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	<title> - FRESHMAN MEMBERS DAY</title>
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	[House Hearing, 107 Congress]
	[From the U.S. Government Publishing Office]





	FRESHMAN MEMBERS DAY

	=======================================================================

	HEARING

	before the

	COMMITTEE ON THE BUDGET
	HOUSE OF REPRESENTATIVES

	ONE HUNDRED SEVENTH CONGRESS

	FIRST SESSION

	__________

	HEARING HELD IN WASHINGTON, DC, FEBRUARY 7, 2001

	__________

	Serial No. 107-1


	Printed for the use of the Committee on the Budget


	______

	U.S. GOVERNMENT PRINTING OFFICE
	70-194cc WASHINGTON : 2001



	COMMITTEE ON THE BUDGET

	JIM NUSSLE, Iowa, Chairman
	JOHN E. SUNUNU, New Hampshire JOHN M. SPRATT, Jr., South
	Vice Chairman Carolina,
	PETER HOEKSTRA, Michigan Ranking Minority Member
	Vice Chairman JIM McDERMOTT, Washington,
	CHARLES F. BASS, New Hampshire Leadership Designee
	GIL GUTKNECHT, Minnesota BENNIE G. THOMPSON, Mississippi
	VAN HILLEARY, Tennessee KEN BENTSEN, Texas
	MAC THORNBERRY, Texas JIM DAVIS, Florida
	JIM RYUN, Kansas EVA M. CLAYTON, North Carolina
	MAC COLLINS, Georgia DAVID E. PRICE, North Carolina
	ERNIE FLETCHER, Kentucky EDWARD J. MARKEY, Massachusetts
	GARY G. MILLER, California GERALD D. KLECZKA, Wisconsin
	PAT TOOMEY, Pennsylvania BOB CLEMENT, Tennessee
	WES WATKINS, Oklahoma JAMES P. MORAN, Virginia
	DOC HASTINGS, Washington DARLENE HOOLEY, Oregon
	ROB PORTMAN, Ohio RUSH D. HOLT, New Jersey
	EDWARD SCHROCK, Virginia JOSEPH M. HOEFFEL III,
	JOHN CULBERSON, Texas Pennsylvania
	HENRY E. BROWN, Jr., South Carolina TAMMY BALDWIN, Wisconsin
	ANDER CRENSHAW, Florida [Vacancy]
	ADAM PUTNAM, Florida [Vacancy]
	MARK KIRK, Illinois [Vacancy]
	[Vacancy] [Vacancy]
	[Vacancy]
	[Vacancy]

	Professional Staff

	Rich Meade, Chief of Staff
	Thomas S. Kahn, Minority Staff Director and Chief Counsel




	C O N T E N T S

	Page
	Hearing held in Washington, DC, February 7, 2001................. 1
	Statement of:
	Hon. Edward Schrock, a Representative in Congress from the
	State of Virginia.......................................... 1
	Hon. Anibal Acevedo-Vila, the Resident Commissioner of Puerto
	Rico....................................................... 5
	Hon. Henry E. Brown, Jr., a Representative in Congress from
	the State of South Carolina................................ 8
	Hon. Jeff Flake, a Representative in Congress from the State
	of Arizona................................................. 12
	Hon. Adam H. Putnam, a Representative in Congress from the
	State of Florida........................................... 15
	Hon. Steve Israel, a Representative in Congress from the
	State of New York.......................................... 27
	Hon. Rick Larsen, a Representative in Congress from the State
	of Washington.............................................. 30
	Hon. Adam Schiff, a Representative in Congress from the State
	of California.............................................. 32
	Hon. Todd Akin, a Representative in Congress from the State
	of Missouri................................................ 35
	Hon. James Langevin, a Representative in Congress from the
	State of Rhode Island...................................... 38
	Prepared statement of:
	Mr. Schrock.................................................. 3
	Hon. Felix J. Grucci, Jr., a Representative in Congress from
	the State of New York...................................... 7
	Mr. Brown.................................................... 9
	Mr. Flake.................................................... 13
	Mr. Putnam................................................... 17
	Hon. Mike Pence, a Representative in Congress from the State
	of Indiana................................................. 23
	Hon. John Culberson, a Representative in Congress from the
	State of Texas............................................. 26
	Mr. Israel................................................... 28
	Mr. Larsen................................................... 31
	Mr. Schiff................................................... 33
	Hon. Dennis Moore, a Representative in Congress from the
	State of Kansas............................................ 35
	Mr. Akin..................................................... 37
	Mr. Langevin................................................. 40
	Hon. Rob Simmons, a Representative in Congress from the State
	of Connecticut............................................. 42




