Hearing of the House Budget Committee on the President's Budget for Fiscal Year 2005

Copyright 2004 Federal News Service, Inc.
Federal News Service

HEADLINE: HEARING OF THE HOUSE BUDGET COMMITTEE

SUBJECT: THE PRESIDENT'S BUDGET FOR FISCAL YEAR 2005

CHAIRED BY: REPRESENTATIVE JIM NUSSLE (R-IA)

LOCATION: 210 CANNON HOUSE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES: PANEL I:

JOSHUA B. BOLTEN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET;

N. GREGORY MANKIW, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS;

PANEL II:

PETER R. ORSZAG, PH.D., SENIOR FELLOW, THE BROOKINGS INSTITUTION

BODY:
REP. JIM NUSSLE (R-IA): The budget meeting will come to order. This is a hearing on the president's budget for Fiscal Year 2005. We are very pleased again today to have before us the director of the Office of Management and Budget, Mr. Josh Bolten, and the honorary-or the Honorable Gregory Mankiw, who's the chairman of the Council of Economic Advisors.

And I understand it's your birthday today, so happy birthday. Now do you get a-do you need a CBO score to determine your age or anything like that before we start?

MR. N. GREGORY MANKIW: I'll ask Josh about that, he's in charge of all the numbers.

REP. NUSSLE: Well, up here on the Hill we believe CBO's in charge of all the numbers, just so you're clear about that. We also have another announcement that I am pleased to make, and this is right out of the-there's obviously somebody for everybody in the world, because the staff director for the minority side, Tom Kahn is engaged to be married. So congratulations. There is somebody for everyone, as they say. Knowing Tom as we all do, no it's-we're very pleased for you and we wish you the best of luck to move forward, thank you. Congratulations.

Well, now we got all of the fun out of the way, we can get down to some of the things that we came to talk about. And I know that we're meeting today in an air of concern as we should about the federal budget deficit, we are all concerned as we move forward from this point exactly how we're going to deal with it, but I don't want to get off the subject of deficits just yet, because while we are all concerned about the federal budget deficit today, we are not going to shy away from some of the other deficits that we have out there in the county.

When President Bush took office we believe he had a security deficit in this country, homeland security, national security deficit. We also believe that there was an economic growth deficit. The fact he inherited a recession that we had to do something about, certainly it manifested itself very dramatically in the years after President Bush took office. But before we talk about only the financial situation of the budget, we do I believe have to hearken back to how we got to this situation and the fact that there were deliberate choices made by this committee on both sides, with votes that we're glad to advertise, to reduce taxes, to increase defense spending, and to protect the homeland and to deal with national emergencies that have gotten us to this situation.

And so before we start talking about where we are today, we do need to remember that part of how we got to this situation was because of other deficits that needed to be taken care of first in order to protect this country and make sure that people were working again. The budget that the president has proposed is not going to meet everybody's likes or dislikes. There's always something in it for everybody, and there's always something in it that people can disagree with.

The choice of this committee as we move forward is to come together and to come up with a fiscal blueprint that addresses the needs of our economy, that addresses the needs of our national security and that can do it in a fiscally responsible way to get us back on track. The president has laid out an agenda of strength, of growth and of opportunity for the future. Strength of our nation because we have to be strong if we're going to be free. We can't be free unless America is strong, so we've got to be free, and we want to be strong in order to preserve that.

Secondly, that America cannot provide the opportunities for our future if America's economy is not growing, creating jobs and providing opportunities for our kids and their future. And we knew that whether it was the federal budget or the budget that families have to balance around their kitchen table every night in Iowa, or across the country, that you need a job in order to get that done. And while every economic indicator is pointing in the correct direction right now for economic growth, there is still too many people out there who tonight around their kitchen table with their spouse and their kids are trying to figure out how to pay their bills because they don't have a job. And so we have to maintain a continued vigilance in making sure the economy grows and we want to make sure that we do not raise taxes in the budget that we've put forward, and so that will also be a hallmark.

