Let me state to the members who are here that it has been my impression-and I think I have a pretty good feel for this budget process. I have kind of grown old with it. It has grown old, too.

But essentially, on the one hand there is a cry that the budget resolution is not effective. On the other hand, there is a great reluctance to give the budget resolution or the Budget Committee any authority. When we drafted the first Budget Impoundment Act that created a budget resolution as an instrument of policy and committees to draft it and enforce it, nobody was quite sure whether they wanted to take away any of the authority at all of the appropriations committees.

So if you read it and look at it carefully, it is a very interesting document that says that the Budget Committee shall set how much we will spend for domestic programs, but as soon as we try to say so much of it for defense, or so much of it for function number such-and-such; it is: We didn't ask you to do that.

For example, during the first 2 years of the Reagan Administration we argued about numbers, Representative Obey, on how much we spend on defense. Remember that? There were big arguments. The problem is that we had those debates. Then in the first 2 years the Congress took $44 billion of the defense number-we had agreed on $296 billion for defense. They took $44 billion in budget authority out of that as it went its way through the appropriations process and spent it wherever they wanted on domestic programs. Let me tell you that interestingly enough, maybe we want that to be the rule. But let me tell you that it really matters that we determine the outlays not just the budget authority. It took us 5, 6, 7, or 8 years to get that.

Let me tell you why it matters. If you take $44 billion away from defense and you don't have an outlay restraint, that $44 billion can be spread across low spend-out programs so that you put it in and not very much spends out, or you can do the reverse. You can put it in where it spends out dramatically.

Congress did an interesting thing with that money. You know there is a cry that we cut housing. Congress intentionally did that. President Reagan had nothing to do with it. They found that once they took more money from defense and could spend it, that if they changed the housing programs so that they were quick spend-out programs they could spread that budget authority all over that budget because they didn't need very much for housing. That is why we went to vouchers and other things that spend out quickly because they take the excess budget authority and spend it on others because we didn't care what the outlay result was.

So we kept within President Reagan's and the Budget Committee's budget authority, but we spend considerably less on defense and lo and behold, if you would look at the second or third year out we spent a huge amount more on domestic programs in outlays because we jiggered the budget authority around to see that we did that.

This is budgetese, and who wants to listen to this? But nonetheless, we have to talk about these things.

Mr. OBEY. Would you yield on that?

Senator DOMENICI. I would be pleased to, but I only wanted to make the point that we need more authority to get things done, not less, as I see it. I very much want to ask him a little bit about that. Mr. OBEY. I just want to say that I agree with everything you have said. You have described what happened exactly. I think that has made my case because what happened is that we could follow the pretense of meeting the numbers, but in the process we really did not have the kind of fiscal control that people thought we had in some of those areas.

I am only saying that we ought not kid ourselves that this system gives us any better fiscal control than the last system if you don't have the will that has to go along with it.

Senator DOMENICI. But it does give us some very significant new authorities because what we have now done is to establish a convention for determining how many outlays flow from budget authority. So we put an outlay cap on, too. What I just described could not happen now. It would be much different. The playing of the game would be different.

I am really suggesting that the agreement of 3 years ago, the 5year summit agreement of Andrews-it did a few things by law that are interesting that we ought to wonder whether we want to do in recommending change. It said, have your debate on defense and put a number in for defense. If you don't spend all of that on defense, you put it back in the Treasury. At least if we did some of those kinds of major categories that we were debating for real on the Floor in a budget resolution, it seems we would have more truth and honesty in the result.

If in fact you are going to determine policy this year for President Clinton, and you agree with his policy, it is clearly doubtful whether the budget resolutions, with their current authority or lack of authority-it is very difficult to say with certainty that by adopting a budget resolution you are carrying out his policy, is it not?

Mr. REISCHAUER. That is certainly true because a big chunk of his policy occurs in discretionary spending. Discretionary spending, after all, is the purview of the Appropriations Committee. He has recommended a number of pluses in the discretionary area and a number minuses in the discretionary spending area. What the budget resolution and what the caps control would really be the net number, nothing else.