	FRESHMAN MEMBERS DAY

	----------


	WEDNESDAY, FEBRUARY 7, 2001

	House of Representatives,
	Committee on the Budget,
	Washington, DC.
	The committee met, pursuant to call, at 11:03 a.m. in room
	210, Cannon House Office Building, Hon. Jim Nussle (chairman of
	the committee) presiding.
	Members present: Representatives Nussle, Sununu, Gutknecht,
	Fletcher, Schrock, Culberson, Brown, Crenshaw, Putnam, Pence,
	Spratt, Hooley, McCarthy, and Flake.
	Chairman Nussle. The committee will come back into order,
	please.
	Today we will be having the first of a series of hearings
	involving budget and budget priorities. Today we have invited
	freshman Members of the 107th Congress to come before us to
	testify on behalf of themselves, their districts, some of the
	priorities that maybe they have heard about as they campaigned
	over this last campaign season.
	I think oftentimes in the Budget Committee and other
	committees of Congress we tend to rely on some celebrity-type
	witnesses who are often requested to come and give us their
	opinions, and we forget that within our own conferences and
	caucuses we have Members with a vast array of experiences from
	a number of different industries and career backgrounds as well
	as perspectives that they share with us from their
	constituents. So we wanted today to invite the freshman Members
	of the 107th Congress class to come before us and to present
	testimony.
	The first witness today will be the Honorable Ed Schrock
	from Virginia, a member of this committee and president of the
	freshman class for the Republicans of this year. Welcome both
	to the committee and to our witness table. Your entire
	statement will be part of the record without objection, and you
	have 5 minutes to summarize your testimony, Mr. Schrock.