Finally, with regard to the budget we need to, I believe, control spending. It's the one thing-it's the one port in the storm that we can hold on to. It's the one thing we can control. Numbers will go up, numbers will go down, all sorts of things are outside the control of this committee, but there is one thing that we know for sure and that is we can, if we determine that it's important enough, control spending; not only in the 17 percent that the appropriators like to remind me is the proportion that seems to always get the attention, but across the board.

In Defense, in Homeland we shouldn't be wasting one penny. One dollar should not be wasted in those programs and we know that there are opportunities out there to make sure that those dollars are being spent wisely, and so we're going to look in every nook and cranny of the budget in order to make sure that we can find savings, ways that we can root out waste, fraud and abuse. And we're going to continue to be vigilant in controlling spending because for us, cutting the deficit in half is an important goal. In fact, I'm not aware of anybody who's got a better goal to meet right now.

But we know that this long journey toward cutting the deficit in half in five years-while a five-year journey can start with a first step today, and that's by controlling spending in this budget. It doesn't matter what we're projecting for next year if we can't get our job done this year. And so this year's budget, as we look at the future, has got some work cut out for it. The president has proposed, as Director Bolten has identified in his budget, 65 programs that can be eliminated, another 63 that can be reduced. There's a number of suggestions that are good that we should pay heed to on both the discretionary as well as the mandatory side.

But as we move forward, we have to also look at ourselves in the mirror. We have a transportation bill coming to the floor here and in fact, as I understand it, the Senate, the other body, just passed a bill here today that has already gotten a veto warning from the president.

If we cannot control the spending this year, five years is somewhat of an irrelevant goal. We've got to do what we can right now and so I think the proof will be in what we're able to do now, not just what the budget looks like five years from now.

One other thing I wanted to mention because it has come up and I'll just-I want to put it into the record. There's been some discrepancy over numbers already on Medicare and a few other instances and I just want to get this out. I've had an opportunity to communicate with the Congressional Budget Office. They have sent me back a letter indicating that while there might be all sorts of different predictions, prognostications and projections for what the budget may look like in the future, the Congressional Budget Office has done its research, has done its work on the Medicare bill. It did it back when it passed, it has taken another fresh look at it.

And in its operative sentence here, and I will read it for you, it says, "To date we have not received any additional data or studies that would lead us to reconsider our conclusions, therefore CBO believes its estimate is sound and has no reason at present to revise it." Medicare is going to be scored by CBO and CBO numbers are going to be the ones that control, determining the size of the Medicare bill. Does that mean that we aren't going to have to provide oversight to Medicare? Absolutely not. We have got to provide oversight for Medicare just like we should for food stamps and every other mandatory program that is out there.

We should push in our other committees that we serve on an effort to ensure that we, as authorizers or appropriators, provide the oversight on a regular basis. But at least to start with, CBO is firm on the fact that we're going to-we are-we have good numbers to use. And while it's interesting that there are other people making predictions, those numbers are probably wrong almost the date that they're put out, and we're going to have to provide constant vigilance to make sure that that program stays within its means and meets the needs of seniors the way we did this last year when we provided a voluntary drug benefit under Medicare for the first time ever.

We've got a lot of work to do and I know that this is going to be a lively discussion, as it almost always is. We have some important work to do that begins today. But again I believe that the most important thing we can do this year to set us on the right course is to make sure this budget provides that America is strong, that our economy continues to grow and that we have very detailed provisions to control spending now. Not just five years from now, but today in this budget. And with that, I'd be happy to yield to my friend Mr. Spratt for any opening comments he would like to make.

-BREAK OF TRANSCRIPT-

REP. NUSSLE: Mr. Thompson?

REP. MIKE THOMPSON (D-CA): Thank you, Mr. Chairman.

Thank you, Mr. Bolten. You know, I would agree that September 11th and the downturn in the economy created a bunch of challenges that we had to deal with, unexpected challenges. But I really don't think that they explain what I see is a real credibility gap in a document that we're looking at today. There's just-there's omissions, there's out year costs are ignored. If you look at just the tax cut provisions, the big cost doesn't come until after 2009 and that's at the same time we have a huge spike in the baby boomers that are going to be dependent upon different services and I really think that has to be explained to have any credibility.

