You know, you mentioned the 1990, Dick Darman's 1990 budget deal, that was a bad policy, it was based on bad numbers, it was a $1 trillion error over 5 years in terms of what the deficit was supposed to be versus what it was, and essentially what my position is going to be on that commission is what works. We have to find something that produces good numbers. I mean, it is that simple. If you look at the-going back to capital gains, I don't want to sound like a Johnny One Note on this, but the revenue forecasts that have been used by Joint Tax and CBO on capital gains have been atrocious. I mean, if you look at what they were predicting back in 1986 when they raised the rate to 28 percent, they were saying that we were going to be collecting $60 to $80 billion of revenue this year from capital gains. Well, in fact we are going to be about $30 billion, so they were off by a factor of 100 percent. Now, I think we can come up with something that works better than that. I mean, there has got to be something that works better than that. Mr. LINDER. Two more points. When you said the national referendum was radical, actually it isn't all that radical. Gingrich tried to convince the working group on which I sat to put it in the contract, he wanted it in the contract, and he didn't win that one. You talked about the flat tax and what it would do to the economy, but you are right about the national point-of-sale sales tax which does something that the flat tax won't do, it brings in the underground economy more efficiently, it eliminates the need for the IRS. It sends our exports overseas with no tax burden on their shoulders and brings imports to our shores equally taxed. Why are we talking about the flat tax? Mr. MOORE. We could have a separate hearing on this. I am glad you brought it up, though. The Cato Institute 5 years ago endorsed the idea of a national sales tax for all of the reasons that you have suggested, but I used to work for Dick Armey, helped him put together the flat tax idea. I think either one of them Mr. LINDER. I knew there was something wrong with this guy. Mr. MOORE [continuing]. Either one of them would be a vast improvement. My only fear really is there is a divide in the Republican Party between these two great proposals, I think, and I just hope you can get together and come up with something that works. What we have proposed at Cato is, if you have got the votes to do the flat tax, do it this year, do it today. It might take a longer time to convince the public that something like a sales tax, which is more radical, needs to be done. If you put the sales tax in place, you know I mean the flat tax, it is essentially the same program in terms of the economic effects, it is a flat rate, consumption-based tax system with about a 17 percent rate, you are taxing the same thing. The only difference between the Armey plan and the Archer plan is essentially whether you collect the tax at the cash register or whether you collect it at the-through the postcard return. Mr. LINDER. That is what we want to get rid of. One of the flaws with the Armey flat tax, it seems to me, is that it doesn't tax dividends at all, it taxes corporate income tax. I think we should tax dividends. We don't want to be in the position of treating inherited wealth more special than hard labor. I think we would collect more money on 17 percent dividends than we would with the corporate income tax. Mr. MOORE. That is a good point. Mr. Goss. I don't want to get off a very exciting subject, but our lease is about to expire. Bill, I have two additional questions I will write you about. One has to do with your views. In fact, I would like yours, Steve, as well, on this question of separate enrollment that the Senate has proposed to us on the line-item veto which is similarly off the subject today. The other is your views on the lockbox question about how you take whatever savings and at some point create a process to reduce the caps or reduce the statutes on them, which is causing us a problem now on how to deal with that. The other point, for the record--my staff wanted me to make sure that I got this in the record-that since you would like us to redo the Budget Act and you are a big fan of GRH, the question needs to be asked, can you really expect Members of Congress to be responsible for what they can't control? And I think it is a fair question, and it is somewhat rhetorical at this point, but I think you can see our concern on that. Mr. MOORE. Sure. [Answers to additional questions submitted to Mr. Frenzel follow:] ADDITIONAL QUESTIONS SUBMitted to Mr. BILL FRENZEL, THE BROOKINGS INSTITUTION Question No. 1.-Lockbox? In the end, the appropriators usually get their pound of flesh-pork, that is one way or another. Even so, the House should make it as hard for them as possible. The lockbox is one good way to do so. One obvious problem is that you need a Senate lockbox as well, or a law, to prevent the Senate appropriators from spending your savings. As I noted in my testimony, it is also helpful to make Appropriations handle separate bills for every action, so that spending is more evident. Combining rescissions with supplementals just provides more hiding places. A highlighted lockbox is easier to maintain. Question No. 2.