	STATEMENT OF HON. EDWARD SCHROCK, A REPRESENTATIVE IN CONGRESS
	FROM THE STATE OF VIRGINIA

	Mr. Schrock. Thank you, Mr. Chairman, and members of the
	committee that are still here. It is an honor for me to be here
	to detail the priorities shared by the 28 Republican freshman
	Members of Congress.
	As you know, the budget resolution frames our agenda and
	priorities on both taxes and spending for the coming fiscal
	year and beyond. I will first discuss our priorities on tax
	relief for every American.
	In our view, President Bush's tax relief promoting is fair,
	responsible and allows the typical American family to keep at
	least $1,600 more of their own money. The President's tax
	proposal will cut taxes for everyone who pays income taxes,
	will spur economic growth, and tear down the high tax barriers
	that keep low-income Americans from accessing the middle class.
	Specifically, we support the following provisions: Replace
	the current five-rate tax structure with four lower rates--10,
	15, 25 and 33 percent; double the child tax credit to $1,000;
	eliminate the marriage penalty; eliminate the death tax; expand
	the charitable deduction to include those who file with a 1040
	EZ, or short form; and make the research and development tax
	credit permanent.
	We strongly support the President's tax plan because low-
	and middle-income families are the biggest winners. For
	instance, one in five taxpaying families with children will no
	longer pay any tax at all, completely removing 6 million
	American families from the tax rolls. A family of four making
	$35,000 would get a 100 percent Federal income tax cut. A
	family of four making $50,000 a year would receive a 50 percent
	cut, receiving at least $1,600. The marginal income tax rate on
	low-income families will fall by more than 40 percent.
	There is no doubt that American families need a tax cut.
	Indeed, the reason we are enjoying surpluses is that we are
	taxing too much. We simply must cut taxes for the following
	reasons:
	The current Tax Code is unfair. Under the current system, a
	single mom making $22,000 a year pays a higher marginal tax
	rate than someone making $200,000 a year.
	Federal taxes are the highest ever during peacetime.
	Americans pay more in taxes than they spend on food, clothing,
	and housing combined. Americans work more than 4 months per
	year just to pay their tax bills. Recent layoffs by businesses
	of every size prove that the American economy needs a boost and
	quickly.
	Many of us also support other tax cuts, including education
	expense tax credits, expanding Medicare savings accounts,
	medical savings accounts, IRA expansion of pension reform,
	repeal of the Spanish-American War phone tax, small business
	tax cuts and tax cuts in the capital gains rates.
	But, to reiterate, we unanimously support President Bush's
	tax proposal.
	At this point in my remarks I would like to turn to our
	priorities on Federal spending. For many of us, our highest
	spending priority is national defense. The Congress of the
	United States is constitutionally charged with providing for
	the common defense, raising and supporting armies, and
	providing and maintaining a navy. In our view, spending on
	national defense must be increased to provide for pay raises
	for all military personnel, force modernization and
	maintenance, overseas deployments, and the acquisition of
	modern weapons systems that will maintain our military
	supremacy on seas, on land, and in the air.
	Social Security and Medicare must be financially secured
	for future current and future generations. We support securing
	Social Security and Medicare surpluses so that these funds
	cannot be used on general appropriations. However, there is a
	tremendous concern about the Department of Health and Human
	Services' Office of Inspector General report that disclosed
	waste, fraud and abuse totaling $13.57 billion, over 8 percent,
	of the amount spent on fee-for-service reimbursements at the
	Health Care Financing Administration. In order to maintain the
	integrity of Medicare and Social Security, strong and
	successful efforts must be undertaken by all appropriate
	Federal agencies to ensure that Medicare and Social Security
	fraud is eliminated.
	Furthermore, it appears to us that entitlement reform is
	critical to the long-term financial viability of the United
	States Government. Social Security, Medicare, Medicaid,
	welfare, and other mandatory Federal entitlements now total
	more than $1 billion per year. Because of our aging population,
	the projected growth rate of these entitlement programs is
	staggering. Congress must work in a bipartisan manner with the
	President to reform these entitlements before they consume even
	more of our tax dollars and make tax increases inevitable.
	In the area of education spending, we support local control
	of schools. Federal education spending should require
	accountability measures at the State level. However, Federal
	education dollars otherwise should come with little or no
	strings attached. As a former State legislator, I know parents,
	teachers and local schools can determine what is best for their
	own community. While we support increased education spending at
	the Federal level, these new funds should not be accompanied by
	new mandates that stifle creativity and burden our local
	schools.
	Finally, I would like to discuss the Federal debt. We
	applaud Congress' record of paying down $625 billion in debt
	over the past 4 years. The Republican freshman class is
	strongly committed to continuing these efforts to reduce the
	Federal debt in a responsible manner. The near elimination of
	the Federal debt will result in lower interest rates and would
	provide, in essence, another tax cut for families who mortgage
	homes and finance the purchase of cars.
	In conclusion, Mr. Chairman, we stand ready to work with
	you and this committee to develop a budget resolution that
	provides tax relief for every American family and a spending
	blueprint that will strengthen America's military, improve
	education for our children, pay down the national debt, and
	protect Social Security and Medicare.
	Thanks for this opportunity to appear before you.
	[The prepared statement of Congressman Schrock follows:]

	Prepared Statement of Hon. Edward Schrock, a Representative in Congress
	From the State of Virginia

