going to the top 1 percent. Income from capital as opposed to 
labor is growing. We need to alter the Tax Code to capture 
growing income sources from those who have the most ability to 
pay. But Congress has been willing to deepen the deficit for 
tax cuts that mainly help the wealthy and corporations.
    The budget is about choices. Congress ought to use hearings 
and reports to investigate the impact of those choices.
    What should we do? End the tax loophole that provides hedge 
fund managers with a $1.5 billion break or expand preschool and 
Head Start?
    We could use Senator Sanders' far-reaching tax on corporate 
profits sheltered overseas. That income would stop a great 
portion of sequestration cuts.
    We do need to reduce our debt over time. We are making 
progress, though. The deficit is now lower as a share of the 
economy than at any time in President Reagan's Presidency. 
While it will go up, the upward trend has been significantly 
slowed by the Affordable Care Act, and that is a piece of very 
good news.
    One final point: the debt limit. It is worth noting that 
even the threat of U.S. default can dampen economic growth. 
Please, we are getting close to Halloween. Do not scare us. 
Just raise the debt limit to pay automatically for programs 
that Congress has approved.
    Thank you.
    [The prepared statement of Ms. Weinstein follows:] 
    
    
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    Chairman Enzi. Thank you.
    Now we will turn to questions, and I will take a second to 
explain how we do this. Each member will have 5 minutes for 
questions, beginning with myself, and then Senator Whitehouse 
has suggested--
    Senator Whitehouse. I will yield to the rest of the 
Democrats since I will be here to the end.
    Chairman Enzi. Okay, yes. All members who were in 
attendance when the hearing began will be recognized in order 
of seniority. And for those who arrived after the hearing 
began, they will be listed in order of arrival. So we will 
begin with the questions.
    Dr. Holtz-Eakin, I mentioned in my opening statement that 
the balance between discretionary and mandatory spending in the 
Federal budget has changed substantially, and you mentioned it 
in your comments as well. Given the increasing share of outlays 
devoted to mandatory spending, does the current budget process 
allow adequate legislative oversight? Does it allow review of 
existing mandatory spending programs? And can it allow 
oversight and review?
    Mr. Holtz-Eakin. I do not believe so. As everyone has 
noted, the rise in mandatory spending is squeezing out of the 
budget the annual discretionary appropriations. The Budget 
Control Act merely codified something that has been going on 
for a long time. I think it is important to think hard about 
how the Congress can essentially budget the mandatory programs. 
Medicaid is an appropriated entitlement, and so you have the 
opportunity there every year in principle to look at Medicaid 
and figure out how much you are going to spend on it.
    I think anything that the Committee and the Congress as a 
whole can adopt to better regular oversight of the trajectory 
of these mandatory spending programs is the single biggest step 
toward getting things lined up correctly.
    Chairman Enzi. Because we do not get a chance to actually 
look at the details of those programs, we do omnibuses. That 
runs into some problems.
    Mr. Peterson, your foundation's Solutions Initiative 
gathered long-term budget plans from groups across the 
ideological spectrum with the goal of laying out some options 
to set the Federal budget on a sustainable path for prosperity 
and economic growth.
    Taken together, can we provide a range of scoreable policy 
proposals? Can we shift focus to the true drivers of the future 
Federal spending and debt? Do you think the current budget 
process encourages Congress to think and create policy within 
some sort of strategic long-term framework?
    Mr. Peterson. Clearly not. I think the current budget 
process, as I said in my testimony, does not look enough out 
into the future, and that is why we recommend looking out 25 
years. I think one of the best aspects of the Solutions 
Initiative was that we set a 25-year period. And I think the 
organizations enjoyed having the ability to look out longer and 
be more strategic and forward-thinking.
    Really, there are two problems with looking at only 10 
years. One is visibility. As we say, I think the greatest 
threat to the future of the country is not happening within the 
next 10 years, but it is in the next few decades. If you only 
look 10 years, you actually do not see the big problem. If you 
measure debt as a share of GDP, it is relatively stable over 
the next 10 years, but it really begins to skyrocket 
thereafter. So if you have a budget process that effectively 
ignores the real problem, how are you going to solve it?
    And then, secondly, credit. A lot of the best long- term 
reforms are phased in gradually. They deal with things over 
time. If the budget process is so focused on 10 years that any 
of the latter second-decade effects are not even measured, how 
do you get credit for those reforms? How do you justify those 
reforms, et cetera? So we think that is a very important 
component of budget process reform.
    Chairman Enzi. Thank you.
    Dr. Holtz-Eakin, in recent years we have seen Government 
loan programs expanding significantly. Do the current budget 
rules understate the cost and risk of these loan programs and 
make them seem profitable? Do the rules encourage Congress to 
add and expand these types of programs without adequately 
disclosing the true risk to taxpayers? Perhaps you can tell us 
what the origins are of the scoring system and how it can be 
improved to incorporate modern financial concepts in our budget 
estimates.
    Mr. Holtz-Eakin. I think this is an important issue. I 
mean, credit market activities are a large fraction of what the 
Federal Government now does, and the original Federal Credit 
Reform Act was intended to level the budgetary playing field 
between direct loans, which showed an immediate outflow and 
then a series of receipts over time, and loan guarantees, which 
showed no outflow but, in the event of default or delinquency, 
cash flows going out of the Federal budget. Those are 
economically equivalent activities and should have looked the 
same in the budget. The Credit Reform Act did a good thing by 
getting those equalized and their budgetary treatment 
equalized.
    What it did not do was treat as the same a loan that exists 
in the private sector and a loan that is put on the Government 
balance sheet. And, indeed, by leaving out the market risk 
associated with loans and only putting into the Credit Reform 
Act the credit risk of those loans, it made all of the 
Government loans look more valuable than they really are. And a 
great budgetary problem is getting rid of a private loan, 
putting in on the Government balance sheet, and showing that as 
a scoreable savings for the Federal Government when, in fact, 
it is exactly the same economic entity in both locations. That 
needs to get fixed. Fair value accounting is the way that could 
get fixed. And I would encourage any budget reform to take a 
good, hard look at getting that squared away because it is a 
big part of what the Federal Government does and we are 
misleading people in every way when we show the transactions at 
the moment.
    Chairman Enzi. Thank you. I do have additional questions 
for all three of you, and I will submit those in writing, and 
anybody else can, too. I would appreciate it if you would 
provide us timely answers on those.
    [The questions of Chairman Enzi follow:] 
    
