year cycle, and requiring the President to submit his budget only every other year. In 1993, both Vice President Gore's National Performance Review and the Joint Committee on the Organization of Congress recommended that the Federal Government move to a biennial budget.

Although if the timetable was followed as planned, biennial budgeting would free up the Congress to concentrate on nonbudgetary issues-such as oversight-during the nonbudgetary year, there are reasons to question whether that would actually occur. Biennial budgeting could, for example, result in large supplemental budgets and appropriations in the second year, without appreciably reducing the overall time and attention paid to the budget. In addition, it would make it more difficult for the President and the Congress to implement significant changes in fiscal policy when they decide such changes are warranted in the off-year-even-numbered year-of the budget cycle.

Question No. 4.-Any discussion of the current budget process would not be complete without an examination of how the Federal budget itself is structured. Specifically, we have taken certain programs or accounts off-budget or placed them in trust funds to ensure that resources are used for intended purposes. In light of the increasing tendency toward trust funds and the fact that many of the budget's largest programs are set aside in such accounts, should we review the structure of these off-budget designations? Are the current procedures working or do you have suggestions for change to help bring about better overall control of the budget?

Current law requires that only two entities be off budget: the Social Security trust funds-the Federal Old-Age and Survivors Insurance and the Federal Disability Insurance trust funds and the Postal Service. The off-budget designation applies to transactions of the Government that would be included in the totals in the President's budget and congressional budget resolutions in the absence of laws that require them to be excluded. Trust funds other than Social Security-conversely, are on budget but are typically accounting devices that attempt to ensure that the proceeds from earmarked taxes are spent for specific purposes. Overall budget control is made more difficult by the creation of off-budget entities and trust funds. Clearly, the intention of the Congress in designating the Social Security trust funds and the Postal Service off-budget was to insulate them from budget control. Furthermore, earmarking receipts and dedicating them to specific types of spending can make control more difficult because it creates pressure to allocate funds for earmarked programs, as long as the trust funds have positive balances. Although there may be other arguments in favor of off-budget designations or the creation of new trust funds, such a move would clearly be detrimental to overall budget control.

Question No. 5.-For a budget process to be credible, it must be fair, both in terms of not giving procedural advantages to specific programs (Social Security) and members. Would you describe the current budget process as being fair from both perspectives?

Certainly it is true that the current process gives procedural advantages to certain Federal programs over others. The best examples of that are probably the Social Security trust funds, which are excluded from budget enforcement procedures, such as pay-as-you-go and sequestration. Other programs are somewhat advantaged by being specifically excluded from any PAYGO sequestration. Certainly the relative advantage accorded Social Security and these other programs was intentional. Whether it is fair or not is a policy decision.

The question of fairness to individual Members is a complicated one. The Congress, by necessity, does much of its work in committee. The current budget process is probably fair to committees; the Budget Committees, the Appropriations Committees, and the authorizing committees have important roles to play in the process. By contrast, if a small number of Members made all budgetary decisions, the vast majority of Members would have little power in the process. In addition, to the extent that Members are free to offer amendments to budget-related legislation on the floor-as they are under more open rules, for example--their prerogatives in the budget process are maintained.

I hope that these responses are helpful to your committee as you deliberate changes to the budget process. Thank you.

Mr. Goss. We have run our time. I want to thank you very much for this and we will go now to our next panel, if that is agreeable to you, Mr. Chairman.

Mr. DREIER. I guess so.

Mr. Goss. Well, it was a tough persuasive argument. Ms. Susan J. Irving, the Associate Director of the General Accounting Office. We welcome you to the table.

Thank you very much, Dr. O'Neill.

Mr. DREIER. Thank you very much.

Mr. Goss. We thank you for your testimony. We have it included in our briefing materials. We will have it entered in the record, and you may proceed. Anything in addition or exactly close that you would like to say, just feel free.

STATEMENT OF SUSAN J. IRVING, ASSOCIATE DIRECTOR, BUDGET ISSUES, GENERAL ACCOUNTING OFFICE

MS. IRVING. Thank you, Chairman Goss, Chairman Dreier, Mr. Hall. Thank you for inviting me to talk about the budget process. I was here last year to talk about some of the recommendations of the House Members of the joint committee, and I suppose this marks me as odd, but I actually like to talk about the budget proc

ess.

Mr. DREIER. It sure does.