Senator DOMENICI. The net aggregate.

Mr. REISCHAUER. Correct.

So within the appropriations committees, they could decide to have more pluses and balance by more minuses, or they could decide to have fewer pluses and balance by fewer minuses. Where that comes out is determined by later decisions in the legislative process.

Senator DOMENICI. One last question. Again, I would hope those members who are interested in how this process works and doesn't work would listen to this one for an example of how things go awry.

We have a reconciliation process that is general and not specific. So in the past, it has said to a finance committee or a ways and means committee, or a ways and means committee and an energy

committee combined in the House: Raise revenue by $50 billion and adjust entitlements within your jurisdiction by $20 billion.

Until recently, those were 1-year mandates. So what the reconciliation bill could do—and it did it numerous times—it would comply with the reconciliation instruction for the year mandated and then write permanent law in the reconciliation instruction spending more money in the out-years than was expected. That is how they would design the program. Medicaid is a very good example of that. Reconciled, saved money in the first year, in the bill itself added programs in the out-years so it went up.

Second, you can do the same with taxes. You can raise taxes in the first year because you mandate it and then in the out-years you can spend it. I think this is true of the early years of the budget process.

I would like to ask that you submit for the record a detailed analysis of the reconciliation process and its evolution from the standpoint of what its multi-year control mechanism is now. Second, since we are now being told that we might even get the health care plan in reconciliation-everybody ought to know what that is going to say. That will be three sentences. That is going to say that committees of jurisdiction, if they pass a health care plan under reconciliation, the chairmen of the committees can just change the budget numbers to accommodate it and you will have reconciliation for the whole health care plan.

My second request is, could you tell us what the status of the law is with reference to putting into reconciliation irrelevant measures-measures that do not pertain to fiscal policy—and what controls we have tried to place on putting in pure authorization bills in reconciliation? Could you give that to us in writing?

Mr. REISCHAUER. Certainly.

The reconciliation instructions can be multi-year. You have chosen not to do that sometimes and other times you have. So there is nothing within the Budget Act that precludes a multi-year reconciliation.

Second, it is important to remember that in addition to reconciliation-and reconciliation instructions are designed to change direct spending or revenues-you have the pay-as-you-go score card restraints. If the President's proposal to extend those pay-as-you-go restraints for 10 more years is enacted, that serves as a backstop to the type of shenanigans that Senator Domenici described which occurred during the early years of the budget process.

But once again, getting back to the Chairman's original statement, this is one of those elements that has added to the complexity of the existing process. When we didn't have that complexity, we had the games being played.

Senator DOMENICI. Mr. Chairman, might I just say that those caps and those spending pay-as-you-gos were not part of the Budget Act. Nobody had such authority under it and we were expected to control expenditures. They are added on, truncated on it by the 5year agreement.

Mr. REISCHAUER. That's correct.

Senator DOMENICI. So they are law and not budget resolutions. They are written into law.

Mr. REISCHAUER. They are written into law. They are not written into the basic law, which is the Budget Act of 1974. And they expire in 1995 unless they are extended.

Chairman HAMILTON. Senator Boren?

Chairman BOREN. Dr. Reischauer, what is historically the earliest period of time in which the reconciliation bill has been acted upon by both Houses since we have been following this process?

Mr. REISCHAUER. It was in 1981. I believe it was August 13th, which is when the Reagan Omnibus Bill went through the Congress.

Chairman BOREN. I thought there was 1 year in which both Houses had Floor action in June and committees in May. Do you recall that?

Mr. REISCHAUER. We will provide you for the record when the various reconciliation bills have passed. It is conceivable that one of the less controversial ones or a small one might have gone through earlier.

Chairman BOREN. The budget resolution can fix a date for the reconciliation bill, can it not? Can it set a target date?