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    Senator Whitehouse. Mr. Chairman, since I will be here as 
Ranking Member until the end of the hearing anyway, I am going 
to allow my colleagues to go first. And I believe Senator 
Baldwin was the first of those who are present.
    Chairman Enzi. Correct.
    Senator Whitehouse. So, Senator Baldwin.
    Senator Baldwin. Thank you. I appreciate your holding this 
hearing.
    We talk often about budgets as documents reflecting our 
values and our priorities, and I know I bring to the Senate 
Budget Committee a priority on building an economy that works 
for everyone and not just the wealthy few. But, also, I served 
on the House Budget Committee early on in my House tenure, and 
now I have the privilege of serving on this Committee in the 
Senate. So I have had the chance to see how the process has 
worked at various points in time, and it is interesting to sort 
of see this predictable path to crisis and manufactured crisis.
    You know, in 2013, as a brand-new Member of the Senate and 
this Committee, we had one House in Democratic control, one 
House in Republican control. Each passed a budget that, 
arguably, reflected a set of priorities, partisan priorities, 
because they came out on pretty partisan votes. But then there 
was a negotiation that occurred between Senator Murray, our 
Chairwoman, and Paul Ryan, the House Committee Chairman, that 
gave us a blueprint for 2 years.
    This year, as we started our process, each House is 
obviously controlled by a member--or by the same party, but we 
have a President who made it very clear that in order for the 
final products, the individual appropriations bills, to gain 
his signature, there had to be some compromise. So I think part 
of our challenge is how do we get compromise up front rather 
than on the eve of a crisis or create unnecessary ripple 
effects throughout the economy as we approach the brink time 
after time after time.
    I guess I would ask the three of you, in terms of a process 
focus, how do you put compromise earlier in the process? If you 
have any brilliant ideas for all of us, let me know. Please.
    Ms. Weinstein. Thank you. That is a tough question, and I 
wish I did have a magical process answer for what is, as I 
think others have said, a policy dilemma, and that two things I 
would put out: one is when there were compromise efforts being 
discussed, it really did start with the premise that there 
needed to be multiple parts to a solution, and that that 
solution needs to include revenues, that there certainly have 
to be some spending reductions, but that--and that they should 
certainly not be limited to the discretionary area. Everybody 
understood that would be a very bad outcome.
    But because we could not agree at the outset that all 
elements, spending and taxation, needed to be part of the 
solution, then things did transpire to be this kind of 
Government by crisis and standoff.
    Senator Baldwin. Let me make sure in the time remaining 
that I get to hear from each of you. But if I were not using up 
all my time, my next question would have been about a revenue 
proposal, my bill to close the carried interest loophole, which 
you talked about in your testimony, Ms. Weinstein.
    Douglas?
    Mr. Holtz-Eakin. In terms of process proposals that are in 
the spirit of what you asked, probably the most prominent is to 
change the budget resolution from a congressional resolution 
into a law and force the House, Senate, and President to agree 
at the outset on the broad outlines of--
    Senator Baldwin. Which the Murray-Ryan proposal ultimately 
had as an impact because it amended the sequestration Budget 
Control Act language.
    Mr. Holtz-Eakin. Right. I think the lessons of Murray-Ryan 
are:
    Number one, the discretionary caps are a great budget 
gimmick, but they do not reflect real policy. And so until you 
have got a policy underneath those caps that people are willing 
to live with, they do not really mean much.
    The second is the Murray-Ryan deal raised discretionary 
spending and cut mandatory spending. That is the fundamental 
need in the Federal budget going forward, and repeating those 
steps again and again would be a good idea.
    Mr. Peterson. I would just simply add, back to the point I 
made earlier about setting fiscal goals, I think if you are 
looking to get compromise and cooperation earlier in the 
process, I think it would be easier to agree on a goal than 
some of the other measures of the budget. So putting something 
forward in the beginning of the process, like what is our 
fiscal goal in general, to me would start the process off 
better.
    If you look at our Solutions Initiative, all of the 
organizations, despite being very different, all came out 
pretty similar in terms of the long-term debt as a share of the 
economy. So setting fiscal targets, fiscal goals, to me is an 
essential part of the budget process anyway. But if you are 
looking for more cooperation, I think it is easier to come 
around a goal first and then move toward the policy second.
    Chairman Enzi. Senator Perdue.
    Senator Perdue. Thank you, Mr. Chairman. I do have some 
questions that I will submit for the record. I just have a 
couple of comments, and I hope I have time to get to a question 
on the 25-year planning horizon. But I want to give a little 
context, just as the Ranking Member did.
    First, in the last 100 years, we have had three super 
majorities, all Democratic: the first gave us the New Deal, the 
second gave us the Great Society, and the third gave us Dodd-
Frank and the Affordable Care Act. I am new to this process, 
but I am a business guy, and I am looking at this thing, and I 
can--a lot of the responsibility for this current financial 
catastrophe we can lay at the feet of those three super 
majorities.
    But I will tell you the irony is that they have not 
achieved a lot of the goals that we had set for them even when 
they were imagined many years ago, and that is, to help the 
people who need help the most. And those are the people--Ms. 
Weinstein, I agree with you. One of my first jobs was in the 
Head Start program. The people in most jeopardy because of our 
intransigence in Congress are the people who need help from the 
safety net
    However, what we have got right now is a system where today 
the poverty rate is the same as it was when the Great Society 
was signed into law. In the last 6 years, we have spent $21.5 
trillion running our Federal Government. That is so large, Mr. 
Chairman, it is hard to relate to that. What I can relate to is 
the fact that of that $21.5 trillion, we have borrowed $8 
trillion of that.
    Now, in the year 2000, we had $6 trillion--$5.5 trillion of 
debt. By 2008, we had $10 trillion, as the Ranking Member 
rightly pointed out, probably largely due to two wars. However, 
since then we are on track since 2010 to more than double the 
debt by the time this administration leaves office.
    The budget process does not produce a budget, as we in the 
business community know it. Dr. Holtz-Eakin, I agree with you, 
the reason I applauded is that you called that out. This is not 
a budget process. We have got a situation right now literally 
today where we have passed a budget this year, as we call it, 
we have gone through an authorization process, and here we are 
in the appropriations process, and yet one side in a partisan 
way is blocking those very bills which 11 of the 12 
appropriations bills were passed in a bipartisan way in 
Committee. One party is deciding that we are going to block 
those from even getting to the floor to have debate. This 
process does not work. The people back home know that, and it 
is time to do something about it.
    But let me just remind everybody. When this budget process 
was put in place in 1974, the debt was 32 percent of our GDP, 
full debt. In 2000, it was 55 percent. Right now, it is a 
little over 100 percent if you include the $4 trillion that is 
owed to various parts of the Government.
    It seems to me that with a system that has only worked four 
times in the last 40 years, Mr. Chairman, we have got to change 
the process. I think all three people here with different 
perspectives are saying the same thing, and I applaud your 
testimony today.
    Mr. Peterson, I am going to run out of time, but I really 
want to ask you--the 25-year planning horizon is very 
intriguing to me. On the one hand, I agree 100 percent, because 
if you look at the mandatory expenditures over the next 10 
years they double; over the following 10 years they quadruple. 
It runs away from us. So while I hear one side beating their 
chests about our deficits are at an all-time low, well, I 
understand what the math is, but the debt continues to spiral 
out of control.
    My only problem with the 25-year planning horizon is it 
seems to me we need to have two things. If you have a 25- year 
planning horizon that allows us to spend money now and save it 
later in the 25-year planning horizon, that is a problem. I see 
it even in the 10-year horizon. So it seems to me we need to do 
what most corporations do in the world, and that is, look much 
shorter term in terms of the expenditure planning with a 3-year 
budget and a 25-year strategic plan to look at these important 
dynamics as they come at us, particularly in our crisis here 
with the mandatory spending and the people we are putting in 
jeopardy.
    Would you respond to that?
    Mr. Peterson. Well, listen, I think looking out 25 years 
does not mean you only look at the 25th year. You have got to 
look at the path from here to there, clearly. And as I said 
also, setting medium- and long-term goals would be part of the 
process. So if you have been in business, you know you do not 
just look at the fifth year. You look at every year, for 
example, in a 5-year plan.
    And, lastly, I would say budget enforcement--
    Senator Perdue. But we do not really do that. This budget 
does not do that. I agree with you 100 percent. If we did it 
properly, it would not be a problem. We do not do that. A lot 
of what we do is we will spend the money in the first few 
years, but we will save it in the last few. Then the problem is 
we roll into the next year, and now everything is forgotten. 
All bets are off, and here we go again.
    I agree with you we need a longer-term perspective but 
address the shortfall in--
    Mr. Peterson. Well, I think it comes to the third point I 
was making about budget enforcement. We have got to make sure 
we are staying on that path. So if agree on a long-term path 
and you agree on a set of goals and objectives, you have got to 
make sure you are meeting them along the way. And I think we 
cannot have the dessert before the vegetables, so to speak, and 
have all the easier things to do and delay that and then delay 
that further. So we have seen kicking the can down the road for 
a long time, and we need enforcement measures to make sure we 
stay on that path.
    Senator Perdue. I am out of time. I have got other 
questions. I am going to hang around, Mr. Chairman. I hope to 
be able to ask Dr. Holtz-Eakin and Ms. Weinstein a couple 
questions as well. Thank you.
    Chairman Enzi. Thank you.
    Senator Kaine?
    Senator Kaine. Thank you, Mr. Chair, and thanks to the 
witnesses. My time running a law firm and being a mayor and 
being a Governor has made me a certainty fanatic. I think both 
internal to the organization of a government--State, local, 
Federal--external, you know, the nonprofits that are out there 
doing work, universities, citizens making their plans, 
companies trying to decide what they want to do, certainty has 
only an upside and no downside. And where we have really failed 
here is we have not provided certainty to anybody, internally 
or externally.
    Senator King and I were just coming from an Armed Services 
hearing with former Secretary Gates talking about defense 
reform, and he said the biggest threat to the United States is 
not the deficit. He said the biggest national security threat 
to the United States is dysfunction and indecision within the 2 
square miles encompassing the White House and Capitol Hill.
    He talked about the fact that over the last 10 years, only 
twice has a fiscal year started with the Defense Department or 
any other unit of Government having an appropriations bill that 
gave them certainty about what they could do, how they could 
plan to use their funds. He talked about 2013 when mid-year 
suddenly, because of the sequester going into effect, they had 
to achieve a whole bunch of savings during a partial fiscal 
year or CRs that then there is later appropriations where then 
they have to spend money that they did not necessarily know 
they would have.
    So, Mr. Chair, I applaud you having this as the first of a 
series of hearings about budget reform, and I am going to be 
pro-budget reforms that promote certainty and that force us to 
do what we are supposed to do. Even if I do not like a line 
item, I would much rather have a line item than have a question 
mark. And we should not be getting to October 1 of every year, 
if we are going to say that is the start of a fiscal year, and 
have everybody just have question marks and not know what we 
are going to do.
    So I guess I would like--you know, I do not know who it was 
that said that consistency is the hobgoblin of small minds. Is 
a desire for certainty a hobgoblin of small minds? Or would you 
all agree that the more certainty we could put into a budget 
process that Congress would actually do the job and have 
appropriations bills by October 1 the better?
    Ms. Weinstein. Well, I completely agree that if you are a 
social service agency wondering what allocation you are going 
to get or a Federal agency trying to figure out how to plan, it 
sure does help if you know what you are going to get. You are 
absolutely right. I would say that kind of certainty is 
something that we need to work towards. The way we are going to 
get there, though, is to have that agreement on goals and be 
assessing what works, and that will help us to be able to have 
the agreement that you are looking for.
    I would say on the long term we need a little humility in 
terms of, you know, right, it would be nice to be able to 
predict 25 years out, but at least we need to understand that 
we have got to keep reassessing because we can be wrong, and 
small wrongness creates a gigantic problem down the road, so a 
little humility in recognizing where we cannot be totally 
certain.
    Senator Kaine. Thank you.
    Mr. Holtz-Eakin. There has been some very good work done by 
Steve Davis at the University of Chicago and some of his co-
authors on the impact of product uncertainty on economic 
performance, literally how will we grow and create jobs. And 
those impacts are dramatic, and this is a period of very high 
uncertainty with big negative impacts on the economy.
    So there is no question that diminishing that uncertainty 
would be beneficial not just to the process but to the economy 
as a whole. So I would applaud that.
    The one certainty we do have, I will point out, is that we 
are going to have a crisis. We do not know what day yet, but 
let us not confuse the short-term uncertainty with long- term 
uncertainty. We know what is going to happen in the long term. 
We are off track, period.
    And I just want to, you know, as someone who has sat at 
this table and tried to explain how we made $7 trillion misses 
in the 10-year window, forecasting 25 years is not an easy 
task. Enforcing a 25-year budget, when some of the reasons it 
changed are not policy decisions but, in fact, forecasting 
changes by people like the Congressional Budget Office becomes 
a very difficult thing to actually do.
    So I like the idea of knowing what is going on over 25 
years. But you know. You can look at the CBO's long-term budget 
outlook right now, and that is very different than doing 
something about it. And I do not think the process is going to 
get you to do something about it. That is a policy decision 
that you should make.
    Senator Kaine. Mr. Chair, could I ask Mr. Peterson just to 
respond to my certainty point? I am at my time, but if he 
could?
    Chairman Enzi. Yes, briefly.
    Mr. Peterson. I would agree with Doug. Certainly it is very 
important for the economy for businesses to make decisions. 
When you delay important policy decisions that are designed to 
create a positive economic environment and no one knows what 
the policy is, that certainly is a strong negative. In 
particular, sometimes tax credits are not dealt with until the 
end of the year in which the behavior that was supposed to--or 
in the tax credit that has already happened. So that is 
probably the worst example of that. But I think it is very 
important to focus on certainty.
    Senator Kaine. Thank you.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you.
    Senator Corker?
    Senator Corker. Thank you, and thanks for having this type 
of hearing, and I want to thank all three of you for your 
testimony.
    I could not agree more that the budget document ought to be 
a law. I think the American people are fooled by the budget. 
They believe that we actually have a budget process, and they 
do not understand that it is not really a law. And so what it 
becomes is a political document that, at best, sets 1-year 
spending caps. But because we do it in a totally partisan way, 
it ends up leading to the type of situation that we have right 
now. So I could not agree more that it should be a law that is 
signed by the President and something that we go forward with.
    Now, let me ask you this question: To make it a law that 
works, we would have to also put in place all the policy 
assumptions, it seems, that we make that we know we totally 
make them up. It is unfortunate. It is never going to happen. 
Our 10-year budget is never going to happen, the policy 
assumptions that we make.
    What would be a forcing mechanism--you have been here 
inside Government, Douglas. What would be a forcing mechanism 
not just to set the spending levels but to force us to actually 
put the policies in place so you would actually achieve those 
levels?
    Mr. Holtz-Eakin. So I think there are two different 
answers. On the discretionary side, I would not try to solve 
that problem, and the reason I would not try to solve it is I 
think a future Congress--
    Senator Corker. On the mandatory piece.
    Mr. Holtz-Eakin. That is the piece. That is where the big 
money is, and that is where--
    Senator Corker. Okay. But how do we make--how do we create 
a forcing mechanism so instead of laying out these things that 
we know are never going to happen, it forces us to deal with 
these issues?
    Mr. Holtz-Eakin. So if you go down--you sign a law, then 
that law should contain language that would be quite similar to 
the reconciliation instructions, that says to hit these 
targets, we will give to the Ways and Means, the Senate Finance 
Committee, you know, the committees of jurisdiction, the 
responsibility of delivering policy that hits that target. If 
they do not, the Budget Committee can draw it up, and we have 
an actual procedure that has been used. That would force it to 
happen. And if they choose not to do it, since it is a law, it 
would then go to the executive branch. So if Congress decides 
to punt entirely, you live with the consequences.
    Senator Corker. Mr. Peterson, I love what your organization 
does, and I thank you for your testimony, and the 25-year issue 
is interesting to me. The problem with it is, because we do not 
have forcing mechanisms to actually change policies on the 
mandatory piece, it would be just as irrelevant as the 10-year 
budget that we have right now. Again, all we have done is 
established a 1-year spending level that now we are not even 
going to adhere to.
    Let me come to another point. What about the process we go 
through here where we spend money like we are doing this year 
on the highway bill; we spend it over 3 years, and we act like 
we are paying for it over 10. Now, that is not part of the 
budget process. It is unfortunately the character of this body. 
What is it we can do to affect that so that we are not making 
up--I mean, for instance, in this highway thing, it is 
unbelievable. The Republicans are doing this, by the way. 
Fiscal hawks. Republicans. We are going to spend money over a 
10-year period, only 9 percent of the offset--we are going to 
spend money over 3 years, pay for it over 10, only 9 percent of 
the offsets occur during the years we are spending the money.
    And, by the way, we are making up stuff, like oil is going 
to sell for $89 a barrel at some point.
    So how do we cause there to be some integrity--there is 
none in this bill, in my opinion, but some integrity in how we 
pay for things?
    Mr. Holtz-Eakin. I am not usually a source of integrity.
    [Laughter.]
    Mr. Holtz-Eakin. So the highway bill is probably the 
biggest example of something that is all wrong, I mean, because 
it is part discretionary, part mandatory, the easiest place to 
evade anything. So do not create more things like the Highway 
Trust Fund, okay? Be honest about what is coming in and what is 
going out and put it in there, force--you can in some cases 
force offsets to lie within the same area and, thus, not get 
into this business. Or you can have points of order for any 
time you increase the out-year, meaning the second year, third 
year, fourth year. But in the end, if you allow for this time 
shifting that Senator Perdue mentioned and which is common 
congressional practice, there will be the temptation to defer 
the pain and take the spending up front. It has been true for a 
long time.
    Senator Corker. Well, look, we have got--the budget 
document should be something that has integrity and means 
something. And a way for that to happen is for it to be a law 
and for us to force the policy changes that it takes to meet 
those numbers.
    Now, this is probably far-fetched, but one of the things we 
could do without changing the law is decide we are not passing 
any more budgets unless they pass with strong bipartisan 
support. If we do that and we move away from them becoming 
political documents, then we actually have something that we 
have a much greater chance of adhering to.
    But with that, Mr. Chairman, I thank you for the time.
    Chairman Enzi. Thank you.
    Senator King?
    Senator King. Thank you, Mr. Chair.
    Taking off on what Senator Corker just said, I am all for 
looking at process. I think it is important. I think there are 
things we can do, perhaps a 2-year budget, a capital budget. I 
think there are lots of process. But, come on, the problem is 
us. It is not the process. We could have any kind of process. 
This is perfectly good process: pass a budget bill, pass 
appropriations bills, and vote on them before October 1st. I 
mean, that is where the problem is.
    I would say, you know, changing the process is like 
rearranging the deck chairs on the Titanic, except that would 
be an insult to the Titanic. I mean, we--there is no process 
change that is going to fix this. It is that Congress has to do 
its job, which it is not doing.
    I am sort of speechless, which is very uncommon for me, 
but--and here is another example. If a terrorist group--I am on 
the Intelligence Committee. If we went to a meeting this 
afternoon and found out that a terrorist group was going to 
attack our financial system in 2 weeks, raise our interest 
rates, disrupt our economy, cost us jobs, and devalue the 
dollar around the world, we would be bombing them. Oh, wait a 
minute. That is the debt ceiling debate. We are doing that to 
ourselves.
    It is just completely--to the man in the street, to our 
citizens, they do not get this. You know, this is not nuclear 
science. This is making numbers balance. Every household does 
it. Every business does it. And we are just kidding ourselves.
    One of the things that surprised me when I came here is 
nobody ever heard of net present value. We are using 25- cent 
dollars 25 years from now to offset real dollars today. I mean, 
that is a just a minor example.
    If you can find a question in there, you are welcome to it.
    [Laughter.]
    Senator King. But, seriously, do any of you want to-- now 
is your chance to take a shot at this really--well, I will save 
the adjectives. ``Poorly performing institution,'' how is that?
    Ms. Weinstein. I guess here is the question I will glean 
out of that. Congress does understand really that they are 
doing the budget for a purpose. Everybody may not agree on the 
primary purpose, but they know that there are important things 
and needs that our Nation has that the budget should enable us 
to meet. And where we get so snarled up or you get so snarled 
up in, you know, budgetary tricks that pay for things in odd 
ways, it is because you really want to meet some of those 
needs. We absolutely--
    Senator King. We want to meet the needs, but we do not want 
to necessarily pay for them. That is the problem. The Highway 
Fund is a perfect example. Everybody says, you know, we need to 
do something about our infrastructure, and we are using this 
Rube Goldberg scheme about foreign taxes and everything else 
that has nothing to do with highways because nobody around here 
wants to say we have got to pay to fix the highways.
    Ms. Weinstein. And if you--
    Senator King. The one thing this institution does really 
well is avoidance, and that is the pattern, whether it is the 
Highway Fund or the overall budget.
    Sir?
    Mr. Holtz-Eakin. I would say two things. Just to repeat, 
the problem is not the process. The problem is the problem. I 
think we recognize that, and you have to deal with the problem.
    The second is, you know, I mentioned fiscal rules in my 
written and my oral remarks. One of the reasons those have 
worked is it gives the legislatures, who have a rule that says 
you cannot do more X, Y, or Z, a way to say no. You have no 
good way to say no to a constituent right now, because there is 
no boundary. There is nothing you really cannot do. And so it 
empowers lawmakers in ways, and I think looking at those rules 
is important. And, you know, all I can say is what the current 
process has accomplished in 40 years, you know, if you look 
back 40 years at the Congressional Budget Act, I think now the 
budget is, you know, performing poorly and Congress is more 
embarrassed than it used to be, and that is all we have really 
accomplished.
    Senator King. Thank you, Mr. Chair--oh, I am sorry.
    Mr. Peterson. I was just going to add briefly, I agree with 
Doug that the process is not a substitute for the policy. And 
one of the challenges here it is very easy to defer difficult 
decisions. But if you need additional incentive, one of the 
charts we have in here talks about, if we keep waiting, how 
much harder it is.
    Senator King. Oh, yeah.
    Mr. Peterson. The current fiscal gap is 3.2 percent of GDP, 
so that is the sum total of all the changes, revenue or 
spending, we need to make to solve this problem. If we wait 
just 5 years, that amount goes up by 24 percent. So the problem 
is 24 percent more difficult 5 years from now. Ten years from 
now, the problem is 66 percent more difficult.
    So, yes, in the moment, it is easy to postpone these 
things, but you are actually--you know, the more we wait, the 
harder it gets.
    Senator King. But we are not going to be able to solve them 
as long as both sides of the political equation adhere to 
almost theological positions that make it impossible.
    Thank you.
    Mr. Peterson. It requires compromise.
    Chairman Enzi. Senator Whitehouse.
    Senator Whitehouse. Thank you.
    First, I want to thank Chairman Enzi for holding this 
hearing. This is a really important issue, and I think that the 
selection of the panel has reflected the sincerity of his views 
about getting something done. This is a very helpful, 
thoughtful, honorable panel.
    You say you do not represent integrity, Mr. Holtz- Eakin, 
but I think you do. And I appreciate your views, even though we 
do not always agree.
    As a member of the Budget Committee, it pains me to say 
this, but the budget process has become meaningless, and I am 
sick of it. Partly it has become meaningless because the 
penalty to the Senate for violating the budget process always 
was that you had to get all the way to 60 votes if spending 
violated what this Committee had authorized.
    Now that we are at a place where you have to get 60 votes 
for anything and everything, we have mooted any effect that 
this Committee has. The appropriations folks know they have to 
get 60 votes for their stuff. Once they have got 60, who cares 
what the Budget Committee did?
    Also, given the size of things, I think we need to look 
beyond a 1-year budget. It just does not make sense to me to be 
putting all that effort in to only get 1 year of return out of 
it, particularly when ultimately it does not matter and the 
appropriators can completely ignore this Committee because they 
have played the 60-vote target already.
    The result has been, I think, really a pretty embarrassing 
process. The most embarrassing day in the Senate is vote-a-
rama. Most of the amendments are preposterous. Only slightly 
less embarrassing is the Budget Committee process when we go 
through hours after hours of these deficit-neutral budget 
reserve fund things, which never have any effect but occupy the 
day, and when the dust really settles, what happens is one 
party produces a budget that I think in the case of the last 
one--I have said this before. I do not think the Republicans 
actually would have lived with the budget they passed. I think 
they passed a budget knowing that Democrats, thank God, would 
be there to stop them from what they passed, because if they 
had passed it and had to go home and sell it with its outcomes 
in regular families' lives, people would have said, ``What did 
you maniacs do? What is going on here?''
    So that whole process, I think--and that was the last one, 
but I think it happens on both sides. We do not get to the 
process of it. I think the best comment that has been made 
today was Senator Corker's. Either do it bipartisan or do not 
do it at all. And I hope that if I ever become Chairman of this 
I can get an agreement real early on that the budget vote-a-
rama process is of fixed duration, and at some point if you 
want to hang around for voice votes, that is your business. But 
these votes that have nothing to do with budgeting, that are 
targeting individual Senators for political campaigns, I mean, 
it is--we have become preposterous, and it is a shame because 
there was a good intent behind this Budget Committee. But I am 
tired of being on a Committee that is preposterous and 
meaningless. So we need to change
    So thank you, Chairman Enzi. I think your desire to do this 
is very sincere, and I think this has been very helpful.
    The second point I will make is that if we are going to do 
this, right behind the question of the budget reforms is the 
question of what you do. And if we are going to do this--and I 
agree that the debt has got to come down, but everybody who has 
looked seriously at this has looked at it and played multiple 
cards. We cannot do this just with cuts. This is not where you 
only get to play the drums, you know? There is also a horn 
section. There is strings. We have got to work on all of it. 
And from our point of view on our side of the aisle, we have 
seen discretionary spending go from over 9 percent to under 7 
percent. We believe we kind of have given at the office on 
spending. And yet we see out there the most wealthy and heavy-
earning corporations in the history of the planet getting 
completely unnecessary and ridiculous subsidies for oil 
drilling, and people defend that as if it were essential to the 
survival of the Republic. It is not. It is ridiculous. It is 
unnecessary.
    Hedge fund folks who earn more money in a year than their 
grandchildren could spend pay lower tax rates than hospital 
orderlies and truck drivers, and we cannot get any movement on 
that to add revenues to the equation?
    The Social Security problem, one easy way to solve it is 
there is no reason somebody making $118 million should make the 
exact same contribution to Social Security as somebody making 
$118,000. And that is the silly rule that we have, and people 
defend it as if it was essential to the continuation of the 
Republic.
    We have to have a longer-term conversation, I believe, and 
my time has expired, but I want to thank *** pages 8 to 11 
about what health care costs mean. We can have a sensible 
conversation, but not if the only thing we can say in this 
building is, ``Repeal Obamacare,'' ``Oh, do not,'' ``Repeal 
Obamacare,'' ``Oh, do not.'' We absolutely have to have a 
sensible conversation because it is preposterous for us to be 
spending 50 percent more than our least efficient international 
competitor and delivering health care outcomes that Croatia 
matches us on. We can do a lot better, and I will yield. I see 
Senator Ayotte has come for her time, so I will silence myself.
    Chairman Enzi. Senator Ayotte.
    Senator Ayotte. We are not asking you to silence yourself. 
Well, thank you very much. I appreciate it. And I thank all of 
you for being here.
    I wanted to ask about a couple of different issues. I first 
wanted to get your thoughts on baseline budgeting. We have this 
process that, under the current process, I know that Dr. Holtz-
Eakin is quite familiar, given his prior positions, with the 
baseline budget practice that automatically builds in increased 
spending based on inflation into the Federal budget. And there 
has been discussion about the potential of eliminating that so 
we can compare apples to apples, and I wanted to get your 
thoughts on that.
    Mr. Holtz-Eakin. I think this is one of the top things for 
the Committee to look at. I actually do not have a strong 
position on where you end up, but the current asymmetries do 
not make any sense.
    Senator Ayotte. Right.
    Mr. Holtz-Eakin. On the spending side, the inflation of 
discretionary accounts over the 10 years, the continuation in 
the baseline of any spending program over $50 million, but on 
the tax side, things following current law exactly in the 
moment--
    Senator Ayotte. Right. We have got to disconnect, right?
    Mr. Holtz-Eakin. It ought to be the same.
    Senator Ayotte. Right. On one side we are building in the 
automatic inflationary increase.
    Mr. Holtz-Eakin. Yes.
    Senator Ayotte. The other side, we cannot do any dynamic 
scoring, so they are inconsistent.
    Mr. Holtz-Eakin. So, you know, if you want to do current 
law both sides, fine. But that means the discretionary goes 
away. At the end of the year it is gone. Or you can essentially 
do current policy, extend everything that is going on for 10 
years. But, number one, make it symmetric so that you are at 
least dealing on a level playing field. That seems like a 
minimum requirement for a budgetary document.
    Senator Ayotte. Make it consistent.
    Any other thoughts on the panel about this?
    Mr. Weinstein. Well, just very important to recognize that 
if you are trying to assess what it actually costs to provide a 
service and you do not factor in inflation over the years, you 
will ratchet down these programs, and we know that 
discretionary domestic programs have already, as everyone has 
said, been ratcheted down hugely. So you want to watch out for 
making that worse.
    Senator Ayotte. No, I appreciate the role of inflation, and 
I think the idea--one thing that gets frustrating is a lot of 
times we have these fights about, okay, we are cutting 
spending, but, you know, it is not-- your average person thinks 
like, okay, I have got $25 and if, you know, I am cutting 
spending, I am going to $20, right? So I just want to make sure 
that we have an honest conversation on both the revenue side 
and also on the spending side, which is--I hope this is 
something we could think about as a group on a bipartisan 
basis, how are we going to judge this. There is no doubt that 
we have to look at what things currently cost, but I think we 
also need to make sure that we are consistent in how we are 
doing that and have an honest conversation about it.
    The other issue that I wanted to ask about briefly is 
biennial budgeting. There has been a lot of discussion about 
biennial budgeting here, and that is how it is done in New 
Hampshire. And in conjunction with that, I want to ask about 
something that is probably a little controversial, but--and 
that is this, because at the State budget level, it is a 
biennial budget where you pass the budget for 2 years.
    The second--what we would do in this Committee on the 
second year is we would actually have oversight of how it is 
going, the numbers that we put together, and make sure that we 
would actually look at is it working, did we make the right 
conclusion, and have much greater time for oversight.
    So I wanted to get your thoughts on the idea of a biennial 
budget, and then, so my time does not expire, I also wanted to 
get your thoughts on--many of us serve on authorizing 
committees, and then there is the Appropriations Committee. And 
a lot of times at the State level, there are not two separate 
entities. In other words, you actually have to make a decision 
on the policy basis for the numbers which you are enacting. And 
it seems like we have this very divided process that makes it 
very difficult to actually put together a real budget, which is 
we have got one committee over here who tends to be an expert 
in a certain area--I serve on the Armed Services Committee, so 
I have seen this experience time and time again, and some of my 
colleagues who are here as well do that. And then you have got 
a separate committee doing the same thing, and it seems to me 
to be a very divided way to do things and not how it has been 
done at the State level.
    So I wanted to get your thoughts on the two things: 
biennial budget and this process of--I know it is controversial 
to suggest that, but this divided authorization versus 
appropriation process.
    Mr. Peterson. Okay. In terms of biennial budgeting, I think 
there are some key advantages. I think budgeting in non-
election years must somewhat help it be less political. If you 
are a little further away from an election, that should help. 
It obviously makes things more efficient if you are doing it 
less often, and it provides more time for other things.
    And back to Senator Kaine's point about certainty, I think 
you would have additional certainty knowing that we have 2 
years of budgeting. I tend to think more about trying to go 25 
years than 2, but I see advantages to that, and these are 
really separate issues, anyway.
    Then in terms of process, I would really defer to the rest 
of you on how to go along to get along a little bit better. But 
I am sure there are efficiencies that can work throughout that 
process.
    Mr. Holtz-Eakin. I would point out that you are doing 
biennial budgeting. When was the last time you did a budget 
resolution in an election year? You are doing it already 
without the structure and the oversight, so you might as well 
acknowledge the reality and do it better. So that seems 
reasonable to me.
    And on authorizing versus appropriations, I could happily 
lose one or the other, but it is easy to suggest congressional 
reform from this side of the table.
    [Laughter.]
    Senator Whitehouse. Prudently said, Mr. Holtz-Eakin.
    Senator Ayotte. I did not say that was without controversy 
why I asked the question.
    Ms. Weinstein?
    Ms. Weinstein. Well, as somebody who worked in 
Massachusetts for many years, when I came here I was very 
perplexed by the distinction between authorizing and 
appropriating. I guess I would only say that whatever process 
is revised, it needs to be able to take continued reassessments 
of what is actually happening to people. And so longer-term 
processes where you cannot go back and adjust when you see that 
people are being harmed would be a worry. But I have to admit 
that right now the logjams mean that things are not being 
decided in a very timely basis, anyway.
    We do need to get back to the certainty that Senator Kaine 
was talking about, and longer time periods where all we are 
doing is, you know, sort of stopgap measures, that is the 
worst.
    Senator Ayotte. Thank you,
    Chairman Enzi. Well, the purpose of this hearing, of 
course, was to see if there was a need for budget reform, and I 
have not heard anybody disagree with that. So I am going to 
schedule two more hearings for solutions, because we are 
starting to get into solutions at this point, and we need to 
get into solutions, and we need to do something about this.
    When I became the Budget Chairman, I did not have time to 
change the process. There were certain set schedules, April 
15th being a key one that we have to meet. We recognize 
difficulties with it. I have been on the Budget Committee 
almost since I got here, and it has always worked the same. And 
by ``the same,'' I mean the majority party has us do the 
opening statements on the budget and then lets us see the 
budget. I changed that this year so that you got to see it 
before we did the opening statements. I offered to allow it 
much earlier than that and hopefully have more interaction. But 
I wanted to do that in exchange for having a limited--not a 
limited number of amendments, but amendments submitted before 
the actual day of the markup. That is what is done in all of 
the other committees, and that gives the Chairman and the 
Ranking Member a chance to go through the amendments and see 
which ones are similar and see if they cannot be put together 
so that there are less amendments and so that the amendments 
are more effective.
    So there are a lot of things that we could do, and I hope 
we will be thinking about what some of those are so that we can 
change the process, get it to work, have more oversight, and 
maybe make the authorizing committees do a little more work. I 
mentioned that there are 260 authorizations that are out of 
date, but we are still spending money on them. That means that 
those committees have not looked at their authorization again 
and brought it to the group with a solution for how it really 
ought to work. If you have got a program that goes back to 1983 
when it expired, we are probably not doing our work.
    So there are a lot of things that we can do, and I am going 
to schedule two more hearings for doing that. And I appreciate 
Senator Perdue being the first on my side to show up and 
wanting some additional questions. But I am hoping that he will 
be willing to submit those in writing, along with everybody 
else that might have additional questions, so that we can move 
on to the--and I hope you will share with me any suggestions 
that you have for solutions, and we will be sharing with you 
the people selected for the next panels on solutions on what we 
can do. I think we have a chance to make a real difference, and 
I want to do that. So thank you all for attending.
    Senator Whitehouse, did you have a comment?
    Senator Whitehouse. May I ask one question of Mr. Peterson 
and Mr. Holtz-Eakin before we leave?
    Chairman Enzi. If Senator Perdue gets to ask his questions, 
yes.
    Senator Whitehouse. Let us do it.
    Senator Perdue. No. I will waive my time to Senator 
Whitehouse.
    Senator Whitehouse. I just wanted to ask this: Mr. 
Peterson, you have talked about extending our budget horizon 
into the second decade. Mr. Holtz-Eakin, you have talked about 
extending it 25 years. If you do look out into a second decade 
and if you do look out 25 years, how do each of you anticipate 
that the effects of climate change would roll into the budget 
and the costs of the country?
    Mr. Holtz-Eakin. So just for the record, I am in favor of 
having the information, but I am less enthusiastic about 
putting it into the formal budget process because of the 
uncertainties that come with this kind of an exercise. You 
know, if you look at revisions to 1-year CBO projections of the 
deficit, they could be quite large, especially in percentage 
terms. So, you know, if you asked me to roll into it all of the 
impacts of climate change, economic uncertainty, what happens 
with international relations, potential for war, you are 
getting into some very difficult territory. And that is why I 
am nervous about formally embedding that.
    Senator Whitehouse. Looking out, do you think the effects 
of climate change within that kind of a period would be small, 
moderate, or large?
    Mr. Holtz-Eakin. I do not know enough to say, but, you 
know, one would have to look.
    Senator Whitehouse. Mr. Peterson?
    Mr. Peterson. I am not an expert on that either. I know the 
CBO has started to roll climate change estimates into its 
forward-looking projections.
    Just to clarify, I think at a minimum we need to look out 
at that period in some fashion. It does not necessarily have to 
be the exact same as the 10-year budget window. But bringing 
that dialogue into the conversation more directly, in a more 
focused way, again, gives us better visibility over the real 
problems and gives us a chance at implementing solutions that 
address that. I think without even looking, it is just hard to 
imagine we would solve this problem.
    Senator Whitehouse. Understood. And you would both support 
a carbon fee if it reduced taxes on other productive effort?
    Mr. Holtz-Eakin. I could imagine eliminating the 
corporation income tax and replacing the revenue with a carbon 
fee, yeah.
    Senator Whitehouse. That would be good for the economy?
    Mr. Holtz-Eakin. Yeah.
    Senator Whitehouse. Very good. Thank you.
    Chairman Enzi. Senator Perdue.
    Senator Perdue. I will waive my time, Mr. Chairman. Thank 
you.
    Chairman Enzi. I want to thank the panel for their 
participation, a difficult topic to stay to topic, but I think 
we got a lot of guidance on some things that we can do and 
things that need to be done and ways that the Budget Committee 
can maybe get them started for doing. So thank you for being 
here, and I think everybody has until 6 o'clock tonight to 
submit any questions in hard copy in Dirksen 624, and we would 
hope the witnesses would answer those within 7 days of the 
receipt of the questions.
    So if there is no further business, the hearing is 
adjourned.
    [Whereupon, at 12:00 p.m., the Committee was adjourned.]



  REFORMING THE FEDERAL BUDGET PROCESS: A BIENNIAL APPROACH TO BETTER 
                               BUDGETING

                              ----------                              - 


                      WEDNESDAY, NOVEMBER 4, 2015

                              United States Senate,
                                   Committee on the Budget,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:31 a.m., in 
Room SD-608, Dirksen Senate Office Building, Hon. Michael B. 
Enzi, Chairman of the Committee, presiding.
    Present: Senators Enzi, Grassley, Sessions, Crapo, Portman, 
Ayotte, Perdue, Whitehouse, Warner, Kaine, and King.
    Staff Present: Eric Ueland, Majority Staff Director; and 
Warren Gunnels, Minority Staff Director.