	Mr. Chairman, members of the committee, it is a tremendous honor to
	be here today to detail the priorities shared by the 28 Republican
	freshmen Members of Congress.
	As you know, the Budget Resolution frames our agenda and priorities
	on both taxes and spending for the coming fiscal year and beyond.
	I will first discuss our priorities on tax relief for every
	American.
	In our view, President Bush's tax relief proposal is fair,
	responsible and allows the typical American family to keep at least
	$1,600 more of their own money.
	The President's tax proposal will cut taxes for everyone who pays
	income taxes, spur economic growth and tear down the high tax barriers
	that keep low income Americans from accessing the middle class.
	Specifically, we support the following provisions:
	<bullet> Replace the current five rate tax structure with four
	lower rates--10, 15, 25 and 33 percent.
	<bullet> Double the child tax credit to $1,000.
	<bullet> Eliminate the marriage penalty
	<bullet> Eliminate the death tax
	<bullet> Expand the charitable deduction to include those who file
	with a 1040 EZ or Short form.
	<bullet> Make the research and development tax credit permanent.
	We strongly support the President's tax plan because low and
	middle-income families are the biggest winners.
	For instance,
	<bullet> One in five taxpaying families with children will no
	longer pay any income tax at all--completely removing 6 million
	American families from the tax rolls.
	<bullet> A family of four making $35,000 would get a 100 percent
	Federal income tax cut.
	<bullet> A family of four making $50,000 a year would receive a 50
	percent cut--receiving at least $1,600.
	<bullet> The marginal income tax rate on low-income families will
	fall by more than 40 percent.
	There is no doubt that American families need a tax cut. Indeed,
	the reason we're enjoying surpluses is that we are taxing too much. We
	simply must cut taxes for the following reasons:
	<bullet> The current Tax Code is unfair. Under the current system,
	a single mom making $22,000 a year pays a higher marginal tax rate than
	someone making $200,000 per-year.
	<bullet> Federal taxes are the highest ever during peacetime.
	<bullet> Americans pay more in taxes than they spend on food,
	clothing and housing combined.
	<bullet> Americans work more than 4 months per year just to pay
	their tax bills.
	<bullet> Recent layoffs by businesses of every size prove that the
	American economy needs a boost--quickly.
	Many of us also support other tax cuts including education expense
	tax credits, expanding Medical Savings Accounts, IRA expansion and
	pension reform, repeal of the Spanish American War phone tax, small
	business tax cuts and cuts in the capital gains tax rates. But to
	reiterate, we unanimously support President Bush's tax proposal.
	At this point in my remarks I would like to turn to our priorities
	on Federal spending.
	For many of us, our highest spending priority is national defense.
	The Congress of the United States is constitutionally charged with
	providing for the common defense, raising and supporting armies, and
	providing and maintaining a Navy.
	In our view, spending on national defense must be increased to
	provide for pay raises for all military personnel, force modernization
	and maintenance, overseas deployments, and the acquisition of modern
	weapons systems that will maintain our military supremacy on the seas,
	on land and in the air.
	Social Security and Medicare must be financially secured for
	current and future generations. We support securing Social security and
	Medicare surpluses so that these funds cannot be used on general
	appropriations.
	However, there is tremendous concern about a Department of Health
	and Human Services Office of Inspector General report that disclosed
	waste, fraud and abuse totaling $13.5 billion, or about 8 percent, of
	the amount spent on fee for service reimbursements at the Health Care
	Financing Administration.
	In order to maintain the integrity of the Medicare and Social
	Security systems, strong and successful efforts must be undertaken by
	all appropriate Federal agencies to ensure that Medicare and Social
	Security fraud is eliminated.
	Furthermore, it appears to us that entitlement reform is critical
	to the long-term financial viability of the United States government.
	Social Security, Medicare, Medicaid, Welfare and other mandatory
	Federal entitlements now total more than $1 trillion per year.
	Because of our aging population, the projected growth rate of these
	entitlement programs is staggering. Congress must work in a bipartisan
	manner with the President to reform these entitlements before they
	consume even more of our tax dollars and make tax increases inevitable.
	In the arena of education spending, we support local control of
	schools. Federal education spending should require accountability
	measures at the state level; however, Federal education dollars
	otherwise should come with little or no strings attached.
	As a former state legislator, I know that parents, teachers and
	local schools can determine what is best for their own community. While
	we support increased education spending at the Federal level, these new
	funds should not be accompanied by new mandates that stifle creativity
	and burden our local schools.
	And finally, I would like to discuss the Federal debt. We applaud
	Congress's record of paying down $625 billion in debt over the past 4
	years. The Republican freshman class is strongly committed to
	continuing these important efforts to reduce the Federal debt in a
	responsible manner.
	The near elimination of the Federal debt will result in lower
	interest rates and would provide, in essence, another tax cut for
	families who mortgage homes and finance the purchase of automobiles.
	In conclusion, Mr. Chairman, we stand ready to work with you and
	this committee to develop a budget resolution that provides tax relief
	for every American family and a spending blueprint that will strengthen
	America's military, improve education for our children, pay down the
	national debt and protect Social Security and Medicare.
	Thank you, Mr. Chairman for the opportunity to address the Budget
	Committee.

	Chairman Nussle. Thank you, Mr. Schrock. Are there
	questions for this witness from members of the committee?
	If not, thank you very much for your attendance and for
	your testimony.
	The next witness--and I may ask you for a little help with
	the pronunciation; we have not met before, and this is one of
	the advantages of having a hearing such as this--the Honorable
	Anibal Acevedo.
	Mr. Acevedo-Vila. That's fine.
	Chairman Nussle. And do you add the Vila at the end?
	Mr. Acevedo-Vila. That is the way we do it down in Puerto
	ico, but it is fine if it is only Acevedo.
	Chairman Nussle. We appreciate your coming before us today.
	You are obviously from Puerto Rico, as you stated. We
	appreciate your attendance and your testimony. Your written
	statement, without objection, will be made part of the record
	and you may summarize for the 5 minutes. Welcome.

