Question No. 7.-How in your judgment do numerous and sometimes contradictory congressional decisions on programmatic items affect confidence in the budget process? Could one of the three layers-budget resolution, authorization, appropriation-be eliminated or combined? How would such fundamental reform affect the institution?

As I noted in my testimony and in response to earlier questions, the distinction between the budget resolution and decisions by the appropriations and authorization committees is confusing to the public-especially as the level of detail in the budget resolution increases. Many outside the Congress undoubtedly believed that the budget resolution actually changed Medicare and eliminated the Department of Commerce.

What appears to be repetitive debates combined with disappointing results have reduced some observers faith in the current budget process. It is, however, less clear whether eliminating or combining the three parts of the current process-resolution, authorization and appropriations would increase public confidence or what the impact on Congress would be.

I would like to make several observations. First, multiyear agreements between the Congress and the President as to a fiscal policy path can establish a framework for the debate over national priorities. Within such an agreement, a change to a 2year budget resolution, combined with a "look back" procedure-as described in the answer to question No. 1 above every year might be possible. The budget resolution would be used to translate that agreement into priorities. Reconciliation would be used to achieve the agreed-upon changes necessary to comply with the resolution and fiscal policy path and to recoup slippage.

Second, greater use of multiyear authorizations might allow the authorizations committees to focus additional attention on oversight and program evaluation.

Mr. Goss. Panel 3. Honorable Bill Frenzel, former Member of Congress, current friend, and Stephen Moore, Director of Fiscal Policy Studies at Cato Institute.

Mr. Frenzel, I have received testimony from you, and Mr. Moore, I have received testimony from you, and I am prepared to submit it to the record.

Mr. Frenzel.

STATEMENT OF BILL FRENZEL, GUEST SCHOLAR, THE
BROOKINGS INSTITUTION

Mr. FRENZEL. Thank you, Mr. Chairman, it is great pleasure to be here. Thank you for accepting the testimony for the record, but I do have to say verbally, as well, that the ideas I present today are my own views and do not represent the opinions of the Brookings Institution.

You gave us three questions on which to comment. I have done that in written form. I would like to present a little discussion of question number one. I have given you some ideas of what I think is good in the Budget Act. I am not going to dwell on those in my testimony. I am going to talk about a few of the things that I think need to be changed, and then you will, of course, question as you will.

I suggested in my testimony that I didn't know what the framers of the Anti-impoundment and Budget Act of 1974 were doing. Actually, they didn't share a lot of their intentions with the rest of us more junior and minority members. You have to go back to that time to understand some of the problems.

President Johnson and President Nixon had withheld the spending of a lot of highway monies in order to finance a certain amount of unpleasantness over in Asia, and Congress was madder than hops about that because roads and bridges were just as important in those days as now. Congress had taken the President to court

and had received a favorable ruling in the Chada decision which indicated, in general, the President couldn't withhold.

Anxious to beat up the President in the time of great weakness of that office, Congress passed such things as the War Powers Act, the Base Closing Act which precipitated all the difficulties we have today, which said you couldn't close any without congressional vote, and the Anti-impoundment and Budget Act.

The anti-impoundment feature simply codified the Chada decision, only spread it perhaps more broadly than the Justices did. I think the whole idea was to improve the role of the Congress to restore what the Congress thought was the legitimate power of the purse granted by the original framers.

But there was a hint of mean spiritedness in it, and there was the idea to try to get the President farther out of the budget game and to limit the President's power.

One of the problems they got into was that all of the various senior committee chairmen-and in those days their rule was absolute-were nervous about their jurisdictions, and so the act was careful not to trod on them and, in fact, was very careful to place several members of the Ways and Means Committee and the Appropriations Committee, who have to be key players in both the Budget Act and its reconciliation, on the Budget Committee to assure those committees generous representation.

One previous witness indicated that she thought the Budget Act had been helpful, and we would have a bigger deficit than if we didn't have it. In my judgment, from 1974 until Ronald Reagan arrived on the scene, the Budget Act was used as a giant engine to accelerate spending because the Congress thought that those in the White House didn't have an expansive enough fiscal program. My guess is that the budget process drove our spending and our deficits higher from fiscal years 1975-81.