-Separate enrollment? On my totem pole, the unrestrained power of impoundment is at the top; the lineitem veto is next best; and everything else is a big step down. However, since you are short a few right thinking Senators, you must take the next best arrangement that is obtainable. Enhanced rescission is marginally better than the current arrangement. Any improvements, like separate enrollment, even though marginal, ought to be accepted with alacrity, if they are the best you can negotiate. Thanks again for inviting me to your hearing and good luck in your quest to tighten up the budget process. I believe your work is the single most important project in the Congress. [A letter with additional information submitted by Mr. Frenzel follows:] THE BROOKINGS INSTITUTION 1775 MASSACHUSEITS AVENUE, N.W. WASHINGTON, DC. 20056-2188 Governmental Studies Program September 18, 1995 The Hon. Porter Goss US House of Representatives Dear Porter and David: The Hon. David Drier Chair, Subcom. on Rules & Org. of House Committee on Rules US House of Representatives Washington, DC 20515 Referring to my testimony at your Joint Hearing on Budget Procedures of July 13, and my follow-up letter to you both of August 23, I would like to add a further post-script. At the hearing, somebody, I think Porter, asked about a two year Budget cycle rather than the current one year system. My comment was that since Congress would have to do it all over again the second year it would not make much difference, but, if it helped to attract positive votes for reform from otherwise recalcitrant Appropriators, It would not do major harm. Last week, the question arose during a conversation on another matter with a former OMB person, who felt strongly that a two year cycle would prevent the annual end-of-year spending spree by all executive agencies. My friend belleves that the annual sprees would become blennial sprees and therefore be only half as bad for the Republic. She, of course, expects that the two year Budget cycle would be coupled with a two year Appropriations cycle. Since I had never heard this argument raised in Congressional discussions about the two year cycle, I thought I should pass it along to you even though I know you guys are smarter than I am, and have probably considered it often. As a personal aside, I am still very proud of you and your Republican associates. You are very close to real glory this year, and I hope you can tough it out. Good luck! Bie Bill Frenzel. FAXed to Wendy Selig, 225 6820, for delivery to the two Chairmen ◆ FOUNDED 1916 ♦ Mr. Goss. I thank you both very much for your testimony. We have gone a little longer than we anticipated, actually not too badly, and I apologize that it is such a busy day and we didn't have more of the members, but I know this subject is going to be a continual one with us and that we will all be up to speed and that your contributions are indeed valuable. Mr. FRENZEL. We believe the quality of the Members made up for any deficiency. Mr. Goss. We appreciate that. Thank you very much. [Whereupon, at 12:10 p.m., the committee was adjourned.] CONGRESSIONAL BUDGET PROCESS Wednesday, July 19, 1995 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON LEGISLATIVE AND BUDGET PROCESS, OF THE HOUSE, COMMITTEE ON RULES, Washington, DC. The subcommittee met, pursuant to call, at 10:35 a.m. in room H-313, the Capitol, Hon. Porter J. Goss (chairman of the Subcommittee on Legislative and Budget Process) presiding. Present: Representatives Goss, Linder, Pryce, Solomon, and Beil enson. OPENING STATEMENT OF HON. PORTER J. GOSS, CHAIRMAN OF THE SUBCOMMITTEE ON LEGISLATIVE AND BUDGET PROCESS Mr. Goss. Good morning, ladies and gentlemen. Today, the Subcommittee on Legislative and Budget Process and the Subcommittee on Rules and Organization of the House will come to order and continue our efforts to review the congressional budget process. Thank you for your interest, distinguished chairman, Mr. Beilenson, acting ranking member of the full committee, and the chairman of the full committee, and other members I think will be coming in. Today's joint subcommittee hearing which focuses on the testimony of Members with interest and expertise in the budget process is the second in which we will examine the big picture of the budget process. There will be others as well as we go forward on this. Last week, we began the project by hearing from Director June O'Neill of CBO, Associate Director Susan Irving of the GAO, former Budget Committee Ranking Member Bill Frenzel, and Cato budget policy expert, Stephen Moore. At that hearing we talked a great deal about the objectives of the 1974 Budget Act, whether those objectives are still relevant in today's fiscal environment and whether we should be looking to redesign our congressional budget process or not. We hope to continue that conversation today with Members of Congress on both sides of the aisle that have labored under the requirements of our congressional budget process, some for many years and some for only a few months. All of today's witnesses have exhibited a commitment to ensuring that we have in place an effective and workable budget process as we proceed along the road toward balancing the budget by the year |