    [Senate Hearing 115-204]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-204

                      TERRIBLE, NO GOOD, VERY BAD WAYS OF
                     FUNDING GOVERNMENT: EXPLORING THE COST
                      TO TAXPAYERS OF SPENDING UNCERTAINTY
                     CAUSED BY GOVERNING THROUGH CONTINUING
         RESOLUTIONS, GIANT OMNIBUS SPENDING BILLS, AND SHUTDOWN CRISES

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

                                    HEARING

                                   before the

                        SUBCOMMITTEE ON FEDERAL SPENDING
                       OVERSIGHT AND EMERGENCY MANAGEMENT

                                     of the

                                  COMMITTEE ON
                             HOMELAND SECURITY AND
                              GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                FEBRUARY 6, 2018

                                   __________

                       Available via http://www.fdsys.gov

           Printed for the use of the Committee on Homeland Security
                            and Governmental Affairs

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     U.S. GOVERNMENT PUBLISHING OFFICE

     29-446 PDF               WASHINGTON : 2018
    ____________________________________________________________________
     For sale by the Superintendent of Documents, U.S. Government Publishing Office,
    Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
      Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001

            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                        RON JOHNSON, Wisconsin, Chairman
    JOHN McCAIN, Arizona                 CLAIRE McCASKILL, Missouri
    ROB PORTMAN, Ohio                    THOMAS R. CARPER, Delaware
    RAND PAUL, Kentucky                  HEIDI HEITKAMP, North Dakota
    JAMES LANKFORD, Oklahoma             GARY C. PETERS, Michigan
    MICHAEL B. ENZI, Wyoming             MAGGIE HASSAN, New Hampshire
    JOHN HOEVEN, North Dakota            KAMALA D. HARRIS, California
    STEVE DAINES, Montana                DOUG J0NES, Alabama

                      Christopher R. Hixon, Staff Director
                   Margaret E. Daum, Minority Staff Director
                         Laura W. Kilbride, Chief Clerk
                        Bonni Dinerstein, Hearing Clerk

      SUBCOMMITTEE ON FEDERAL SPENDING OVERSIGHT AND EMERGENCY MANAGEMENT

                         RAND PAUL, Kentucky, Chairman
    JAMES LANKFORD, Oklahoma             GARY C. PETERS, Michigan
    MICHAEL B. ENZI, Wyoming             MAGGIE HASSAN, New Hampshire
    JOHN HOEVEN, Montana                 KAMALA D. HARRIS, California
                          Greg McNeill, Staff Director
                    Zachary Schram, Minority Staff Director
                          Kate Kielceski, Chief Clerk

                                C O N T E N T S

                                     ------
    Opening statement:
                                                                       Page
        Senator Paul.................................................     1
        Senator Peters...............................................     3
        Senator Jones................................................    16
    Prepared statements:
        Senator Paul.................................................    27
        Senator Peters...............................................    29

                                   WITNESSES
                           Tuesday, February 6, 2018

    Heather Krause, Director, Strategic Issues, U.S. Government
      Accountability Office..........................................     5
    Clinton T. Brass, Specialist, Government Organization and
      Management, Congressional Research Service.....................     6
    Maya MacGuineas, President, Committee for a Responsible Federal
      Budget.........................................................     8
    Alice M. Rivlin, Ph.D., Senior Fellow in Economic Studies, The
      Brookings Institution..........................................    11

                         Alphabetical List of Witnesses

    Brass, Clinton T.:
        Testimony....................................................     6
        Prepared statement...........................................    42
    Krause, Heather:
        Testimony....................................................     5
        Prepared statement...........................................    32
    MacGuineas, Maya:
        Testimony....................................................     8
        Prepared statement...........................................    52
    Rivlin, Alice M. Ph.D.:
        Testimony....................................................    11
        Prepared statement with attachment...........................    59

                                    APPENDIX

    Statement submitted for the Record from:
        American Federation of Government Employees, AFL-CIO.........    92
        Senior Executives Association................................    96

                      TERRIBLE, NO GOOD, VERY BAD WAYS OF

                       FUNDING GOVERNMENT: EXPLORING THE

                         COST TO TAXPAYERS OF SPENDING

                        UNCERTAINTY CAUSED BY GOVERNING

                     THROUGH CONTINUING RESOLUTIONS, GIANT

                  OMNIBUS SPENDING BILLS, AND SHUTDOWN CRISES

                                  ----------

                           TUESDAY, FEBRUARY 6, 2018

                                     U.S. Senate,
                            Subcommittee on Federal Spending,
                        Oversight and Emergency Management,
                        of the Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2:31 p.m., in
    room SD-562, Dirksen Senate Office Building, Hon. Rand Paul,
    Chairman of the Subcommittee, presiding.
        Present: Senators Paul, Peters, Harris, and Jones.

                  OPENING STATEMENT OF SENATOR PAUL\1\

        Senator Paul. I call this hearing of the Federal Spending
    Oversight Subcommittee to order.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Senator Paul appears in the Appendix
    on page 27.
    ---------------------------------------------------------------------------
        Before we start, I want to express this Subcommittee's
    deepest sympathy to the family and friends of Ed Lorenzen, who
    was a senior policy advisor at the Committee for Responsible
    Federal Budget. Ed and his 4-year-old son tragically passed
    away 12 days ago in a house fire. Ed was a well-respected
    member of the budget community and possibly the foremost
    champion of the PAYGO rule. In fact, his Twitter handle was
    Captain PAYGO.
        By all accounts, Ed was a great guy and a dedicated
    budgeteer. Literally, the day of his death, Ed was working with
    my staff in preparation for this very hearing. So this tragedy
    is close to our hearts, and it is with deep sympathy to his
    family that I ask everyone to join me in a moment of silence.
        [Moment of silence.]
        Thank you.
        We are here today to discuss continuing resolutions (CR),
    omnibus appropriations, missed funding deadlines, and
    shutdowns. This hearing is entitled the ``Terrible, No Good,
    Very Bad Ways of Funding Government.'' I cannot think of a
    better way to describe how dysfunctional Congress is with its
    power of the purse.
        Today, government is open and on its fourth CR of the year.
    Who knows what will happen Thursday? But what we know is we are
    already a third of the way through the fiscal year (FY) and
    still using temporary funding. It just makes no sense.
        And this is not a partisan problem either. The last time we
    passed all appropriation bills on time was 1997, which was only
    the fourth instance all appropriations were done since 1977,
    four times in 41 years.
        Missing appropriation deadlines have consequences. It
    causes uncertainty in agencies and delays plans, which may
    increase cost to the taxpayer. In October, we had a hearing on
    wasteful end-of-the-year spending. Part of the problem there is
    caused by the use-it-or-lose-it mentality, but we also heard
    that delayed appropriations compresses the funding window,
    meaning even good projects become lower quality as there is
    just less time to plan and obligate the funds.
        Another part of the problem that concerns me is that once
    Congress goes beyond the funding deadline, our incentive turns
    to doing an omnibus appropriation, which is maybe only slightly
    less bad than a continuing resolution. That is where we glue
    together all the unfunded programs into one single giant bill.
    How can Congress do proper oversight of spending when we throw
    everything into one giant trillion-dollar bill, sometimes with
    only hours to scrutinize and no chance to amend?
        As a doctor, I need an ophthalmoscope to look at the back
    of your eye, but being able to take a closer look helps me to
    diagnose and fix these problems. That is what we need in the
    budget process. That is exactly what we need is a closer look.
        Instead, we are given one giant bill, with little debate
    and asked to vote up or down, and rarely allowed to amend the
    bill.
        Of course, we all know about and dread the government
    shutdowns. In fact, I often say while I do not want to shut
    down government, I also am not sure I want to keep it open and
    still borrowing a million dollars a minute. They are both not
    very good solutions.
        Making government less efficient, we have to talk about
    what we can do to fix it. So I have introduced something called
    the Shutdown Prevention Act, which says at the end of the
    fiscal year, anything still not funded would automatically be
    funded at 99 percent of the previous budget.
        What should make this a win-win for everyone is that
    agencies will have at least a minimum level of certainty.
    Government will not completely shut down. They will keep
    spending money, but there will be a penalty. They will spend
    one percent less, and around here, spending one percent less
    ought to be enough of a penalty to get everybody to do their
    job and do the appropriation bills on time.
        So I think this is an important and timely hearing, and I
    thank Senator Peters for working with our office to set this
    up.
        With that, I will recognize the Ranking Member for his
    opening statement.