As was suggested, when the act was created, we were only 5 years away from the last balanced budget in fiscal year 1969. Nevertheless, we didn't see much comfort from the act until Reagan's first year, when Congress began to use reconciliation, and discovered that that was a very important aspect of the act.

Second, with respect to whether you should change it, I really believe you should, but I do not want you to underestimate the dif ficulty of the chore.

Mr. Goss. I don't think we will.

Mr. FRENZEL. Today committee chairmen are not as tough as they were in 1974. They are still pretty tough. The last I heard, you have not been able to make the Senate knuckle under every time you wanted it to do so. You are going to have the devil's own time getting this thing figured out, but it is worth doing, because it is pretty clear that even before you got to the change of Democrat to Republican control, the Congress was beginning to look at the Budget Act as a way of restraining spending and ratcheting down the deficit.

I don't know whether you go to Phil Gramm in 1985 or whether you go to the Reagan summit of 1987 or BEA 1990 or even Clinton's first budget in 1993, but over a period of time, the Congress was groping for ideas which would stop us before we kill again.

My next bit of advice is that no amount of budget process is going to keep you from doing that which you want to do. But I think the idea, when you restructure the Budget Act, is to make sure that it is at least of neutral and doesn't get in your way.

At the moment, because of the way the Budget Act was written and the way we have interpreted it, the precedents and the rules, it tends to tilt everything toward the status quo, more spending. Baseline budgeting, and all of that garbage, simply tends to drive spending and the Government presence up. That needs to be cleansed from the act.

Perhaps under new control or with the change that was taking place in the Congress even before the Republicans took over, there will be a will to make the Budget Act more restrictive rather than guaranteeing the status quo.

For 15 years, the Budget Act worked to ensure that every old program got a big CPI increase and a demographic increase, and it meant the new Presidents coming in, or Congresses, who had new programs couldn't get them. How much of President Clinton's program did you give him when you came in? Half, maybe in dollars.

But anyway, that is what he got even with a friendly Congress, and because the Budget Act was driving the Congress, and so were the propensities of the Appropriations Committee to fund all the old programs at ever-increasing rates. We had a situation in the 1980's where our Federal spending was increasing at two or three times the rate of inflation, and revenues were rising at about the rate of inflation, leaving us to 2-5 percent deficit, and absolutely ruined us.

Well, all I want to say is it is going to be tough, even if the new law is perfect, it cannot make you do the right thing. No budget act can have the force and effect of the balanced budget amendment which I think you still need. Nevertheless, I hope you will clean it up.

I have a few thoughts on other improvements, and they relate— I am not going to go through them all-to what I have been suggesting. In the first place, over the years, committee chairmen have figured out ways to get the CBO to agree with them that their program is indeed a mandatory program.

Mr. Goss. Yes, they have.

Mr. FRENZEL. So we have to go back through the whole damn list of accounts and clean out all the fake mandatories that aren't really mandatory. If we have got guts enough to do that, then we ought to go through all the entitlements and unentitle them, but I am not going to wish that job on you. I doubt Congress is ready for that. The other problem that is in the Budget Act now what drives what we do is this baseline budgeting. We had the trouble from the beginning, but the real crunch came in Gramm-Rudman I, when we ran up against the big sequester. So what did we do? We retired to the coat closet and made Gramm-Rudman II with a broad new baseline that was more steeply accelerated.

We need to have honest baselines, the kind that the people of America apply to their own budgets. Obviously, the Federal budget is far more complicated, but ultimately my goal would be for the Congress to be able to produce a budget resolution that the Amer

ican public could understand. It would consist only of aggregates. Its spending function categories would correspond to appropriation bills that were being directed.

That was one of the problems in the beginning, the Appropriations Committee thought its jurisdiction was being trampled on, and it insisted on being able to make what people refer to as a crosswalk between the budget resolution into the various subdivisions of the College of Cardinals and as a result exercised a great deal of control.

It would certainly be more simple if we rationalized that process so that when Congress passed a budget resolution, it would know what it was passing on to the subcommittees of appropriations. We do it two ways: No. 1, change some of the subcommittees and their bills, and No. 2, change a lot of the functions. These functions date back from 50 years ago.

