602(b) allocations-are made by the Appropriations Committees. At one level, priority-setting within the discretionary side of the budget has been delegated to the Appropriations Committee where it resided before the 1974 Act. This may or may not be considered to be a problem. Nevertheless, among the questions to be asked in any overview of the entire budget process is whether the functional structure is doing as much as you would like to facilitate a debate among priorities.

The sharp division BEA sought to draw between discretionary spending limits and the PAYGO scorecard made a great deal of sense. It simplified jurisdictional issues. It also recognized the difference in time horizons. Discretionary appropriations may be provided for 1 or more years and a discretionary spending cut may be a 1-year cut. In contrast, most changes in entitlement or tax laws last longer than a single year. This sharp division, however, limits the ability to shift spending priorities because cuts in mandatory spending cannot be used to pay for increases in discretionary programs. Thus, it would be difficult to shift spending away from consumption support concentrated in the mandatory sector toward investment programs funded in the discretionary portion of the budget. Among the issues you may wish to consider is when and under what circumstances breaching the wall between discretionary and mandatory categories makes sense.

At a level below establishment of broad spending priorities, the selection of the appropriate policy tools with which to address missions are important decisions. For any given goal or mission in which the Federal Government will play a financial role, there are a variety of tools available: grants, loans, loan guarantees, and tax provisions. It is important that the budget process provide the information necessary to permit a choice based not on jurisdictional issues or scoring conventions but on the match between the goal and the tool.

gave

Considering these choices is easier if the budget also provides information on the costs of various alternatives-on a comparable basis-and on the nature of the Government's commitment. This is one area in which there has been some improvement. The Credit Reform Act changed the way loans and loan guarantees were treated in the budget because the previous cash-based treatment decisionmakers misleading signals on the cost comparisons among grants, loan guarantees, and direct loans. However, as I have noted, there are still some programs for which either cash-based reporting sends misleading signals or for which even a 5-year perspective provides a misleading perspective on the nature of the Government's actual or potential commitment.

Objective: Provide enforceability, accountability, and transparency

These three elements are not identical, but they are closely related and achieving one has implications for the others. By enforcement I mean a mechanism to enforce decisions once they are made. Accountability has at least two dimensions: accountability for the full costs of commitments that are to be made and targeting enforcement to actions taken. It can also encompass the broader issues of taking responsibility for responding to unexpected events. And, finally, there is transparencybeing understandable to those outside the process is important. I will discuss each of these in turn.

Enforceability: In general, enforceability requires a system for tracking outcomes and tying them to actions. One great strength of the BEA has been the enforcement provisions. By targeting penalties to actions, BEA has succeeded in restraining discretionary spending to within the caps and in restraining new direct spending legislation. The design of the enforcement provisions in BEA has also created accountability for actions. Costs are to be recorded in the budget up front, when they can be controlled. And enforcement is targeted to actions. The Appropriations Committees are responsible for compliance with the discretionary spending limits while the PAYGO scorecard tracks compliance with the PAYGO rules. Unlike the prisoners' dilemma created by GRH, sequesters are applied only to the area of the budgetdiscretionary or PAYGO-where the breach occurs.

Accountability: The targeted nature of the sequester provisions in BEA served also to provide accountability for compliance with the rules. Some of the scoring conventions and costing rules introduced with the BEA have also increased accountability for the costs of actions taken. On another level, however, accountability is diffuse. The deficits in the early 1990's were greater than expected by those who voted for and complied with the provisions of ŎBRA. This slippage was due almost entirely to a worse-than-expected economy and technical changes. Although GRH showed that holding committees responsible for results rather than actions is problematic,

5

5 For a discussion of this, see Budget Process: Issues Concerning the 1990 Reconciliation Act (GAO/AIMD-95-3, October 7, 1994).

there are ways to bring more responsibility for the results of unforeseen actions into the system.

