we believe it is necessary to decide soon about whether we should count on following LIMS or develop a plan to strike out on our own.

Question. Is it realistic to think that $100,000 will be adequate to resolve this problem in fiscal year 1999-waiting until the fiscal year 2000 budget to request the funds necessary to implement the change would leave only 3 months for installation of a new system before Jan. 1, 2000.

Answer. If CBO's applications can follow LIMS and we receive support from HIR staff, then $100,000 should be enough. However, if we must hire a vendor to assist us in moving our systems, then no matter where they are moved, $100,000 will be too small a sum. If we cannot follow the LIMS migration and are left to obtain our own service outside of a House contract, we expect to see an adverse impact on our future budget requests.

As you note, waiting until fiscal year 2000 to implement another plan would not leave us enough time. This decision must be made in the very near future-certainly during this fiscal year.

Question. CBO has expanded the use of its Web site to include testimony, cost estimates, and reports. Obviously there is an increased cost associated with this function. Does CBO publish everything it produces on its Web site? If not, what is the criteria for whether an item will be posted?

Answer. Our first priority for posting on our site is all general work products as they are released. As time and resources permit, we are also including certain CBO publications issued before the Web site was activated, as well as expanding the available file formats in order to post spreadsheets, where appropriate. Although the response to our Web site has been quite positive thus far and we have received nearly 100,000 requests for information since September, it is not yet clear whether the demand for printed copies of our publications will drop.

The growing use of the Internet as both a source of and distribution tool for information has affected our budget primarily through the purchase of the hardware, telecommunications services, software, and Web development expertise needed to establish and maintain our link to the network.

Question. Your testimony notes that you plan to assess the value of a CBO Intranet this year. What type of functions do you envision the Intranet serving? Answer. CBO plans to move existing systems-some of which are automated, some manual, but all of which are antiquated-to the Web-based Intranet technology. For example, CBO currently tracks its incoming correspondence using an old microcomputer database program; that correspondence-monitoring system would eventually be moved to the CBO Intranet. In the process, the system would be enhanced to meet new requirements that have emerged since the original system was developed and to exploit features offered by the newer technology. Another example is the way CBO currently satisfies internal requests for administrative_support. Under the present system, requests for support are made via phone or E-mail to the unit within CBO that is responsible for providing the requested goods or services. With an agencywide Intranet application, CBO users could use their computers and a standard interface (an Internet browser) to request service. The system would determine who should receive the work order and would automatically provide internal management controls such as notifying the responsible manager when a request was made and tracking its fulfillment (including who does it and how long it takes). The system would also provide a real-time summary of requests; in addition, aging reports would be available to identify any outstanding requests that had not been completed. All of that information could be requested by authorized CBO personnel through the CBO Intranet. Yet another planned application is the redesign and relocation of the CBO project information control system, which is currently a mainframe-based system. There are other applications, internal to individual divisions, that are also envisioned for the CBO Intranet.

CBO has established an internal World Wide Web steering committee with representatives from all divisions within the organization. All requests for Internet or Intranet applications must be presented to and approved by the committee before any development activity begins.

Question. Does CBO have a plan to make its systems year 2000 compliant?

Answer. CBO does have a plan to make those of our systems that are under our direct control Year 2000 compliant. Some portions of that plan have been presented verbally to the General Accounting Office (GAO), and some have been provided in writing. The plan is currently in a format that is more informal than the one prescribed by GAO in its Year 2000 Computing Crisis: An Assessment Guide. Moreover, we have not carried out all of the recommended Year 2000 activities outlined in the guide. Because of the nature of CBO's information systems and the agency's small size, we do not currently have the resources nor do we feel it necessary to produce the same response expected of a larger agency.

Many of our important systems operate by means of interagency and commercial computing resources. For example, our Budget Analysis Data System runs on the House Information Resources computer, our payroll and personnel systems are handled by the National Finance Center, and our financial management system runs on a Library of Congress computer. We have other systems that rely on proprietary data models provided by commercial vendors. To the extent that we can influence the Year 2000 compliance issue through contracting language, we have done so. We also plan to send letters of inquiry to all interagency and commercial vendors concerning their Year 2000 status and plans, which we will monitor. On the one hand, we have little control in the final analysis over whether those systems will or will not be Year 2000 compliant. On the other hand, we have contingency plans for some of those systems that will be activated if necessary. For the other systems, such as payroll, personnel, and financial management, we are forced to rely on the service agency. For the systems that are within our control, we have developed compliance plans, some of which were addressed in our hearing statement.

Question. What is the strategy for testing renovated systems for compliance? Answer. We plan to simulate the year 2000 by advancing the system clock; we will then run the software on a program-by-program basis. However, until HIR supports an operating system platform that is Year 2000 compliant, we are unable to test those of our renovated programs that require that computing resource.

Question. How many data interfaces does CBO have with external organizations? Describe how CBO is working with those organizations to develop mutually agreedto data formats for exchanging information after Jan. 1, 2000.