                 OPENING STATEMENT OF SENATOR PETERS\1\

        Senator Peters. Well, thank you, Mr. Chairman, and thank
    you for providing this forum on this topic today, in a
    collaborative and bipartisan way and a bipartisan spirit, and I
    always appreciate that of you, Mr. Chairman.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Senator Peters appears in the
    Appendix on page 29.
    ---------------------------------------------------------------------------
        The conversation that we are having today goes to the heart
    of how Congress functions as an institution. One of our most
    fundamental responsibilities is to pass a budget and fund the
    government. This is our most basic job, and the American
    people, quite frankly, expect us to get it done.
        The way we budget and fund the government is,
    unfortunately, now dysfunctional. It is a problem that has gone
    on for far too long, and we have become accustomed to it. It
    has become the new normal, and the purpose of today's hearing
    is to say enough is enough. This is no way to govern.
        This broken process filled with last-minute deadlines,
    continuing resolutions, and even government shutdowns is
    wasteful. It is inefficient and harmful to the American people.
        That is why our esteemed panel of witnesses are all here
    today, and I appreciate your expertise, your experience, and
    your time. Your testimony today is critical to helping us
    diagnose the severity of our budgeting problem and how it
    impacts government services and waste taxpayer dollars. I hope
    you can help us explore some constructive solutions.
        Our broken budget process needlessly shortchanges
    effectiveness of Federal programs through the never-ending
    cycle of short-term continuing resolutions and omnibus spending
    bills, creating budget crisis and keep the government
    perpetually at the edge of a shutdown. That threat occasionally
    comes to pass, as we just saw recently.
        Though Congress designed a clear budget process in the 1974
    Congressional Budget Act to establish our own funding
    priorities and set a timeline for enacting them into law, we
    have failed time and time again to live up to our own
    standards. In fact, Congress has only managed to enact all 12
    required appropriation bills on time in four of the past 40
    years.
        Instead, this body has passed an average of four CRs every
    year, and the frequency has only increased in recent years.
    Since 2011, we have passed 34 CRs. Sometimes these CRs fund the
    government for as little as one day at a time. As a result, the
    majority of sitting Members of Congress have never seen this
    body pass a budget through ``regular order.''
        We can and we must do better. I am hopeful that this
    hearing will offer a candid discussion of the facts and
    emphasize the true cost and consequences of governing through
    short-term CRs. We lurch from crisis to crisis, wasting
    countless hours across the Federal Government, as employees
    prepare for shutdowns or draft detailed comprehensive yearly
    budget documents that are completely disregarded.
        Most significantly, this dysfunctional pattern needlessly
    threatens our national and economic security. Without a long-
    term budget outlook, our military is unable to plan ahead and
    effectively conduct their critical missions to protect the
    American people and American interests abroad.
        Instead of thoroughly evaluating spending priorities or
    conducting meaningful oversight of government programs,
    Congress kicks the can down the road and lets taxpayers foot
    the bill.
        In the event of a shutdown, hundreds of thousands of
    Federal workers are furloughed from their jobs, and Americans
    of all walks of life lose access to important public services
    that they count on.
        To offer a better sense of the real impact this has on
    Federal workforce, I ask unanimous consent (UC), Mr. Chairman,
    to enter into the record a letter that I received today from
    the American Federation of Government Employees.\1\
    ---------------------------------------------------------------------------
        \1\ The letter from the American Federation of Government Employees
    appears in the Appenidx on page 92.
    ---------------------------------------------------------------------------
        Senator Paul. Without objection.
        Senator Peters. Last week during a hearing in the Commerce
    Committee, I asked the Director of the National Science
    Foundation (NSF) about the impact of continuing resolutions and
    shutdowns on her agency. Not only did the NSF have to cancel a
    whole slate of important meetings, including with several Nobel
    Prize laureates, the Director also told me that, ``Everybody
    just basically stops work in order to gear up for a shutdown.''
    That is unacceptable.
        That is a lot of time and tax dollars wasted preparing for
    a shutdown that would not happen if Congress simply did its
    job.
        I look forward to hearing a robust discussion from today's
    witnesses about potential reforms and solutions that will help
    us break this harmful cycle and restore regular order to the
    congressional budget and appropriations process. We must work
    together in a bipartisan way to reduce our reliance on short-
    term CRs, mitigate the harmful effects of this uncertainty on
    Federal agencies, and minimize the cost of this broken process
    to taxpayers.
        I am sure the Chairman would join me in saying that we are
    very eager to hear your ideas today.
        So let us get to work. Thank you very much, and thank you
    again, Mr. Chairman, for this hearing.
        Senator Paul. Thank you, Senator Peters.
        With that, I will begin with our witnesses' opening
    statements. I will remind the witnesses that their statements
    have already been submitted, and we would like to try to keep
    it to five minutes, if possible.
        Our first witness is Heather Krause. She is the Director of
    Strategic Issues for the Government Accountability Office
    (GAO). Ms. Krause previously testified before this Subcommittee
    on wasteful end-of-year spending. In that testimony, she
    pointed out that part of what can cause spending surges at the
    end of the fiscal year and lead to waste in agency funding
    being continually delayed, so we wanted to bring Ms. Krause
    back and continue that discussion to learn more about the cost
    and inefficiencies created by funding delays and uncertainty.
        Ms. Krause has a bachelor's degree in political science
    from the University of Minnesota Duluth and a master's degree
    in public policy from the University of Minnesota.
        Ms. Krause, thank you for coming back.

      TESTIMONY OF HEATHER KRAUSE,\1\ DIRECTOR, STRATEGIC ISSUES,
                 U.S. GOVERNMENT ACCOUNTABILITY OFFICE

        Ms. Krause. Thank you, Chairman Paul, Ranking Member
    Peters, and Members of the Subcommittee. I thank you for the
    opportunity to discuss our work on how continuing resolutions
    and other budget uncertainties affect agencies and the services
    that they provide.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Ms. Krause appears in the Appendix on
    page 32.
    ---------------------------------------------------------------------------
        As you know, Congress annually faces difficult decisions on
    what to fund among competing priorities and often postpones
    final funding decisions to allow more time for deliberations.
        To prevent funding gaps, Congress enacts continuing
    resolutions, so that agencies can continue to operate
    government services until Congress and the President reach
    agreement on regular appropriations.
        In all but four of the last 40 years, as was noted in the
    opening statement, Congress has passed CRs to provide agency
    funding until agreement is reached. In some years, including
    the current fiscal year, when new appropriations or a CR have
    not been enacted, there is a lapse in appropriations or
    government shutdown. This leads some agencies to halt their
    activities and furlough employees until appropriations are
    enacted.
        Our prior work on Federal budgeting has shown that
    operating under a CR, the possibility of a government shutdown,
    or both, creates uncertainty and management challenges for
    agencies.
        In response to these uncertainties, agency officials have
    taken various actions and leveraged available authorities to
    execute their budgets and carry out their missions.
        Today, I will focus my statement on, one, the effects of
    CRs and shutdowns on agency operations and, two, legislative
    authorities and agency actions that assist in managing these
    budget uncertainties.
        Our prior work has shown that CRs and government shutdowns
    can increase cost and reduce government services and
    productivity. For example, in 2009, we reported that agencies
    delayed contracts, grants, and hiring during a CR because final
    appropriations could have been less than anticipated.
        For example, officials at the Bureau of Prisons (BOP) told
    us then that delaying one of their contracts had prevented them
    from obtaining lower prices and resulted in $5.4 million in
    additional costs.
        We also found that the effects of CRs can differ based on
    their number and duration. Shorter and more numerous CRs can
    lead to more repetitive work. This includes having to enter
    into short-term contracts or grants multiple times to reflect
    the duration of a CR.
        On the other hand, longer CRs can allow for better planning
    in the near term. However, they can lead agencies to rush to
    obligate funds late in the fiscal year. Agency officials told
    us that following a lengthy CR, they can end up spending funds
    on lower-priority items that can be procured quickly if they do
    not have enough time to spend funds on higher-priority needs.
        Congress and agencies have taken several actions that help
    manage budget uncertainties and disruptions associated with CRs
    and shutdowns. For example, CRs include standard provisions
    that require most agencies to operate similar to the prior year
    but to spend conservatively and without starting new
    activities.
        Congress may also choose to include other provisions in CRs
    called legislative anomalies. Such provisions can address
    specific issues certain agencies face in executing their
    budgets during a CR.
        Further, Congress can provide some agencies with multiyear
    budget authority. With this authority, there is less pressure
    to obligate the funds at the end of the year, and agencies may
    be able to continue some activities during a shutdown.
        Agency officials can also take actions to mitigate budget
    challenges. For example, agencies may have the ability to shift
    contract and grant cycles to later in the fiscal year when they
    are less likely to be under a CR. Agencies also establish
    contingency plans and other guidance to assist in managing CRs
    and shutdowns.
        In close, the Federal budget is an inherently political
    process in which Congress faces difficult decisions on what to
    fund among competing priorities. While not ideal, CRs continue
    to be a common feature of the annual appropriations process.
    There is no easy way to avoid or completely mitigate the
    effects of CRs and other budget uncertainties on agency
    operations.
        Agencies must act within their authorities to manage their
    programs in the face of funding uncertainties and constraints.
    We believe the experiences identified in our work provide
    useful insights for Congress.
        This concludes my statement. I look forward to answering
    your questions.
        Senator Paul. Thank you, Ms. Krause.
        Our next witness is Clint Brass, who is a Specialist in
    Government Organization and Management at the Congressional
    Research Service (CRS). Mr. Brass is here to talk about how the
    process is supposed to work and what happens when it does not,
    what goes on at agencies when they are on a CR or worse during
    shutdowns, and how the process has evolved over time.
        Mr. Brass has a bachelor's degree from Cornell, a master of
    public policy from Michigan's Gerald Ford School, and an MBA
    from Wharton School at the University of Pennsylvania.