               OPENING STATEMENT OF CHAIRMAN ENZI

    Chairman Enzi. Since it is 10:30, I will call to order the 
Senate Budget Committee for the hearing on ``Reforming the 
Federal Budget Process: A Biennial Approach to Better 
Budgeting.'' Good morning and welcome to the second hearing in 
a series this Committee is holding on reforming the Federal 
budget process.
    In our last hearing, we discussed the serious budget 
challenges our country faces. We all agreed that the current 
budget process is broken and not adequate for the task before 
us. In today's hearing, we will move from defining the problem 
to identifying solutions. We know that an effective budget 
process should follow regular order to provide predictability 
and stability. It should also encourage legislative oversight 
of the entire Federal budget and promote reduced spending and 
increased savings. Moving to a biennial budget cycle would 
improve the current process on all of these fronts.
    The worst-kept secret in Washington is we essentially 
operate on a 2-year budget already. In 2011, 2013, and now in 
2015, Congress has set spending limits for the following two 
fiscal years, but these deals have been negotiated without the 
transparency and predictability that regular order provides.
    True reform of the Federal budget process would formalize 
biennial budgeting and move spending decisions from the shadows 
and into the light where they belong. They would also have many 
other benefits beyond increased transparency.
    A biennial process would create more stability and 
predictability for agencies, for the States, and for local 
governments, and for American citizens that rely on Federal 
funding. They would know and be able to plan for 2 years of 
funding. Under the current process, spending bills are nearly 
always late. We have completed all appropriation bills on time 
in only 4 of the last 40 years. In 15 of those years, we did 
not pass one appropriations bill on time. Instead of well-
considered funding decisions, the Government operates on short-
term spending bills or continuing resolutions. We have had 173 
short-term spending bills since 1977. Biennial budgeting would 
help Congress return to regular order. The legislative floor 
time required to complete the appropriations process would be 
cut in half. Politically difficult spending decisions could be 
made in non-election years, avoiding partisan disputes that 
might otherwise derail full consideration and passage. And 
appropriations would last for 2 years, preventing the annual 
expiration and renegotiation that encourages and delays and 
causes fiscal cliffs. It would also allow agencies and States 
and local governments 2 years of stable planning and spending.
    As appropriation bills are enacted on time and for 2- year 
terms, agency management and efficiency will improve. Under 
habitually late appropriations bills, agency managers must 
submit requests to the OMB for the next fiscal year at the same 
time Congress is still deciding what they will get for the 
current fiscal year. That does not make any sense. And then 
also with the delays, sometimes the cuts that are made in that 
period of time have to be condensed into a shorter period of 
time, which makes them more drastic.
    Two-year appropriations would give managers more certainty 
concerning current funding and a longer timeline to implement 
strategic decisions rather than having to resort to short-term 
reactionary policies. A biennial process would also improve 
Congress' management and oversight of Federal spending. If less 
legislative time were devoted to setting budget targets for the 
next year, more time could be spent on reviewing program 
management. Under an annual cycle, authorizing and 
appropriating committees only have time to assess how much 
money is needed in relation to the previous year rather than 
conducting a systematic review of Federal programs in their 
jurisdiction. This oversight would help make Government more 
accountable by allowing additional time to consider whether 
taxpayer dollars are being spent effectively.
    Congress' energy and attention could also be redirected to 
reviewing all Federal spending. Despite the two-thirds of our 
budget devoted to mandatory spending, the current budget 
process still forces Congress to spend the majority of its time 
each year worrying about annual appropriations that now account 
for one-third of Federal spending.
    While each of the appropriations bills must travel through 
the normal legislative process annually, mandatory programs 
continue to spend and grow unless Congress votes otherwise, 
which we do not have time to do. By taking up less of Congress' 
time with annual appropriations bills, it will have more time 
to focus on the true drivers of spending and debt.
    Despite these benefits and nearly 40 years of strong 
bipartisan support, not one biennial proposal has been enacted 
into law at the Federal level. Today there are few different 
legislative options that would implement a biennial process. In 
just a moment, Senator Isakson will tell us about his proposal 
to require a biennial budget and all biennial appropriations 
bills to be adopted in non- election years. This is a good 
proposal that would go a long way in fixing our broken budget 
process, and I have cosponsored the legislation to show my 
support.
    I have also introduced legislation to establish biennial 
appropriations. When you are dealing with $1 trillion, you 
ought to have more time to consider the actual spending than 
what the current process allows. It is hard to grasp the 
magnitude of millions or billions of dollars let alone 
trillions. Amendments dealing with a million dollars should be 
a big deal. But when framed with the debate over a trillion 
dollar, or as I prefer to call it, a thousand billion dollars 
of annual funding, there really is not enough time to work on 
that level of detail.
    People have become frustrated because of the time it takes 
to fully consider and review all 12 of these huge 
appropriations bills every year. And the level of detail that 
they are able to get into has frustrated me for a long time. 
When I first got here, I was curious about Yellowstone Park and 
why they were running out of money in August. So I asked to see 
what they were spending it on. You cannot get that. Unless you 
now go to the current superintendent, who is superb and has an 
accountant doing the work for the park, you can get that.
    So I am not sure how many different agencies really do not 
have good information for appropriators to make their 
decisions. My legislation would split the appropriations 
process in two parts. In non-election years, we would consider 
biennial appropriations for the more controversial bills. In 
election years, we would consider the less controversial 
biennial bills. This would give Congress more time to review 
where tax dollars are going and make it more likely that the 
process is completed before the start of the fiscal year.
    Support for a biennial budget cycle is broad and it is 
bipartisan. Presidents from both parties have supported the 
concept. Organizations like Third Way, Americans for Tax 
Reform, Bipartisan Policy Center, the Committee for a 
Responsible Federal Budget, and the Partnership for Public 
Service have also endorsed this idea.
    In the House of Representatives, a majority of Members, 
both Democrats and Republicans, are currently cosponsoring 
biennial legislation, and a 2013 Senate amendment calling for 
adoption of biennial budgeting received 68 votes in support. 
That is a super majority of Senators in favor of a 2-year 
process.
    Biennial budgeting has also gained support at the State 
level. In Iowa, Governor Terry Branstad moved the State from an 
annual to a biennial process by demanding that the legislature 
send him spending bills. The Governor credits this move with 
restoring predictability and stability to a budget process that 
is in the midst of crisis. He also noted that it removed the 
incremental cost increases that were creeping into the State's 
base budgets. A witness on our second panel will discuss 
similar successes in Ohio. Twenty States have adopted biennial 
budgeting, and 12 of the Senators of this Committee represent 
biennial States. Such widespread support at the Federal and 
State level proves what we have been saying for decades. Our 
annual appropriations system is broken and incapable of 
providing predictability and proper legislative oversight at 
the Federal level.
    Moving to a biennial process is well vetted, it is 
nonpartisan, and it is a solution that will make our Government 
more accountable and ensure taxpayer dollars are spent 
effectively.
    Since the Ranking Member is not here, we will allow a 
statement from the minority side whenever someone is here for 
them.

               OPENING STATEMENT OF SENATOR KING

    Senator King. Speaking as the Ranking Member on this--
    [Laughter.]
    Senator King. That was a fast ascent, Mr. Chairman. I would 
just echo your comments. I am a former Governor of a State with 
a biennial budget, and it has always struck me as sensible for 
our Federal Government to adopt a similar method, which would 
both give more stability to the funding process but also allow 
the Congress to do more vigorous oversight, which I think 
everyone believes would be in the best interests of the 
country. So I look forward to hearing the witnesses and am 
certainly receptive to their position.
    Thank you.
    Chairman Enzi. And thank you for being here.
    We will now move to the introduction of the witnesses, but 
before I do that, I will mention that it is the tradition in 
the Senate that when colleagues either from the Senate or the 
House are testifying, they are not asked questions following 
their testimony.
    Senator King. Oh, come on, Mr. Chairman.
    [Laughter.]
    Chairman Enzi. However, if you want to submit written 
questions for them, we will pass those on and then circulate 
the answers.
    I want to congratulate the witnesses on something else that 
often does not happen, which is we do have the testimony in 
advance from each of the witnesses so that members of the 
Committee could review those. And I really appreciate that 
extra effort that you went to.
    Senator Isakson is the Chairman of the Veterans' Affairs 
Committee. He is a long-time champion of biennial budgeting and 
the lead sponsor of the Biennial Budgeting and Appropriations 
Act here in the Senate. There are few Senators who have fought 
harder for biennial budgeting, and I am happy to be a cosponsor 
of his legislation.
    Senator Carper is the Ranking Member of the Homeland 
Security and Governmental Affairs Committee and a former 
Governor of Delaware, so he knows how important a predictable, 
stable budget is to effective Government. He is also a 
cosponsor of legislation I have introduced called the 
``Biennial Appropriations Act,'' and I appreciate his support 
on that.
    Congressman David Price represents North Carolina's 4th 
District in the House of Representatives. He currently serves 
on the House Appropriations Committee and is the Ranking Member 
of the Transportation, Housing, and Urban Development 
Appropriations Subcommittee. He is also a member of the 
Appropriations Subcommittee covering homeland security, 
military construction, and veterans' affairs.
    I would mention that Senator Cochran, the Chairman of the 
Senate Appropriations Committee, has submitted testimony, which 
is available to everyone as well.
    So, with that, Senator Isakson?

  STATEMENT OF THE HONORABLE JOHNNY ISAKSON, A UNITED STATES 
               SENATOR FROM THE STATE OF GEORGIA

    Senator Isakson. Well, Chairman Enzi, thank you very much 
for calling this hearing today, and thank you very much for 
your introduction and testimony because you made all the points 
that all of us who look to support biennial budgeting
    have tried to make for years in the United States Senate.
    This is my 34th year in elected office, 17 in the State
    legislature and 17 in Washington, D.C. In the State of 
Georgia, in the legislature where I was an appropriator, we had 
a constitutional prohibition on meeting for longer than 40 
days. We had a constitutional prohibition on deficit spending, 
and bonded indebtedness and debt service could not exceed 10 
percent of the budget. Therefore, we had a good fiscal policy. 
We did not waste time when we were in session, and we did not 
overspend.
    I would submit to you Congress needs the same type of 
imposed self-restraint to begin to handle the money of the 
people of the United States of America in a more responsive 
manner. If we were hired rather than elected, we would have all 
been fired for the way in which we handle the money of the 
people of this country, and I think it is time we changed our 
discipline and changed our restrictions.
    As the Chairman noted, he is a cosponsor of my bill, and I 
am a cosponsor of his. We have 25 cosponsors of S. 150, and I 
appreciate Jeanne Shaheen from New Hampshire being my cosponsor 
as a Democrat on that legislation.
    Sixty-eight Members of the Senate 2 years ago in the budget 
debate adopted this concept as a concept the Senate would like 
to go to. I can tell you from having gone to
    every Member of the United States Senate and talked one on 
one about this bill, almost everybody on the Budget Committee 
favors it, almost every rank-and-file member that is not an 
appropriator favors it, and almost every appropriator does not. 
And it is the fear of the appropriators of giving up something 
by going to a 2-year cycle.
    I want to submit early on in my testimony they are giving 
up absolutely nothing, except to appropriate on a supplemental 
basis when there is a crisis in need in between the 2 years of 
budgeting and appropriating. That is all the appropriators give 
up. And, in fact, if we have a crisis and they need to 
appropriate, it is important that it only be on one subject 
rather than redoing the entire budget or the entire 
appropriations act.
    This idea's concept is based on exactly what the Chairman 
said. If we appropriate in odd-numbered years when we are not 
running for reelection and do oversight in even- numbered 
years, then instead of bragging about how much bacon we are 
bringing home when we go back to campaign, we brag about how 
much money we saved because of quality oversight. Every one of 
us in the Senate knows this fact to be true. There is little, 
if any, oversight of the spending of Federal money in the 
Congress of the United States of America. We cannot even get 
our appropriations acts passed within time, much less get an 
oversight bill done in time.
    It is time we change the rules by which we govern ourselves 
to see to it we do the oversight that is necessary to 
efficiently and effectively spend the $3.7 trillion taxpayer 
dollars we spend every year. And as the Chairman said, that 
oversight does not just mean discretionary spending. It means 
mandatory spending as well, because we all know the way to 
reduce our debt and our deficit over time is to reduce our 
mandated spending by reforming Social Security, reforming 
Medicare, and reforming a lot of other programs which we will 
best do if we dedicate ourselves to oversight.
    So I will just simply say this: I have been elected to 
office for 30 years. I have operated under rules. I have 
operated where there are no rules in the United States. And I 
personally prefer having the rules that make me do what I am 
supposed to do rather than leaving me to my own devices. After 
all, it is our people's money. It is not our money. It is our 
country. It is not anybody else's country. And if we will begin 
to put in place the disciplines we need to put in that you did 
in your shoe store and I did in my real estate company when we 
ran a business and had to balance budgets, we would be a lot 
better off. And I submit to you the biennial budget is the best 
process to move America forward to better fiscal 
accountability, less deficit spending, and a richer, more 
robust future for our children and our grandchildren. And I 
thank the Committee for its time and its willingness to allow 
us to testify today.
    [The prepared statement of Senator Isakson follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
    
    
    Chairman Enzi. Thank you for your testimony, both oral, 
which is well prepared, and the written, which is well 
prepared.
    Senator Carper?

 STATEMENT OF THE HONORABLE THOMAS R. CARPER, A UNITED STATES 
               SENATOR FROM THE STATE OF DELAWARE

    Senator Carper. Thanks, Mr. Chairman, and thanks to you and 
to your colleagues, our colleagues on the Budget Committee. It 
is nice to be with all of you today. And it is great to be with 
Senator Isakson and my former compadre in the U.S. House of 
Representatives, David Price. I have known David for over 30 
years. He has never changed. He looks just the same. I do not 
know how. Either he got old early or he is just well preserved.
    [Laughter.]
    Senator Carper. It is great to see you, David.
    I want to go back in time a little. Sometimes, as Angus 
knows, I call myself, I refer to myself as a ``recovering 
Governor.'' And we have a support group for recovering 
Governors around here that meets pretty often. But before I was 
a recovering Governor, I was a recovering State treasurer, and 
I got elected State treasurer when I was 29 in Delaware. And at 
the time, Pete du Pont was elected Governor that same year, in 
1976. He turned out to be a terrific Governor. But we had the 
worst credit rating in America. We were ranked dead last, Baa1. 
We were tied with Puerto Rico. The folks in Puerto Rico were 
embarrassed to be in the same company with us. We were the best 
in the country among the 50 States in overestimating revenues 
and underestimating spending. That is how we got the worst 
credit rating. We had no cash management system. We had nothing 
in the pension fund. We had a 19.6 percent marginal personal 
income tax rate. We had the lowest startup of new businesses of 
any State in the country. We paid our bills by issuing tax-
exempt revenue anticipation notes. Imagine that. That is how we 
met payroll. That is how we met our pension payments on a 
monthly basis until the revenues actually came in in the 
spring.
    We did not move to a biennial budget process, but what we 
did under the leadership of Pete du Pont--and we had Democrats 
and Republicans in the legislature who were part of this. I 
hope that I helped a little bit as State treasurer. But we did 
move to a number of changes in our budget process. We could 
only appropriate three-fifths of the revenues that we 
anticipated. We put together actually a sound revenue 
forecasting system, not one that was jury- rigged by us and 
those in the legislature.
    In order to raise revenues, when we raised taxes, you 
needed a three-fifths vote. We created a rainy day fund that 
could not be violated or used for just any old reason. We have 
never taken a dime out of that rainy day fund since that time.
    So I say all this in order to say that we can have sound 
budgeting in a State without having a biennial budgeting 
process. But a lot of States have done it, and a lot of States 
have done it to good effect. I think the key is to find out 
what works and do more of that. And around here, the system we 
have does not work.
    I was a House Member--I do not know if David and I were 
House Members were together, but Jim Wright was elected Speaker 
of the House, and when he became Speaker of the House, he said, 
``We are going to pass every single appropriations bill next 
year.'' Every one, on time, signed by the President, Democratic 
Senate, Democratic House, and a Republican Governor. And you 
know what? We did. We did.
    So I would just suggest to all of us, one of the keys to 
getting things done like this is to have the kind of leadership 
that is committed and you have folks who work together in the 
House and the Senate toward a mutual purpose, and hopefully 
with the Chief Executive.
    I was just downstairs having a hearing in the Homeland
    Security Committee on a voucher program here in the D.C. 
area, looking at it and seeing how it is working with Federal 
money. And I reminded my colleagues of a hearing that you and 
I, Mr. Chairman, were in a couple of years ago in the Finance 
Committee where Alan Blinder was our witness. The subject of 
the hearing was what to do about our fiscal mess in the Federal 
Government. Alan Blinder now teaches economics at Princeton. He 
used to be Vice Chairman of the Federal Reserve when Alan 
Greenspan was Chairman. He testified that unless we get our 
arms around the health care costs in this country, we are 
doomed. He talked about Medicare, Medicaid, and other aspects 
of that, and he said that was the biggest challenge. When I 
asked my question of him, I asked him what should we do about 
it. What should we do about that? He said--here is what he 
said. He said, ``I am not a health economist. I do not pretend 
to be an expert about this. But if I were you, here is what I 
would do. I would find out what works and do more of that.'' 
That is all he said. And I said, ``Do you mean find out what 
does not work and do less of that?'' He said, ``Yes.''
    Well, we can look at the States, which are the laboratories 
of democracy, and find out what seems to be working pretty well 
for them. I applaud Senator Enzi and Senator Isakson and others 
for providing the leadership to say let us look at those 
things, let us look at those laboratories of democracy and see 
if there are other things, whether it is from Delaware, North 
Carolina, whether it is from Maine or Virginia or whatever 
State it is from, and find out what is working and do more of 
that. A longer budget cycle does allow for greater long-term 
strategic planning for both legislatures and Federal agencies. 
It also encourages and ensures greater certainty and 
predictability for agency officials who are tasked with 
implementing legislative decisions. And, in addition, a 2- year 
appropriations process allows for more time, for more thorough 
program evaluation and oversight during the second year, 
ensuring better informed decisions about program spending in 
the budget cycle that follows.
    I am proud to be a cosponsor of your bill, and I would be 
proud to be a cosponsor of your bill, Senator Isakson, if I am 
not already. And I would call on us in Congress to see what we 
can learn from both of you and other efforts to improve this 
process.
    Again, find out what works and do more of that. Find out 
what does not work and do less of that.
    What did Einstein used to say? Einstein said a lot of 
things that are memorable. But my favorite was the definition 
of insanity? Do you remember that one? Doing the same thing 
over and over again and getting a different result. He was 
right, and still is.
    Thanks so much for the chance to come by and put a 
spotlight on the way our appropriations process could be made 
more effective, and my hope is that we will be in a position to 
give it a shot. Thank you.
    [The prepared statement of Senator Carper follows:]
    
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    Chairman Enzi. Thank you for coming and for leaving the 
other Committee, which you are the Ranking Member of. I 
appreciate that.
    Congressman Price?

STATEMENT OF THE HONORABLE DAVID E. PRICE, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Price. Thank you, Mr. Chairman. It is a pleasure to be 
here with you and your colleagues and with these two renegade 
House Members. Mr. Isakson and Mr. Carper are both good 
friends.
    I would like to request that my full statement be put in 
the record. I will give an abbreviated account.
    Chairman Enzi. Without objection.
    Mr. Price. I remember first testifying about biennial 
budgeting something like 15 years ago before the House Rules 
Committee, and we were considering legislation to transition 
Congress to a biennial appropriations process. Then our 
Nation's fiscal situation was quite different than it is now. 
We had had multi-year budget agreements in 1990, 1993, 1997, 
coupled with a growing economy that had produced several years 
of balanced budgets. It allowed us to pay down more than $400 
billion of the national debt.
    Well, needless to say, we are now in a very different 
situation. Since the 1990s, we have had trillions of dollars in 
lost tax revenue, two unpaid-for wars, a necessary but 
expensive countercyclical response to the Great Recession, and 
most recently 5 years of extremely partisan and largely 
dysfunctional congressional budget politics. So it is 
understandable that the idea of biennial budgeting would once 
again hold some appeal for members in search of solutions to 
our current woes. But my position here today is that this is a 
case where we better be careful. The remedy might well be worse 
than the disease.
    Now, I am the first to agree that the congressional budget 
and appropriations processes have eroded significantly in 
recent years. The pressures of divided Government and a 
polarized electorate, the general subjugation of Congress' 
``power of the purse'' to partisan political forces, all this 
has greatly delayed the enactment of our annual spending bills, 
increased our reliance on continuing resolutions and omnibus 
packages, not to mention the damage that has been done by the 
consolidation of power within leadership circles at the expense 
of Appropriations and other committees.
    But biennial budgeting, by which I mean biennial 
appropriations, would do nothing to address the underlying 
causes of this dysfunction and would likely make matters worse 
by weakening congressional oversight of the executive, jacking 
up even more decisions to the leadership of both parties, and 
increasing our reliance on supplemental appropriations bills 
considered outside the regular order.
    I should stress that the same argument does not necessarily 
apply to a multi-year budget agreement or to a 2-year budget 
resolution of the sort that we passed last week. My argument 
this morning applies to the 12 appropriations bills that must 
be passed under any budget agreement regardless of its 
duration.
    Now, proponents of biennial budgeting claim that it would 
free up Congress to conduct oversight in the off-year. That is 
a supremely ironic claim because the most careful and effective 
oversight Congress conducts is through the annual 
appropriations process. When an agency's performance and needs 
are reviewed program by program, line by line, off-year 
oversight would be less effective, not more effective, because 
it would be further removed from actual funding decisions. 
Congress' leverage would be far, far less.
    Supporters sometimes note that four recent Presidents-- 
both Bushes, Bill Clinton, and Ronald Reagan--all favored 
biennial appropriations. Why should that surprise anybody? If 
this suggests that the proposal is not a partisan issue, it 
should warn us that it is definitely an institutional issue. It 
should be obvious why Presidents would support a free pass 
every other year from a legislative process that could make or 
break an administration's agenda--for the same reason they 
support the line-item veto, they support a ban on congressional 
earmarks. Republican and Democratic Presidents support all 
those things because they weaken Congress' authority vis-a-vis 
the executive branch.
    Now, it is often asserted that opponents of biennial 
budgeting are merely defenders of Appropriations Committees' 
turf. I am a senior appropriator, so I am sensitive to those 
charges. But the annual work of appropriations serves the 
entire institution and its place in the constitutional balance 
of power, regardless of who is President. I agree that the 
appropriations process must be held accountable to Congress and 
the country. But here, too, I fail to see why biennial 
budgeting would deliver that result.
    Asking agencies to put forward a budget request for the 
second year of a 2-year cycle as many as 28 months in advance 
would require a level of advance planning and foresight that 
may not be possible or realistic, especially given the 
uncertainty of revenue and expenditure projections and the 
constantly evolving challenges the Federal Government must 
tackle.
    So faced with outdated and unworkable funding levels for 
individual programs in the second year of a biennial 
appropriation, each Federal department would be forced to 
present the Appropriations Committees with countless requests 
to reallocate, or ``reprogram,'' their annual budgets. 
Typically, these requests are granted or denied solely by the 
Appropriations Subcommittee Chairman and Ranking Member. There 
is no debate, there are no amendments, there are no votes, 
there is no public scrutiny.
    Off-year budget problems that could not be handled through 
reprogramming would necessitate supplemental appropriations 
bills. We already enact supplemental bills when unforeseen 
needs crop up. Budgeting 2 years in advance would only lead to 
a greater mismatch between the country's needs and agency 
budgets. In fact, the whole purpose of a biennial budget could 
be undermined by the proliferation of supplementals in the off-
year.
    So, perversely, we would have replaced the deliberative and 
democratic process of annual appropriations with supplemental 
bills that are sporadic, rushed, and heavily controlled by 
leadership.
    So for reasons practical as well as institutional, biennial 
budgeting is not really any better an idea today than it was 15 
years ago. It would be a mistake to allow recent budget 
disagreements to lure us toward a supposed ``remedy'' that 
would make the appropriations process less systematic, less 
flexible, and less potent.
    Finally, Mr. Chairman, we all know that the congressional 
budget process has broken down. For years, we have passed 
unrealistic, ideologically driven budget resolutions that not 
only make bipartisanship impossible; they sometimes make 
appropriations itself impossible. This year, once again, it is 
only in the face of a Government shutdown that we have revised 
our budget resolution to enable us to stitch these 12 
appropriations bills together into an omnibus bill 3 months 
into the fiscal year. And that is currently our best-case 
scenario.
    But, tell me, what of any of this would biennial budgeting 
fix? It might make it worse. What we have got to do is muster 
the political will to make difficult and politically costly 
decisions, including a comprehensive budget plan that addresses 
the main drivers--the main drivers--of our deficits and debt, 
namely, tax expenditures and entitlement spending. So I urge 
colleagues to reject the siren song of biennial budgeting. We 
should all redouble our efforts to address instead the 
underlying causes of our long-term fiscal challenges.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Price follows:]
    
