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recommends that the new Budget Concepts Commission study the possible establishment of a national lending fund that would be responsible for all federal loan and guarantee programs but would not be allowed to subsidize transactions or to take risks on its own account. Instead, government agencies sponsoring loans and guarantees would reimburse the lending fund to compensate it for the subsidy portion of federal credit activities.
Capital Budgeting. We are opposed to proposals for a formal capital budget outside the unified budget. There is a strong risk that a separate capital budget would become a giant loophole for evading budget disciplines. However, we do favor substantially greater focus on clearer presentation of investment-type programs and on "capital budgeting" approaches within the unified budget.
Tax Expenditures. Tax expenditures are reductions in federal revenue attributable to provisions in the tax law that allow special deductions, exclusions, or exemptions from gross income, or that provide a special credit, a preferential tax rate, or a deferral of tax liability.
We are opposed to a ceiling on total tax expenditures in the budget resolution. However, we believe that in cases where the relevant Congressional committees agree that tax expenditure programs and regular spending programs serve similar purposes, such programs should be subjected to joint reviews when feasible.
STRENGTHENING CONGRESSIONAL BUDGET PROCEDURES
Even if Congress has the best possible information and the best possible conceptual framework for budget options, it still must face up to making and enforcing specific budget decisions. We believe that the evolutionary changes in the process introduced in recent years have significantly strengthened the process and should be retained. However, some operational changes need to be made. In particular:
The First Concurrent Budget Resolution should be made binding, thereby eliminating the need for a mandatory second resolution. Congress should, however, retain the option to pass a subsequent revised resolution if this appears necessary. The "elastic clause" should continue to be available as a needed means of providing a workable degree of flexibility in applying budget-process rules. The "outyear" targets in the budget resolution should be made binding. The shift toward the use of reconciliation in conjunction with the first budget resolution and its broadened application to existing entitlements and its implementation on a multiyear basis represent essential steps for making reconciliation effective. However, there should be some limitations on the scope of the reconciliation procedure, such as forbidding reconciliation bills to be vehicles for extraneous legislative proposals.
• Binding limits under budget resolutions, enforceable by points of order, should be tied to committee and subcommittee spending allocations, as well as to total spending.
Improving Congressional Timing. Because there are still many unresolved questions about two-year budget cycles, we do not favor an immediate across-the-board shift to biennial budgeting. Instead we recommend a gradual extension of the time period for budget and related decisions. This would involve active experimentation with two-year appropriations and other longer funding arrangements. If a high percentage of programs turns out to be suitable for two-year decision cycles, our recommendation would be consistent with an eventual move to a biennial budget. At a minimum, however, authorizing legislation should be for two years, and in some cases even longer.
We are opposed to any proposal under which Congress would be able to take up appropriations bills as soon as the deadline for the First Concurrent Budget Resolution has passed, whether or not the resolution has actually been approved by Congress. We believe that such a change would remove a major incentive for achieving timely budget resolutions and could significantly weaken the process.
To avoid unnecessary crises over continuing resolutions, we recommend that, with appropriate safeguards, a continuing but reduced appropriation be automatically put into effect at the start of the fiscal year for any account that has not yet received a regular appropriation.
Structural Realignments within Congress. While there should be careful study of possible realignments in Congressional committee structures and functions, the report is against any action that would abolish the House and Senate budget committees, undermine their essential functions, or otherwise weaken the budget process.
A Constitutional Amendment on the Budget. We are opposed to a constitutional amendment to balance the federal budget or to place specific limitations on budget outcomes. In our judgment, a constitutional amendment would be unworkable and would be likely to do more harm than good.
We believe that further strengthening of the Congressional budget process is a vital precondition for sound and effective fiscal and economic policies. Improvements of the present process along the lines indicated in this statement offer the best hope of bringing the budget under control.
Vosed to approve the policy statement but submitted memoranda of comment, reservation, or dissent. "Nontrustee members talse part in all discussions of the statement but do not vote on it..
RESEARCH AND POLICY COMMITTEE
WILLIAM F. MAY
A. ROBERT ABBOUD, President Occidental Petroleum Corporation RAND V. ARASKOG, Chairman and President
ROY L. ASH
Los Angeles, California
HARRY HOOD BASSETT, Chairman,
Southeast Bank N.A.