       TESTIMONY OF CLINTON T. BRASS,\1\ SPECIALIST, GOVERNMENT
      ORGANIZATION AND MANAGEMENT, CONGRESSIONAL RESEARCH SERVICE

        Mr. Brass. Thank you, Mr. Chairman.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Brass appears in the Appendix on
    page 42.
    ---------------------------------------------------------------------------
        Chairman Paul, Ranking Member Peters, Members of the
    Subcommittee, thank you for the invitation to testify. As
    requested, this testimony focuses on interim continuing
    resolutions, their purposes and effects, and related subjects,
    including the possibility of a government shutdown.
        The written statement goes into more detail, and I would
    like to acknowledge the work of CRS colleagues from which the
    statement benefits, so some highlights.
        First, context. The power of the purse is a legislative
    power. The Constitution provides that funds may be drawn from
    the Treasury only through appropriations made by law.
    Nevertheless, the Constitution does not spell everything out.
    So the budget process has evolved with statutes, chamber rules,
    and the use of discretion.
        As practiced in recent decades, the process entails many
    sub-processes, and many actors are involved. If problems are
    perceived with aspects of the overall process, it may be
    fruitful to look at these aspects but also how they relate to
    the whole. Notably, changes to the budget process may affect
    power relationships and influence policy outcomes. Proposals
    may be controversial, therefore.
        During high-stakes negotiations over annual appropriations
    measures, several options present themselves to Congress and
    the President. These include coming to agreement on regular
    appropriations acts by October 1st when the fiscal year begins
    or using one or more interim CRs to extend temporary funding
    beyond October 1st until decisions are made on full-year
    funding or not agreeing on full-year appropriations or interim
    funding in a CR, resulting in a temporary funding gap and a
    corresponding shutdown.
        As has been noted in practice, CRs are commonplace in the
    Federal budget process. During the 25 fiscal years covering
    fiscal year 1952 to 1976, one or more CRs were enacted during
    all but one fiscal year. From fiscal year 1977 to present, all
    of the regular appropriations acts were completed before the
    beginning of the fiscal year in four years out of 42, including
    this one.
        In general, interim CRs are intended to, one, preserve
    congressional funding prerogatives to make decisions on full-
    year funding and, two, to prevent the government shutdown
    during negotiations within Congress and between Congress and
    the President.
        Consequently, interim CRs include significant restrictions
    on agencies. An interim CR may be structured purposefully as
    less than optimal in order to retain incentive for negotiators
    to come to an accord.
        If restrictions would cause major disruptions, a CR may
    include exceptions to the restrictions or so-called anomalies.
    Anomalies tend to be rare, however.
        Thus, apart from preserving prerogatives and preventing a
    shutdown, CRs may have significant effects. First, the
    restrictive funding level and pace of an interim CR may affect
    an agency's activities; for example, agencies may reduce or
    delay hiring staff or awarding contracts and grants.
        Second, an agency may experience uncertainty about what its
    final funding level and composition of the funding will be.
    Uncertainty may cause an agency to alter its operations, rates
    of spending, and spending patterns.
        Third, because an interim CR imposes tight restrictions, it
    may increase an agency's administrative work burden.
        Fourth, a CR's prohibition on new projects may delay or
    disrupt an agency's ability to undertake planned activities and
    also to be nimble in response to events.
        In 2008 and 2009, CRS and GAO each explored potential and
    reported effects of interim CRs. GAO also identified factors
    that influenced how agencies manage during CRs and mitigate
    uncertainty.
        While common themes emerge from analyses like these, the
    specific reported impacts vary across agencies and from year to
    year, as one might expect from agencies with varied missions
    and funding mechanisms.
        Looking ahead, CRS takes no position on the advisability of
    particular options. However, if options for legislation or
    oversight or further study are of interest, potential strengths
    and weaknesses may be explored and analyzed.
        In the meantime, I would be happy to answer any questions.
    Thank you.
        Senator Paul. Thank you, Mr. Brass.
        Our next witness is Maya MacGuineas, President of the
    Committee for Responsible Federal Budget and the head of the
    Campaign to Fix the Debt. Ms. MacGuineas is one of the leading
    voices on budget policy. She has testified numerous times
    before committees on the dangers of our fiscal trajectory and
    has worked on several commissions to reform the process and
    right the fiscal ship. Her work has caused The Wall Street
    Journal to dub her an ``anti-deficit warrior.'' That is great.
        Ms. MacGuineas. Like that?
        Senator Paul. Congratulations. I just wish we are more
    effective at listening.
        Ms. MacGuineas has a bachelor's degree from Northwestern
    and is a graduate of the Kennedy School at Harvard.
        Ms. MacGuineas, you are recognized.

