Again, I couldn't agree with you more. And earlier, before you came, I gave some credit to our Republican colleagues-even though I disagree with many of the specifics that they have gone ahead and done, or are in the process of trying to do, including most important, most specifically, changes in Medicare, Medicaid, which are critical because they are the biggest programs and because they are the fastest growing programs. I mean, those are the key programs, although lots of other things perhaps ought to be done, we have to concentrate on them. So I would be critical-I don't even mean to put it this way-but I am just mildly critical of your talking about a whole series of process reforms as well. That is fine and maybe some of them will be useful. But we have to concentrate on doing something about entitlements. I think we have to get our colleagues who haven't thought so much about it as you and a few of the others who testified today, perhaps a few of us, to concentrate on what has to be done. The answer is policy changes in the entitlement programs. And finally, again, when you are talking about some way of looking back and enforcing what we learned among other things in the past 10 years was that spending goals could be met and enforced under the BEA, but the deficit goals were very difficult to achieve under Gramm-Rudman-Hollings. And I worry a little bit about our focusing again on deficit goals as such, because I think we have had much more success with specific spending limitations in specific areas, and again most importantly, on entitlement bills. That is all. Some rambling comments. Mr. ORTON. If I might very briefly respond. Mr. BEILENSON. Sure. Mr. ORTON. Part of the problem in estimating has not only been spending, it has also been in revenues. We have missed in estimating what the revenues would be. We have overestimated, we have been overoptimistic. Mr. BEILENSON. And economic conditions. Mr. ORTON. And economic conditions have an impact in that. That is part of the problem. The problem is not specifically geared entirely to spending. As to your other point on process reforms, you are right. We are not going to resolve deficit spending simply with process reforms. You can't do it without entitlement reforms. I agree with that. And we need to make the entitlement reforms. But the reason I still encourage us to make process reforms is that this will facilitate the process of making better decisions, based on priorities and judgment. It focuses those priorities and allows us to make better policy decisions, rather than a process which ignores many of the policy decisions that we should be making. Mr. BEILENSON. Got you. Mr. ORTON. And so that is the reason that I think we ought to have a capital budget. A capital budget isn't going the resolve the deficit crisis. The capital budget will allow us to make better decisions about whether we ought to be acquiring a building or equipment under a lease or build it or acquire it ourselves. There are decisions that we can make through our fiscal process that are guided by our statutes and our budget process. And I think by changing that process we can facilitate better decisions and that is why I favor that. Mr. BEILENSON. I got you. Thank you. Thank you, Mr. Chairman. Mr. Goss [presiding]. Thank you very much. Mr. ORTON. Thank you. Mr. Goss. Have you voted? Mr. BEILENSON. No. Mr. Goss. The Honorable Robert E. Wise of West Virginia. Mr. BEILENSON. May I say this at this point as the Honorable Wise comes up here, because I have to go vote. I want to tell the Honorable Wise, (a), I have read his testimony. (b), I agree with him completely. (c), I argue all the time back home with folks who talk about how everybody has to have a balanced budget, and we don't; of course, they don't, either. I mean, they borrow to buy their homes and their cars and send their kids to college. If you have a capital budget you would, (a), make it easier for us to reach zero, and, (b), it would take a little pressure off of our failing to invest or make the kind of investments we have got to do to keep growing because all spending is thought of as the same kind of spending. So if I don't get back here in time to say anything more, I want to tell you that I totally agree with you and for all kinds of reasons. Mr. WISE. Thank you. I want to thank the Honorable Beilenson, and I wish to, if I could, open my testimony by saying I would like to echo the gentleman's remarks, and I won't because he has made them so well. If I could open by saying, Mr. Chairman Mr. BEILENSON. I am going to leave now. I will be right back. STATEMENT OF HON. ROBERT E. WISE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST VIRGINIA Mr. WISE. If I could open, Mr. Barton testified to you that he had spoken to the present Budget Committee Chair on his proposals and had been told he wouldn't lose any sleep over it. I have to be honest with you and let you know I talked to a previous Budget Committee Chair about my proposal and said he would be an insomniac if mine passed. But I think that for all the reasons that Mr. Beilenson just said, capital budgeting is vital, and I might point out that the legislation I have sponsored, I have actually cosponsored with people like Government Reform Chair Bill Clinger and many others who have looked at this over the years. I will introduce my testimony of course for the record and simply Mr. Goss. Without objection. Mr. WISE [continuing]. And simply point out that, When do we match our rhetoric? All of us have made speeches about the need to have the Federal budget like the family budget, the business budget, the budgets of 50 States. The fact is the Federal budget isn't because the Federal budget does not recognize long-term investment in physical infrastructure as a separate accounting item and indeed the Federal Government discourages that kind of investment. The result is that the pencils that go into the Federal courthouse, that dollar for those pencils is counted exactly the same as the construction cost of the courthouse. The dollar that you put into filling a Federal vehicle up with gasoline is exactly the same according to the Federal budget as a mile of highway that that car will drive over. And so for these reasons, I think it is vital that we have a capital budget. Mr. Chairman, I am talking critical about physical infrastructure. Some have would argue perhaps that job training, research and development, that that might go into a capital budget. That is an argument for another day, but I think that you need to limit it to physical infrastructure. I believe that many recognize the need for some type of accounting for investment. The GÃO, while not embracing capital budgeting, does talk about a separate investment account so that you can look at how much you are investing. Indeed, our own unified budget process has certain procedures in it so that we can try to separate investment from simply consumption. But a capital budget would permit us to get about the business of building the roads, the bridges, the infrastructure, the water, the sewer systems that are so vital and put us in line incidentally with every-with I believe every State, with every city, with every business, and certainly with every family. You will borrow, you and I will probably borrow for our homes, for our children's education. We know we better not be borrowing when we go to the grocery store and that is the spirit of the capital budget. We think this is a good time to press for it, because I think while we may have great differences on some of the proposed cuts that are coming up to get to a balanced budget in the year 2002, I suspect that everyone