Answer. Current CBO systems exchange data with the following interagency organizations: HIR, the House Appropriations Committee, the National Finance Center, the Library of Congress, the Treasury, the Office of Management and Budget (OMB), and the Census Bureau. Of those systems, only the OMB and HIR systems are critical to CBO's mission. The OMB interface currently allows for a four-digit year, and the HIR interface has been renovated and awaits testing.

Although CBO has many data interfaces with commercial vendors, only three are mission critical: Haver Analytics, General Electric Data Services, and Data Resources Incorporated. We believe those systems are Year 2000 compliant already because they provide economic forecasting data beyond 2000.

CBO is also a member of the Legislative Year 2000 Committee sponsored by the House and Senate. The committee identifies and monitors Congressional systems that interact and share information for the purpose of determining whether they need Year 2000 renovation.

We are satisfied that no changes are needed in the data format. We have included Year 2000 language in our contract renewals that make compliance a condition of the contract.

Question. What is your estimated total cost to address the year 2000 problem? Answer. We have no accurate estimate at this time, given the uncertainty of the HIR mainframe relocation and whether we will follow LIMS with HIR assistance. Question. What has been spent to date?

Answer. To date, we have spent funds only for personnel. But we have budgeted $180,000 to replace our library collection management system during fiscal year 1998.

Question. What is requested in your fiscal year 1999 budget?

Answer. We are not requesting separate funds for Year 2000 activities at this time. However, we have asked for $100,000 for the mainframe conversion, and some of that effort will include Year 2000 activities.

Question. What is your cost estimate beyond fiscal year 1999?

Answer. Given the uncertainty surrounding the move of our key mission-critical system, which currently runs on the HIR mainframe computer, we have no estimate beyond fiscal year 1999 at this time. The decision regarding our request to follow the House Legislative Information Management System will strongly influence that matter. If CBŎ must obtain vendor support to move its mainframe systems and cannot benefit from HIR's work in the Year 2000 area, additional funds will certainly be necessary.

Question. When will CBO publish the reestimate of the President's budget? Answer. The projected release date for CBO's analysis of the President's budget is March 31, 1998. A preliminary report of our analysis was released on March 4.

QUESTIONS SUBMITTED BY SENATOR BYRON DORGAN

Question. Dr. O'Neill, would you explain to the subcommittee what is meant by dynamic scoring and to what extent CBO does it now?

Answer. The term "dynamic scoring" has several interpretations. Many people mistakenly believe that estimates prepared for the Congress of the budgetary effects of spending or tax proposals do not take into account the changes in behavior that could result from passage of those proposals. In fact, all Congressionally mandated budget estimates-whether the spending estimates required of CBO or the estimates of receipts prepared by the Joint Committee on Taxation-employ the same basic estimating conventions. Such conventions incorporate assumptions about how changes in taxation or government spending might change individual behavior in response to new economic incentives.

Those behavioral and other estimating assumptions cover a wide variety of microeconomic effects and reflect the best available research and estimating methods. For example, the estimate for a proposal to subsidize health insurance for early retirees would include the additional costs that would result from the likely increase in the number of early retirees. Similarly, the estimate for a proposal to increase the excise tax on tobacco products would take into account the resulting decrease in cigarette consumption.

In most instances, the estimating conventions used in producing cost estimates of bills are not controversial. However, questions may arise in two types of situations. First, estimators sometimes disagree about the magnitude of microeconomic responses, such as the extent to which an increase in excise taxes would reduce consumption. Second, some proposed legislation could give rise to macroeconomic effects, which are not included in routine cost estimates. That is, a major tax or spending measure might affect saving, investment, or work effort and thus affect the potential growth rate of the economy. In that sense, critics sometimes argue that the assumptions used for budget estimates are not dynamic enough.

Although estimating the effect of proposed legislation on the macroeconomy may appear desirable, it is impractical, particularly for routine bill cost estimates, for a number of reasons. In some cases, little or no research may be available on which to base an estimate. In other instances, even when research bearing on a topic is available, economists disagree so much about the magnitude of macroeconomic effects that no single estimate can be meaningfully treated as a consensus. In addition, CBO often lacks sufficient time and resources to produce the complex estimates required. And finally, long-run changes in macroeconomic variables could be invisibly small in the five- or 10-year period used for budget estimates, even if they were likely to be significant in later years. In consequence, routinely incorporating macroeconomic effects into budget estimates would create considerable uncertainty and possibly endless controversy.

CBO has, however, provided information about the possible macroeconomic effects of major legislation in a number of its analytical studies. Those studies were feasible because an extensive economics literature was available for reference and because CBO had sufficient time and resources for proper analysis. Moreover, unlike bill cost estimates, studies allow for a range of results. For example, CBO included an analysis of the macroeconomic effects of the 1997 budget reconciliation package in the updated economic and budget outlook published last September. Last year, CBO also published a study of the possible economic effects of comprehensive tax reform. In addition, the budget resolution for fiscal year 1998 incorporated assumptions made by CBO on the macroeconomic effects of balancing the budget. That produced a socalled fiscal dividend that reduced the magnitude of the policy changes needed to reach budgetary balance.