      TESTIMONY OF MAYA MACGUINEAS,\1\ PRESIDENT, COMMITTEE FOR A
                       RESPONSIBLE FEDERAL BUDGET

        Ms. MacGuineas. Thank you so much, and thank you very much
    for your kind words about Ed Lorenzen, who was an invaluable
    colleague, and doing a hearing on CRs without him, it just does
    not feel right.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Ms. MacGuineas appears in the
    Appendix on page 52.
    ---------------------------------------------------------------------------
        So thank you to the Committee for having us here today, and
    I will touch on several main points.
        First, budgeting is one of the most basic functions of
    governing, and we are failing at it.
        Second, CRs and omnibuses represent a failure of the budget
    process, as do obviously shutdowns.
        Third, our fiscal situation is approaching dangerous
    territory, and we seem utterly intent on making it worse.
        And finally, there are multiple ways to improve the budget
    process, though none of them will replace the actual political
    will that it is going to take to fix this.
        So budgeting is central to governing. It is the opportunity
    to agree to national goals, to contemplate the policies to
    achieve them, to lay out the means of financing them, and our
    budget reflects our values, our priorities, our Nation's game
    plan, and our shared purpose as a Nation. So no business would
    consider operating without a thoughtfully designed budget, and
    certainly no country should.
        And yet, the way we budget now represents how broken our
    process of governing has become, and basically, our budget
    process is completely different, what we have on paper and what
    we have in reality.
        So the process we engage in suffers from a number of
    shortcomings, including a lack of transparency, a lack of
    accountability, a focus on the short term, an abundance of
    gimmicks which seem to grow with every budget session, auto-
    pilot spending for both mandatory spending and tax
    expenditures, and increasingly terrible fiscal outcomes. The
    fact that shutdowns and defaults are sort of part of the budget
    terms right now is just utterly alarming.
        The breakdown of the budget process has caused policymakers
    to bounce from one self-imposed crisis to the next. We have
    already heard a lot of the details about the cost and the
    specific shortcomings involved in CRs and omnibuses, so I will
    just say that both of them are both qualitatively and
    quantitatively problematic. I will focus a little bit on the
    cost of must-pass legislation, which is something that is
    becoming incredibly costly and we are experiencing right now.
        In the most recent example, just a few weeks ago in the CR
    which ended the brief shutdown, we actually tacked on $31
    billion to our debt to pass that legislation; that is, if it
    were made permanent, that would be close to $300 billion in
    borrowing. That was part of that.
        And it now appears that we are on the verge of a new budget
    deal. Rumors have it adding about 300-to $400 billion to the
    debt, and what is happening now is these financing methods,
    this borrowing is being added to bills without any discussion.
    It is as though the issues of deficit and debt have just kind
    of disappeared, and because of these must-pass bills, there is
    always an opportunity to tack more things on.
        Because I am really pleased that you are doing this hearing
    in a bipartisan way--it seems that most often things that are
    bipartisan only get there because both parties get to borrow
    for the things they want instead of working on bigger budget
    deals.
        This all is happening also while our fiscal picture is
    already quite alarming. Things were very bad a year ago when
    the debt was at a near record level, the highest that it has
    been relative to the economy since World War II.
        Since then, as the result of an incredibly costly tax bill,
    our debt trajectory is much worse than it was before, and now
    we appear intent on making it even worse with stunningly little
    resistance as we put more into these CRs and other spending
    maneuvers.
        We are in the midst of what I see as kind of a fiscal free-
    for-all, and we are soon going to see trillion-dollar deficits
    that have returned during a time of economic expansion. Last
    time we saw that, we were in the midst of a huge downturn, but
    now we are going to have a trillion dollars that are completely
    self-imposed at the time where we should not be borrowing. We
    should be getting control of our debt so that we have enough
    fiscal space to deal with the future crises and downturns.
        There are multiple ways that we can think about improving
    the process, and there are certainly few defenders of the
    current process that we have right now. But again, I do want to
    emphasize that budget process reform will in no way be able to
    replace the political will to confront the issues that we are
    trying to fix.
        I would group the kinds of fixes into three categories,
    basically incremental reforms, increasing punishments or
    stronger enforcement mechanisms, and finally a major overhaul
    to the budget process.
        I put myself in the camp of preferring a major overhaul
    because I think that is how big of a change we need to meet the
    challenges of today.
        That said, I quite honestly do not think that Congress is
    ready for the kind of big choices that will be necessary in
    that. So I am very encouraged by the ideas of some of the
    incremental steps that would show we can make improvements,
    work together, and it is really important that they be done in
    a bipartisan way because budget reform or budget process is
    about creating rules that people think are fair and, therefore,
    they will stick to them.
        In the incremental reforms camp, I would certainly put the
    automatic continuing resolutions, which is something that,
    Senator, you have put forth, and there are a couple of ideas
    about that. And I think that would go a long way to helping
    address the issues that we are confronting in the budgeting
    process right now.
        I would also add to that other ideas like biennial
    budgeting, joint budget resolutions, which would all address
    some of the problems that are going on.
        In terms of stronger incentives or larger punishments,
    there are a lot of ideas that have been put out there: no
    budget, no pay; canceling congressional recesses; prohibiting
    consideration of bills that have fiscal impacts until a budget
    has been passed; and compelling the Senate to be in session in
    the chamber if the government has shut down.
        Finally, there is the approach of a major overhaul. We find
    when we study budget process, we find that rules do not
    actually succeed as well in forcing action as they do in
    enforcing action that has already been put in place.
        The Peterson-Pew Commission and the Better Budget Process
    Initiative, which Ed Lorenzen ran for us, has come up with a
    lot of different recommendations, but basically they center
    around a major overhaul that would focus on picking a fiscal
    goal, putting in place a multiyear budget that would achieve
    those fiscal goals, and much stronger enforcement techniques to
    keep that budget on track.
        This would also include budgeting for entitlements and tax
    expenditures, and I think all of these changes would make
    coming to agreements in the front end much more difficult, but
    it would greatly improve the fiscal outcomes.
        I know that our country can do better than we are doing
    currently in terms of budgeting. I think that is one thing we
    can all agree on, and I am very encouraged about focusing on
    budget process as a place to begin this process. So thanks so
    much for having us today.
        Senator Paul. Thank you, Ms. MacGuineas.
        Our final witness is well known in budget circles and
    beyond. Dr. Alice Rivlin is a Senior Fellow at Brookings
    Institute and a Visiting Professor, Public Policy at George
    Washington. She has a storied background in Federal budgeting,
    going back to the inception of the Congressional Budget Act.
    She served as the first Congressional Budget Office (CBO)
    Director from 1975 to 1983, as the Office of Management and
    Budget (OMB) Director during the Clinton Administration, and
    has been a big part of various groups whose aim is to reform
    and improve the budget process.
        Dr. Rivlin holds a Ph.D. from Harvard, a bachelor's degree
    from Bryn Mawr, both in economics.
        Dr. Rivlin, thank you for joining us.