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    Chairman Enzi. Thank you.
    Senator Carper. Mr. Chairman, could I ask unanimous consent 
that my full statement be made a part of the record.
    Chairman Enzi. Actually, all of the statements will be a 
part of the record. I appreciate you submitting them in 
advance.
    Senator Carper. And, Mr. Chairman, could I just have 15 
seconds to just say one quick thing and sort of thinking 
through what David just said, please? You know, we have all 
these States that are doing biennial budgeting, and it gives us 
an opportunity to kick the tires and see if it works for 
States. The legislation I think that you have introduced and 
that Johnny has introduced would, as I understand it, move us 
to biennial budgets with the Government sort of like at once. 
And I was just in a high school not long ago. There was a 
charter school, a Marine Corps charter school in Dover, near 
Dover, and this year is 9th and 10th grade, next year 11th 
grade, next year they added 12th grade. We have seen this in 
schools in our States. The idea of like moving--if we are going 
to do something, let us try it on. The idea of maybe to pick 
like one appropriations bill and do like one of them, a handful 
of departments on a biennial basis, and if it works, then maybe 
try two, and three and four and five, like phase it in. I do 
not know if that is a good idea or not, but that might be food 
for thought.
    Thanks so much.
    Chairman Enzi. I appreciate any ideas. That is what this 
Committee is about, is collecting ideas on how we can do the 
budgeting and the spending in a better way.
    As I mentioned before, it is typical that we do not give 
questions to colleagues at the hearing. But if any of you want 
to address written comment, written questions, those should be 
submitted by the end of business tomorrow, and we will pass 
that on to them and ask for as speedy an answer as possible on 
it. I thank you for taking the time out of your busy days for 
the testimony and all of the ideas that you put forward.
    I would mention that Senator Cochran, the Chairman of the 
Senate Appropriations Committee, was unable to join us this 
morning, but he submitted a statement for the record about his 
concerns regarding biennial budgeting, which go along with 
Congressman Price's concerns, and I ask unanimous consent to 
have his statement appear in the record in its entirety and 
would allow questions for him as well. Without objection.
    Chairman Enzi. While we are setting up for the next panel, 
I will introduce the two additional witnesses appearing before 
the Committee this morning.
    Bill Batchelder joins us from The Buckeye Institute in 
Ohio. Before that, he served in the Ohio House of 
Representatives for more than 30 years. Most recently, he was 
the Speaker of the House and worked with Governor Kasich's 
Administration to pass responsible budgets that balanced 
billion-dollar deficits.
    And Bob Bixby is the executive director of The Concord 
Coalition where he has worked for over 20 years. His 
nonpartisan organization encourages and educates the public 
about the Federal budget and the need to protect our children 
and future generations from excessive Government debt.
    So we will start with Speaker Batchelder.

  STATEMENT OF THE HONORABLE WILLIAM G. BATCHELDER III, EDWIN 
    MEESE III DISTINGUISHED FELLOW, THE BUCKEYE INSTITUTE, 
       COLUMBUS, OHIO, AND FORMER SPEAKER, OHIO HOUSE OF 
                        REPRESENTATIVES

    Mr. Batchelder. Thank you, Mr. Chairman, members of the 
Committee, and the gentleman from Rhode Island. The opportunity 
to speak to this question is particularly interesting because 
we have had this system for a number of years, beginning in 
1908, and it has resulted in our ability to keep a handle on 
Government spending as well as budgeting and the timelines on 
budgeting. Having been Speaker, I serve now as the Edwin Meese 
III Distinguished Fellow at The Buckeye Institute in Columbus. 
I was in the House of Representatives for 38 years.
    We have seen everybody in the budgeting field do something 
wrong at least once, and that includes all Governors and all 
members of the legislature. I am here to tell you today that 
budgets of a biennial nature have worked well to protect Ohio 
taxpayers and to avoid crisis budgeting.
    When I was in the legislature, we did not have a budget 
crisis every year because our system of biennial budgeting 
provides a great deal of flexibility in handling emergencies, 
but at the same time requires us to use foresight and to look 
at what will happen if certain things are done in the process 
instead of having the 2-year budget.
    For example, in the 1980s, we had a group of savings and 
loan banks which got in trouble. We had a private insurance 
system. They ran out of money. I was on the Banking Committee 
where I received a call from then-Governor Richard Celeste. He 
was of the other faith, but he knew that I had paid attention 
to what was going on in the banking area. We were faced with a 
situation in which there would be a series of bankruptcies 
because of the weakness of the private effort to provide 
insurance, like FSLIC, only this was a private system.
    Working together in a bipartisan fashion, we solved the 
problem because we had anticipated difficulties in the passage 
of the first budget. What we did, in effect, was to set aside 
money in that budget in the event that there was a series of 
insolvencies. Those occurred in Colorado and Maryland, if I 
recall correctly, but because of the budget technique that we 
were using, we were in a position to save people who had their 
life savings placed in building and loans which were, 
unfortunately, part of a private insurance system. States with 
annual budgets had a harder time solving problems than we did. 
Those two I mentioned were among them.
    Biennial budgets are not new. They have withstood the test 
of time. Ohio has had biennial budgeting since, as I said, the 
early 1900s. We are now a full-time legislature, and not having 
annual budgeting means that we can devote a whole year to 
setting priorities and adapt to the concerns of Ohio citizens.
    In my last year as Speaker, we did not have to do an annual 
budget, which enabled us to deal with issues that were 
challenging, some of the municipalities, because of the tight 
national economy, and as a result of that, we did some things 
that were imaginative and I think helpful in the long term to 
the State. We had a piece of legislation on mens rea which was 
very complicated. Those of us who are lawyers loved it. 
Everybody else took a bye. But I am not sure that a great and 
bipartisan bill like that could have been approved had we had a 
battle over the annual budget prior to its passage.
    We are also flexible when we get a new problem. We have had 
a drug epidemic, and I know many of you in your States have had 
the same thing. I had two freshmen who were really concerned 
about it. They were younger, and so we set up in the second 
year of our budget, we set up hearings all across the State so 
that we could find out from medical professionals, from law 
enforcement, and others what it was that needed to be done 
about the problem that we faced. They were freshmen. They were 
freshmen, but they absolutely devoted themselves to statewide 
travel and taking testimony. Without the ability and the 
flexibility that you get in a biennial budget, they would 
probably still have been trying to figure out the budget.
    It also offers stability and certainty, which is good for 
businesses, and it is good for taxpayers and for planning for 
the future. We do not have very many crises in Ohio. Only twice 
since 1990 have we missed our budget deadline, and that was 
because of recession. Fiscal emergencies are bad for budgeting. 
In times of crisis, deals get struck which mean wasteful 
spending, and you do not have an oversight on spending. Every 
Governor I have worked with has hidden money, and with more 
time, we can make sure that money is not then wasted on issues 
that have not been examined.
    Agencies that receive State spending--in Ohio, the public 
schools in particular and the criminal justice system--can be 
more efficient because they know what their budget will be for 
a 2-year period. They can hear the train whistle before they 
get hit. I personally believe that we avoid wasting resources 
trying to get more money. Instead, we have more time to do the 
job in law enforcement, construction, and education.
    The key to successful budgeting is strong leadership and 
coordination between the General Assembly and the Governor. The 
Governor submits a budget. The House really does most of the 
work in Ohio. After our budget, we then meet with the Senate to 
work out differences. Obviously, there are always differences. 
Ideally, you want to get the budget completed on time and then 
leave it alone for 2 years. We only needed to worry about the 
budget in the off- year because there was a recession or an 
economic downturn.
    In summary, biennial budgeting allowed me to have more time 
to help Ohio instead of fighting over spending every year. If 
there was a real problem, we fixed it. I could talk the budget 
over with my colleagues from the opposite party. We simply had 
more time to put thought into the process.
    Biennial budgeting is not necessarily a miracle cure- all, 
but certainly it can lead to a better and more thoughtful 
process, increased stability and certainty. And I want to thank 
you again for the opportunity to be with the members of this 
Committee on this very important challenge that we face.
    [The prepared statement of Mr. Batchelder follows:] 
    
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    Chairman Enzi. Thank you for your testimony.
    Mr. Bixby.

 STATEMENT OF ROBERT L. BIXBY, EXECUTIVE DIRECTOR, THE CONCORD 
                           COALITION

    Mr. Bixby. Well, good morning, Mr. Chairman and members of 
the Committee. Thank you for inviting me here today to discuss 
ways to reform our broken budget process.
    Given the frequent breakdown of the budget process in 
recent years, The Concord Coalition commends you and the 
Committee for devoting attention to improving the process in 
ways that will produce more informed, thoughtful, and far- 
sighted decisions. In that regard, I would like to express The 
Concord Coalition's strong support for moving to a 2-year 
budget cycle.
    Mr. Chairman, I think I agree with almost everything you 
said. I would like to be associated with the remarks of the 
Chairman in his opening statement, and I will make several of 
the same points.
    A 2-year cycle would lengthen the scope of the budgetary 
decisionmaking process, allowing for a more strategic approach. 
Ideally, the first session of each Congress would be spent 
setting priorities and establishing funding levels. The second 
session would be devoted to long-term planning and oversight.
    The Federal budget is a statement of political values as 
well as a management tool, and the individuals expressing those 
values through the budget resolution are elected on 2- year 
cycles in the other body. But we all function in the whole 
Congress on 2-year cycles. It is logical, therefore, that 
Congress should adopt one statement of priorities for each full 
cycle.
    When you look at appropriations bills, historically 
Congresses have been twice as successful at budgeting during 
their first session than during their second. Over the past 18 
Congresses, 10 have passed more appropriations bills on time in 
the first year compared to 5 in the second year. Given that 
track record, it is hard to defend the idea of repeating the 
entire Federal budget process and appropriations process in the 
second year of each Congress.
    Having time for greater oversight would certainly help to 
further the cause of a more efficient Government in which 
programs are evaluated on their merits and extended 
strategically, not simply extended by default because no one 
has the time to ask whether or not they are still working or 
are needed.
    The Congressional Budget Office estimates that roughly $300 
billion per year was appropriated for programs with expired 
authorizations in both fiscal years 2014 and 2015, and that 
number has been growing.
    The value of building in time for adequate planning and 
oversight would go far beyond the dollars saved. Our Nation's 
fiscal challenges require policymakers to evaluate existing 
programs and eliminate those that are no longer needed, 
ineffective, or are unaffordable.
    To me, this is a crucial step in restoring public trust in 
Government. There is no question that the public right now has 
a low regard for the process of the budget, as well as other 
things, but I think getting back to a more regular budget 
process where they see that the public dollars are being 
treated more respectfully and wisely would help restore trust. 
And that is really going to be needed because our really big 
problems are with the entitlement programs and the Tax Code. I 
think it is going to be very difficult to make those tough 
decisions with the public being so distrustful of the way money 
is handled around here, so restoring trust in the budget 
process I think is a real precursor to the more difficult 
choices that we are going to have to make.
    So it would be particularly useful for Congress to devote 
enhanced scrutiny to the mandatory spending. It is not reviewed 
in the annual appropriations process, and it has been an 
alarming trait in the past 40 years that Congress has spent an 
ever growing amount of time on an ever shrinking fraction of 
the Federal budget. The mandatory spending programs already 
consume around 60 percent of every dollar spent, and that is 
projected to grow more quickly than the economy and at a faster 
rate than the resources allocated to pay for them. So this is 
not sustainable over the long term, and we need to focus more 
attention on that.
    Congress could also use biennial budgeting as an 
opportunity to give lawmakers more time to conduct needed 
oversight of the special provisions, loopholes, exclusions, 
preferences in the Tax Code, sometimes referred to as ``tax 
expenditures'' or ``tax entitlements,'' because economically 
they function similarly to direct spending programs. These tax 
provisions add up to over $1 trillion a year, and like 
mandatory spending, they avoid the scrutiny of the 
appropriations process and grow on autopilot.
    Critics of biennial budgeting simultaneously argue that it 
would become both a fiscal straitjacket and an excuse for 
uncontrollable supplemental appropriations. In fact, it would 
be neither, or at least it need not be either of those. You 
could still enact a corrections bill in the second year, but 
such changes, barring major events like a war or economic 
recession, are likely to be modest and would not necessarily 
require extensive review.
    A biennial cycle will work as long as realistic 
discretionary spending assumptions are used in the 
congressional budget resolutions, rosy economic assumptions are 
avoided, and a mechanism is in place to consider second session 
updates if needed.
    Process reform obviously cannot serve as a substitute for 
the real and challenging budget choices we need to make, but it 
can create the space for those choices to be made. The 
realities our Nation faces are far different today than they 
were about 30 years ago with the budget process, but neither 
the budget itself nor the process to create it reflects these 
changes, and I strongly encourage you to consider this reality.
    Biennial budgeting is certainly not a panacea, but I do not 
think it needs to be in order to be a better idea than what we 
are doing now. So I thank you again for inviting me to testify 
on this important issue, and I look forward to taking any 
questions you may have.
    [The prepared statement of Mr. Bixby follows:] 
    