We-and former CBO director Reischauer-have previously suggested that the Congress might want to consider introducing a lookback into its system of budgetary controls. In a report issued to the Republican leadership last year, we described such a process under which the Congress would periodically look back at progress in reducing the deficit. Such a look back would compare the current CBO deficit projections to those projected at the time of a prior deficit reduction agreement and/ or the most recent reconciliation legislation and analyze the reasons for any dif ference. For a difference exceeding a predetermined amount, the Congress would decide explicitly-by voting-whether to accept the slippage or to act to bring the deficit path closer to the original goal by recouping some or all of this slippage. Although one could argue that each year's budget resolution implicitly accepts or rejects changes in the deficit outlook, it does not require an explicit consideration and decision. Adoption of the requirement for such explicit consideration would provide members who make difficult choices in reconciliation an additional opportunity to ensure that the deficit path they voted for will, in fact, materialize.

A similar–but more narrowly focused process could be used to prompt consideration of the path of mandatory spending.? Under its current structure BEA requires any action that would cause a growth in mandatory spending to be offset, but it leaves completely unconstrained any growth in these programs that results from economic or demographic factors. This distinction is consistent with BEA's focus on controlling actions, but it has created other problems. Indeed, the very success of BEA at constraining discretionary and new direct spending has highlighted the dramatic growth of some entitlement programs. One way to begin to deal with this might be to adopt a procedure similar to that recommended by the House members of the Joint Committee on the Organization of Congress. Under such a procedure, direct spending targets for several fiscal years could be specified. If the President's budget showed that these targets were exceeded in the prior year or would be exceeded in the current or budget years, the President would be required to analyze the cause of the overage and recommend whether none, some, or all of the overage should be recouped. The Congress could be required to vote either on the President's proposal or on an alternative one. If the goal was merely to restrain direct spending to the currently projected levels, then the current law baseline would constitute the targets. However, such a procedure could also be used as a kind of lookback on the success of any efforts to reduce mandatory spending.

Transparency: Transparency is important because the budget debate is critically important-not because of the numbers in it but because it represents a statement about collective priorities and collective action. In a democracy, the debate about these priorities should be made as understandable as possible. If even reasonably educated citizens cannot understand the budget document or the budget debate, there is little accountability.

If the budget debate is to be accessible to the American people, consideration will have to be given to simplifying the structure of the budget, streamlining the process, and reducing the number of translations required to get from one part of the process to another. Does the Congress wish to organize the debate by national mission or by agency? If there is a need for both perspectives, how can they be brought together in an understandable way? Discussions about 602(b) allocations and direct spending are the stuff of what someone once called budget process groupies—not of the evening news or quick explanation.

Achieving at least some public understanding of the budget process is dependent on the availability of summary documents such as the old "Budget in Brief" to explain where money comes from and where it goes. For fiscal year 1996, OMB once again included a citizen-oriented document as part of the budget documents. A "Citizen's Guide to the Federal Budget" provided an overview of the budget, highlighting such concepts as the deficit and the debt, and reviewing the President's 1996 proposals. It did not, however, provide much insight on the long-term implications of current spending policies.

Citizens cannot be expected to feel a stake in the budget debate-a debate that will affect all our lives and our national future-or to accept decisions made by others without basic information. At a minimum, citizens need to know how much money the Federal Government takes in-and how-and on what, funds are spent.

See Budget Process: Issues Concerning the 1990 Reconciliation Act (GAO/AIMD-95–3, October 7, 1994). 7See Budget Policy: Issues in Capping Mandatory Spending (GAO/AIMD-94-155, July 18, 1994).

OVERALL STREAMLINING ISSUES

Each of the objectives is important, and they are related—but they cannot all be maximized in a single process. Tradeoffs are necessary. Any review of the budget process must deal with the overarching question: Is there just too much process? The feeling that there are too many votes on related issues is, as I noted, in part a function of the way the process was created: Of the decision to layer the Budget Committees and the budget process on top of the existing committee and procedural structure of the House and the Senate. The idea was that the budget resolution would define the overall aggregates and the rest of the process would proceed within those aggregates. As I have mentioned today, however, especially as the goal of the process shifted to deficit reduction, this distinction became increasingly strained. There are a number of possible responses, but most of them involve considering the relationship of the budget resolution to legislation and of the various committees in the Congress.