MS. IRVING. Well, there are worse ways to be thought of as odd, I suppose. I feel this way because I think, although it is really frustrating in a fundamental way, little is more important than the debate about how much of the wealth that is produced in the country should be taken for the collective use and how it should be spent. The budget process is in a very real sense, the process through which we seek to reconcile the competing claims and views of Americans about what the Federal Government should do. We shouldn't be surprised that it is time consuming and frustrating, but we need not accept that it can never be better.

Everyone involved in the budget process shares a sense of frustration. The public finds it very confusing, and I think in a democracy that raises some real problems. Executive branch agencies find it burdensome and time consuming. For all of you it is repetitive and I suspect it feels like you make many of the same votes over and over again. Finally, the results are all too often disappointing.

You asked us to look at the objectives of the 1974 Act, to think about whether they are still relevant and to think about ways and whether the process should be changed. In an overarching sense the answer to the second question has to be, yes. It is clearly still relevant for Congress to assert its constitutional role and a strong role in the decision about Federal fiscal policy and the selection among competing priorities.

In my written statement I talk some about the history and the development of the 1974 Act and amendments. I will not use up your time on that today. I would like to note just three things about that act that I think we need to keep in the front of our minds when we look at revising it.

One is that this is the act that created the Congressional Budget Office. Dr. O'Neill was much too modest to talk about what a major contribution CBO has been to the power of the Congress but I would note that in a very real sense the creation of CBO reduced the congressional dependence on OMB's good nature and analysis

and provided an independent source of numbers and analysis for the Congress.

Second, I think it is important to remember that the 1974 Act was neutral as to results. It was not established to create a balanced budget. It was established within 5 years of the last balanced budget, so its creators were not overly concerned with that problem. It was established to create a structure and a timetable. Finally, and the observation I think is most relevant for examination of future changes, the act created the functional structure we know today. That structure changed the budget from one organized by agency to one organized around the point of the expenditures, that is the national mission or goal the spending seeks to advance, regardless of in which agency the task is located. As I said, I think that is one area you may want to look at again.

I suggest in my written statement that it is possible to think about criteria for looking at a budget process along four clusters. I don't want to say these are the only things that matter, but I think they are important and they cover a pretty wide range.

The first is some ability to look at the long term, in both the macro sense and in the micro sense. By the macro sense I refer to the Government's role as custodian or contributor to the Nation's long-term economic growth. What is the fiscal policy that you seek to advance over the long term?

The micro links back to some of the things you were discussing with Dr. O'Neill, the need to recognize that while long-term projections are inherently uncertain and you probably wouldn't want to score them, you need to be able to look 30 years out for some programs, for example, retirement programs and pension insurance. You need to have a sense about the long-term costs.

The second major criterion is the ability to provide the information necessary to make macro tradeoffs. Most particularly, I would suggest the tradeoff between investment—that is spending to support long-term economic growth-and consumption, which we might think of as spending to improve today's quality of life. It is not that one of these is unimportant, but rather that-as we have suggested-the decision should be an explicit and conscious one. You can dig through today's budget documents and find the information to differentiate investment, but it is not an organizing theme in the budget presentation or the budget process, and maybe it should be. The way you bring it in depends on the structure you select for the budget process. We have suggested-and I could provide you with more detail-that within the current BEA structure you could create an investment component on the discretionary side of the budget. It is a way of focusing and highlighting information and decisions on this important tradeoff.

The third criteria deals with another level of tradeoffs that the budget process should help you make: between missions and between the tools with which you advance those missions. Let me start with the tradeoff between missions. The functional structure was a beginning; it allowed for the first time Congress to look atfor example-all the spending for income security or for agriculture regardless of where it was located. In the income security function you see agriculture's food and nutrition service, you see HUD's sub

sidized housing programs, and, of course, you see many programs in HHS.

However, the functional structure is limited in its ability to organize these tradeoffs for you. For one thing, it includes only spending or credit programs. If you choose to advance a national mission through a tax credit or deduction, it does not show up in the functional presentation. Someone could do that crosswalk for you, but it does not naturally flow into the debate across missions or the perception of how priorities are allocated.

Another limitation is something I believe Mr. Frenzel will touch on, which is the fact that the functional structure of the budget does not match the structure of the Appropriations subcommittees. Therefore it is sometimes difficult to follow the translation from the full Congress' decision about allocations across national needs to the Appropriations Subcommittee. CBO does an allocation to the full committee, but the allocation downward by mission has to be translated into an allocation by agency or groups of agencies.

