[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
                        
                        
                        
                        
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        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.
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    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.]

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