       TESTIMONY OF ALICE M. RIVLIN, Ph.D.,\1\ SENIOR FELLOW IN
              ECONOMIC STUDIES, THE BROOKINGS INSTITUTION

        Ms. Rivlin. Thank you, Chairman Paul and Ranking Member
    Peters and Members of the Committee.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Dr. Rivlin appears in the Appendix on
    page 59.
    ---------------------------------------------------------------------------
        I am grateful to this Subcommittee for holding this hearing
    to call attention to the total breakdown of the Federal
    budgetary policymaking process. I believe this breakdown is a
    serious threat to our democracy and to America's future
    prosperity.
        I would like to emphasize three points. First, the major
    cost of failure to agree on a budget for the current fiscal
    year is not the short-term cost of uncertainty and inability to
    plan for efficient spending, although these costs are real, as
    the GAO and others have pointed out. Rather, preoccupation with
    short-term budget warfare makes it impossible for the Congress
    to face up to the long-run challenges ahead and adopt policies
    to deal with them.
        These challenges are daunting. We have an aging population
    combined with high health costs. We have slow productivity
    growth and lagging wages. We are facing climate change and
    rising frequency of natural disasters. We have had huge
    increases in inequality of wealth and income and rapidly
    growing national debt combined with rising interest rates. As
    Maya and others have emphasized, these are very serious
    problems, especially the debt.
        These are tough problems to manage individually and
    collectively. They require consensus building and bipartisan
    deliberation. No one party has all the answers, but blaming and
    bickering over short-run CRs or converting them to omnibus
    bills has eclipsed serious efforts to craft long-run budget
    policy and economic policy.
        Second, the biggest obstacle to constructive economic
    policymaking, I think, is extreme partisanship and the
    rejection of the once-honored art of consensus building and
    bipartisan negotiation. The Framers of our Constitution
    bequeathed us a policymaking system that requires compromise
    and consensus at every stage of legislating. If we forget that
    and pretend we have a winner-take-all parliamentary system in
    which the majority party calls all the shots, we will be doomed
    to gridlock and wild swings in policy.
        Major tax and spending legislation, including health care,
    that affects millions of people's lives must have bipartisan
    buy-in to avoid the other party demonizing the policy and
    trying to reverse it after the next election.
        Moreover, differences among us are not as stark as they
    appear. Crafting tax and spending policy that can command broad
    public support involves a pragmatic balancing of competing
    interests and values, negotiating modest changes along a
    continuum, and not scaring a public that is generally afraid of
    radical change.
        Bipartisan negotiation and consensus building must become,
    again, a normal part of congressional decisionmaking, not a
    desperate response to artificial deadlines if the American
    democratic process is to regain the confidence of voters and
    the respect of countries that look to us for leadership.
        And finally, although budget process changes are, as all of
    us have emphasized, not a substitute for bipartisan will to
    solve problems together, they could help to make the task
    easier.
        The late Senator Pete Domenici and I, under the auspices of
    the Bipartisan Policy Center, made a proposal in July 2015 that
    I believe encapsulates the main elements of a more workable
    budgetary process. The proposal had three main themes. One, the
    budget process should include all Federal spending and
    revenues. It should not leave out the huge spending on
    entitlements and other mandatory programs or spending through
    the Tax Code that together now dominate the Federal budget.
        Second, the budget should be transparent, and the process
    should contain strong incentives for on-time completion,
    including, I think, an automatic CR with some penalties, as you
    proposed, Mr. Chairman.
        The budget should also have buy-in from the President and
    leadership of both houses.
        I also believe that Congress would benefit greatly from
    simplifying the Committee and Subcommittee structure to reduce
    overlapping jurisdictions. Simplifying the budget itself by
    drastically reducing the number of budget accounts would also
    facilitate more timely decisionmaking.
        But no process or structural change will help Congress and
    the Executive Branch make decisions on the budget or resolve
    other major issues facing the country unless elected officials
    recognize that the public desperately wants you to get out of
    partisan attack mode and start working together to find
    solutions.
        Thank you, Mr. Chairman and Members of the Committee.
        Senator Paul. Thank you, Dr. Rivlin.
        At this point, we will open it up for questions, and I know
    Senator Peters has a conflict, and so we are going to let him
    go first. He may have to leave us for another committee.
        Senator Peters. Thank you, Mr. Chairman. I thank you for
    the opportunity to ask the first questions. Again, thank you
    for this hearing.
        I also want to recognize Senator Jones, who I think is
    joining us for the first time, so welcome to the Subcommittee.
    I am sure you will enjoy it. It is good to have you here.
        Well, I certainly appreciate the testimony of all four of
    you. It clearly highlights the pickle that we find ourselves in
    and the fact that we have to fix this system.
        One way in which Congress has dealt with this issue in
    addition to CRs are the omnibus spending bills which, as you
    know, just lump everything all together in one year. And all of
    us who are not part of that process basically get one vote to
    fund this incredibly large enterprise called the Federal
    Government of the United States.
        We are looking for some ways to get more involvement, where
    members have an opportunity to deal with some of the issues
    that you brought up.
        So I am going to bring up a proposal that my colleague,
    Senator Lankford, has actually raised. He is not with us here
    today. He had another commitment, but I wanted to bring up his
    idea, which would give members the opportunity to consider
    alternative approaches and be involved in the appropriations
    process. His proposal would have us work on each appropriation
    bill, as we normally would through the Committee, have that
    regular order process, and then strike a deal to have not one
    omnibus but perhaps several omnibus to put some of these
    budgets together, so three or four separate minibus
    appropriation bills. Rather than push through a formal change
    in the rules, we would consider each bill with a set time
    agreement and number of amendments, so members could actively
    engage in this process and offer amendments through these
    smaller, presumably more manageable, minibuses.
        It seems to be an alternative idea, but I wanted to hear
    from Dr. Rivlin. Ms. MacGuineas, maybe if you would not mind
    commenting on whether you would see that as a positive step
    forward, or do we need to do something different?
        Ms. Rivlin. I would see it as a positive step forward in
    the sense that three or four minibuses seems better than one
    omnibus.
        Senator Peters. Right.
        Ms. Rivlin. It still is going to be a large bill, and the
    amendment process seems crucial. Also the hearing process,
    which is in the appropriations committees, which seems to have
    fallen a bit into disuse, but that seems to me an improvement.
    But you could go further.
        Senator Peters. Right. Ms. MacGuineas.
        Ms. MacGuineas. Yes. So I would share that. I think that is
    an improvement for sure. I do not think it would be the bigger
    kinds of overhauls that I am kind of drawn to, and when I think
    about budgeting, I think you want to make sure every step of
    budgeting, you are going through the basic process of what is
    the objective, what are the different options for achieving it
    and what are the pros and cons of those, how are you going to
    finance it, and how are things working, the evaluation process.
        I think a lot of those big-picture things are lost in the
    appropriations process, but I certainly think this is an
    improvement because I think bills where you have more of a
    chance to understand the details and more people are involved
    in being engaged in that is clearly important because
    appropriations is just kind of this foreign area to so many
    people where they do not understand what is going on in there,
    and so drawing more people into the process at a greater level
    of detail is definitely a plus.
        Senator Peters. Great. Thank you.
        The other issue that I have with CRs is one shared by folks
    in the military in particular--I serve on the Armed Services
    Committee and actually have Secretary Mattis testifying before
    us today on our National Security Strategy--is the fact that it
    is very difficult for the military to make any long-term plans
    in a CR process.
        Ms. Krause, I would like you to elaborate a little further
    on how you see continuing resolutions impacting the military
    and its readiness. That would be helpful for us to understand
    why relying on CRs is such a bad idea.
        Ms. Krause. Sure. We have not done work looking
    specifically on the military issues in terms of CRs, but
    certainly, in looking at other agencies that deal with
    contracting, which Department of Defense (DOD) obviously does,
    they will delay contracts until they know the amount of money
    they may have at the end of the year. They will put that off.
    They delay hiring when dealing with CRs. Compressing those
    processes can sometimes reduce the quality of the competition
    of contracts. There are a number of inefficiencies that come
    from managing within CRs.
        Senator Peters. Anybody want to add anything related to
    Department of Defense? Mr. Brass.
        Mr. Brass. Just that my colleague at CRS, Lynn Williams,
    has a couple reports on the subject that I am sure she would be
    happy to talk with you and your staff about.
        Senator Peters. Great. We would like that.
        Ms. MacGuineas, I am interested in your thoughts about the
    deficit. You are the deficit attorney. Is that what I heard?
        Ms. MacGuineas. The anti-deficit warrior.
        Senator Peters. Anti-deficit warrior.
        Ms. MacGuineas. It was not my Halloween costume, though.
    [Laughter.]
        Senator Peters. You said that is not your Halloween
    costume? She did.
        Ms. MacGuineas. Someone else dressed up as the debt.
        Senator Peters. Oh, OK. Well, it is----
        Ms. MacGuineas. Anti-deficit warrior.
        Senator Peters. I would be curious as to your thoughts on
    long-term effects. You mentioned some of that in your
    testimony--and, Dr. Rivlin, you did as well--as to how do we
    deal with these long-term, fundamental, structural problems
    that we have with our deficit when we are in the process of
    using these CRs. It complicates things immensely. Would you
    just further elaborate on that?
        Ms. MacGuineas. Yes. It complicates things immensely, and
    as Alice said, it takes all of the oxygen away from solving the
    real problems that we need to on the fiscal front.
        So the first thing is that budget deficits, balancing the
    budget, they are not an ends in and of themselves. They are
    part of a comprehensive economic strategy, which is critical
    for the country right now, particularly right now, because we
    have this aging of the population. Growth is going to be slower
    than it has been before. We need to do everything that we can
    to help promote growth but share broadly, and a key piece of
    that is sustainable fiscal policy.
        We all know anybody who reads CBO reports or looks at these
    numbers knows that the big drivers right now are the aging of
    our population, health care costs, interest payments that are
    growing faster than the economy writ large, and revenues that
    are not sufficient to pay for the level of spending that we
    have decided to spend. If we do not spend our time focusing on
    that, what it does is it leaves us in a situation where it
    harms us economically. High levels, excessively high levels of
    debt slow economic growth. It means that interest payments are
    pushing out whether you care about tax cuts or spending
    increases. If you are spending more on interest payments, it is
    not going to those things. It leaves us completely vulnerable
    to the next economic downtown or national disasters when they
    come along because we are not able to borrow for the things
    that we would, and at some point, there is a potential that
    there would be a fiscal crisis.
        I do not think, because this country is the safe haven,
    that is likely to happen soon, but it could. And why are we
    trying to test the boundaries of when it would?
        So you want to have a sound fiscal policy, which means your
    debt is not growing faster than the economy. We do not have
    that, and we know there is no way to fix that without dealing
    with the drivers, meaning entitlement reform and tax reform
    that is ultimately going to generate more revenue. We just made
    that more difficult.
        We have to really go with the big drivers of the debt and
    get the debt. It is twice relative to the economy what it has
    been historically. We have to get it so it is not growing
    faster than the economy.
        Senator Peters. Well, I want to pick up on what you said,
    because I think it is important as we are looking at dealing
    with the deficit to understand that this is probably a three-
    legged stool. One, you have to grow the economy, but also you
    have to deal with, two, revenue and, three, cost. We are
    focusing on the spending side of it right now, but revenue is a
    piece as well.
        And given all of the challenges that you just outlined,
    which I agree with, and as we continue to be on an
    unsustainable fiscal course, this Congress just passed a tax
    cut that is going to add $1.5 trillion to the deficit. How
    should that have been done differently, perhaps, so that we do
    not just keep digging a deeper and deeper hole, which we just
    did a few weeks ago?
        Ms. MacGuineas. So we desperately needed tax reform. There
    was no question that our Tax Code was anticompetitive,
    antigrowth, and we are taxing the wrong things.
        Revenue-neutral tax reform or tax reform that ultimately
    raised more revenue would have been better for us fiscally.
        There were arguments out there that the tax cuts will pay
    for themselves. They will not, just as spending programs will
    not pay for themselves.
        Tax reform that is not debt financed actually grows the
    economy more than tax reform that is.
        So it seemed very unwise to me to add to the debt through
    tax reform, just as it would through spending increases, and we
    are going to either need to figure out how to do a lot of the
    base broadening that we should have done as part of tax reform.
        Before this bill, we had $1.6 trillion in tax breaks in the
    Tax Code a year. The whole point of tax reform is to get rid of
    as many of them as possible and bring rates down. We did not
    get rid of basically any of them, so we need to broaden that
    tax base to generate more revenue, and I think ultimately, we
    are going to have to consider other revenue increases, but I
    also do not want to take the eyes off the picture of
    entitlement reform, which has disappeared completely from the
    conversation. And there is no way to get that fiscal situation
    under control without looking at both those sides of the budget
    of mandatory spending and revenues.
        Senator Peters. All right. Thank you.
        Senator Paul. In an attempt to reward attendance at
    Subcommittee Committee meetings, I am going to our newest
    Senator, Senator Jones.