Tradeoffs across missions are also somewhat hampered by the absolute wall between PAYGO and discretionary. That wall reflected the different time horizons of those decisions. Appropriations decisions expire when they expire, unless renewed. But tax cuts, tax increases, and entitlements go on unless repealed. So creating that wall made sense, but it does hamper your ability to make some tradeoffs, most especially the macro tradeoff I referred to between consumption and investment.

Finally, I think the BEA deserves a lot of credit for improving your ability to compare tools on a comparable basis. You would like to select, it seems to me, between a loan guarantee or a grant based on how much they really cost the Federal Government, not because one is scored some odd way. The Credit Reform Act put those on a consistent basis. We complain a lot about the Budget Enforcement Act, but it has, I think, some successes we should not ignore.

The fourth criteria cluster has to do with transparency, enforceability, and accountability. By transparency I mean merely the ability of Americans who are not part of the budget process to understand what this debate is about. This is important precisely for the reason I mentioned at the beginning: It is their money and it is their priorities and it is their argument. Americans have very different views about what the budget should do, but I think Americans are more willing to accept losing an argument if they understand it than if they cannot. And I sometimes think that if it is hard for someone close to the process to follow the debate, it must be even harder for people who are a little further removed from it. I will give you just one example in today's debate. The assumptions behind this year's budget resolution are quite detailed. I suspect many people outside the Roll Call reading area think the budget resolution actually changed programs, may have even actually abolished the Commerce Department. They are going to watch all of us write analyses and all of you debate and vote over the next year and they may have trouble figuring out why you are voting on the same thing over and over again. Now, we all know you are not voting on the same thing because the last vote was on a broad

goal-the Budget Act carefully avoided having the budget resolution change laws-but I think it is a problem for transparency.

On enforceability and accountability, the report card must be mixed. At one level the Budget Enforcement Act has done an impressive job. It has, in fact, controlled what it set out to control. The discretionary caps have held. I think much to many people's amazement, people did not drive a truck through the emergency loophole.

Mr. Goss. I agree, larger trucks could have gone through it.

Ms. IRVING. And the PAYGO neutrality rule has held. But the Budget Enforcement Act was a first step. Perhaps because of the failure of Gramm-Rudman, the BEA left uncontrolled any slippage that was a function of economic changes or technical changeswhich increasingly looks like a code word for we don't know what is happening in health-and demographic changes. It controlled what Congress could control, and it left uncontrolled the rest. I think that was a reasonable decision at the time, but it means that today we face a world where deficit growth is someplace else. GAO has suggested in the past that Congress might want to consider bringing in something that I will, for lack of a better word, call a look-back process, in which Congress looks at the agreement it had made in a multiyear budget agreement or reconciliation bill, and every year quite explicitly tracked progress, and then asked, How are we doing?

In this process you would measure slippage-not slippage because it is anyone's fault, not because of misbehavior, but just slippage. The process would ask: Do we wish to accept this slippage? Do we, in fact, believe the economy went into the tank and we should revise our targets, or should recoup some of this slippage? Should we go back and have a new reconciliation bill? Should we direct ourselves to act to bring ourselves closer to where we expected to be?

Now, you can certainly argue that the budget resolution does that every year, but I think there is a difference between having the budget resolution implicitly start from a new baseline estimate and saying, "Hey, look, we slipped, we are not where we hoped to be, let's decide whether we want to get back on track."

Finally, I will turn to the question that Mr. Dreier especially raised: Is there just too much process, layers on layers on layers? Well, that, as I think all of us know, reflects the way this process was created. The Budget Committees and the budget resolution were created to provide some overarching view, and offer in part a counterpart to the executive branch, but the budget committees aren't in any stretch of anyone's imagination the Office of Management and Budget. There is no single head of this branch of government and the Budget Committees do not exercise any authority except to enforce a resolution everybody has agreed to.

The Budget Committees deal only in large numbers. Perhaps it is hard to remember, that the requirement that the committees didn't deal in numbers less than $100 million used to be quite restrictive. That was precisely to prevent the Budget Committees from making policy decisions. Now that line between numbers and policy was always a little odd because you can't come up with numbers without knowing something about the policy.