ROBERT A. BECK, Chairman
The Prudential Insurance
Company of America
JACK F. BENNETT, Senior Vice President
"OWEN B. BUTLER, Chairman
The Procter & Gamble Company
*THEODORE A. BURTIS, Chairman
FLETCHER L. BYROM, Retired Chairman
PHILIP CALDWELL, Chairman
ROBERT J. CARLSON, President
and Telegraph Company
JOHN B. CAVE, Executive Vice President
and Chief Financial Officer
EMILIO G. COLLADO, Chairman
Grace Geothermal Corporation
RICHARD M. CYERT, President
D. RONALD DANIEL, Managing Director
National City Bancorporation
FRANK P. DOYLE, Senior Vice President
Corporate Relations Staff
General Electric Company
W. D. EBERLE, President
Manchester Associates, Ltd.
WILLIAM S. EDGERLY, Chairman
State Street Bank and Trust Company
WILLIAM S. EDGERLY/Education and Social and Urban Development
RODERICK M. HILLS/Improvement of Management in Government
*THOMAS J. EYERMAN, Partner Skidmore, Owings & Merrill
FRANCIS E. FERGUSON, Chairman Northwestern Mutual Life
JOHN H. FILER, Chairman
EDMUND B. FITZGERALD, President
WILLIAM C. GREENOUGH, Retired Chairman
TIAA and CREF
PHILIP M. HAWLEY, Chairman
ROBERT C. HOLLAND, President
PHILIP M. KLUTZNICK, Senior Partner
RALPH LAZARUS, Chairman,
ROBERT W. LUNDEEN, Chairman
J. PAUL LYET, Former Chairman
G. BARRON MALLORY
WILLIAM F. MAY, Dean
School of Business Administration ALONZO L. McDONALD, Chairman Avenir Group, Inc.
JAMES W. MCKEE, JR., Chairman
CPC International Inc.
E. L. MCNEELY
La Jolla, California
J. W. MCSWINEY, Director
RUBEN F. METTLER, Chairman
STEVEN MULLER, President
NORMA PACE, Senior Vice President
VICTOR H. PALMIERI, Chairman
and Company Incorporated
C. WREDE PETERSMEYER
DEAN P.PHYPERS, Senior Vice President
JAMES Q. RIORDAN, Executive
HENRY B. SCHACHT, Chairman
RICHARD R. SHINN, Former Chairman
Metropolitan Life Insurance
ROCCO C. SICILIANO, Chairman
RICHARD M. SMITH, Vice Chairman
Bethlehem Steel Corporation
ROGER B. SMITH, Chairman
ELMER B. STAATS, Former Comptroller
CHARLES B. STAUFFACHER
WILLIAM C. STOLK
WILLIS A. STRAUSS, Chairman
WALTER N. THAYER, Chairman
Whitney Communications Corporation
"W. BRUCE THOMAS
*Voted to approve the policy statement but submitted memoranda of comment, reservation, or dissent.
Vice Chairman of Administration
and Chief Financial Officer
United States Steel Corporation
SIDNEY J. WEINBERG, JR., Partner
Goldman, Sachs & Co.
ALTON W. WHITEHOUSE, JR., Chairman
Standard Oil Company (Ohio)
*FRAZAR B. WILDE, Chairman Emeritus
Connecticut General Life
RICHARD D. WOOD, Chairman and
Eli Lilly and Company
Improving The Information Base
BUDGET PRESENTATION: THE NEED FOR
Adequate and timely information is indispensable for an effective budget process. This part of our statement examines the information requirements for sound budget decisions and key areas for improvement. MEANING AND PURPOSES OF THE BUDGET
Fundamentally, the federal budget is a plan or framework for making federal government spending and taxing decisions for a stated future period- at least one year but preferably a series of years. At the same time, it provides information about past government activities so that it can serve as a management as well as a planning tool. The budget should also be viewed.
• An instrument for setting priorities and allocating resources, both between the public and the private sectors and within the public sector • A fiscal policy tool focused on the impact of federal spending and taxation on incomes
• A tool for assessing the impact of federal government operations on overall financial flows and for measuring total government borrowing needs
• A tool for monitoring federal government performance