                   OPENING STATEMENT OF SENATOR JONES

        Senator Jones. Thank you, Mr. Chairman, and thank you,
    panelists, for being here.
        I have to tell you, as the new kid on the block here, I do
    not know where to begin because I came into this with the same
    concerns, almost with my hair on fire, with the same concerns
    that you have expressed.
        Ms. MacGuineas, during my campaign, I had the same concerns
    about the tax bill. I talked more about the fact that we were
    increasing the deficit by $1.5 trillion. Of course, when I
    questioned the Treasury Secretary about that the other day, he
    said, ``No, no, no. We disagree with that.'' I think he is the
    only one.
        But I would like to go back to something you said about the
    political will because having just come off of the campaign
    trail, I did not see out there among the public, the same kind
    of concerns about the deficit that I have.
        Having grown up with a Senator, Howell Heflin, who was a
    balanced budget fiend, I just did not see that. As I get here
    to the Congress, I am not seeing a whole lot of people who are
    willing to step out there to be a candidate for the Profiles
    and Courage Award with regard to deficits.
        So one of the questions I have is how do we get this
    message across. What do we do? Because in order to develop the
    political will in this climate, so much has to bubble up from
    people who are actually going to vote, and they have to express
    concerns. People who are getting these tax cuts, even though
    they may be very modest tax cuts, they are still important to
    those folks. So how do we do that?
        I would like to hear all of you to talk about how we can
    engender the public to understand and know what we are going
    through and what this future holds.
        Ms. Rivlin. I think that is a very good question, Senator,
    and welcome to Washington.
        Senator Jones. Thank you.
        Ms. Rivlin. I think that we have to do several things at
    once. There is no substitute for leadership, both in the
    Congress and in the White House.
        I am a veteran of the period in which President Bill
    Clinton and Speaker Newt Gingrich--``worked together'' is
    perhaps not the right word. It was not all that friendly, but
    it was a negotiation toward the same goal, and both of them
    were articulating the goal of getting to a balanced budget, and
    in fact, as a result of that negotiation, we got beyond a
    balanced budget. We had a surplus at the end of the last
    century, which was the result of bipartisan cooperation to do
    some things that neither side really wanted to do, but which
    got us to a balanced budget.
        I think we have to get the leadership of both parties
    cooperating, and they will not want to get there in the same
    way. We know that. But if we are going to get to a lower growth
    in our debt, which is a rather modest objective compared to
    balancing the budget, we have to get there with both parties
    being willing to give something and to say, ``OK. We do not get
    everything we want, but we will get part of it,'' and it will
    result in slower growth of debt.
        Senator Jones. Ms. MacGuineas.
        Ms. MacGuineas. Yes. Also, welcome to Washington.
        Senator Jones. Thank you.
        Ms. MacGuineas. It is a really important question, and we
    have spent so much time grappling with this. And the bottom
    line is this will not be a grassroots issue that starts at the
    grassroots. There will not be Million People Marches about the
    debt, as much as I wish there were.
        But it is an issue that the grassroots understand when
    people go and talk to them. So things will change either from
    the bottom up or top down. This is going to have to start with
    political leadership. It is going to have to start. The
    President is going to have to be a part of it, and it is going
    to have to be bipartisan political leadership for people to
    believe it.
        But then people find that if they go talk to voters, they
    do understand the issue. You have to talk to them not just
    about this is a problem and why and because it is so
    shortsighted and it harms our economic sustainability, but you
    also have to let them know that the solutions are not easy
    because the problem is nobody wants higher revenue or lower
    spending.
        In fact, Republicans do not even want to cut spending, and
    Democrats do not even want to really raise taxes. That is the
    dirty little secret that nobody wants to do the hard choices on
    either side.
        I think where you start is you talk about a shared fiscal
    goal. It used to be reaching balance. The sad situation is that
    our fiscal situation is so bad, we probably cannot reach
    balance as quickly as we would like to, but we certainly should
    get the debt back down to sustainable levels.
        Then there are ways to take people through the exercise of
    looking at how you get there. We and other groups have budget
    simulators. We will go to do town halls with Members of
    Congress and take them through the budget exercise of the
    different ways to fix the debt, and that is very educational
    for voters. We do that a lot. They learn a lot. They start to
    understand the real parameters.
        Ultimately, I think they tend to come to the conclusion you
    cannot do this without compromising and doing things you would
    not want to, but that the final goal of achieving something
    like that is worth it. And so I think it is a big issue of
    education from the top down, and the coalition of strange
    bedfellows, doing it with other members who you do not agree
    with, but you share this goal, helps people believe that it is
    important.
        Senator Jones. All right. Mr. Brass and Ms. Krause, do you
    want to add in? My time is about running out, but that is fine.
    If you would like to add something, please do.
        Mr. Brass. I will just add that one suite of options that
    Congress might consider in this context is how to engage with
    the public in sharing information about the tradeoffs that may
    be implicit and choices. A former colleague of mine, Wendy
    Ginsberg and I did a paper where we looked at the past century
    of how Congress has embedded public participation and
    additional transparency into multiple aspects of how the
    Federal Government operates, and there might be creative ways
    to engage the public in those conversations.
        Senator Jones. All right. Ms. Krause?
        Ms. Krause. Just very briefly, we now do an annual report
    on the fiscal health of the Federal Government, and that has
    been a good communication tool in terms of helping explain the
    issue.
        Senator Jones. All right. Great.
        I think my time is up. Mr. Chairman, thank you.
        Senator Paul. Thank you.
        Well, I think we all can agree, the panel seems to agree,
    both sides of the aisle seem to agree that continuing
    resolutions, shutdowns, and even omnibuses are not the idea way
    to do this, and that they do lead to problems.
        The problem becomes, now that we all agree, how come we
    cannot figure out a solution if we all agree, and so we all
    agree there is a problem. We tend to all say, well, we ought to
    pass the 12 appropriations bills, and everybody will say,
    ``This is the last one I am voting for. This is the last CR I
    am voting for. We are going to fix it,'' and yet it does not
    get fixed.
        So there has to be something that has to change, and I
    agree with you that we can have these process changes, which I
    am for and I proposed some of them, but really it is also
    political will. People have to have the will to actually do the
    right thing because in the past, we have tried process changes.
    We have a PAYGO rule, which is a great idea. I think it was
    passed actually with the Democrat majority in 2010 the last
    time, and yet I think we have evaded it 30 times at least at
    last count. So we set up rules, and then we disobey our own
    rules.
        The sequester turned out to be the best thing to slow down
    the rate of growth of government in a long time, and it
    actually worked. We actually did reduce overall spending for a
    year or two, and we were heading in the right direction. Yet
    the compromise we have in Washington is both parties want to
    exceed the sequester caps now. Republicans loudly want more
    military spending. The Democrats say, ``Well, we will give you
    that as long as you give us ours.'' Everybody gets a little
    bit. So we have the reverse of the compromise that is needed.
    We continue to increase all spending.
        And then others will say, well, that is the discretionary
    spending. It is really the mandatory spending, which is growing
    at about six percent.
        So I think if you want to see how bad the picture is, you
    can eliminate all the discretionary spending, and you do not
    balance your budget. So you really do have to look at the
    growth of mandatory spending, but it becomes more difficult
    when we look at things that people have expectations for. But
    you cannot grow at six percent. There is no way, that and the
    demographics. There is just no way you can continue that. So we
    look at some of the ways to do it, and I think there has to be
    some sort of punishment.
        Now, we could have continuing resolutions instead of
    shutdowns, but if we just did that, have we really fixed or
    helped the problem? It may be better than having a shutdown,
    but then we would be just stuck with continuing resolutions
    that would roll on and on, and we would have eliminated one
    problem, a shutdown.
        So really what I have proposed and what I would like to
    hear sort of each of you comment on is we have proposed a
    punishment, a hammer, and the hammer is basically spending goes
    down by one percent. And we know both sides do not want
    spending to go down. They are all for more spending. So maybe
    they would say, ``Oh, my goodness. All the special interests
    who want this money will be knocking on our door and yelling
    and screaming,'' so then they would do it on time.
        I frankly think it is not too much to expect to do 12