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    Chairman Enzi. Thank you very much. I want to thank both of 
you for testifying, and we will have a round of 5- minute 
questions in order of where they were at the gavel or their 
order of arrival. I get to begin, and I would mention that 
Wyoming has a biennial budgeting session. We meet 40 days one 
year and 20 days the next year, and the 20-day session is the 
budget session. Of course, that is all we do is budget. You can 
bring up legislation, but the legislation requires a two-thirds 
vote of the body with no debate. So seldom is anything able to 
pass that unless it is an emergency. But we have balanced the 
budget and done some of those rainy-day account things that 
Senator Carper talked about, which have never been touched. It 
has never rained that hard in Wyoming. We are kind of a dry 
State.
    [Laughter.]
    Chairman Enzi. I will begin with Speaker Batchelder. 
Congress' adoption of late appropriations bills and the 
frequent short-term funding bills, the extensions, how does 
that uncertainty affect State governments and private 
organizations like the colleges and the universities in your 
State? Do you have to deal with that as an emergency basis when 
we delay?
    Mr. Batchelder. We have a Governor who is somewhat tight-
fisted by his Washington training, John Kasich, and we try to 
avoid that and have done so. But you are correct. We do have 
problems particularly with the colleges and universities, which 
are results of young people not having adequate funds or 
scholarship help to go to our various State institutions.
    We do, however, provide funds to the operation which runs 
the State colleges, the Board of Regents, and that money is 
available to them in the event that there is some untoward 
circumstance that occurs. But basically that is not a problem. 
Our problem would be more in the primary secondary schools. If 
people do not renew our voted millage, then we face a 
difficulty, obviously. But most of the private--pardon me. Most 
of the primary secondary actually anticipate that and start 
raising those issues early enough that we ordinarily do not 
have to bail them out.
    Chairman Enzi. Okay. Thank you.
    Mr. Bixby, a Gallup survey fielded in February asked 
whether the responses approved of the way Congress is 
conducting its business, and only 20 percent of those polled 
said yes, and I think that was our best poll. Do you think 
Americans' low opinion of Congress is a reflection of our 
inability to pass spending bills under regular order? Would the 
biennial budget restore predictability? Would it help public 
trust in our institutions?
    Mr. Bixby. Well, I think it would, and 20 percent strikes 
me as high--
    Senator Whitehouse. Microphone.
    Mr. Bixby. Oh, I am sorry. Twenty percent strikes me as 
high, so maybe that is a bit of good news. But I do think that 
the budget process is--because I spend a lot of time around the 
country going to--you know, conducting budget exercises and 
talking to people about the budget. And I do think that a lot 
of the frustration people feel is as a result of the budget 
process. They hear about bills not being passed and wonder why 
the Government might shut down or nobody knows what is going to 
happen with the debt limit. And it is a very high profile 
reflection of a system that is not working.
    So sometimes I really think that budget process reform, 
while it seems rather dull on its face, saying those words 
sounds kind of dull, is a key to regaining public trust. If 
people begin to see an orderly budget process and that their 
dollars are being dealt with more wisely and thoughtfully and 
the process is running on time, I think that it would help 
restore public trust that Congress will need to make far more 
difficult budget choices. And, look, the process is definitely 
broken. I agree with the adage, ``If it ain't broke, don't fix 
it.'' But that is not what we are dealing with here. It is 
broken, and so we do need to fix it.
    And so the idea really is, you know, I think we have an 
opportunity here to come up with a new budget process that, you 
know, seems to be more rational on its face and more, you know, 
oriented towards long-term planning.
    So, yes, I do think it could have benefits beyond just 
dollars saved or ``efficiency.''
    Chairman Enzi. Thank you. My time is almost up.
    I will yield to Senator King, followed by Senator Ayotte. 
Senator King?
    Senator King. Mr. Batchelder, it seems to me one of the 
most important things you said is that legislatures have no 
shortage of problems to deal with, so why deal with the same 
problem every year when you can deal with it every other year 
and use the time otherwise? Is that your experience in Ohio?
    Mr. Batchelder. Not really. In Ohio, I have had interim 
efforts when we are not in session. I sent those two young men 
out to look at the drug problem, and our new Speaker spent a 
great deal of time when we were out of session dealing with the 
problems of higher education, particularly the financial 
problems that students are having. And so we do get around the 
problems by addressing them in the off-season, as it were.
    Senator King. Well, that was my point, that by not having 
to do the budget every year, you freed up legislative time to 
deal with other issues.
    Mr. Batchelder. That is correct. But, obviously, if we were 
in an annual appropriations situation, then you would have a 
whole different set of problems that would arise as a result of 
the inability of the members to get together on issues and to 
work through them, in my opinion. I have had a nice career of 
being a friend of both caucuses, and as a result of that, we 
are able to anticipate problems and take care of them in the 
biennial budget.
    Senator King. Mr. Bixby, you have been watching the Federal 
budget process for some years. It strikes me that we are in the 
middle of the second Federal biennial budget. The Murray-Ryan 
was 2 years, and the agreement reached just the other night is 
2 years. So, in effect, we are doing it. And what you are 
suggesting is that should be the regular part of the process, 
that we are doing it and I think everyone would agree that it 
made it a lot easier around here knowing that we had the 
certainty of 2 years. But it did not compromise the 
appropriations process because the appropriations have to be 
done within those overall budget levels.
    It seems to me we have had our trial run, in effect, and it 
seems to be working.
    Mr. Bixby. Yes, I think we have had an experiment by 
default, biennial budgeting by default. And so moving 
explicitly to a biennial budgeting process would not be a 
radical change. It would almost be confirming what we have 
stumbled into. And perhaps it has been a stumble, but I do not 
think it is an accident that the last two budget agreements 
have been 2-year agreements. It makes sense. And so when you 
have Democrats and Republicans negotiating a budget deal, doing 
it over a 2-year period makes sense. It gives a certain amount 
of stability. You have got budget caps in place, and the 
appropriators can, you know, make decisions, as they should, 
about what happens beneath those caps.
    So, yes, I think we are--we are looking at four fiscal 
years in a row where we will, in effect, have been governed by 
a 2-year budget.
    Senator King. How would you feel about a proposal--and 
there are various proposals, as you know, that have been 
submitted--where you had a biennial budget but single-year 
appropriations? In other words, you would set the overall 
budget limit for 2 years, but then the Appropriations Committee 
would still do the allocation within those numbers on an annual 
basis. That might be a way of finding a solution that we could 
find consensus on here. I am not advocating it. I am just 
interested in your view, both of you.
    Mr. Bixby. Well, from my view, as kind of a biennial 
budgeting purist, you might not get as much of the benefit of 
the biennial budgeting. You would for the 2-year budget, as we 
are doing now. If you went through still an annual 
appropriations bill, a lot of the time for oversight and that 
sort of thing that we are talking about would probably be lost, 
so you would not get--most of the time is spent on the annual 
appropriations, not the budget itself.
    Senator King. Mr. Batchelder, what are your thoughts about 
that hybrid?
    Mr. Batchelder. I have not examined that, even though I was 
hanging out there for 38 years. But I would think that the--I 
can see that there would be some pluses, but I think the system 
that we have used--when Kasich became Governor, I became 
Speaker. We had an $8 billion deficit. And that is 18 percent 
of the State budget. So we had to move lightly and quickly to 
get that taken care of. We did pass a balanced budget. It was 
more partisan than I had hoped. All of my party voted in favor 
of that budget. The other party, with two exceptions, voted 
against it. But I think part of this has to do with the focus 
that you do get on budget issues in terms of priorities and so 
forth. If you could have time to send people out--our new 
Speaker, for example, I sent him out to the universities to 
meet with the presidents, and we have a carload of universities 
in the State of Ohio. And he was able to profit by that and 
participate in the making of the budget in an in-depth way that 
a freshman ordinarily would not have had.
    Senator King. Thank you, gentlemen.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you.
    Next will be Ms. Ayotte, followed by Senator Warner.
    Senator Ayotte. Thank you, Chairman.
    Speaker Batchelder, do you have a balanced budget 
requirement in Ohio?
    Mr. Batchelder. Yes. We have had occasions, obviously, over 
the period of time that I have been there where they were 
observed perhaps in the absence of action, but basically both 
parties adopt that as their approach.
    Senator Ayotte. And does that help contribute, obviously, 
to what you have to come up with in terms of limitations?
    Mr. Batchelder. Indeed.
    Senator Ayotte. Also, in terms of this biennial budget--and 
let me just say I am a cosponsor of this. New Hampshire has a 
biennial budget process like many States, and I think that it 
is a very effective process. But to the point that is being 
raised about separating the budget from the appropriations, I 
guess my concern would be about that, and I wanted to maybe ask 
Mr. Bixby about this. If we separate the budget from the 
appropriations, I just do not see how the oversight gets done 
because we are still in this continuous appropriations process 
as opposed to using the second year to really look at, okay, 
what is working, what has not worked; otherwise, you are just 
constantly appropriating. I want to get--if you had a 
preference, do you prefer that we just take the unified 
approach?
    Mr. Bixby. Yes. I would think that the benefits of biennial 
budgeting mostly come from doing the appropriations once for a 
2-year term.
    Senator Ayotte. Right.
    Mr. Bixby. That is what frees up the time.
    Senator Ayotte. The time, because we are actually--if you 
look at the work we did on the Budget Committee this year 
putting together a budget, we were pretty--we had a time 
deadline that we had to follow under the Budget Act, and we did 
our work in a pretty efficient time period. And so the budget 
process took up a lot less time that I see, obviously, the 
appropriations process or the 12 appropriations bills overall. 
And the appropriations are really where the rubber meets the 
road in terms of what programs you are going to fund within the 
overall number.
    And one of the things that has frustrated me over the 
years, too, is that we have a Government Accountability Office 
that does audits and does some really good work on some ideas 
on which programs are performing, which programs have issues, 
and yet too many of those reports sit on the shelf.
    Do you see an opportunity in this process, if we did have 
the second year in oversight, to more effectively take up the 
work that has been done of that agency auditing programs and 
saying here are things you should be addressing if we were to 
move to this process? I would have either of you comment on 
that.
    Mr. Batchelder. My sense would be that you apparently have 
something working for you which was like our old Legislative 
Budget Office, and we had very good success with that. And, in 
fact, I was disappointed because that budget office was done 
away with. That was a legislative tool. We hear enough from the 
Governor about the budget. He is traveling from city to city 
informing--
    Senator Ayotte. He is traveling in my State, too.
    [Laughter.]
    Mr. Batchelder. I understand. But I think that that kind of 
an approach is superior to what we are doing now, which is 
relying on the Governor to send the budget, and then he sends 
new taxes. He and I--in Ohio, we have been blessed with a whole 
new source of funds. We hit oil. And as a result of that, the 
Governor wanted to put a severance tax into effect. And it 
seemed to me what we needed to do was encourage everybody who 
wanted to drill holes in the ground to do so. And that did not 
involve taxing them. The LBO would probably have been against 
doing that until we had a good sense of what the prospect was 
going to be in that particular area.
    Senator Ayotte. What do you think about the GAO role and us 
using their work more if we had more oversight?
    Mr. Batchelder. Oh, I think it would be terrific. I think 
that they put out some--
    Senator Ayotte. Some really good work.
    Mr. Batchelder. Some really good work, and that is exactly 
the kind of oversight that is needed.
    You know, we always emphasize the mandatory part of the 
budget, but oversight can go to the discretionary and mandatory 
side, and as I said, even the Tax Code. There are a lot of 
things that need to be reviewed for whether or not they are 
even working. I mean, we all know that things get into the 
Federal budget, and, you know, they stay there and they do not 
get that much oversight.
    So I think making better use and having time to make better 
use of the GAO work would be a really good idea.
    Senator Ayotte. Thank you both. I appreciate it.
    Chairman Enzi. Senator Warner.
    Senator Warner. Thank you, Mr. Chairman.
    Let me just follow up on Senator Ayotte's comments. I also 
am supportive of this 2-year approach. I think most States that 
have 2-year budgets have worked that process successfully, and 
I think Senator Kaine will make this point as well. It is not 
like having a 2-year process and in effect a 2-year 
appropriations that you cannot make adjustments at the end of 
each year.
    Mr. Batchelder. Right.
    Senator Warner. In our State, the Governor submits true-ups 
and budget amendments. The legislature takes that and disposes 
of it as appropriate. But it does not dominate the whole time. 
And I would hope my colleagues on the appropriations process 
would realize they would still have a bite at the apple if we 
were to do this 2-year process. So I do hope that we are able 
to move forward.
    My line of questioning, I actually want to follow up again 
on what the Senator from New Hampshire, was talking about, and 
this is an area that I know Senator Whitehouse, when I first 
got on this Committee, had talked about this Budget Committee 
having a Government Performance Task Force. We worked together 
on that. Senator Portman and I have worked on legislation in 
this area. And I would argue that GAO is one tool we could use, 
but that we have absolutely done legislative activity. It was 
called the Government Performance and Results Modernization 
Act, GPRA, the smallest little bill that nobody had ever heard 
of that, if actually fully implemented, can have enormous 
results because it requires every agency to actually identify 
not only its most successful programs but its least successful 
programs, something that entities are loath to do, but we have 
never really taken those results--actually, the administration 
has started to put out just in the last year- -and really 
reviewed those underperforming programs.
    Senator Portman and I last year worked very hard on 
something called the DATA Act, again, bipartisan, trying to 
bring transparency to our financial reporting systems. There 
are 200 separate financial reporting systems just inside the 
Department of Defense alone. How are we ever going to sort 
through how our taxpayer dollars are wisely used and where we 
need actually additional investments if we do not have 
commonality of terms?
    What I feel, Mr. Chairman--and I am going to get to a 
question here--is that every administration, Democrat or 
Republican, OMB has this responsibility, but the ``B'' part 
always trumps the ``M'' part, and management always seems to 
get left to being a secondary item. And, frankly, a lot of this 
activity is nitty-gritty, but if you are really going to roll 
up your sleeves and say where can we save resources and where 
are there programs that need additional resources, you got to 
do this review. And whether it is GAO-wise or whether it is 
taking legislative actions that the administration is charged 
with right now, like GPRA or the DATA Act, and actually making 
sure we have that oversight, I think it would add tremendous 
value.
    Mr. Bixby, I know we have worked together on these issues 
for a long time. I would like you to speak a little bit more to 
the question of the oversight tools that we can use. OMB has 
that list every year. I remember my first year on this 
Committee where they published the programs that both the Bush 
Administration and Obama Administration thought should be 
eliminated, I thought that would be low-hanging fruit. I 
quickly learned that was not as much low- hanging fruit, even 
though both administrations had looked at that, but I do not 
think we had ever looked in-depth at those programs to reach 
some kind of legislative conclusion.
    Mr. Bixby. No, and I think that that is what is missing. We 
have got a lot of--as you said, we have got a lot of reporting 
mechanisms now that were put in place, geez, going back about 
10 years or more, that the Federal agencies need to report 
their progress and defining goals and meeting them and 
reporting each year how they are doing. And that information is 
available along with the GAO reports, and what is missing is 
some sort of formal process for making use of that material.
    And I think now this is something that should get 
bipartisan interest because we are living under tight spending 
caps, and we know that the budget pressures in the future are 
going to get, you know, more acute.
    So there really is--there never is an excuse for wasteful 
programs, but there is even more of a necessity to find as 
much--to require as much efficiency and effectiveness as we 
can. So making use of those tools that you mentioned I think is 
really the next logical step, and hopefully the biennial budget 
process would help do that.
    Senator Warner. I would just add one last editorial 
comment, and Mr. Bixby raised this. I think we put lots of 
requirements on every program to have reports. One of the 
things Senator Ayotte and I have worked on is actually saying 
if some of these reports are not looked at, let us eliminate 
them, because I think at some level we have actually gotten so 
report-heavy and yet we do very little analysis on that.
    Mr. Bixby. There may be waste in looking or waste.
    Senator Warner. There may be waste in looking for waste.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you.
    Senator Portman?
    Senator Portman. Thank you, Mr. Chairman, and it is an 
honor to have Bill Batchelder here with us. I know he was able 
to introduce himself earlier, but he has spent 38 years in the 
House and the last 4 or 5 years as Speaker. And he really is 
one of our icons in Ohio, one of our great legislative leaders, 
and he was also an elected judge, so he will go down in Ohio 
history as one of the great public servants. And unless term 
limits change, he will also go down as having some of the most 
impressive longevity. So it is great to have you here and have 
your wisdom on this particular issue, Bill. Thank you so much 
for coming.
    Mr. Batchelder. Thank you.
    Senator Portman. And, Bob Bixby, always good to see you. 
Thanks for sticking in there and fighting the good fight, not 
just on this but on entitlement reform and other things.
    I was, as you know, in the position at OMB to put together 
these budgets, and I am a 2-year budget person in part because 
of that experience. So I was on the Budget Committee in the 
House and on the Budget Committee here, and I am happy to be 
cosponsoring the legislation as it relates to Congress.
    But even at the Office of Management and Budget, as you 
know, there is an enormous amount of effort and time put in 
every year to coming up with the budget, and it is probably the 
biggest single job of the OMB Director, although as Mr. Warner 
has said, you know, there is also an important management 
function and regulatory review function and policy function on 
every single administration initiative. Frankly, doing the 
budget every year makes it harder to address those, so I would 
think there is an analogy to what Speaker Batchelder talked 
about, and more time spent on the oversight side would be 
important.
    I am looking at your testimony. You said four things that I 
think are really interesting. One, legislators spend the second 
year of a budget cycle focused more on programmatic review, and 
you talked about some specific examples of that and big things 
you have gotten done. You also mentioned oversight later. You 
talk about the flexibility to respond to serious new problems 
rather than being sort of hemmed in by the budget process. You 
talked about, for instance, now our unfortunate situation with 
drug overdoses in Ohio. You talked about more predictability 
and certainty, including for the Government. Specifically, you 
talked about the agencies can be more efficient; they can hear 
the train whistle before they get hit. That is one I would like 
to have, again, your 38 years of experience with this, working 
with the State agencies, a little more on that. Could you flesh 
that out a little more? I think we do not talk about that 
enough, the certainty, the predictability, and, you know, being 
able to plan, and the efficiencies you get from that.
    Mr. Batchelder. That is an area where I think we need to 
have a very much increased focus because, frankly, in the 
absence of it, then we end up with people who are short of 
programs funding them, particularly when the money is sent back 
to the local level. You can have problems emerge if you do not 
do that properly, and we have had some of those. We had a 
previous Governor who had a significant number of them. And an 
$8 billion deficit, 18 percent of the budget, is not a laughing 
matter. And I think it is something that can be very, very 
helpful if you have the people in place, obviously, who are 
willing to come to you and say we have a situation here and we 
need to address it. And, generally speaking, our Cabinet 
members are capable of that.
    Senator Portman. I think for them, much like the Federal 
agencies and departments here, there is sometimes a temptation 
with the annual budget also to spend it all--
    Mr. Batchelder. Oh, yeah.
    Senator Portman. --so that you are not penalized the next 
budget year, and having a 2-year budget and being able to be 
maybe a little more efficient and thoughtful about your 
spending makes sense as well. So I appreciate that. And I do 
think Ohio is a good model in terms of just the better 
governing at the agency and department level.
    I have also found it interesting, and you talked about 
focusing during that second year more programmatic, you said, 
and on oversight. Can you give us an example of that, something 
that you were able to do during an off-year that would have 
been difficult to do during a budget year?
    Mr. Batchelder. We had a situation in which there was a 
great deal of prescription writing going on down at your region 
of the State in particular, and there was very little 
enforcement by those people who are in charge, if you will, of 
the policing of the medical profession. And we were able 
through meetings with various officials who were local as well 
as actually an expansion of some of the power of the Highway 
Patrol to solve those problems, to take away their licenses and 
to get them out of the selling of paper businesses that they 
were in, and particularly in some of the rural areas of the 
South, those were very, very serious problems.
    Senator Portman. Shutting down the pill mills.
    Mr. Batchelder. The pill mills, yes, sir.
    Senator Portman. That is a good example where it takes a 
lot of time and effort and focus.
    Well, my time has expired. I want to apologize to my 
colleagues. Mr. Sessions, I did not know he was coming, and he 
is actually more senior than me. He should be seated on my 
right, not on my left--I just want you to know that--as former 
Chairman of the Committee.
    Senator Sessions. Senator, I like you on my right.
    [Laughter.]
    Senator Portman. But, Mr. Speaker, thank you for coming.
    Mr. Batchelder. Well, thank you for your kind comments.
    Senator Portman. I know it was an inconvenience for you to 
have to come here to D.C. We always appreciate having you here. 
And, Bob Bixby, thanks for your testimony, and I appreciate 
your continued work on these budget process reforms.
    Mr. Bixby. Thank you.
    Chairman Enzi. Thank you.
    Senator Whitehouse, followed by Senator Sessions.
    Senator Whitehouse. Thank you, Chairman, and thank you for 
the continuing series of hearings on our Budget Committee 
process that you have had. I think I share your frustration 
with the process that I think we probably all on this Committee 
feel. I think there is a reason that nobody shows up at Budget 
Committee hearings, today being a case in point. If you could 
turn the camera around, you would see more empty seats than 
full. Even when we are debating the budget here in the 
Committee room, there are usually masses of empty seats. The 
insignificance and irrelevance of this Committee has really 
become quite apparent, and I think a good deal of that has to 
do with the fact that we have changed as a body from the 
practice of majority votes on appropriations to the new 
practice that everything has to go by 60 votes. So if you are 
an appropriator and you know that your appropriations bill has 
to get 60 votes, the penalty of a budget point of order for 
violating the budget is nonexistent.
    So it seems to me--first of all, let me say I support the 
idea of biennial budgeting. I am intrigued by it. I am not 
comfortable with any particular bill yet, but I look forward to 
working with people who are interested in trying to make this 
work.
    I do think that there should be some procedural obstacle to 
appropriations that violate the Budget Act or the budget level 
that we have set. And since there is not one right now, we are 
just making noise over here, and everybody knows it. The 60 
votes is really the procedural obstacle, and you have to be at 
60 anyway, so we have basically neutered ourselves.
    We also, I think, have the opportunity here to be kind of a 
bipartisan crucible for a, you know, Ryan-Murray type deal. But 
for a variety of reasons, we have not taken advantage of that 
political opportunity either. So both for want of any 
procedural value to complying with what we have done and 
because we have not taken advantage of the political 
opportunity, we have basically made ourselves insignificant.
    I think there is hope for this Committee. I think it has a 
great role. But I do think that under present procedures we 
will continue to see rooms full of empty seats and an 
Appropriations Committee that takes zero interest in what we do 
because they know that they do not care.
    I would add one additional point, and this follows up on 
what Congressman Price said. By not paying attention to the 
budget, by not paying attention to appropriations, by not 
paying attention to oversight, we are transferring immense 
political power from the legislative branch to the executive 
branch.
    I remember coming here and somebody said, look, there are 
three great battles in Congress. One is the battle between the 
parties, Democrat on Republican. The other great battle is the 
battle between the branches, executive versus legislative. That 
is a battle that has been going on since the founding of the 
country. And the third, they said--and you are going to have to 
pay attention to this--is the great battle between members and 
staff. I do not know about the third battle, but we have become 
so intoxicated with the first battle that we have totally 
overlooked the fact that we are having our clocks cleaned by 
the executive branch year after year after year after year. It 
is like a boat with a hole in it, and instead of plugging the 
hole and paying attention to our jobs, the two people in the 
boat are busy having a fistfight in the boat.
    So, you know, I am willing to work with all of you. I have 
got a minute left. If either of the witnesses have any reaction 
to that set of observations, I will yield the remainder of my 
time to the witnesses.
    Mr. Batchelder. Governors are interesting. I would have to 
say that in all those years I have seen totally different kinds 
of Governors. Some of them are very cooperative. In the case of 
our Governor, he, of course, cut his teeth here on the Budget 
Committee in the House. I believe that was the last time the 
budget was balanced. So those of us who are budget balancers 
and planners have an edge. I am not sure you can get one of 
those guys in every State to run for Governor, but I understand 
exactly what you are saying.
    One of the frustrations that I think a lot of new young 
legislators have is the fact that they are really not in charge 
in any substantial way. I had the privilege of running the 
House a little bit differently. I started with 45 members. I 
took that up in 2 years to 60 members and then to 65 members. 
And the reason was they knew when they went down there, they 
were really going to work, or they were not going to be part of 
the process. So we had a good relationship that way
    Senator Whitehouse. Yeah. I guess my point in conclusion is 
that even if we do get a good agreement on a biennial budgeting 
system here for the Committee, if we have not solved the 
procedural problem that there is no value to anybody to 
complying with our budget, and if we have not somehow engaged 
on the political opportunity of having this be the bipartisan 
crucible for trying to work something out, then doing what we 
do now over 2 years is just slowing down a bad and ineffectual 
process. So I think that has to be part of a larger 
conversation. But the fact that we are here today having this 
part of the conversation I think is a testament to the 
Chairman's continuing interest in this and is one that at least 
this Senator appreciates very much. Thank you, Chairman.
    Chairman Enzi. Thank you.
    Senator Sessions, followed by Senator Kaine.
    Senator Sessions. Well, Senator Whitehouse, as he 
frequently does, makes some very important points. We have 
passed some budgets, but we have not followed our budgets. And 
I think Congress is timid to challenge the Executive, which I 
have expressed concern about for some time. And Congress is 
failing to understand that at the bottom line, we are 
responsible for spending. We have the appropriations power. The 
President cannot spend any money that we do not authorize or 
direct to be paid through an entitlement program. And so the 
debt, as a practical political matter, can be blamed on the 
President because he is advocating more spending and opposing 
reductions. But, fundamentally, the bottom line when it becomes 
law and the money is appropriated, Congress has done it, it 
cannot be spent.
    I worry about that. What good is a budget if we do not 
follow it? And we had a pretty tough budget, but not-- Senator 
McConnell likes to remind me I voted against the Budget Control 
Act. I did not think it cut enough. But we cannot adhere to 
that. And it did constrain spending on the discretionary side 
in a significant way.
    Also, I do not think the American people are unaware of the 
debt situation that we have. I think the American people do, in 
fact, think this Government spends a lot of money it does not 
need to spend, and that properly done, like so many Governors 
have done, Governor Kasich--you go in there, and you defend 
your actions and fight for them, and most people are going to 
give the Executive and the Congress a chance, see if you can do 
it. And are people going to be thrown in the streets, children 
going to be starving to death if we trim some of these 
increases in spending? So I do think that we are at a crisis 
time.
    I appreciate both of you and your thoughts on the 2- year 
budget. Senator Enzi has worked hard on this. A number of our 
other members, Johnny Isakson and others, have spent time on 
it. I think it is a good idea. But it has got some 
complexities, Senator Enzi, as you know. You could see doing it 
this way, this way, that way, and that way. But I believe if we 
do this right, we could improve the expenditure of the 
taxpayers' money.
    Mr. Batchelder, in your experience does it actually reduce 
spending and help contain spending with a biennial budget as 
opposed to an annual budget? And how?
    Mr. Batchelder. That has been our experience in Ohio. 
Basically what happens is that some of the programs that a 
Governor would want to fund simply do not have appeal to a 
majority of the members of either the House or Senate, and, 
therefore, the result is that that item is either reduced or 
taken out entirely from the budget.
    We have had in Ohio in recent years growth in business and 
industry, as you have in Alabama, and that has been an offset 
for us, too. We have been able to count on more income than we 
had had previously. I will never forget one day--
    Senator Sessions. But when you do this for 2 years--
    Mr. Batchelder. Yes.
    Senator Sessions. So you make a decision, and you are not 
subject to an emotional appeal the next year. At least it is 2 
years before the next appeal comes forward.
    Mr. Batchelder. Exactly.
    Senator Sessions. And if somebody has got a new program, 
then they have a period of time to propose it and a period of 
time to analyze it before a new spending program is adopted? Is 
that a factor?
    Mr. Batchelder. It is a factor the way our Finance and 
Appropriations Committee operates, but that is largely a result 
of the leadership within the House and the Senate. The House, 
of course, gets the budget first, and we do remove things. And 
it is not a problem if you remove things with Kasich as 
Governor.
    Senator Sessions. Mr. Bixby, I appreciate the work of your 
organization. You have been at it a long time, and you have 
constantly pointed out dangers that we have in the debt that we 
face. Can you say to us, without repeating some of the things I 
know you have already said, how you think in your organization, 
after its years of work, believe that biennial budgeting is a 
positive step?
    Mr. Bixby. Well, I start from the premise--and I have been 
testifying about biennial budgeting going back to the last 
century.
    Senator Kaine. The last millennium.
    Mr. Bixby. Exactly. So, I mean, there you go. But I think 
that the argument maybe has changed a little bit. I mean, it 
used to be we were more focused on just the idea of sort of the 
good government aspect of it. You would have more time for 
oversight, and that would be good for the process.
    I think right now the budget process is just so totally 
broken that it is important for Congress to make a statement by 
coming up with a new budget process. It is not just biennial 
budgeting. I think there are a lot of things we could do to 
focus more attention on the mandatory side of the budget where 
the real budget problems are. The dynamic of the budget has 
changed a lot even just in the time that I have been talking 
about this. But you go back to the 1970s and everything, you 
know, the discretionary part of the budget is only about a 
third of the budget right now, and that is what we are talking 
about in the annual appropriations bills.
    So spending so much time rehashing the same issues over and 
over again over an appropriations bill that is a shrinking part 
of the budget seems like a misuse of congressional time when we 
have some real issues to address with health care programs or 
veterans' programs or Social Security or tax expenditures. So I 
think that the argument is still that I think we would do a 
better job looking at the appropriations bills if we had more 
time for oversight. But I also think it is very important to 
think of Congress reestablishing its credibility with the 
budget by coming up with a new budget process. And I think this 
would be part of it because it strikes people, it strikes me, I 
think it strikes a lot of people--there is nothing partisan 
about it- -as a logical thing to do, to take a 2-year budget, 
to use it as a planning document to guide each Congress, each 
session of Congress, and starting with that and doing the 
appropriations and then making time for those oversight 
activities that, you know, you do not have enough time for 
right now.
    So, yeah, I mean, I just think it would not only be good 
government, but I think it would save money, and I think it 
would help regain trust that we are going to need going 
forward.
    Senator Sessions. Thank you, Mr. Chairman, and maybe this 
hearing will provide some momentum to some of the ideas you 
have worked for.
    Chairman Enzi. I hope so. Thank you.
    Senator Kaine?
    Senator Kaine. Thank you, Mr. Chairman, and thanks so much 
for doing this. I am a strong supporter of your budgets. I was 
a mayor, I was a Governor, and I have come to the conclusion 
really that my support is less about good governance, less 
about oversight. It is about the economy does better with more 
certainty than less. It is a certain producer. I mean, I think 
we all have this experience in dealing with constituents, you 
know? You may not like my answer, but I will give you an 
answer. And everybody kind of adjusts around a known, and it is 
very difficult to adjust around an unknown.
    I am on the Armed Services Committee. We have got Pentagon 
planners who are supposed to be planning to deal with these 
very challenging threats in the world who are spending time 
wondering, you know, will we have a budget and when will it be? 
Or will we have a CR? Will we have a shutdown? Will we have to 
furlough people? Will we have full sequester budget caps or 
partial or none? And they spend their time, where they are 
supposed to be planning about cyber attacks and whatever, 
running seven or eight budget scenarios instead.
    And in the outside world, there is good economic research 
on this point--we had some testimony, Mr. Chair, about this at 
the last hearing--that uncertainty has a cost in terms of 
economic growth and GDP. And I would argue that the primary 
generator of economic uncertainty in the last decade in the 
United States has been the United States Congress. And so we 
should do things that reduce uncertainty.
    As a mayor, a Federal budget that was done in October and a 
State budget that was done in January and February gave a mayor 
the ability to do a city budget in April or May for a July 1 
fiscal year. And we all know how much budgets are transfer 
pays. The Federal budget is filled with transfer payments to 
State and locals. State budgets are filled with transfer 
payments to locals. And so if you have a Federal budget that is 
uncertain, then you end up with State and local budgets with 
question marks throughout the line items.
    And so whether you are talking about the outside world, the 
private sector, or the Pentagon planner or States and 
localities, the more certainty the better.
    Senator King said something that I love and I think is 
true, but I am going to offer a cautionary tale about it. Are 
we now in a new norm of 2-year budgets? We did a Murray-Ryan 
deal in 2013. That was a 2-year budget, essentially a 2-year 
deal. The vote last week, a 2-year deal. That is great, and I 
have already been promoting, Mr. Chair, this is proving to the 
world that the Senator Enzis and others like us who support 2 
years, we are normalizing the idea of a 2-year budget. Remember 
what it took to get each of them. The Murray-Ryan deal only 
worked after the two Houses each did budgets but refused a 
conference, and then the Government shut down because we got to 
the end of the fiscal year and there was no deal. And we had a 
16-day shutdown because there was a refusal to do a budget 
conference. The end of that shutdown was an agreement to go to 
conference, and then that produced the 2-year deal.
    What produced this deal? Arguably, absent the unprecedented 
resignation of the most powerful member of the most powerful 
legislative body in the world, who was not in danger of losing 
a reelection and his party was not in danger of going into the 
minority--that has never happened before, that the number three 
person in line to be President has said, ``I am tired of being 
the most powerful person in the most powerful branch in the 
most powerful Government in the world.'' Absent that, we do not 
know whether we would have gotten a deal.
    So I like the idea that we have maybe normalized 2-year 
deals, but I am not sure we can count on something as 
extraordinary as a Government shutdown or a resignation of a 
powerful person to push us to do something. So that is why I 
think we have to normalize it through legislation.
    The last thing I will say is this: There are different ways 
to do this, and, Mr. Chair, I think a 2-year budget is a good 
thing if we do 1-year appropriations. I think it is a good 
thing if we do 2-year appropriations. I think it is a good 
thing if we do staggered 1-year appropriations of the kind that 
you have suggested. And what I worry a little bit is we will 
all have our own preferences about it, and then a strong 
consensus behind 2-year budgeting could get diluted because of 
the different ones. You know, if I was just thinking this is 
kind of a game theory problem, I would hope for a bill on the 
floor that would be the one that would compel the greatest 
number of votes, and I suspect that would probably be 2-year 
budget, 1-year appropriations, just because of the testimony of 
folks like Senator Cochran. I think that we could pick up some 
appropriators that might otherwise have worries.
    Then you do floor amendments. You do a floor amendment 
about, okay, let us consider 2-year appropriations but 
staggered, or let us consider straight 2-year appropriations 
and we see whether we can amend the bill and get to, you know, 
plus 60 for a 2-year bill. But I hope we do not--I think the 
votes are here to do a 2-year budget. I hope we do not dilute 
down into subgroups over exactly how we do it and then whittle 
away the momentum that we picked up because we have done two 2-
year budgets in a row.
    So I really am glad you are doing this reform hearings and 
you are particularly focused on this, and I am going to vote 
for 2-year budgets of all--you know, reform bills of all 
flavors until we get one passed. So thanks, Mr. Chair, and 
thank you to you all for coming and offering your perspective 
on this.
    Chairman Enzi. Senator King.
    Senator King. Before we close, Mr. Chair, I just wanted to 
follow up on Senator Kaine's--
    Chairman Enzi. As the Ranking Member of this, you have that 
right.
    Senator King. Yes, thank you.
    [Laughter.]
    Senator King. My fame eluded me for a moment.
    I was going to ask the Chair, are we at a place where we 
can do a markup and move a bill? I think there is some momentum 
developing here.
    Chairman Enzi. We are getting close. We have one more 
hearing on budget reform yet that could play into coming up 
with something more concise for this. That could be soon, and 
then we need to do that.
    Senator King. Good. I certainly would be supportive, and 
thank you.
    I just had one other observation, as we were discussing it, 
and I think Mr. Bixby made this point but it needs 
reemphasizing. We are fighting over a smaller and smaller share 
of the budget. It is under a third now. If you count tax 
expenditures, it is more like 28 percent, approaching 25 
percent, or will be in a couple years. So all the drama is 
around 25 percent of the budget, and there is virtually no 
discussion of the other three-quarters. And I think as we talk 
about this budget issue and deficits and the fiscal issues, we 
really need to take cognizance of the fact that we are just not 
even talking about three-quarters of the budget, and that is 
the three-quarters that is growing. We have all in the Armed 
Services Committee, discretionary spending, either defense or 
nondefense, is declining as a percentage of GDP. It is the 
lowest it has been in 50 years.
    So we have to sort of shift this discussion, it seems to 
me, to talk about the whole budget, including tax expenditures, 
which now, by the way, equal the entire discretionary budget, 
$1 trillion a year, and the parts that do not get any review.
    So, anyway, Mr. Chairman, I am delighted to work with you 
and continue the work of this Committee. I think it is very 
important. Thank you.
    Chairman Enzi. Thank you.
    Senator Whitehouse, did you have an additional comment you 
wanted to make?
    Senator Whitehouse. No. I think I am fine. I am just 
interested in hearing what my colleagues had to say. I think 
this is a really noteworthy discussion. I think the work on 
this Committee to try to reboot itself and make itself relevant 
again is important.
    Mr. Bixby. Can I say something, Mr. Chairman?
    Chairman Enzi. Sure.
    Mr. Bixby. I just want to--I have testified a lot. I think 
this is just--I have noticed such a terrific bipartisan nature 
to this hearing, I think thoughtful, cooperative questions on 
both sides, people trying to find some way that might work. And 
I think that is terrific, and I want to commend the Budget 
Committee for the way in which the hearing was conducted.
    Chairman Enzi. Well, thank you, and I appreciate all the 
great ideas that have been thrown out, a whole number of 
different ways that we could do biennial budgeting or 
budgeting. And I have got to say I have been pretty frustrated 
with the whole process. It begins with the Office of Management 
and Budget doing a budget, but quite often, if that President 
is not from the same party as the Chair of the Budget 
Committee, it was kind of a worthless exercise. And more so 
than that, from my experience on the Budget Committee, we 
usually do opening statements and then we get to see the 
budget. I reversed that this year, and you actually got to see 
the budget beforehand. I wanted to even give more advance, but 
was hoping that we could have some kind of a pre-filed 
amendment process, which is normal in the other committees.
    So there are a lot of things that we can do to make this 
process a lot better. We did not even get into capital 
budgeting or regulation budgeting or it was mentioned but now 
how we would actually do the Government Performance and Results 
Act, which has been around for a long time. That is where every 
agency is supposed to say what they are going to do and how we 
will know if they got it done. And then we are supposed to 
review that and see if they actually did it.
    So there are a lot of tools out there that I think we could 
impose or use, so I hope that will come out of the process. And 
we will get into more of the solutions in our next hearing.
    Thank you for your testimony, and we do have a system where 
Senators can ask questions for the record until 6:00 p.m. today 
that will be sent to you that we hope you will provide us with 
some speedy comments on. And the same applies to the Senators 
and the Congressman that spoke earlier and provided testimony.
    So, with that, thank you, everybody. Even though it is 
small attendance, I think we got a lot accomplished. The 
meeting is adjourned.
    [Whereupon, at 12:10 p.m., the Committee was adjourned.]
    