Streamlining-making the process take less time-has been the focus of a number of proposals in the past. However, it is in this area that it is especially important to think about the fact that a reponse to one problem may create another problem. Eliminating parts of the process or changing the cycle will have consequences beyond reducing the number of votes. These may or may not be acceptable, but they should be recognized. I will touch very briefly on three processes: The budget resolution, authorizations, and appropriations.

If the recent pattern of multiyear fiscal policy agreements is to continue, are annual budget resolutions still necessary? It is important to review progress every year, but such a review may not require a complete budget resolution. If, however, annual budget resolutions are to be replaced with biennial budget resolutions, then something like the lookback procedure just described could become very important. Without it, there would be no procedure for tracking progress against the previous budget agreement or reconciliation bill.

Multiyear authorizations can provide a longer-term perspective within which appropriations would be determined. Although the need for periodic reauthorizations can provide a window for program revision, there is little reason to reexamine and reauthorize programs more often than they might actually be changed. Of course, multiyear authorizations are already the rule in the nondefense portion of the budget.

Some have suggested that changing the appropriations cycle from annual to biennial could free up time. As I have previously testified before this committee, it is important to differentiate between the length of availability of funds and the timing of the appropriations cycle. Even within the 39 percent of the budget that is on an annual budget cycle, not all appropriations are for 1-year funds. The appropriations subcommittees have been able even within an annual appropriations cycle-to provide 1-year, multiple year, or no-year money as they have thought appropriate for the program or agency at issue. Annual appropriations have long been a basic means of exerting and enforcing congressional policy. A 2-year appropriation cycle would change the nature of that control. It is also unclear how much time it would

save.

In the end, streamlining or reducing the amount of time spent on apparently repetitive votes will require decisions about which votes are no longer necessary. That, in turn, is likely to require decisions about the relationship between discretionary and mandatory spending, between various committees, and about the nature and style of congressional control over the budget and appropriations.

SUMMARY AND CONCLUSIONS

The budget process is the source of a great deal of frustration. The public finds it hard to understand. Members of Congress complain that it is time-consuming and duplicative, requiring frequent votes on the same thing. And, too often, the results are not what was expected or desired.

Given the nature of today's budget challenge, it is likely that the budget process will be the source of some frustration. In considering whether and how to redesign the budget process, however, it is important to look beyond those frustrations tied directly to the need to bring down the Federal deficit. The budget process serves a wider purpose. It is, in a real sense, "The" process for dealing with competing claims and setting priorities.

It is important for the budget process to offer the Congress the means to set overall fiscal policy and to make decisions on relative priorities among missions or claims. In a democracy, the process should be understandable to the interested citizen and it should offer citizens some accountability. I have discussed four important objectives that could help a process achieve these overall goals: Provide a long-term

focus; provide information and structure to focus on important macro tradeoffs; provide information necessary to make tradeoffs between mission areas and between different governmental tools; provide enforceability, control and accountability, and transparency.

The apparently never ending and repetitive nature of the budget process is in large part a function of the way it was created. A new process to provide an overall view was layered on top of the existing structures and processes by which the micro decisions are made in the Congress. Any attempt to streamline or simplify the process must consider the relationship between the goal of simplicity and the existing decision structure in the Congress.

In addition, I have suggested that the Congress might want to consider the creation of a lookback procedure by which it would periodically look back at progress in reducing the deficit. Such a lookback would compare the current CBO deficit projections to those projected at the time of a prior deficit reduction agreement and/ or the most recent reconciliation legislation and then analyze the reasons for any difference. For a difference exceeding a predetermined amount, the Congress would decide explicitly-by voting-whether to accept the slippage or to act to bring the deficit path closer to the original goal by recouping some or all of this slippage. Although one could argue that each year's budget resolution implicitly accepts or rejects changes in the deficit outlook, it does not require an explicit consideration and decision. Adoption of the requirement for such explicit consideration would provide Members who make difficult choices in reconciliation an additional opportunity to ensure that the deficit path they voted for will, in fact, materialize.