Mr. REISCHAUER. There are many dates that are established, and few are adhered to, as you know. You are right that usually the instructions include a date at which the various committees are supposed to report back to the Budget Committee with their recommendations. Your question is, when does it go to the Floor after it has been pieced together in a single legislative initiative?

Chairman BOREN. Right.

So when we act on the budget resolution this time, we could try to push that process. We would be free to set a time deadline, at least one we would try to push on the committees, as to when the committees would report back to the full Congress with their cuts. Mr. REISCHAUER. I would expect that to be a part of this.

Chairman BOREN. What mechanism do we have now? Is it simply once a year or is it semiannual for updating the progress of deficit reduction and where we are exactly? I know we have a snapshot, I recall, once a year that sticks in my mind. But is it more often than that?

Mr. REISCHAUER. There are two different ways of answering that question. One is that the Congressional Budget Office twice a year-once in January and once in August-updates its economic forecast and updates all of its budget numbers to reflect actions and laws that have been taken to that point. We project them out 5 years so that gives you a feel for where the deficit is and where it is going twice a year.

The Administration does the same thing. It has two updates.

The other way of looking at that question is, how often do you, as a Congress, speak on this? The answer is once a year in the budget resolution.

Chairman BOREN. What concerns me is—and I think this point has been made to us by several witnesses that this year, as we go through this budget process and especially if we are successful in passing a package that will result in deficit reduction-that making sure that we're accurate that we stay on our target is extremely important. If we say that we're going to reduce the budget

X billions of dollars over the next 5 years and this year we will have a smaller budget deficit next year than we have this year.

If the deficit grows or doesn't go down nearly as much as we promised, the public will be much less willing to make the sacrifices the next time around.

Mr. REISCHAUER. This is a terrible dilemma that you're in because the public is holding you accountable for events over which you have no control. The fact that the Congressional Budget Office publishes tables that show the policy actions of the Congress has caused a reduction in the deficit of X amount, but that has been offset by worse economic conditions don't phase the public at all. They judge you on the bottom line, hold you responsible for something which you in fact control probably half of.

Chairman BOREN. Is there any mechanism we could use that would keep us do you think it would be advisable for us to have reports more often so that we could really track our progress as to whether or not we are staying on our deficit reduction target? It might mean that there would have to be some "if economic conditions change"-if our forecast said to change, it might mean that we might have to take some remedial action ourselves to stay on target in terms of trying to meet the deficit reduction.

Mr. REISCHAUER. The problem here is that it takes you the better part of 12 months to make one set of difficult decisions and it would be terribly complex for us or OMB to do this every 3 months. It takes a tremendous amount of manpower to do these kinds of estimates. I am not sure that more frequent updates would improve the final outcome.

You might look at-if you were to enter into an agreement like you did in 1990, which was 5-year deficit reduction agreement, that under the assumptions of the time was really going to make the deficit, for all practical purposes, go away. It would have been down below $50 billion. It would have been off the front pages of the newspaper. It wouldn't have been brought up by your constituents at town meetings by 1995. We would have been on a downward trajectory right now and your attention would be focused on other things.

As I said, the economy turned sour, technical factors went the other way, but the Budget Enforcement Act required you to do no more than what was agreed to in 1990. You might want in the next round of agreements some look-back that would say: If we aren't on the track we were on, we have to address these issues before the 5th year. We have to come up with an interim adjustment. Chairman BOREN. Thank you very much.

Chairman HAMILTON. Senator Sasser has some questions that I presume you will receive and respond to in writing.

Mr. REISCHAUER. Fine.

Chairman HAMILTON. He had to leave for another hearing.
Ms. Holmes Norton?

Ms. NORTON. Thank you, Mr. Chairman.

I have found your testimony particularly helpful, particularly because it tries not to do what is I'm sure the temptation to make one's one mission seem the center of the universe, but rather to put budget reform in some context. Budget process reform tends to be bigger than life in this body, I'm afraid.