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         MOVING TO A STRONGER ECONOMY WITH A REGULATORY BUDGET

                              ----------                              - 


                      WEDNESDAY, DECEMBER 9, 2015

                              United States Senate,
                                   Committee on the Budget,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:30 a.m., in 
Room SD-608, Dirksen Senate Office Building, Hon. Michael B. 
Enzi, Chairman of the Committee, presiding.
    Present: Senators Enzi, Grassley, Crapo, Johnson, and 
Whitehouse.
    Staff Present: Eric Ueland, Majority Staff Director; and 
Warren Gunnels, Minority Staff Director.

               OPENING STATEMENT OF CHAIRMAN ENZI

    Chairman Enzi. Since it is 10:30, I will call to order this 
hearing of the Senate Budget Committee. Our topic today is 
``Moving to a Stronger Economy with a Regulatory Budget.'' It 
is the last hearing of the year, and it is a fitting end to a 
very eventful year for the Budget Committee.
    One of the usual customs that goes along with the new year 
is reflecting on the old and bringing in the new. First, the 
old. This hearing in many respects is an extension of the June 
23rd joint hearing the Committee held with the Homeland 
Security and Governmental Affairs Committee. That hearing, the 
first joint hearing between the two Committees in 30 years, 
discussed the need for the Budget Committee to measure the 
regulatory costs of the economy and explore different 
accounting methods to control those costs, including a 
regulatory budget.
    Also a first, the head of Canada's Treasury Board testified 
about their successful one-for-one red tape reduction effort 
which they enacted into law earlier this year.
    Now, the new. In the new year, one of the Committee's goals 
will be to focus on the dangers that high regulatory burdens 
pose for our ability to sustain economic growth and fiscal 
health and on how Congress can exercise more effective 
authorization and oversight of the regulatory agencies. With 
our almost $19 trillion in debt, we cannot afford to accept the 
notion that we are entering into what some call the ``new 
normal'' of anemic economic growth. Maybe better guidance by 
Congress will help lift some of the regulatory drag on the 
economy and put an end to this view that we have no choice but 
to grow slowly.
    I am looking forward to hearing from our witnesses today 
their ideas and suggestions on how we should move forward. 
According to the Congressional Budget Office, the potential 
growth rate of our economy, or the rate of growth that is 
possible given the education of workers, the quality of capital 
equipment, and the business formation rate, averaged 3.3 
percent from 1950 through 2014. This concept of potential 
growth may seem a little strange, but it means about the same 
when we talk about a person or group of individuals achieving 
their potential. When we do not achieve our potential as a 
group, we begin to look for reasons why, and that is what we 
are doing now about the U.S. economy.
    The potential growth rate of the U.S. economy has been 
dropping steadily since 2002. Indeed, from 2008 through 2014, 
it averaged 1.4 percent. CBO now expects the annual rate to 
remain significantly below its long-term average and to fall to 
2.1 percent for the period of 2015 through 2025. That is a 36-
percent reduction in the long-run average potential growth rate 
of the economy.
    Why is this so critical? According to the President's own 
Office of Management and Budget, a 1-percent increase in the 
economy's annual growth rate will yield more than $400 billion 
in new revenues for the Government without raising taxes. But 
when the growth rate falls, when we grow more slowly than we 
could and we are not meeting our full potential, Government 
revenues also fail to keep up with budget projections. So what 
happens when the Government revenue comes up even shorter in 
the face of growing overspending? More borrowing, more 
overspending, expanded debt.
    The effects of regulation can be seen every day in my home 
State, not as fluctuations in statistical data but in lost jobs 
and in the concerns that people have about the future of their 
communities. The EPA's crusade to keep coal in the ground is 
already costing hundreds of jobs in my State and will cost my 
State and this country billions of dollars. At the end of July, 
Wyoming had 15 percent fewer energy industry jobs than it did a 
year earlier, according to the U.S. Department of Labor and 
Labor Statistics. Since 2012, two EPA rules--the Mercury and 
Air Toxic Standard Rule and the Ozone Rule--are estimated to 
cost tens of billions of dollars. The two rules do not even 
include the final rule of the Clean Power Plan. With an 
estimated price tag of at least $366 billion, the Clean Power 
Plan will not only devastate the energy industry by mandating 
unrealistic carbon reductions, it will also squeeze American 
families' checkbooks by causing double-digit electricity rate 
increases in more than 40 States. And that is just a few of the 
major rules recently announced.
    The Senate exercised its power under the Congressional 
Review Act an unprecedented four times this year by voting to 
disapprove four different agency rulemakings: the National 
Labor Relations Ambush Elections Rule, the EPA's Waters of the 
U.S. Rule, and the Greenhouse Gas and the Carbon Limits Rules 
on utilities.
    Congress is also trying to control the agencies through the 
annual appropriations process, but stopgap efforts to address 
problems once they have been created are not the answer. We 
need fundamental reforms to rebalance and fix the authorizing 
and budgeting authority Congress has over agencies.
    Over 35 years ago, on the Joint Economic Committee, 
Chairman Lloyd Bentsen asked a fair question at the first 
Senate hearing on regulatory budgeting. He said, ``What is so 
different about preparing a regulatory budget from preparing a 
fiscal budget?'' As an accountant, I know firsthand how 
effective a sound budget process can be, not just to provide 
discipline against overspending or overregulation, but to 
provide a path forward for success and prosperity. I look 
forward to hearing a discussion about this more today.
    I would yield to Senator Whitehouse.

            OPENING STATEMENT OF SENATOR WHITEHOUSE

    Senator Whitehouse. Thank you, Chairman. I guess as the 
only Democrat present today I am standing in for our Ranking 
Member, and I would like to make a brief opening statement, and 
let me open with a word of gratitude for regulation.
    Medicines are not snake oil mysteries any longer. People 
are rarely burned or killed in boiler explosions. Automobiles 
have air bags. Smokestacks have pollution controls. Stock 
jobbers have a harder time gulling innocent investors. Most 
insurance policies actually pay when the insured risk occurs. 
Quacks and barbers cannot be doctors.
    We too often take for granted the safety and reliability 
that a regulated world has built. We also take for granted how 
regulation helps advance our economic progress. Regulation 
helps channel America's competitive enterprise into good and 
helpful innovations instead of into new tricks and traps for 
consumers or new ways of cutting safety corners. Confidence in 
our industries grows when consumers know they can count on the 
safety and reliability of the product.
    Ask yourself, Would the American pharmaceutical industry be 
a world powerhouse if patent medicine hucksters were still 
allowed to operate? Regulation sets a positive frame for 
economic progress.
    Where there are common goods we share, like the clean 
streams of Wisconsin, like the sparkling oceans of Rhode 
Island, or the unpolluted skies of Wyoming, there is a perverse 
economic incentive to abuse that resource, leaving all of us 
poorer. This is the principle famously described in Garrett 
Hardin's ``Tragedy of the Commons.'' Regulation is what 
constrains this perverse economic incentive and protects our 
precious common resources.
    If we are to look at a regulatory budget, it should be 
incumbent upon us to look both at the costs and the benefits of 
regulation. Otherwise, it is not a sound budget process, no 
more than a budget process that looks only at expenses and not 
income would be a sound budget process. Without looking at both 
costs and benefits of regulation, all we would be doing here is 
putting a thumb on the scales in favor of the big industries 
that create hazardous pollutants, that create dangerous 
chemicals, that create risky financial products, and that 
create unsafe consumer products.
    It is really important that we look at both sides of the 
ledger. Otherwise, this entire process is not actually a 
process in budgeting. It becomes only a process in creating 
talking points for the big industries as they try to subvert 
the regulations that keep America safe.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you, Senator Whitehouse.
    The task for today is to discuss how to make the economy 
stronger through regulatory budgeting. Federal regulations are 
threatening to overwhelm our struggling economic recovery. 
Today's hearing will focus on moving the Committee and Congress 
to a long-run goal of greater annual oversight of Federal 
agency regulatory priorities.
    We have three expert witnesses with us today that have 
volunteered their time and expertise to help us with our work, 
and I would mention that with the education bill that is going 
on today, we might not have many here, but we always invite 
them to ask questions as well which would be sent to you, and 
we would ask for you to respond to those.
    Our first witness today will be Dr. John Graham, who is the 
dean of the School of Public and Environmental Affairs at 
Indiana University in Bloomington. Dr. Graham leads the two-
campus, $50 million professional school with programs in public 
affairs, environmental science, and nonprofit management, among 
others. Dr. Graham served as the head of the Office of 
Information and Regulatory Affairs from 2001 to 2006. He is 
also well known as the founding director of the Center for Risk 
Analysis at Harvard's School of Public Health.
    Dr. Jerry Ellig is a senior research fellow at the Mercatus 
Center at the George Mason University where he is a member of 
the graduate faculty in the College of Humanities and Social 
Sciences. In addition to teaching, Dr. Ellig has worked at the 
Federal Trade Commission, serving as Acting Director in 2003. 
He is an author of several books and articles, including 
reviewing the performance of the Government Performance and 
Review Act, or GPRA. He holds a Ph.D. in economics from George 
Mason University.
    Robert Verchick holds the Gauthier-St. Martin Eminent 
Scholar Chair in Environmental Law at Loyola University in New 
Orleans and is the faculty director of the Center of 
Environmental Law at Loyola. He is also a senior fellow in 
disaster resilience leadership at Tulane University, and he is 
the president of the Center for Progressive Reform. In 2009 and 
2010, he served in President Obama's administration as Deputy 
Associate Administrator for Policy at the U.S. Environmental 
Protection Agency. He helped develop the climate adaptation 
policy for the EPA and served on President Obama's Interagency 
Climate Adaptation Task Force.
    Dr. Graham, you can begin. We may have to recess to do a 
quick vote, but we will continue the process and get finished 
up. Dr. Graham.

 STATEMENT OF JOHN D. GRAHAM, PH.D., DEAN, INDIANA UNIVERSITY 
           SCHOOL OF PUBLIC AND ENVIRONMENTAL AFFAIRS

    Mr. Graham. Thank you, Mr. Chairman. Our topic today is a 
promising reform of the Federal regulatory system called the 
``regulatory budget.''
    In the late 1970s, when the regulatory reform movement 
began to gather steam, reformers noticed an oddity about how 
the Federal Government operates. If the costs of a Federal 
program are incurred within the Federal budget, then those 
costs are subject to scrutiny in the normal congressional 
appropriations process. But if instead Federal agencies impose 
costs on the private sector or on State and local governments, 
those costs are ``off budget'' and, thus, are not considered a 
part of the Federal budgetary process. Why, reformers asked, 
should $1 billion in compliance costs on investors, workers, 
and consumers be treated differently than $1 billion in Federal 
budgetary outlays that are typically financed by taxpayers?
    Congress imposes annual limits on these appropriations but 
not on these regulatory costs. So what is the idea of a 
regulatory budget? The basic notion is that Congress would 
place annual limits on these off-budget regulatory expenditures 
through a process similar to what is currently used to define 
appropriations for agencies. Step 1, agencies request a 
regulatory budget from OMB within the executive branch for the 
forthcoming fiscal year. Step 2, OMB, representing the 
President and the agencies, would make a regulatory request to 
Congress for the Federal Government as a whole and for specific 
departments and agencies. Step 3, Congress would make the final 
decisions regarding the regulatory budget, first in committee 
actions and then in floor actions. The regulatory budget is 
enacted by the Congress, is defined in monetary units that 
represent the costs of regulation.
    Now, what would be the advantages of this type of system? 
The first point is that this process of setting an annual 
regulatory budget would force the Members of Congress, who 
oftentimes do not like to take difficult votes, to accept 
accountability for regulatory costs, both the costs of 
individual agencies and programs and the overall magnitude of 
regulatory burdens on the economy.
    Second of all, the regulatory budget would induce a 
competition between new regulatory proposals, since the budget 
may not be large enough to support all of the new proposals 
supported by regulators. By setting priorities among these 
worthy proposals, the regulators will work to advance the best 
proposals and drop the weaker ones. As a result, new 
regulations under a regulatory budget are expected to be more 
effective and more cost-effective than they would be without a 
regulatory budget.
    Finally, budget limitation creates an incentive for 
agencies to streamline or reduce waste in the existing 
regulatory programs, since those savings can be used, under the 
regulatory budget, to finance promising new regulatory 
proposals. Thus, if an agency is already at its cap with a 
regulatory budget, the agency can still move forward with a 
promising new regulation if the savings from the rescission or 
modernization of an existing regulation are adequate to pay for 
the new rule.
    There are some myths about a regulatory budget that I would 
like to discuss.
    One is this idea that a regulatory budget is not feasible 
because nobody knows what the existing costs of regulations 
are. There is an element of truth to this argument; that is, 
the thousands of existing regulations now in operation, nobody 
has ever touted up whether these regulations work or how costly 
they are. It is, however, feasible to do on an annual basis a 
prospective, incremental regulatory budget, and the costs of 
those rules are already being estimated in the Federal review 
process supervised by OMB.
    The second myth is the idea that a regulatory budget is 
unnecessary. Because OMB is already reviewing all these 
regulations for costs and benefits, what do we need a 
regulatory budget for?
    The truth be told, the tenacity of OMB's review process 
varies not only from administration to administration, but even 
from rule to rule, depending on the preferences of the White 
House. In some cases, agencies and OMB do not consider costs 
and benefits because of statutory preclusions or because of 
public opinion or interest group pressures. A regulatory budget 
would constrain burdens in situations where the executive 
branch is disinclined to constrain burdens.
    The third myth I want to address is this idea that a 
regulatory budget looks only at the cost of regulation and 
ignores the benefits. The key point to remember is that in the 
argument on behalf of raising a regulatory budget, the 
regulatory agency introduces their information on benefits, 
whether it be lives saved or environmental protection or 
consumer protection. That is the currency of the argument in 
OMB. Just on the budget side, when agencies ask for more 
appropriations or more spending, they make arguments based on 
benefits of those programs for why they are seeking to have a 
higher budget. So there is no difference between a regulatory 
budget and a regular appropriations budget with the role of 
benefits information.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Graham follows:] 
    
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    Chairman Enzi. Thank you.
    Dr. Ellig.