Mr. Chairman, no budget process is easy to design or to live with. I would be happy to answer any questions you or your colleagues may have, and we stand ready to work with you as you proceed through this reexamination of the budget

process.

Mr. Goss. Thank you very much. That is very thoughtful and somewhat provocative. I think, some of the things you have said, I certainly agree that the budget process, while it is a very critical tool to the routine around here and the business we are expected to do, is in many ways more a reflection of what the expectation of government is to do in our society in America. And since 1921 when we started getting into formal budgets and have gone through the evolution process in 1974 and 1985 and 1990 and 1993 with the different statements that have been made by the Congress on the subject there has been a good deal of change in that expectation. And I think we pretty much are all at least in the same church if not in the same pew on a lot of the conclusions on the evolution of this and the question of how you deal with where we go.

I totally agree with your point about the I guess the best way to say this is our failure to communicate what the budget process is and what that word means, and it isn't even entirely clear to all of the Members of Congress. I think I am on fair grounds saying that.

You start dealing with the budget and then you start talking about except for emergency problems or borrowing or contracting or some other types of off-budget thing or trust fund, and suddenly you are talking about more than, well, it is the budget, but it is a little more complicated than that, and then pretty soon eyes glaze over and really the great decision making process that is going on here as everybody knows is over an increasingly small percentage and actually they are large numbers of dollars, but against the total, I mean, the part that we actually decide to spend or not to spend or save, which is going to your macro question, is very small, and the rest seems to be just out there on automatic, and not only is it on automatic, it is on automatic headed clearly into trouble. That is, I think, one of the reasons why we will probably want to

follow up more specifically on the details of the look back, following on Tony Hall's observations, and I don't know that they go to biennial budgeting questions as much as the look back. We found on the Kerrey Commission that we were always so worried about next year's discussion that we really never had a chance to see not only did something work in the past, but because we have changed direction a little bit on what we were trying to accomplish in the past.

So there doesn't seem to be a good place to measure from, so when we get a chart, you have probably seen the CRS charts. You just see the thing going into the wild blue yonder and you say oh, my gosh, and this is since we started getting serious about it, and this is not all apples and apples, it is some apples and oranges in there, as has been pointed out there.

One of the other things that has come out about this on the more macro question, the philosophical issue, one of the things that is a measure of the health of the country that we talk about, the wellbeing of the country, is the savings level. We don't, it seems, to me the opportunity to really discuss that as an issue as part of our budget process because that assumption question is quickly driven off the table by other needs, and so we don't make some of the basic well-being decisions we should be making on a macro basis. We quickly get absorbed by these guidelines, as you have put them, nonbinding Commerce Department eradication things that everybody thinks happen and they keep showing up and say, gee, those guys can't even kill the Commerce Department or whatever it is they are trying to do. They can't even get that done, and you are right.

There is a tremendous creation of an anticipation which is probably not going to be realized in the way we handle the budget with the budget assumptions right now, the aggregate assumptions, and that creates also the way we handle the process when we bring the detail down and I know we will talk more about this with Mr. Frenzel, the tension between the appropriators and the authorizers.

The calendar works against that. You can't expect the authorizers to get all their stuff in the pipeline and get it up and out before we get hung up on our deadlines on our budget process, and then what the appropriators have to do to make all their-there is just no way to do it physically; there is too much.

Then when you get a different philosophy coming in or a different political direction coming in as we have now, to load all that on to a system that wasn't working under a routine that was not changing direction has just created a huge bottleneck of a process that doesn't work which we are seeing the results of as we sit here. We are downstairs today having a fuss about a rule because we haven't gotten through the authorizing process. That is essentially the problem. So it goes all the way from a process that doesn't allow us to focus on some of the macro questions like why aren't we figuring out a way to create a savings percentage or some kind of numbers or goals? Why isn't somebody talking about that or dealing with that? All the way down to this thing doesn't work when you try to plug it into what are we going to do today, what are we going to do tomorrow, and that is my frustration.