We have got Defense scattered in three or four functions. It is a mess. I think the budget resolution itself should be minimal, should deal with aggregates only, should be something that people could understand, should begin from last year's number, not from some genius' evaluation of what the baseline is.

You probably can't get away with that for Social Security and perhaps some other entitlements. If you can't, you can't, but you ought to screw down the entitlements and the baseline budgeting just as tightly as you can before you get going.

Mr. Chairman, you have got a lot of work and I have got a lot of wonderful ideas, but you can hear them anytime. I thank you very much for the opportunity to testify before you and Chairman Dreier.

Chairman Dreier found out how hard it was to reorganize the Congress, but he also found out that if you don't succeed at first, wait until 73 new guys come in to help you. He got enormous help and was outstandingly successful.

By the way, one of the things that Chairman Dreier and I were discussing in the Ways and Means Committee the other day, or when he had a joint hearing with the Ways and Means subcommittee, was how do you align the Byrd rule in the Senate with whatever rules we are using in the House, and that is, of course, going to be one of your most difficult jobs.

I have some testimony on how the Byrd rule works perniciously sometimes. In general, I love it because there are no rules in the Senate that I know of other than that, and so I cherish it. And, in general, I think it is helpful, but we have to decide, for instance, if we are going to deal with the Senate on the Byrd rule. We say you have your Byrd rule and as counterweight over here, we will agree to keep nongermane amendments out of our reconciliation bill. The leadership may not like that, but it still would make a much cleaner process.

Mr. Chairman, I have overdone it. I thank the subcommittee and you and Chairman Dreier.

Mr. Goss. Will you be available for some questions after we have Mr. Moore testify? What I am going to do is run downstairs quickly and vote. Mr. Dreier will carry on. I will be right back.

Mr. LINDER. I will stay here until you get back.

Mr. Goss. I do have some specific questions and I enjoyed reading the testimonies of both of you. Thank you.

Mr. DREIER [presiding]. Mr. Moore.

STATEMENT OF STEPHEN MOORE, DIRECTOR, FISCAL POLICY STUDIES, CATO INSTITUTE

Mr. MOORE. Thank you, Mr. Chairman, for the opportunity to address this subcommittee on the idea of fixing the budget process. It is a special privilege to be on a panel with you, Bill. During the 1980's, Bill Frenzel was one of the few heroes that we had on the budget. I just wish we would have had more of you and we still had you around here and not in The Brookings Institute.

Mr. DREIER. To people both inside and outside of Congress, he was a hero.

Mr. MOORE. Mr. Chairman, earlier this year I published this book actually by Dick Armey's think tank called, "Government: America's Number One Growth Industry." Sadly, that is what government has become is America's number one fastest growing industry.

One of the figures that I use all the time when I address groups around the country is that this year for the first time in American history government at all levels will spend about $2.5 trillion, which is an awesome figure, it is an unfathomable figure to most people. But the way I try to put this in language that people can understand is that if you had $2.5 trillion, you could purchase all of the assets of the Fortune 500 companies, all of the farmland in the United States, and you would still have enough money to finance the entire O.J. Simpson trial, so we are talking about quite a bit of money that is being spent at each level.

Mr. DREIER. The city of Los Angeles could use some of those re

sources.

Mr. MOORE. That is for sure. By the way, that is about $25,000 per household, an incredible number. In fact, if you look at government spending today, again, at all levels versus the late 1960's, in the late 1960's, adjusted for inflation, we were spending about $13,000 per household, so government spending adjusted for inflation and adjusted for population is about twice as large as it was today.

As I am sure you are aware, the vast majority of that increase has been on the Federal level and also the vast majority of that spending increase has been since 1974, and that is the reason that I bring this up, is that I agree entirely with you, Mr. Frenzel, that I believe that the 1974 Budget Act has been a colossal failure in virtually every way.

Let me just give you a few statistics to demonstrate the fiscal demise that we have seen since the 1974 Act went into place. By the way, one of the you asked about what was the intention of the 1974 Act. The intention of the 1974 Act was to inject fiscal discipline into the process. Here is what we have seen, though, in the years prior to the 1974 Act and the years subsequent to it.

In the 20 years prior to passing the 1974 Budget Act, we ran budget deficits in this country on average in those 20 years of about 1 percent of GDP. That was about $30 billion, again, in con