TESTIMONY OF
MITCHELL E. DANIELS, JR.
DIRECTOR
OFFICE OF MANAGEMENT AND BUDGET
BEFORE THE
HOUSE BUDGET COMMITTEE
ON THE BUDGET ENFORCEMENT ACT
June 26, 2001
Mr. Chairman, Representative Spratt, Members of the Committee, I am
pleased to be
here this morning to discuss the possible extension of the Budget
Enforcement Act of 1990.
I will make a short statement and then I would be pleased to answer
any questions that
you might have.
A More Orderly and Responsible Budget Process
I want to compliment the Chairman and the Congress for the progress
we've made this year.
You moved quickly to adopt a budget resolution that funds the nation's
priorities and restrains
the growth in spending. Next, the House passed a supplemental
appropriations bill that stays
within the BEA's spending cap for 2001. Unlike past supplementals, this
legislation has not
become a vehicle for questionable spending or a method of evading the BEA
limits. These
successes demonstrate that the Act does work, and its basic mechanisms
ought to be extended
and continued. Together we have demonstrated that the President's
commitment to a more
orderly and responsible budget process can be achieved.
The Budget Enforcement Act
Current Status: CAPs and PAYGO
The Administration believes we must moderate the growth in
discretionary
spending by staying within the $661 billion level the Congress,
and the Administration, agreed to, plus the $18 billion in additional
funding the President will
request this week for the Department of Defense. In order to ensure that
this absolutely
necessary funding for defense is not diverted to other programs in 2002, we
propose to have a
separate category for defense with a cap of $344 billion. This funding
would cover all programs
within the National Defense Budget Function.
The current statutory cap for FY 2002, under the BEA, is $552.8
billion. Assuming
Congress appropriates funds consistent with the Budget Resolution and the
President's Defense
Amendment, the additional discretionary spending would trigger a sequester
of roughly $127
billion.
In addition, OMB's current assessments show that a deficit of $121.2
billion exists on
the "paygo" scorecard. This paygo deficit is due to legislation enacted in
previous years,
as well the recent enactment of tax relief. Like the discretionary cap, if
the paygo requirement is
not waived or modified, OMB would be required to issue a sequester of
mandatory programs
such as Medicare, Agriculture, and the Student Loan Program.
Clearly, the BEA will have to be amended. In fact, the current
discretionary caps have
been obsolete for at least the last two years, and neither the
Administration nor the Congress
expected to reduce mandatory programs when we considered the tax bill this
spring, or even at
the beginning of the 107th Congress.
Modernizing the Act
The need for both of these changes does not mean the BEA is not
working. In fact, I
believe the Act has been successful in transforming the federal budget
process. It has made a
significant contribution to today's large budget surpluses. However, the
machinery associated
with the current BEA should be changed to reflect the era of surpluses that
the Act has helped to
create.
Currently, the BEA's requirements force us to sequester federal
spending when
legislative provisions lead to a reduction in the size of the Government's
surplus. However, the
BEA was developed in order to constrain increased spending and discourage
tax reductions in a
time of deficits. Therefore, the Administration believes that the BEA
should be modernized in
order to guide budget decisions in an era of surplus.
The Administration would like to work with the Budget Committees and
the Congress
to find a more appropriate basis from which to measure BEA requirements.
One potential
position that we believe could be supported in a broad, bi-partisan
fashion, would be to set a goal
of ensuring on-budget balance. One could see this approach as "protecting
the Social
Security Trust Fund Surplus."
Once this minimum threshold is set, new discretionary spending
"caps" and
"paygo" requirements could be determined on an annual basis
through the vehicle of
a Joint Budget Resolution. In fact, if one considers the various changes
to the BEA since 1990, it
could be argued that the Executive Branch and the Legislative Branch have,
from time to time,
entered into agreements that amounted to de facto joint budget resolutions.
I refer here to the
Executive-Legislative Summit agreements of 1990, 1993, and 1997. We should
consider
regularizing this step as an annual process.
Advance Appropriations and Emergency Spending
If we can agree on the need for the discipline and constraint that
the BEA provides, we
should agree to also end the practices that have been used to circumvent
the limits it sets. For
example, we must stop using advance appropriations to shift budget
authority from one year to
the next, just to avoid the cap for the budget year. In addition, we must
work together to limit the
illegitimate use of the emergency designation.
Conclusion
I look forward to working with the Committee and Congress to ensure
that we enforce
the 2002 and future budgets, and that we fashion new mechanisms that
continue the Congress'
recent fiscal success in the new era of surpluses.
Mr. Chairman, that concludes my statement. I would be happy to
answer any of the
Committees' questions.
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