in the Chamber can agree on the need for growth as being a central element of getting to a balanced budget, and capital budgeting permits us to distinguish and invest in longterm investments that bring us that growth and eventually guarantee that we will get to a balanced budget, and will do it with a growing economy, not with a contracting one. And I thank the committee for taking its time. [Mr. Wise's prepared statement follows:] PREPARED STATEMENT OF HON. BOB WISE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST VIRGINIA Mr. Chairman, members of the committee, I want to thank you for the opportunity to testify before you today about budget reform and the importance of moving toward a Federal capital budget. But before I begin, let me commend this committee for focusing on budget reform as a part of comprehensive congressional reform. As a Member, I have served 6 years on the House Budget Committee and I am a veteran of several balanced budget debates where I have offered amendments with a capital budget component. I have come to believe that many of the budget problems facing this Congress, particularly the shift in recent years from public investment toward consumption spending, have as much to do with the budget process as with decisions made—or not made by the Congress. Perhaps the greatest, and to me the most mystifying, problem with the current system is the fact that the Federal Government's unified budget makes no distinction between money spent on investments and money spent for consumption. Highways, Federal salaries, health benefits and foreign aid, which are all examples of Federal programs that are paid for through taxes and borrowing, are all accounted for in basically the same way. But all borrowing is not created equal. Borrowing for physical infrastructure can be justified if it pays for itself in the long run by increas ing the Nation's wealth and capacity for future economic expansion. Borrowing to meet the day-to-day expenses of government cannot. This year I have reintroduced legislation that would divide the Federal unified budget into an operating budget and a capital budget. Under my bill the operating budget would include all programs that meet the immediate obligations of running the Government. The capital budget would include long-term, tangible investments in infrastructure. This legislation would direct the operating budget to be balanced but would allow the Federal Government to borrow money for certain investments in infrastructure that increase the national wealth and contribute to economic growth. Money borrowed for those infrastructure investments would be paid back over the life of the road, bridge, sewer system or other infrastructure investment. Over 30 of our colleagues in the House from both parties have cosponsored this budget reform legislation. The concept of a Federal capital budget is not new. The budget was expanded in the 1950's to include information on investment spending. Reform in the 1980's required even more investment information in the unified budget. Many other industrialized countries employ a capital budget, and businesses and most State and local governments have investment budgets that separate long-term capital investments from year-to-year operating costs. Individuals and groups as diverse as former OMB Director Richard Darman, the General Accounting Office and the Progressive Policy Institute have endorsed distinguishing between investment and consumption spending in the budget. As a recent GAO report on the harmful effects of the deficit points out: A new [budget] decisionmaking framework is needed, one in which the choice between consumption and investment spending is highlighted throughout the decision process, rather than being displayed for information purposes after the fact. Businesses know the difference between borrowing to consume and borrowing to invest. Borrowing is a smart move when the money is used to finance productive investments that help a business modernize its equipment, expand and become more profitable. But borrowing money to pay salaries or executive bonuses or to send employees to expensive conferences rather than to modernize would be foolish. I believe the Federal Government should make this same distinction in its budget. By borrowing for current expenses the Government is asking future generations of taxpayers to pay for the cost of running the Government today. But borrowing to invest is different. If the Government passes part of the cost of building a road to future taxpayers, it also gives them something in return-a new highway that will encourage economic development, facilitate commerce and increase growth for years to come. Instituting a capital budget would force policymakers to decide whether or not each investment is worth borrowing money to finance. In addition, the public would benefit from knowing that the Government's current costs are being paid for and that any borrowing is for investments in the future rather than paying for the present and saddling future generations with bad debt. All of us agree that the United States must make investments that are critical to future economic growth while balancing the budget. Rather than going from crisis to crisis, the Federal Government should have an institutional system of long-term investment planning. Adopting a Federal capital budget would provide such a mechanism. Mr. Chairman, members of the committee, this is a time of fundamental change in the way government serves the people. In order to be more responsive to taxpayers' needs and more responsible with taxpayers' money, I believe the Federal Government should reform its budgeting to distinguish between consumption and investment. Adopting a capital budget would begin to effect this critical change and I hope you will seriously examine and ultimately endorse this important budget reform. [A section-by-section summary of the Capital Budgeting Act of 1993, submitted by Representative Bob Wise follows:] The Capital Budgeting Act of 1993 Section-by-section summary Section I: Short Title Section II: Statement of Findings and Purpose Section III: Establishes Capital and Operating Budgets Requires that the budget submitted by the President be a unified budget comprised of an operating budget and a capital budget. - Limits the capital budget to major activities, projects and programs that support the acquisition, construction, alteration, and rehabilitation of physical infrastructure that produces services or benefits for more than five years and has an initial cost of at least $500,000. - - Restricts expenditures from the capital budget to: roadways and bridges; airports and airway facilities; mass transportation systems; waste water treatment systems; water distribution delivery and related systems; water resource projects; medical facilities; resource recovery facilities; public structures; space and communication facilities and strategic petroleum reserves and mineral stockpiles. Section 4: Review of capital expenditures Requires the Comptroller General to review and report to Congress to ensure that those investments included in the capital budget adhere to the criteria set out in this act. Section 5: Balancing the operating budget Requires the Budget Committee to submit to the House proposed legislation to establish additional deficit targets that require the eventual elimination of deficits in the operating budget. Section 6: Evaluation of capital investments Directs the Government Operations Committee to report legislation directing the Comptroller General to evaluate the value and usefulness of actual and proposed investments in the capital budget. |