Question. You mentioned in your prepared statement that some Members of Congress have proposed expanding certain provisions of the Unfunded Mandates Reform Act. Would you describe some of these proposals and tell us which ones might have an impact on your budget.

Answer. The proposal that has garnered the most attention is S. 389, the_Mandates Information Act of 1997 (sponsored by Senator Abraham and others). S. 389 would set new procedural constraints for private-sector mandates and direct CBO to provide additional types of cost information about those mandates. Specifically, for any private-sector mandate with estimated costs above the threshold of $100 million a year (in 1996 dollars, adjusted annually for inflation), CBO would be required to analyze the impact on consumers, workers, and small businesses, including any disproportionate impact on particular regions and industries. The analysis would cover the effects on consumer prices, workers' wages and benefits, employment opportunities, and the profitability of small businesses.

In previous testimony, we have indicated that we do not expect those increased duties from S. 389 to necessarily require additional resources or a further diversion of resources from our budget work. Some other bills, however, could pose a more significant burden.

H.R. 2591, the Regulatory Accountability Act of 1997 (proposed by Congressman Lamar Smith and others), would impose significant new duties on CBO to prepare regulatory cost analyses. That bill would expand the Unfunded Mandates Reform Act in three important ways: by broadening the definition of costs to include "social, environmental and economic" costs; by including indirect effects of private-sector mandates; and by requiring cost analyses of existing rules and regulations when legislation is reauthorized. CBO could not fulfill those requirements without sustaining substantial damage to its primary functions. In fact, it is not an exaggeration to say that meeting those requirements might be an impossible task, particularly considering the short time frame that characterizes most legislation.

In addition, the following bills could have relatively minor effects on CBO: H.R. 1704, to establish a Congressional Office of Regulatory Analysis, would allow the director of the proposed office to obtain information from CBO and to utilize CBO's "services, facilities, and personnel with or without reimbursement."

H.R. 62, the Unfunded Federal Mandates Relief Act of 1997 (introduced by Congressman Herger), would require CBO to prepare an annual report estimating the total amount of additional costs that state and local governments would incur as a result of regulations promulgated during the previous year.

H.R. 2708, to provide a framework in which the legislative and executive branches could consider unilateral economic sanctions (introduced by Congressman Hamilton and others), would identify a bill that imposed such sanctions on a foreign country as a private-sector mandate and require CBO to analyze the likely short-term and long-term costs to the U.S. economy from those sanctions.

SUBCOMMITTEE RECESS

Senator BENNETT. Thank you very much, Dr. O'Neill, for your testimony.

At this time, if there is no further business to come before the subcommittee, the hearing is recessed.

[Whereupon, at 12:33 p.m., Thursday, February 26, the subcommittee was recessed, to reconvene subject to the call of the Chair.]

LEGISLATIVE BRANCH APPROPRIATIONS FOR

FISCAL YEAR 1999

THURSDAY, MARCH 12, 1998

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.

The subcommittee met at 9:39 a.m., in room SD-116, Dirksen Senate Office Building, Hon. Robert F. Bennett (chairman) presiding.

Present: Senators Bennett and Dorgan.

JOINT ECONOMIC COMMITTEE

STATEMENT OF HON. JIM SAXTON, CHAIRMAN

ACCOMPANIED BY CHRIS FRENZE, EXECUTIVE DIRECTOR

OPENING STATEMENT OF HON. ROBERT F. BENNETT

Senator BENNETT. The subcommittee will come to order. I apologize for being tardy. You are not interested in my explanations but you should get my apologies.

This morning we are going to hear from the joint committees, the Sergeant at Arms of the U.S. Senate, the Library of Congress, the Congressional Research Service, and the Office of Compliance, so we have a fairly full schedule ahead of us.

I want to highlight for the agencies testifying today my particular interest in the year 2000 problem. Those who follow my activities are discovering that this is something of a broken record with me, but I am convinced that this is a very serious challenge not only for the Government but for the economy as a whole.

The majority leader has asked me to take the lead in seeing to it that both the legislative and executive branch agencies are prepared for this challenge and I will use this forum and any other that I can appropriately get to respond to that task from Senator Lott.

Now, our first witness this morning is Hon. Jim Saxton, chairman of the Joint Economic Committee, and he will be followed by Hon. John Warner, chairman of the Joint Committee on Printing, and I appreciate the attendance of both of our colleagues here.

Senator Dorgan, do you have any opening comments?

Senator DORGAN. Mr. Chairman, I do not have an opening comment. Let us hear from the witnesses. I am pleased that we are holding the hearing today, and we have some interesting statements, so let us get on with it.

Senator BENNETT. Thank you.