The others are pay go provision in this document, but it only applies to one side. It doesn't take into effect the revenues, and I don't know how you can spend-do tax expenditures without calculating where those costs are going to come from because, like everything else we've discussed here today, that money comes from some place and as it is right now, it's merely tacked on this incredibly large and ever growing national debt. There's discrepancies between the two entities that calculate the cost of these programs, most notably is the prescription drug bill, it's a $135 billion different cost from one entity vis-vis the other. I hate to beat a dead horse, but the whole war funding issue, it's just not here. We have a budget document that does not have one penny regarding funding for Iraq, and that's just not-you couldn't take that out to any one of our districts and get one person, one constituent that any one of us represents, to see where that's justified. It would be probably laughed at.

And there are also cost shifts in this document. Some on this committee are fond of talking about what constitutes a tax cut. Well, if you're going to charge veterans who leave the military with an understanding that they get healthcare, a $250 charge-and these aren't rich guys. This is $30,000-something a year salary with five dependants. That's a cost shift that these people are having to bear and then the idea of cutting local law enforcement by the number in your document and then put a slide up that suggests we're increasing funds for homeland security.

These are the first responders, the fire and the police guys and if you take it with one hand and then give it back with another, the local guys who are going to have to respond if there's a problem are going to have trouble doing that. And I think that these issues need to be addressed and I would like to hear on PAYGO, how you can possibly expect us to support a half a PAYGO program. It seems to me we should look at both the expenditures and the tax expenditures as well.

MR. BOLTEN: Mr. Thompson, I'm going to ask Dr. Mankiw to talk in more detail about the distinction between a mandatory spending increase and a tax increase or a tax cut, but the short version here on that specific question is, as Dr. Mankiw and others have described earlier, it's spending that's the problem, it is overspending in the economy that damages the economy and it's not under taxing that damages the economy. Let me ask Dr. Mankiw here --

REP. THOMPSON: But it's a loss of dollars and that are available. That would be like saying that I want to retire, work part time, make $30,000 a year and put an addition on my house. And my banker's going to say, well where are you-how are you going to pay for it? That doesn't wash. You've got to be able to assess where they money's going and where the money's coming from.

MR. BOLTEN: I'm going to ask Dr. Mankiw to take that up in just a second, but I want to take up one of the other things that you mentioned, because several of the things you've mentioned I think we've had a chance to have an exchange on. But one of the things that you mentioned last we have not, which is on the first responders. And I want to come to it because I think it's a very good example of where we in the administration and this Congress need to make some tough choices about priorities. The president is proposing to increase homeland security spending overall by 10 percent. Those are large increases in bio-surveillance, there are large increases in counter- terrorism efforts and so on.

I apologize, Mr. Chairman. If I can go over just a minute here the-but we can't spend on everything and one of the areas where we have been spending in homeland robustly is in getting money out to first responders. And we have been-we have put that money out since September 11 as a capacity building undertaking, to try to bring some of the first responders all over America more up to the risks that we face today.

REP. THOMPSON: That may be. But the point I'm making: you give it up on one program then you take it away from local law enforcement/firefighters on the other, and it all comes out of the same pocket of the local law enforcement, the local firefighters, the first responders.

MR. BOLTEN: And the point I want to get to, Mr. Thompson, is that this is part of the very difficult exercise that we need to engage in jointly, which is making some choices. In our budget we have made the choice that the more of that first responder money-there's still a good chunk of first responder money in here, but a lot more of that first responder money needs to go to the high threat areas, to the urban areas, to the critical infrastructure and so on and get moved away from your average city and town that probably is not realistically under as much threat.

Now, this will be unfortunate news to some-a lot of police chiefs and fire chiefs in all of your districts, but it's the right way to set our priorities if we're going to protect the homeland. Those are the kind of choices that are made in the budget, there's a lot of money in this budget going into first responders, but we're going to focus it on the high threat areas and unfortunately disappoint some people who are not in the high threat areas. Let me ask Dr. Mankiw to respond on the other.