    appropriation bills. You could have a couple of months, two or
    three months of committee hearings and then nine months, take a
    couple of weeks, take three weeks for each bill. Three weeks
    would be an enormous amount. We rarely spend more than a week
    on a bill, and we rarely have amendments. Do three weeks for
    each of the 12 appropriations bills and three months' worth of
    hearings, and this is our main job, spending the money.
        But, anyway, I would like to hear what your thoughts are on
    my proposal, the Government Shutdown Prevention Act, which
    would at the end of the fiscal year, after 12 months, if there
    is not an appropriation bill done, then you get a one percent
    across-the-board cut every 90 days until Congress does its job.
        Why do we not just start with Dr. Rivlin, and we will work
    our way down.
        Ms. Rivlin. I am for it, Mr. Chairman. I think that would
    help.
        Let me suggest one other thing, which sounded gimmicky to
    me when I first heard about it, but it would be no recess until
    you pass a budget resolution. That gives you a framework for
    the appropriations bills, and I think that might work.
        Senator Paul. Yes. I like the no recess idea, and I think
    actually it might work. You would be surprised how often people
    want to either go home or go somewhere else besides Washington,
    and that might help. Ms. MacGuineas.
        Ms. MacGuineas. Yes. I also support it. When you are
    thinking about triggers or defaults, you have two models,
    either ones that are so awful that you will never let them
    hit--that is what the sequester was supposed to be, and it
    turned out we let it hit. And like you said, it actually ended
    up controlling spending, though I would say on the part of--the
    less problematic part of the budget--or you have defaults of
    policies that you would want, and you let them go in place
    automatically if Congress is not going to do its job.
        So I think the automatic CR is an important idea. I think
    your idea of including things that would incentivize people to
    come to the table is also very important.
        I will share with you that when we did the Peterson-Pew
    Commission a number of years ago, our Republican members
    actually said we should not have the triggers be just spending
    cuts because enough of our colleagues will actually like them.
    We should also have some revenue increases. So there are
    different models that you could think, which is would both
    sides dislike it enough. I think it is important to have
    something that would bring everyone to the table and realize
    that what they need to do is their job.
        Senator Paul. I think you made a good point in the
    beginning, talking about extending the sequester instead--that
    people complain just in the discretionary. You are right----
        Ms. MacGuineas. Yes.
        Senator Paul [continuing]. If we had the sequester across
    the whole thing, one, it takes pressure off of military
    spending. It takes pressure off of the other domestic spending,
    and it spreads it across. You would really fix government
    actually if you had an automatic sequester.
        The other thing is that with the sequester, I have also
    advocated that people complain that it is every department
    across the board, that let the departments move their money
    around a little bit to deal with the sequester, and I think
    that could have overcome some of the objections. But yes,
    sequester across the board would have actually fixed
    government, but they do not want to sequester at all. Just a
    handful of people are for any restraints or budget caps at all
    anymore, and you are going to find out this week, they are
    going to blow through all of the budgetary caps. Mr. Brass.
        Mr. Brass. I have not studied your legislation in depth,
    but I do have colleagues who focus on the topic of automatic
    continuing resolutions. As you know, CRS does not take
    positions on pending legislation, and so as a consequence, we
    oftentimes go through perceived strengths and weaknesses of
    different approaches from a variety of points of view. It could
    be an action-forcing mechanism. It could be a way to avoid
    disruptions in government operations, but on the other hand, it
    could create winners and losers in policy terms. So when
    looking at those various considerations, it becomes a
    complicated topic to look at, certainly.
        Senator Paul. Ms. Krause.
        Ms. Krause. Similarly, ultimately, it is up to Congress to
    decide whether to alter appropriations process.
        I think just through our work one of the considerations
    that comes up is not only do shutdowns, as we have found, start
    and stop the work and create inefficiencies. Even if there is
    not a shutdown and there is a possibility of a shutdown, there
    is a lot of planning and time that can go into that, so having
    something like this could address some of those issues.
        However, some of the details can be very important. I think
    some of the other panel members have mentioned the incentive to
    bring people to the table and be willing to still negotiate and
    come to a final agreement. Then also Congress sometimes uses
    anomalies within the CR to address specific issues for
    agencies, so that is something that may need to be considered.
        Also, our work on sequesters gives a little more insight
    into this issue as well. On the one hand, across the board-cuts
    give fiscal discipline when we fund with a sequester, but on
    the other hand, it can equally cut good and bad programs, and
    so you are not shifting around to what is more effective. These
    are just some considerations.
        Senator Paul. Yes. I personally think if you had leadership
    that at the beginning of the year had all 100 Senators sit down
    in the chamber and said, ``Look, we are going to do all of the
    appropriation bills, and we are going to spend three weeks on
    each appropriation bill, and there will be as many amendments
    as you want. And as a consequence, the only thing I am asking
    you to do, so we can get to that, is to not filibuster going to
    these bills.
        And even myself, who probably would not like the spending
    level and might vote no on the spending level, I could agree
    not to filibuster to simply get to the bill, but no one has
    ever asked that. No one has ever come forward and said, ``We
    are going to do this, and we are going to get through them.''
    Although the House did, I think, all 12 appropriation bills
    last year, so it can be done and really is the main thing we
    should be doing. It is spending the money and deciding how the
    money is going to be spent.
        We talked a little bit about a sort of punishment to try to
    get it done, decreasing spending or increasing taxes.
        The other idea that was mentioned earlier was biennial
    budgeting. How much of the problem would be fixed by spreading
    it out so we had a little bit more time, I guess, basically?
        And why do we not start with Dr. Rivlin again and go down.
        Ms. Rivlin. I think a biennial budget would be a good idea,
    and I would not spread it--the danger would be that you would
    take the whole two years to make a budget. [Laughter.]
        The concept of the proposal that I have been part of is you
    do get the budget done for two years in the first nine months
    of the year, so you start on the fiscal year on October 1st.
        I do not think it is a panacea, but I think it would free
    up some time to do other things. It would allow agencies to
    plan better if they could get an appropriation for two years.
        Now, admittedly, things happen. You have fires and wars and
    whatever, and you would have to do a supplemental in the second
    year, but you would not be reviewing the whole budget. So I
    think it is a good thing.
        Senator Paul. Yes. And I think from the Constitution, I
    think Defense would have to be done every year, but the rest of
    them could be biennial. I think you have to appropriate Defense
    every year, according to the Constitution.
        Ms. Rivlin. That could be, but the Defense Department
    actually was the leader in doing a two year appropriation in--I
    forget when. The Congress did not like it. They liked to do it
    annually.
        Senator Paul. Even if only one department had to be done
    every year, it would still be, I think, a good idea. Ms.
    MacGuineas.
        Ms. MacGuineas. We support it. We do not think it would
    make major differences. We do support it for a couple of
    reasons. One, I think the additional focus on oversight and
    evaluation is a lot of where the emphasis should be.
        Two, there is a lot of support for it, and if we could get
    something done and some changes, we think success, to get more
    success, it would be good in that way.
        I am a procrastinator. I very much worry that Congress--OK.
    Congress is a procrastinator.
        Senator Paul. We have a history of that.
        Ms. MacGuineas. Yes. There is nothing that gets done until
    your back is against the wall these days, so I definitely worry
    it is not the moment where this would be a big overhaul that
    would work. But I think passing something and changing the
    budget process right now is really in order. And so I would
    like to see part of a package.
        Senator Paul. Not pro or con on the legislation, but pros
    and cons of a single versus a biennial budget. If you have a
    comment, feel free.
        Mr. Brass. Yes. We have that constraint in how we look at
    things and discuss things.
        My other panelists mentioned some of the potential pros
    that come along with the biennial budgeting process. It could
    create extra time for oversight in a second year.
        It could also shift power relationships, in particular,
    between the Legislative Branch and the Executive Branch.
        One aspect of the annual budget process that we have is
    that when appropriations committees put concerns or warnings or
    exhortations in report language to agencies, agencies know that
    the following year, folks in Congress are going to be looking
    at whether agencies complied or listened closely. If budgeting
    is done every two years, it might decrease by 50 percent the