   STATEMENT OF JERRY ELLIG, PH.D., SENIOR RESEARCH FELLOW, 
            MERCATUS CENTER, GEORGE MASON UNIVERSITY

    Mr. Ellig. Thank you, Chairman Enzi and members of the 
committee, for the opportunity to appear here today.
    I work at a university. That means I am in favor of 
knowledge and I am against ignorance. I think regulators and 
legislators have a moral responsibility to make decisions about 
regulations based on actual knowledge of regulations' results, 
not just on hopes or intentions.
    Effective budgeting of tax dollars in the Federal budget or 
effective budgeting of social costs in a regulatory budget 
requires knowledge of the results of regulations and programs. 
And a decisionmaker's failure or refusal to acquire this 
knowledge is a willful decision to act based on ignorance.
    To try to promote knowledge and to try to combat ignorance, 
over the past 15 years the Mercatus Center at George Mason 
University has run two research projects to evaluate the 
quality of information about results that Federal agencies 
produce. The first we called the ``Performance Report 
Scorecard.'' This was a project we ran between 1999 and 2008 
that evaluated the quality of the annual reports that Federal 
agencies are required to produce under the Government 
Performance and Results Act, and our evaluation criteria were 
based on the criteria in GPRA.
    What did we learn from this project? Well, the information 
about the results of Federal programs did improve over this 
period, but it required a full-court press by the Office of 
Management and Budget and, in particular, by an Associate 
Director for Management who had a very close relationship with 
the President and the President's full backing. We found that 
results information did affect some decisions in agencies. 
There is evidence that it affected some Presidential budget 
recommendations. But the use of results information in 
budgeting foundered when the Appropriations Committees made it 
clear that they did not want the information and did not plan 
to use it.
    One Appropriations Committee told a Federal agency 
essentially, ``If you are going to continue this wasteful 
practice of trying to include results information in your 
budget submission, we will assume you have excess resources, 
and we will budget accordingly.'' And this was in a Congress 
controlled by the President's own party.
    The next evaluation project was the Regulatory Report Card. 
Between 2008 and 2013, we looked at the quality of regulatory 
impact analysis conducted for every proposed prescriptive--that 
means non-budget regulations-- economically significant 
regulations between 2008 and 2013 according to criteria laid 
out in the Executive orders and OMB guidance.
    We found that the quality of this analysis is highly 
variable. There are some good ones, but on average, I would 
give a lot of them an F. In 60 percent of the regulations we 
looked at, the agency made no claim to have used the analysis 
to make any decision about the regulations. We found that 
review by OIRA does help improve the quality of analysis, but 
the end result still falls far short of what you would expect 
if you read the requirements in the Executive order and in OMB 
guidance.
    In about half of the regulations we looked at, statute 
required the agency to issue a regulation. Congress made the 
decision to regulate. But Congress currently has no system for 
conducting rigorous analysis of the problem and alternative 
solutions before it passes regulatory legislation.
    A couple of examples I can give you with some of these 
regulations. I have seen a regulation on catfish inspection 
that extrapolated the benefit--that created a benefit estimate 
by extrapolating from the incidence of salmonella on chicken 
because there was only one instance in recent years of 
salmonella infection that might be linked to catfish. Yet we 
used chicken instead of catfish--the other white meat.
    I have seen a regulation in which the accompanying analysis 
presumed that half of the benefits come from preventing 
injuries to blind bicyclists. This was a regulation requiring 
hybrid vehicles to make more noise so that people who are 
vision impaired can hear them. It makes sense if you are 
talking about pedestrians. It does not make sense if you are 
talking about bicyclists.
    I have seen energy efficiency regulations that assume that 
greedy businesses, not consumers but greedy businesses, when 
they buy things like washing machines and refrigeration 
equipment do not understand their own financial self- interest, 
and so they have to be forced to do things that are in their 
own financial self-interest.
    If you remember only three things from my testimony and my 
written testimony, remember this:
    First off, regulations do not enforce themselves, and 
neither do requirements for analysis. Regulatory agencies need 
stronger incentives to focus on results, conduct high- quality 
analysis, and explain how they use the analysis. What is sauce 
for the goose is sauce for the gander. If Congress is going to 
make decisions about regulations and appropriate money to 
regulatory agencies and authorize regulations, Congress needs a 
system to ensure that it has high-quality analysis of the 
likely effects of regulations.
    And, finally, ignorance is not bliss. It is a sin. There 
are a lot of important values at stake when we regulate, and 
given the importance of values, decisionmakers, regulators, as 
well as legislators ought to be acting based on genuine 
knowledge of regulations, likely results, and the results that 
a regulation has already accomplished. That is why the real 
choice in the debate over regulatory reform and the real 
conflict should not be Republicans versus Democrats, should not 
be business versus the public. It should be knowledge versus 
ignorance. And I urge all of you to choose knowledge.
    [The prepared statement of Mr. Ellig follows:] 
    
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    Chairman Enzi. Thank you very much.
    Dr. Verchick.

STATEMENT OF ROBERT R.M. VERCHICK, GAUTHIER-ST. MARTIN CHAIR IN 
        ENVIRONMENTAL LAW, LOYOLA UNIVERSITY NEW ORLEANS

    Mr. Verchick. Chairman Enzi, others present, thank you for 
inviting me here today to share my concerns about regulatory 
budgeting and to explain why I think this strategy could 
deprive Americans of common-sense protections while producing 
no overall benefit to the economy.
    As a former EPA official, I am proud of the achievements of 
our regulatory agencies. And as a law professor, I know there 
is still room to improve. But regulatory budgeting, which 
essentially puts a lid on the quantity of regulation produced 
each year, is the wrong approach.
    It first fails to credit the regulatory system for the 
amount of good, the enormous amount of good that it does, and 
it would ration that good just when technologies create a 
larger need for it. It would also hamstring the Government with 
legal and political complexities, and it would, last, distract 
us from many effective reforms, which I will outline a little 
bit later.
    First, in contrast to what many say, there is no question 
in our country that our regulatory system benefits Americans 
immensely. Federal rules keep our air clean, our water 
drinkable, our workplaces safe, and our access to energy 
reliable.
    Government estimates have routinely shown--in the 
administrations of both parties--that the combined benefits of 
significant regulations far outstrip the costs. For significant 
regulations, OMB's latest report shows that benefits exceed 
costs by seven to one. If you look at just a single statute, 
like the Clean Air Act, the ratio is 25 on the benefit side to 
one.
    But instead of trying to enhance this success, regulatory 
budgeting rations it. Instead of raising quality, it is 
interested in lowering quantity. Under regulatory budgeting, 
carrying out the will of Congress is subordinated to an 
arbitrary cap. And that is going to be a problem when we face a 
future with even more deepwater drilling, edible nano-
particles, self-driving cars, and other advances that could be 
risky.
    Just as there is no end to what we can imagine or invent, 
there is also no end to the amount of good sense that we should 
expect of people along the way. Good sense in the form of 
reasonable standards is what allows society to innovate while 
at the same time remaining profitable and safe.
    To those who ask if we can afford to have more regulations 
like these, the simple answer is we cannot afford not to. 
Imagine that before you put a $20 bill in your wallet or your 
purse you had to first take out a $5 bill to make room for the 
$20 bill. Regulatory budgeting is just like that. It asks you 
to leave advances in public health, environmental protection, 
and money on the table.
    Second, a regulatory budget poses a series of legal and 
political problems. Setting the cap is a first challenge 
because advocates have no standard for determining the ideal 
amount of total compliance costs without referring to 
corresponding benefits. Once the cap is set, you have got all 
kinds of legal problems. One can imagine legal challenges for 
arbitrary deletion of rules under administrative statutes, 
constitutional claims over delegations of authority, and the 
special problem, very familiar to me from my EPA days of court-
ordered rules. And if you think that EPA can make room for a 
new court-ordered rule by removing an old rule, you need to 
consider that a lot of those old rules were also at one time 
ordered by courts.
    Add to that political battles over saving popular rules 
from the chopping block or shutdown threats that could arise 
over raising the ``reg ceiling'' to accommodate new must-have 
rules. And you could have many years of lawsuits and logjams to 
look forward to.
    Finally, regulatory budgeting would distract us from more 
effective reforms, like eliminating unnecessary ex ante 
analytical and procedural requirements, empowering agencies to 
emphasize back-end adjustments in the implementation of 
completed rules, and empowering agencies to emphasize more 
flexible agency-driven reviews of their existing regulations 
and regulatory programs. And I expand on all of these in my 
written testimony.
    So thank you, and I would be pleased to answer any 
questions that you would have.
    [The prepared statement of Mr. Verchick follows:] 
    
