Mr. Goss. Thank you very much.

Mr. KOGAN. Thank you for indulging my statement.

Mr. Goss. Not at all.

We are flexible on time and we have witnesses here because we want to hear what they have to say.

Professor Muris.

STATEMENT OF PROFESSOR TIMOTHY J. MURIS, GEORGE MASON SCHOOL OF LAW

Mr. MURIS. Let me summarize.

Thank you, Mr. Chairman. It is a pleasure to be here.

Let me talk about the source of the problem in our history. For about the first hundred years one committee controlled spending, what we now call the appropriators.

What happened first in the House in 1877 and about 20 years later in the Senate is that the authorizers got power not just to authorize but to directly spend. Deficits exploded. Then right after World War I the power over all the spending returned to the appropriators.

What happened? We ran surpluses. But beginning in the 1930's with the Reconstruction Finance Corp., the appropriators lost control again. Particularly in the 1960's and then early in the Nixon administration when more expansions occurred, the appropriators lost even more control. Now, less and less of total spending comes from the appropriators.

This balkanization problem is what economists call a common pool. For example, if you have a lake and no one owns the fish and everybody can fish in it, then people will overfish. If one person owns the resource-has the property rights over the resource-he has incentive to manage that resource efficiently. This is a way to prevent the overfishing.

This balkanization problem has led to more spending. Mark Crane and I have recently evaluated with econometric testing this thesis at the State level. We looked at the State legislatures. Some have balkanization where they have lots of committees with control over spending, while some have one committee with control over spending.

States with balkanization spend more money per capita. We used one of these complicated regression formulas controlling for all sorts of factors. Thus balkanization is the central problem.

There are some other problems. Let me get to the current process and talk about why, although it has some strengths, that it has even more weaknesses.

Congress recognized in the late 1960's, early 1970's, that they were losing control over the process. The step of giving one committee control was politically impossible. So what happened was there was a creation of this new process.

That new process has some strengths. It clearly facilitates the kind of package that is moving through now. Lest we all praise ourselves too much, the 1990 package was said to produce zero as well.

The process has led to some real flaws. Let me talk about a few, first about baseline budgeting and then about the vastly overpraised Budget Enforcement Act.

With baseline budgeting, we have this Orwellian world in which I think people are coming more to recognize about the misuse of the word cut. This is an important point. If you are an advocate for spending more on Medicare, do you want to go out and say I want to defend 10 percent a year versus 6.5 a year or do you want to defend the word cut. The polls indicate that people are confused. If you ask the American people do you favor balancing the budget if it means cutting medicare, they say no. Yet, if you ask them do you favor balancing the budget if it means slowing the rate of growth of Medicare, the large majority say yes. In fact the only poll I have ever seen that asks people how much should Medicare and Social Security grow, there are levels that no one in the Congress would support; very small low percentages of growth.

Another problem with the baseline is that many believe it is current services. That is sometimes what it is called. Current services means what it costs tomorrow to fund today's government. The people who put together the baseline quickly realized that they can not calculate that. It is an impossibility. In the book that Allen Schick, John Cogan, and I wrote, we have a chapter discussing this issue.

Take Medicare. CBO deconstructs the baseline, explaining why the projections for Medicare are growing. They have three reasons. One reason is increased caseload. This is not a very significant reason, but if you are measuring current services, that is part of that. Second is inflation. That is not a very significant reason either. The most important reason, causing over 60 percent of the projected growth, is increased services. That is not current services in anybody's view.

We can argue what we should do about Medicare, but it is wildly misleading to characterize an attempt to reduce the rate of growth in something that is growing because of more services as a cut.

There is another problem with the baseline. As a former budgeteer I can admire the elegance and the ability to produce large packages of cuts without doing anything, but this is another problem with what has developed.

Medicare is a good example. One of the things that has happened in Medicare is Congress passes a cut, then sets it to expire and then passes it again to claim the same savings. In this year's budget resolution, with the so-called $270 billion in Medicare off the baseline, Congress can get one-third by simply continuing current policies. There are lots of other manipulations of the baseline. Let me turn to the BEA. Divide discretionaries from mandatories. One little understood fact is that since the last year of the Reagan administration and throughout the period of the BEA, the appropriators have had a party. Spending increased 63 percent before the recent rescissions-that is 63 percent from the last year of the Reagan administration. That growth is about double the rate of inflation.

There are multiple reasons for the growth. One is that the appropriate measure for spending is the total of resources that go to the agency, not budget authority, although that is the most important form of resources; certainly outlays are an inaccurate measure.

There are some types of resources that too many ignore. One type, which is increasingly used to fund the regulatory State, are