    opportunities then for Congress to come in and say, ``Well,
    wait a minute. You guys did not do what you said you were going
    to do,'' and so there might be some changes in behavioral
    incentives with agencies.
        Senator Paul. Ms. Krause, do you have a comment?
        Ms. Krause. Sure. The only other consideration, as we have
    already talked about the opportunity for increased oversight,
    is also--it increases the planning timeline for agencies, so it
    increases up to 30 months when you are trying to look out that
    far. So sometimes with forecasting, that can be very
    challenging.
        Senator Paul. I think one of the ironies of the way we
    spend money is you will find, Senator Jones, that a lot of your
    day is occupied by people who come up here advocating for
    something they want money for, but the interesting thing is I
    have never, ever voted for any specific project or even for a
    group of projects because I have never voted for anything other
    than everything all at once or not.
        So somebody comes up here and they want more money for
    legal aid or they want more money for this, I never have a vote
    on that. I do not even have a vote remotely close to that. So
    we have all these people advocating for stuff that we are not
    even paying any attention to.
        On the one side, we are not paying attention to what we
    fund or how much. We are not paying attention to whether it
    works or does not work, and then we are never ferreting out
    misappropriated funds or funds that are going toward wasteful
    things.
        To me, it is sort of a sad state of affairs, and that is
    why I think the accumulation of waste, we do not ever ferret
    any of it out, so it just keeps accumulating year after year
    after year because we just keep voting on continuing spending.
        But I think if you think about it this way, if we were to
    vote--let us say we only passed five appropriations bills. That
    is five-twelfths of government that would not close down when
    we have a shutdown sort of debate, and so if you passed 11 out
    of 12, one, it gets rid of the leverage of shutting the
    government down too. So you really do not have much leverage,
    and I think it would get us away from using the leverage of
    shutting down the government if we had already passed several
    of the appropriation bills.
        So I think we have to do something, but I think ultimately,
    it is political will. It means electing people who care, and
    frankly, neither side cares, and that is a problem. Whether or
    not the public cares, I think they actually do. I think if you
    were to do a large survey of the American people and ask them
    should the government operate the way your family budget does,
    should you spend what comes in, I think, largely, they would.
    When you ask the public whether they are for a balanced budget
    amendment, 75 or 80 percent. But there is a lot of issues like
    that where 80 percent of the public is for something, and then
    80 percent of Washington is on the opposite side of things.
    There is a disconnect in how we represent our people.
        But I do appreciate you all coming.
        Senator Jones, did you have any other questions you would
    like to ask?
        Senator Jones. Just one, very brief. One, Mr. Chairman, I
    am intrigued by the one percent penalty, so to speak. I think
    that is a great idea.
        I will say, Dr. Rivlin, for somebody from Alabama to
    shutdown, not have any recess during college football season is
    a little harsh for me. [Laughter.]
        OK. I just wanted to get that on the record.
        Briefly, Ms. MacGuineas, you mentioned entitlement reform.
    Could you give me just a brief idea of the type? I mean, my
    State gets a lot of dollars from what is referred to as
    entitlement. Can you give me a brief idea, not take a whole lot
    of time, but some of the ideas that you had on an entitlement
    reform?
        Ms. MacGuineas. Sure. So first off, the term that I have
    learned, that a lot of people do not like entitlement reform--
    ``entitlement,'' the term. I mean as mandatory spending, which
    is the part of the budget that is on automatic pilot. It does
    not go through the appropriations process, and so if you
    qualify for something, you get it.
        We know that the growth of mandatory programs is what is
    driving the increase in spending, and like I said before, the
    biggest pieces of it are from the aging of the population and
    health care. It seems to me that if we start with the biggest
    programs, which are Social Security, Medicare, and Medicaid,
    and figure out how to make them solvent, that will go a long
    way to strengthening those programs and alleviating a lot of
    the pressure that is on the budget.
        Just as an example, Social Security. When it started, the
    retirement age was 65, and life expectancy was 62. Today, the
    age is gradually going up to 67, and we are living much longer.
    We are not able to have reasonable discussions about reforming
    these programs. It is very political. If you start talking
    about it, you will see that you get a lot of pushback.
        But there is no avoiding these issues. My personal belief
    is that we have to look at all parts. Take some of that Social
    Security. You have to look at the retirement age. You have to
    look at slowing the growth of benefits for people who do not
    depend on the program so that we can protect it for people who
    do. You have to look at the payroll tax gap. You have to look
    at it all. There is about five or six levers that you move, but
    the sooner that we do it, the easier it is because right now
    baby boomers are moving into retirement every single day. That
    means it is becoming much more costly. These delays are costly.
        Figuring out health care cost is much more difficult. Alice
    is one of the leading experts in the country on how to control
    health care cost, that is a part of Medicare Medicaid.
        But what we do is we demagogue these issues, and we pretend
    we do not have to fix them. By not fixing them, they were
    making the people who depend on them increasingly vulnerable.
    And bearing our head in the stand is just not the right
    approach.
        Senator Jones. Well, thank you very much, and thank you,
    Mr. Chairman. I am looking forward to working with you on this.
        Senator Paul. I think you hit the name on the head. We
    demagogue these issues. One part is going to push grandma off
    the cliff. One part does not care about old people, and really
    these are actuarial problems. We are living longer, and you are
    right. When Social Security was started, there was no need for
    pensions hardly because most people were not surviving beyond
    the retirement age.
        But you can fix them. You can gradually raise the
    retirement age. You can means test. If we do nothing, though,
    when the cliff comes and when we run out of money, then it is
    everybody. Can you imagine somebody who lives on $600 a month
    who gets a 25 percent cut in their Social Security? That is not
    going to be tenable.
        If we were to look at it now, the wealthier among us,
    including most Members of Congress, could agree to take some
    less in Social Security and be done gradually, and it really
    would not even be the whole check.
        When we looked at this a couple of years ago, we looked at
    gradually raising the age to 70 over, I think, a 20-year
    period, a couple of months every year, and then means testing
    the benefits. Really, the means testing was not that draconian.
    A lot of people had to go through it, but really those who
    made--I think the top is $2,200 a month for Social Security. We
    took them to $1,900, and those are for people who made over
    $100,000 a year, but it had to come pretty far down. You had to
    means test all the way down to people who had a salary, maybe
    50,000 or $60,000 a year, but you could do that through means
    testing, a little bit less Social Security and raising the age.
    You can fix them.
        Health care is harder. When we looked at health care,
    raising the age and means testing it fixed about a third of the
    problem, and so health care is an enormous problem. From my
    mind, what you have to have is you really have to have
    competition, but a lot of people do not realize that health
    care in our country, over 50 percent of it is non-market based,
    really probably more than that because even most private
    insurance in a way is not market based in the sense that the
    price is not mobile, and you do not have different people
    offering a different price. That is what capitalism is. You
    have to have a mobile price and different people offering a
    different price.
        But I do cataract surgery. Every surgeon in the country
    gets paid the same by Medicare, so there is no price
    competition in cataract surgery. Even in private practice with
    private insurance, Blue Cross pays all the doctors in my
    community the same. Aetna pays them the same. United pays them
    the same. So nobody chooses their doctor based on price, and
    because that happens, there really is no competition and no
    capitalism really in health care.
        So you would have to reinstitute that, but you have two
    sides up here in the debate. We have one side that really just
    thinks maybe government should be more involved, but if you do,
    then you have fixed prices, fixed distribution, and you will
    have to ration it and tell people they cannot get certain thing
    done. And they do that in other countries, but what we had
    before was not capitalism either and did not work either. So
    the old system of health care did not work. The new system does
    not work, and we still had this question of which direction to
    go, but Medicare is not easy to fix.
        Thank you all for your testimony. Thank you for coming to
    this hearing, and thank you for your participation.
        Ms. MacGuineas. Thank you.
        Ms. Rivlin. Thank you.
        [Whereupon, at 3:41 p.m., the Subcommittee was adjourned.]

                                A P P E N D I X

                                  ----------

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]