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    Chairman Enzi. Thank you. I want to thank all of you for 
your testimony and for your written testimony, all of which 
will be a part of the record.
    The vote is a 15-minute vote, and I think there are 2 
minutes left, so I will have a recess while I go vote.
    [Recess.]
    Chairman Enzi. I call the hearing back to order. I said 5 
minutes over and 5 minutes back. I guess it took me 1 minute 
longer than that. But I want to thank all of you for your 
testimony and what you submitted beforehand, some excellent 
suggestions and warnings, and mechanisms that we might be able 
to use.
    I would mention that there is another hearing going on at 
the same time, and it is on gun control, and apparently there 
are a lot more people who understand guns than regulations.
    [Laughter.]
    Chairman Enzi. So we will conduct this a little bit more 
perhaps conversational, and others will be able to submit 
questions, specific questions for you based on what they have 
read from the testimony. But I will start with Dr. Graham 
because it has been argued by some that, on average, Members of 
Congress lack the subject matter expertise sufficient to do a 
regulatory budget. Indeed, so this argument goes, one has to 
know how a regulation works, for example, a clean air 
regulation, technically and scientifically before you know 
whether it should go forward or how much money to spend on it. 
That is the evolution of our increasingly complex economy, is 
simply taking regulatory oversight and budgeting out of 
Congress' hand and put them in the hands of experts working in 
the administration. It has pushed aside the lawyers, the 
business people, and even the two accountants who serve in
    the United States Senate, and it puts the scientists and 
economists in control of regulation. And it is a good idea to 
have people that have some expertise in charge of things, but 
technically we are the ones who assign regulations. And, 
increasingly, we have had less and less ability to have any 
input into those regulations.
    So one of the ideas that was suggested and even promoted by 
the Canadians based on their experience was having a regulatory 
budget. So how would each of you answer the critics of the type 
of budgeting the world is simply too complicated for people's 
elected representatives to be involved in annually making 
budget decisions about major regulations? We will start with 
Dr. Graham.
    Mr. Graham. Sure. I think the first thing I would say is 
that the regulatory budget idea I think envisions a more modest 
role for Congress because simply setting overall budget targets 
than the concept that Congress should vote on every single 
regulation. And there are proposals out there that suggest that 
Members of Congress should study--should be required to study 
every rulemaking or every significant rulemaking and they 
should vote on every single one of them. And I understand the 
sentiments behind that idea, but I do not think that that is 
practical in the way that our legislative process is set up.
    But I do think it is reasonable for Members of Congress to 
look at the information that agencies are providing for their 
performance, how well they have done in the past with their 
regulations, and what the benefits are prospectively of their 
new regulations, and say, Is this an agency that we think 
should have a substantial regulatory budget or a smaller 
regulatory budget? And I think it is reasonable to expect 
Congress to do that.
    So it is a big difference between voting on every single 
regulation versus just setting the budget and letting the 
executive branch then move forward in the implementation of 
that budget.
    Chairman Enzi. Thank you.
    Dr. Ellig?
    Mr. Ellig. Well, I think it is common sense to say that 
budgeting decisions, whether you are talking about tax dollars 
or social costs of regulation, that budgeting decisions ought 
to take benefits into account, as Senator Whitehouse said in 
his opening remarks. To me that is uncontroversial, and, heck, 
that is what I have been trying to do for 15 years, is improve 
the quality of information about the results of Federal 
programs and regulations.
    But I think that what members ought to ask themselves about 
every argument you hear against a regulatory budget, ask 
yourself, Is this also an argument against having a Federal 
budget for tax dollars? Because many of the arguments against a 
regulatory budget also imply we should not have a Federal 
budget for tax dollars either, Congress does not have the 
relevant expertise. Well, gee, to evaluate--to understand 
programs, you have to understand how the program works; you 
have to understand complicated chains of reasoning in order to 
understand whether the program is actually accomplishing 
results.
    Now, in reality, Congress does not have to know those 
things, but it does have to have access to good information 
about those things that is hopefully impartial and done by 
people with the relevant expertise.
    Here is why we have a Federal budget and a Federal budget 
process, and I think it is the same reason that you would want 
to have some kind of regulatory budget. Without a Federal 
budget, the process of appropriating is like a bunch of people 
who get together for dinner, sit around a table and agree they 
are all going to share the check equally. And if we are all 
sharing the check equally but I am ordering whatever I want, 
you can be if I know I am sharing the cost with everybody in 
the room, I am going to order the filet mignon, and I will be 
happy to get an extra bottle of wine toward the end of the 
evening. There is a difference in the type of discipline that 
people exercise when you are spending money or spending social 
resources and all of the costs are shared among the general 
population.
    The reason we have a Federal budget process is so that 
there is somebody--the Budget Committees--in charge of giving 
an overall look at everything and saying, okay, what is the 
limit on spending that we are going to have, and then we will 
divide that up among various priorities. And that prevents the 
appropriators from saying, well, gee, if you are--you know, if 
somebody else is sharing the cost, we will just kind of go and 
buy whatever we want. The same kind of logic applies to a 
regulatory budget.
    Now, I would be the first to admit, though, that the one 
argument I have heard about a regulatory budget that I think 
has merit is it is harder to count, reliably count social costs 
of regulations than it is to count tax dollars. And so a 
regulatory budget may have to work somewhat differently than 
the budget for tax dollars. But that is a difference in how you 
implement the concept, not a problem with the concept of an 
overall limit set by some entity in Congress whose job is to 
look at the totals rather than be advocates for particular 
programs or regulations.
    Chairman Enzi. Thank you
    Dr. Verchick?
    Mr. Verchick. Thank you. I think it is a really good 
question that you ask, and it concerns me a lot because I agree 
with what I think your belief is, which is that Congress can 
certainly find the resources to understand these complicated 
problems and that the public engaged in the process politically 
also has the ability to understand what is at stake.
    What I fear is that this kind of budgeting process actually 
disarms Congress in a particular way. So, for instance, when 
Congress right now makes decisions about what the train--you 
know, what sort of safety we need on trains or in automobiles 
or whatever, and they issue statutes, and then the 
organizations, the agencies come up with rules as a result, and 
then, of course, there is congressional oversight over that and 
a tremendous amount of cajoling, lobbying, whatever you want to 
call it in the political spheres when agencies are making these 
decisions.
    Now, the problem, why I say that there is less 
accountability for Congress is that Congress is essentially 
saying to the agencies we think you have too many regulations, 
or you are destined to have too many regulations, so you go 
figure out which regulations we told you to initiate and find 
the ones you do not like and take them out, because all of the 
regulations that the agencies have enacted have been authorized 
by Congress.
    And so, you know, for instance, your constituents who may 
tell you that there are some unfair barriers to operating their 
businesses because of regulations, if that is so, I think that 
the right way to do it would be to look into those regulations, 
to find out what is going on and harming the constituents, see 
if they are right, and if they are, then make a move in 
Congress to change the authorizing statute.
    But if you vote instead for a budget, there is no guarantee 
at all that the people that you care about in your community 
are going to see any effect of that, because what are the odds 
that the particular rule that is posing a barrier to them is 
the exact rule that some agency is going to scrap in order to 
make room for a new one?
    I would just make two quick points. The Canadian example I 
think is really interesting, and I watched on video the 
Treasurer's remarks, and I think it is an interesting plan. But 
one thing to keep in mind in comparing other plans is the 
Canadian plan really only applied to what he described, what 
the Treasurer described as ``red tape'' on small businesses. 
And the large examples he brings up are regulations about 
scrapping a regulation that required national registration 
before you could put a kayak in the river.
    I am not so concerned with those kinds of regulations in 
the sense that I am much more concerned with regulations in my 
community outside of New Orleans, for instance, where the EPA 
just created a new regulation to keep benzene from billowing 
out in clouds over communities from oil refineries. My 
neighbors, just miles away from there, they see that regulation 
not as something onerous or burdensome. they see that as an 
improvement to their lives.
    The very last thing about the budget, I think it is a fair 
question to say, well, should we not be aware of the amount of 
cost that we are shifting from one group to another? And I say 
it that way because before the oil refinery rule, the cost was 
borne by those poor and mainly African American communities in 
those neighborhoods. The cost was waking up in the middle of 
the night choking and having to go to an emergency room. Now 
the cost of that is shifted to compliance on the part of 
refineries. And so the cost is always there. It is just a 
question of who is going to bear that cost.
    But I would suggest that we think every day about the 
affordability of compliance rules. Congress does not pass a 
single act, I am sure, without hearing from groups about what 
the expenses are going to be. In almost every authorizing 
statute I can think of, at least under the EPA, costs of 
compliance are baked into the system, either in implementation 
or in writing the standard or in some other way. It is not fair 
to say that affordability is never a concern. Affordability is 
always a concern. My only point is that once we find that rules 
are affordable and that they produce net benefits in health, 
environment, and other things, it is a mistake to say of those 
successful rules, we will only choose a single one. We should 
choose them all, because we are better off with all of them 
than with just one of them.
    Chairman Enzi. Thank you. I have exceeded my time. I am not 
sure if Senator Whitehouse is ready to ask questions. He was 
here at the sound of the gavel.
    Senator Whitehouse. Ready to go if it is my turn, but I am 
happy to defer to Senator Crapo. Why don't we let Senator Crapo 
go? He was here, and I just got here.
    Chairman Enzi. Senator Crapo.
    Senator Crapo. Thank you, Mr. Chairman. I just have a 
couple of questions, and I am conceptually interested in how 
this is going to work if we were to do something.
    Let us assume that Congress were to pass a law that created 
a regulatory budget, which means that we say that all of the 
regulations--maybe I am not even describing it right--that all 
the regulations in the United States can only cost X dollars, 
and then that is allocated to the various agencies. Is that how 
a regulatory budget in concept works?
    Mr. Graham. That is one variant, but it is the more 
complicated one.
    Senator Crapo. Tell me a simpler one.
    Mr. Graham. The simpler one is you look for the next year, 
and Congress would say this is the amount of regulatory cost 
that you are allowed to impose for the next year.
    Senator Crapo. Okay.
    Mr. Graham. You do not have to quantify all the existing 
ones. You see the difference?
    Senator Crapo. All right. Yes. Let us take the simpler 
version. Who decides whether the agency has exceeded the 
budget? How is that calculated?
    Mr. Graham. Right. There either needs to be an executive 
branch process through OMB where the cost estimates of the 
agency are certified, or there needs to be a parallel process 
at CBO or a CBO-like organization that would do the same thing, 
or both.
    Senator Crapo. Okay. So if I understand you right, the 
agency, at least in the approach that you just described, the 
agency would get the first cut at it with their estimate, but 
either the CBO or GAO or--
    Mr. Graham. Or OMB.
    Senator Crapo. Or OMB would validate that. And what I am 
getting at here is the potential for gaming the analysis, 
because I personally think we see a lot of that. So it 
ultimately in my mind comes down to whoever the final 
decisionmaker is making sure that there is a system of 
accountability for the right kinds of analysis. I definitely 
personally would not like to see the agency be its own 
watchdog. So I like the idea of having some other entity do the 
cost analysis.
    But is there a way--I guess my next question then is: Do we 
know how to do that?
    Mr. Graham. Now, just a reminder that we do this on the 
budget side.
    Senator Crapo. I know we try.
    Mr. Graham. Okay, and we have a Congressional Budget--
    Senator Crapo. This is why I am suspicious.
    Mr. Graham. We have a Congressional Budget Office, and when 
I was in the administration from 2001 to 2006, we would float 
up proposals of how much it would cost in the budget if we were 
to make certain changes, say, in the Medicare prescription drug 
benefit or whatever it was. But then CBO would run off and do 
their own analyses, okay? And oftentimes they would call us on, 
in their view, we made errors or we low-balled or whatever it 
is, and so forth and so on.
    The first thing I want to say is there is nothing 
intellectually or qualitatively different about what we are 
talking about, what happened under our regulatory budget, than 
what we are already doing on the budget process.
    Senator Crapo. All right. So let me ask just another couple 
of questions, because my time is already starting to run out. 
When the agency, which would presumably in this process take 
the first cut at it, when the agency puts out its analysis, 
does it do a cost-benefit analysis and subtract the benefits of 
the rule from the costs of the rule?
    Mr. Graham. There are variants of the regulatory budget 
that propose that that be done that way. That is not what I 
would argue is the preferred approach to it. But if you wanted 
to structure it that way, you could.
    Senator Crapo. Would you say the preferred approach is to 
simply identify the cost?
    Mr. Graham. Exactly, like you do in the budget side.
    Senator Crapo. And that cost would be the dollars that 
would be expended by the economy to comply with the rule.
    Mr. Graham. Correct. And the benefits are the way the 
agency argues for why they should get permission to impose--
    Senator Crapo. To impose those costs.
    Mr. Graham. Right.
    Senator Crapo. All right. I guess then the last question 
would be--I would like to shift a little bit to the one-in/one-
out system that Canada has tried. That is one that has been 
talked about a lot. I would just love to have each of you give 
us quickly--I have only got 45 seconds, so if you could each 
take 15 seconds and give me your impression of what Canada is 
doing there.
    Mr. Graham. Well, I think the key thing to remember is that 
the metric is not overall regulatory cost. The metric is 
paperwork burden or think of it as red tape. But you could 
design the whole regulatory budget just around paperwork burden 
and information collection, and you could achieve a lot of the 
benefits of a regulatory budget through that process.
    Senator Crapo. All right.
    Mr. Ellig. It should not be hard, at least in the initial 
years, under one-in and one-out to find a few regulations that 
do not accomplish much and are kind of costly. At some point in 
the future, you might have to ask whether that is the best way 
to do it, but at least initially there are probably a few 
things that could go.
    Senator Crapo. Okay.
    Mr. Verchick. The main difference with the Canadian system 
is it does not apply to public health, to environmental 
regulations, or safety regulations, which I think is a positive 
thing, because those actually are protections to real people, 
and to take them away is a problem.
    Senator Crapo. All right. Thank you very much.
    Chairman Enzi. Senator Whitehouse.
    Senator Whitehouse. Thank you, Chairman.
    Would all of the witnesses agree that there are regulations 
whose benefits exceed their costs?
    Mr. Graham. Absolutely.
    Mr. Ellig. For sure, but we do not always know which ones.
    Mr. Verchick. Yes.
    Senator Whitehouse. And would you even agree that there are 
regulations for which the benefits so exceed the costs that it 
is really clear that the benefits exceed the costs?
    Mr. Graham. Yes.
    Mr. Ellig. Conceptually, yes, not making any commitment on 
any particular regulations.
    Senator Whitehouse. Did not ask that.
    Mr. Verchick. Yes, the air regulations are a good example 
of that.
    Senator Whitehouse. Yes. And we have a phrase that we use 
very often called ``cost-benefit analysis.'' Will you all agree 
that we use that phrase ``cost-benefit analysis'' because the 
cost comparison to a benefit is a relevant comparison?
    Mr. Graham. I try to persuade my students that it is more 
than a phrase, that it is actually an analytic tool.
    Senator Whitehouse. But you agree?
    Mr. Graham. Yes.
    Senator Whitehouse. Dr. Ellig, yes?
    Mr. Ellig. Yes.
    Mr. Verchick. Yes.
    Senator Whitehouse. Okay. So there are some basics. And if 
we were to look at things that companies have to report, for 
instance, statements of assets and liabilities, or statements 
of income and expense, if a company were to omit the assets or 
omit the income and just report the liabilities or just report 
the expense--actually, it would probably be the other way 
around--and you filed that with the SEC, for instance, you 
would be in trouble. It would be dishonest, and you would be 
violating our disclosure laws, correct?
    [Witnesses nodding heads.]
    Senator Whitehouse. Yes. Let the record reflect three 
yeses.
    Mr. Graham. As much as I know about that law, yes.
    Senator Whitehouse. Great. Okay. So here is my problem with 
where we are. Out there in the regulatory world, there are 
regulations and there are costs of compliance and there are 
benefits that emerge, and undoubtedly there are times when it 
is inefficient or obsolete. Got it.
    I live in a smaller world. I live in Congress world. And in 
Congress world, we deal with the forces that do not want there 
to be regulation at all. They are interested selfishly in their 
own costs and have zero interest in the benefits that accrue to 
the general public versus their balance sheet. And we see that 
over and over and over again in industry studies on 
environmental and other regulations that do exactly that. They 
only report the industry costs. They do it over and over again. 
We have even heard that done here today. Over and over again 
you hear only the cost. And that is a weapon in the battle here 
in Congress world where corporations try to get out from under 
regulations. And my worry is that--and I will make one other 
observation.
    Over and over again we hear about how important it is to 
lower the burden of regulation, excessive regulation, 
burdensome regulation. These have become catch phrases. And yet 
virtually every time we actually take up anything that would 
reduce the burden of regulation, it is always the same stuff. I 
is always Wall Street and polluters. We hear about burdensome 
regulation across the board, but I have never seen a list, let 
us get together, Democrat and Republican, let us look at what 
is really burdensome, let us look at what is obsolete, let us 
look at what is excessive, let us look at what is unnecessary. 
No. As soon as you pull back the curtain that says burdensome 
regulation, you see the same creatures: Wall Street trying to 
get out from under regulation, and polluters trying to get out 
from under regulation. And over and over again we have had 
headlines this year saying, you know, GOP moves to attack Dodd-
Frank and EPA regulations. That is what I see. That is the 
world I live in.
    And so I am very worried that a mechanism that looks only 
at costs not only is wrong from a point of view of cost-benefit 
analysis, but also is a tool designed to be used by the 
industries in Congress world in their fight against regulation. 
And I guess I will give you a chance to react to whether you 
think a cost-only analysis would be amenable to that type--
would it be an abuse of your analysis to be used for those 
political purposes?
    Mr. Graham. The first point I want to make is that there 
are proposals in the literature for a regulatory budget to 
operate on benefits minus costs, so it would be formally in the 
calculation. So if that is what you want, you can design a 
regulatory budget system to do that.
    The second, more important point I want to make is on the 
budget side right now, when OMB makes a request to the Congress 
for the budget for a program or agency, in the narrative of the 
justification are benefits. The ask is just for the 
authorization to spend. The regulatory budget would proceed the 
same way. The limitation is on the regulatory burden, but the 
rationale and the evidence that is provided to the Congress is 
benefits. So benefits are really a central part of this 
process.
    So I think that everything you are talking about is going 
to--all this stuff about the industries not wanting any 
regulation, that is going to be true with or without a 
regulatory budget.
    Senator Whitehouse. True. But I guess I would conclude by 
saying if a regulated industry were to use the cost analysis 
without taking into account benefits, you would view that as an 
abuse of the budget--
    Mr. Graham. Right. But all the staffers and all the 
members, they have got the request right there from OMB, and 
they see all the benefits. It is right there in the 
documentation.
    Senator Whitehouse. Got it. Well, that is helpful to 
clarify. I appreciate the Chairman allowing me to go over the 
time a little bit, and I thank the witnesses for being here. My 
time is over.
    Chairman Enzi. Well, thank you, and I appreciate a lot of 
the points that have been made here today. I want to pursue the 
Government Performance and Results Act a little bit more since 
I have an expert on that here and others who are very 
knowledgeable on it as well.
    One of the things that--well, when I was running for office 
for the very first time, people said, ``You know, there ought 
to be some way we can tell what the agencies think they are 
doing and whether they get it done or not.'' And I said, ``You 
know, if I go to Washington, I am going to put something in 
that will cause that to happen.'' And I got back here and got 
to reviewing it, and I found out there was already this law in 
effect called the ``Government Performance and Review Act,'' 
and each agency was supposed to say what they are going to do, 
and then at the end of the year evaluate whether they did it or 
not.
    So I started collecting those to see, you know, how it 
went, and most agencies had not done the list of things to 
begin with that they were going to achieve. And those that had 
listed them and then reviewed their own, I would have given 
them a failing grade because they were not paying attention to 
the goals that they had.
    So one of the problems that we have around here is our 
accountability for what we find or fail to find. One of the 
processes I found as Budget Chairman was that we have 260 
programs that are out of authorization. Their ability to get 
appropriations has expired. But we are still doing them. One of 
them expired in 1983, another one in 1987. Most of them are 
before 2006. And does it amount to much money? $293.5 billion a 
year that we are spending on things that we have not taken a 
look at to see if they are worth doing anymore. Some of them 
may be too controversial to be reauthorized. I am not sure. I 
have tried to figure out the reasons. The biggest reason is we 
do not go back and look at anything. And that is why we brought 
the Canadians down, to get some kind of an emphasis on how do 
we get Congress to go back and look at the old stuff. It is 
only sexy to look at the new stuff. And that is sometimes what 
happens with regulations. And I do appreciate the distinction 
that has been made by several of you that their budget deals 
with red tape costs.
    Another experience that I had when I got here is I had 
teacher, a principal that got a hold of me and wondered where 
all his reports went. And his district let him come back and 
intern for me, so I sent him down to the Department of 
Education, and he followed all those forms around for a 
semester and then reported back to me. And his answer was, ``It 
is absolutely amazing. They check every one of those reports. 
They make sure that everything is filled in, that everything is 
logical. If it is not, they send it back. They get a new one. 
And once it is all completed, they file it in a drawer, and 
nobody looks at it.''
    So that is some of the red tape and paperwork and cost that 
we could be talking about. What we are trying to find is some 
kind of an incentive for people to actually look at that. And 
that is why we talked about a regulatory budget-- it could be 
called a ``red tape budget'' or ``excess reporting budget'' or 
something like that--as a starter budget.
    But one of the things we have gotten into a little bit- -
and you have talked a little bit about it--is this cost- 
benefit analysis, and the ones that I have looked at, the costs 
are fairly easy to delineate. Well, in some cases they are easy 
to delineate. In some cases the inventions have not been made 
yet for industry to put in those things. So they have not been 
costed out yet. But on the benefit side, I cannot get much 
information on what they anticipated were these benefits. We 
get kind of a gross number of what it is, but when we try to 
get into the details, that is a little bit more nebulous. And, 
of course, it is usually done over varying lengths of time, 
which is something the Canadians solved. They said that there 
is an international standard for doing the benefit analysis as 
well as the costs. But it puts them on a equal basis for the 
cost of the time versus the cost of the benefits.
    Have you got any ideas on how we can get better cost 
analysis and benefit analysis or either or both? I will start 
with Dr. Verchick on this one.
    Mr. Verchick. Thanks. I would say that in some ways we do a 
very good job of focusing on those issues. I myself have 
sometimes troubles with seeing how costs are estimated or how 
benefits are estimated, for that matter particularly when the 
benefits are things like human lives or IQ points or a pristine 
environment. Those are things that are monetized, and I think 
it is troublesome sometimes when it happens.
    But I do think if you take a look, for instance, at the 
regulatory impact assessments that are done by agencies for 
significant rules, they are very, very deep in the details of 
how benefits are calculated if one is interested in that. And 
when you get to the point where you find that benefits are 7 to 
25 times the costs, that gets you to a number, I think, where 
it is beyond funding, right? Where when something is 25 times 
more than another thing, it is hard to say, oh, well, you know, 
they rounded it wrong or they dropped a decimal point 
somewhere. That is usually an indication that there is really 
something that is desirable for society.
    The other time, though, that Congress, I think--and what I 
am talking about is agencies, but Congress can really look at 
this, too, and they do every time they pass a statute. Every 
time a statute is passed, or least an expensive one, the CBO 
will come out with an estimate of what it is going to cost, 
what kinds of benefits will be, and so on. And so the idea, I 
think, that we need a separate law to spur Congress to think 
about the costs and benefits of statutes is wrong. They have 
already done it when they enact the statutes. And for parties 
that would like them to do it again every year, that is just 
looking for another bite at the apple at something that they 
have already done. If Congress says we want statutes that 
protect people from such-and-so, presumably they have already 
done the economic work to decide that that is something that 
needs to be done.
    Chairman Enzi. Anybody else want to comment on that?
    Mr. Graham. I just want to clarify that oftentimes Congress 
passes general regulatory authority, for example, for the 
safety of cars, but they do not know at the time that they pass 
that what the total economic burdens or benefits will be over 
the life of that program. So it is not unreasonable for 
Congress to also want to look into whether the overall cost of 
the program should be limited. So the general regulatory 
authority does not mean that they have done the economic 
analysis up front.
    Chairman Enzi. And our government performance and results 
expert here.
    Mr. Ellig. Yes, I have spent 15 years complaining about the 
quality of information that agencies have and produce about the 
results of Federal programs and regulations. That does not mean 
I am against the idea of having a Federal budget that only 
considers tax dollars. What it means is we need better 
information about results, and we need to consider that 
information when we make decisions that lead to the expenditure 
of tax dollars or the expenditure of private dollars when we 
are dealing with regulation.
    So, yeah, there is a big need to improve. I think what our 
experience has shown is just that exhortation does not work. 
Just putting something in a law or an Executive order does not 
necessarily work. There seem to be two kinds of things that 
will encourage better information about the results of 
programs. One is as if the information is actually used by 
decisionmakers, either at agencies or if we see a congressional 
commitment, to use that information in budgeting decisions, 
authorizing decisions, reauthorization decisions, because, 
quite frankly, especially under GPRA, I noticed a number of 
agencies just treat it as a paperwork exercise because they 
presume, well, yeah, it is in the law, but committees in 
Congress are not going to really use this, and they are going 
to make decisions based on other criteria anyway, so we will do 
the minimum we have to do to claim that we complied. Now, to 
get real agency commitment, if they knew that the information 
was going to be used, that might be a different story.
    Secondly, what you need is enforcement. As I said in my 
testimony, regulations do not enforce themselves. Neither do 
analytical requirements. We have seen evidence through our 
regulatory report card that OIRA review of regulations and 
regulatory impact and all this analysis does help improve the 
quality. We have seen for certain kinds of regulations where 
there are statutory requirements that certain types of benefits 
and costs must be considered by the agency, those types of 
regulations tend to do somewhat better analysis of the types of 
benefits and costs that are mentioned in statute, particularly 
the Department of Energy energy efficiency regulations. There 
are other problems in the analysis of those, but they have more 
detailed analysis of benefits and costs than other regulations, 
and I think part of the reason is because the statute lays out 
specific benefit and cost criteria that the Department of 
Energy has to consider.
    You know, the other potential incentive is some type of 
budgetary consequences based on the quality of analysis about 
results that the agencies produce. If you do not have solid 
evidence-based analysis of results, then, you know, maybe we 
should say, well, maybe we should not be spending so much money 
on some of those things.
    Finally, I would take issue with one comment you made about 
costs being relatively easy to identify, and we hear this a lot 
in the regulatory debate, that costs are very easy to estimate, 
but benefits are nearly impossible and that is why we should 
not try and broad values should always trump costs.
    I think that is inaccurate, and it reflects a difference 
between kind of the average person's understanding of costs and 
the economist's understanding of really what social cost is or 
opportunity cost. It can be easy to count up money that 
regulated entities--business firms, State governments, local 
governments, tribal government--it can be easy to count up the 
money that they spend on compliance. But that is not the full 
social cost of regulation. The full social cost is what does 
society give up as a result of the regulation, and the best 
example of that that I have is something that probably 
everybody here is familiar with: airport security.
    If we try to figure out the cost of airport security 
regulations, the first thing that would occur to you is, well, 
you have to pay TSA agents and you have to pay for equipment in 
the airport and the airlines have to pay for that, and they 
pass that on to the passengers in the form of a fee on your 
airline tickets. And that is true enough, and that is several 
billion dollars a year. But that is nowhere near the entire 
cost to society of airport security screening.
    Using the Department of Transportation's own rule-of- thumb 
figures for the value of passengers' time--DOT is actually 
reasonably good about these kind of things in its analysis--
there are several billion dollars more of social costs that are 
a result of the time passengers spend standing in line at 
security checkpoints.
    We also have a reduction in the amount of air travel 
because some passengers, myself included, on shorter trips say, 
``The heck with flying, it is too much of a hassle. I am going 
to drive.'' There is a loss of value to consumers there. And 
there is a paper published in the Journal on Law and Economics 
by some economists at Cornell University who calculated the 
number of additional deaths on the Nation's highways we have 
because a number of people who were traveling decided that, 
``Using the airports is too much of a hassle, and I am going to 
drive instead of fly.'' And, statistically, driving is more 
dangerous than flying.
    So we have the costs of passengers' time, lost output, 
increased highway deaths, which are also costs of airport 
security regulation, and those are costs that are just as 
difficult to estimate as benefits of regulation are.
    Now, does that mean airport security is a bad idea? Of 
course not. I do think, though, that if the social costs of 
airport security had been fully recognized and accounted for 
right after 9/11 when the system was changed, maybe the system 
would have been designed with a little more sensitivity to 
those costs to try to reduce them. And I was going to say I am 
not blaming the man who was OIRA Administrator at the time. I 
am sure behind the scenes he probably tried to make some of 
those arguments. But, in any case, that is just one example of 
how costs of regulation are much fuller and more significant 
than simply counting up some dollars that you see regulated 
entities spending.
    Mr. Graham. Just a quick comment. It took more than 10 
years to get the PreCheck in. So, you know, once you establish 
a regulation, you incur all those burdens to try to gradually 
just kind of rationalize a little bit. It takes a long time, 
and it is very hard.
    Chairman Enzi. And it goes back to my comment about we do 
not usually go back and look at the old stuff. We like to kind 
of promote the new stuff.
    Dr. Verchick, did you have an additional comment?
    Mr. Verchick. Just a short response to Dr. Graham, who is 
exactly right that often or at least sometimes statute are 
passed without an understanding of what the complete expanse 
will be. But, for instance, if a court were to order an agency 
to start regulating or expand its regulation in a certain 
area--they have done that with EPA, for example, or courts have 
ordered EPA to lower standards or raise health standards, which 
increase costs. If those things are unpredicted by Congress and 
they are undesirable in the understanding of Congress, then it 
seems to me that the right answer is for Congress to look at 
that particular statute and to say, ``Oh, wait, it has gone off 
the tracks. Let us fix that.'' That seems to me more 
accountable than saying to agencies generally through a budget, 
``Go back and find things you want to fix.''
    It seems if there is a problem with the statute and it 
really is too expensive or more expensive than Congress 
envisioned, then the answer is that Congress should revisit it 
and change it.
    Chairman Enzi. Well, I have greatly exceeded my time. I 
will go back to Dr. Whitehouse again for his turn.
    Senator Whitehouse. I am the only one who is not a doctor 
here. Mr. Chairman, I would--
    Chairman Enzi. No, no. There are two of us that are not a 
doctor.
    [Laughter.]
    Senator Whitehouse. Okay. I would say that as we are 
sitting here in Congress waiting for the annual tax extenders 
negotiation to reach its conclusion, and waiting for the annual 
appropriations process to reach its conclusion, it might not be 
a bad idea to try to put together a regulatory housekeeping 
annual proposal. And I would suspect that you would find that 
there are a considerable number of things that both sides could 
agree on as being unnecessary, burdensome, or obsolete if we 
did it as a package and tried to put it all together. The 
danger, of course, is that the big, powerful groups that throw 
their weight around here would try to co-opt that process so 
that it once again became the Wall Street and Big Polluter Free 
Ride Act of whatever year it was in. But if we could steer away 
from that, I bet that there is a big area of bipartisanship 
that could be done, and if it became a regular routine, maybe 
the Budget Committee could be the focus or the forum for trying 
to pull that together, and I would be happy to participate in 
such an effort.
    I have been a regulator. I have been an advocate before 
regulatory agencies. I suppose I have been the subject of 
regulation as a candidate. And it is clear that there can--I 
tell you what. Anybody who has been through Union Station knows 
that there are times when regulation does not make sense. There 
is that guy out front, and there are 50 taxicabs waiting, and 
there are 50 people waiting for taxicabs, and they have managed 
to manufacture a chokepoint so that you have a line of 50 
people; whereas, if that individual were dedicated to helping 
people who needed help into cabs and everybody else could just 
go to one, it would be very efficient, and you would have less 
people wasting time, to Dr. Ellig's point.
    So I do not want to put myself--I think it is important 
that we defend regulation where it makes sense because I think 
it is essential to civilized society, but that does not mean it 
cannot get stale or it cannot become obsolete, particularly as 
technologies change. And if this Committee becomes a place 
where we start to look at that in a thoughtful way, then I am 
all for that. And I appreciate your attention to this question, 
Mr. Chairman.
    Chairman Enzi. As usual, you have an outstanding 
suggestion, too, and we will take a look at that as we go 
through some of the reform and see what responsibilities the 
Budget Committee actually ought to have that can actually 
accomplish something. And what you suggest is also a way of 
getting us to look at some of the old things that might be on 
the books that are not being used anymore.
    I always mention that I discovered that there is a certain 
rule to passing bills, and that is, if it is worth regulating, 
it is worth overregulating. We always do things kind of in the 
crisis. The airport security is one of those things that 
happened in the crisis. We needed to do something immediately. 
We did something immediately. Then I did not realize that it 
took 10 years to get PreCheck through, but I can tell you that 
in D.C. the PreCheck line is longer than the regular line.
    [Laughter.]
    Chairman Enzi. Because everybody here deserves PreCheck.
    Senator Whitehouse. One interesting example, Mr. Chairman, 
is hospital quality reporting. Hospitals have to report on 
quality--I do not have the numbers handy because I was not 
prepared to talk about this, but dozens and dozens of reports 
to multiple different agencies, and the effect of that is 
twofold: First, an enormous amount of time is wasted on these 
reports. And, second of all, the effect of having a bad quality 
report is diminished because there is some other report where 
they can say, ``Well, we did well on this one.'' And so you end 
up with what is intended to be a signal to the public to drive 
consumer behavior to pressure hospitals to make sure they avoid 
hospital-acquired infections and so forth. And we manage to 
mute that message by layering on so many different reports that 
it becomes a big Tower of Babel, a big muddle. So it is kind of 
the worst of all worlds. You do not really get the signal when 
a hospital has a bad safety record, and at the same time, 
everybody is complying like crazy with dozens of different 
quality reports, each of which is very well intended. But when 
you look at the whole system globally, it ends up just being a 
clutter out of which no serious consumer message emerges.
    So that is just one that we have been facing off on trying 
to deal with in my office, and I am sure there are a gazillion 
others.
    Chairman Enzi. Very good. I get calls from businessmen all 
the time who wonder if they ought to fill out this report they 
just got from one or another Government agency, and my first 
question always is: Is it mandatory? They usually cannot tell 
from the wording. It sounds very mandatory. So we checked on 
it, and often they are not mandatory. And I always suggest that 
they never fill out one of the non-mandatory reports because 
they will get consistently asked for additional reports. But I 
think that maybe we could make it a little clearer on that.
    I know in the bill that we just passed on elementary 
education, we eliminated a bunch of reports, and we are going 
to start on higher education next. And Lamar was a college 
president, and he brought in a stack of the reports that he had 
to file, and I think it was about 9 feet tall. So I suspect we 
will eliminate a few there, too. But I appreciate your--
    Senator Whitehouse. I hope so. Rhode Island is a very big 
higher education State, and I hear from a lot of very capable 
college presidents, not so much that--I guess it is the same 
issue. They have to report on a million different things, and 
the result in terms of a signal to prospective students, to 
consumers, to parents, is completely lost in the muddle. You 
cannot find it. There are so many reports that there is no 
place for a consumer to go. And if you were to actually create 
a dashboard of consumer information that was really relevant 
and important and then strike everything that was not necessary 
to the dashboard, you would actually have a far better 
regulatory service provided to the public.
    Chairman Enzi. Very good. Well, I thank the panel for all 
of their great comments, and particularly the excellent 
testimony that you provided, too, with some excellent 
suggestions, and we will see where this can all go. So thank 
you, and, again, you may get questions from people that were at 
the gun control hearing.
    Mr. Graham. Thank you, Mr. Chairman.
    Mr. Ellig. Thank you
    Mr. Verchick. Thank you
    Chairman Enzi. The meeting is adjourned.
    [Whereupon, at 11:59 a.m., the Committee was adjourned.]