	STATEMENT OF HON. ANIBAL ACEVEDO-VILA, THE RESIDENT
	COMMISSIONER OF PUERTO RICO

	Mr. Acevedo-Vila. I would like to thank the chairman, the
	ranking member, and the members of the Budget Committee for
	this opportunity to testify here today.
	As the new Resident Commissioner from Puerto Rico, I am
	pleased to offer some ideas on the budget for fiscal year 2002.
	This is a moment of great challenges and, at the same time,
	great opportunities for this Congress and the Nation. We have a
	balanced budget and a surplus which provide new alternatives
	that some years ago were not available. On the other hand,
	there are clear indications of an economic slowdown that has to
	be remedied by Congress.
	There is a consensus that it is time to use this surplus to
	reward taxpayers with a tax cut. The issue is how much to cut
	and how it should be done to forge real economic growth. As the
	representative of Puerto Rico before Congress, I am here today
	to work in a bipartisan fashion to guarantee that the 2002
	budget will help the 4 million U.S. citizens living in Puerto
	Rico. We have before us a unique opportunity to use the current
	budgetary circumstance as a tool for economic development
	through the creation of jobs and investment in businesses in
	Puerto Rico.
	During the period of 1993 to 1996, Congress took the
	necessary steps to balance the budget and eliminate the
	deficit. Puerto Rico paid substantially during this process. In
	1993, Congress passed the Omnibus Reconciliation Act, which
	included a provision that substantially curtailed the tax
	incentives provided by Section 936 of the Internal Revenue Code
	to U.S. companies doing business in Puerto Rico.
	In 1996, Congress enacted another set of amendments that
	eliminated all incentives for new or expanded business
	operations and investment in Puerto Rico. Congress carved out a
	separate section of the Internal Revenue Code, Section 30A, for
	the possession's tax credit, which is applicable only to
	corporations with operations in Puerto Rico during the phase-
	out periods. As of today, Puerto Rico has no Federal incentive
	to create new jobs, and those that apply to companies already
	doing business in the island are set to expire in the year
	2005.
	The negative consequences of the decisions taken in 1993
	and 1996 are clear. The phase-out of these incentives is having
	disastrous effects on the Puerto Rican economy. In the last 4
	years, more than 17,000 jobs have been lost in the
	manufacturing sector as a direct result of the phase-out, and
	Puerto Rico has not been able to attract significant new
	economic investment to build upon. Many of these jobs are
	moving out of U.S. jurisdiction to countries like Malaysia and
	Singapore. Employment and wages by American companies are a
	critical part of Puerto Rico's manufacturing sector, and the
	manufacturing sector is the most important sector of Puerto
	Rico's economy.
	The results are clear. Today, we enjoy a balanced budget
	and a rather large surplus. But my people don't have the jobs.
	While the taxpayers in the U.S. have earned tax relief, so too
	have Puerto Ricans who sacrificed during efforts to balance the
	budget and grow the Federal budget surplus. It is time to
	provide my constituents with tax relief through incentives for
	job creation in the Tax Code.
	Congress has been there for Puerto Rico in the past. In
	1976, Congress enacted the special tax exemption under Section
	936 of the Internal Revenue Code. This was part of an effort to
	attract U.S. companies to Puerto Rico to create jobs for the
	island's residents. At the time, Puerto Rico's economy was
	suffering an economic slowdown, amidst recession, and
	unfavorable tax changes in the United States. Unemployment
	rates started to increase to alarming levels. A number of
	foreign countries became more attractive to U.S. businesses
	because they offered lower wage rates and more favorable local
	tax incentives. Section 936 was an attempt to reverse that
	trend, and it worked. During the 1980's and early 1990's we
	were able to strengthen Puerto Rico's economy thanks in great
	part to the jobs created by 936 companies.
	As I mentioned earlier, one of the reasons to eliminate tax
	incentives for U.S. companies in Puerto Rico was to balance the
	budget. Now we are faced with a surplus. I will not ask this
	Congress to reenact Section 936. What I am asking is to work
	toward new and creative incentives to promote job creation and
	investment in Puerto Rico. If there are no new jobs and the
	companies that we have depart for foreign destinations, our
	best resource also, our people, will be wasted. Clearly this
	would be a setback for both Puerto Rico and the U.S.
	As Congress did during the economic downturn in the 1970's,
	I urge you to consider new and creative ways to foster the
	economic development of Puerto Rico and make them part of the
	2002 budget. The new administration in Puerto Rico is crafting
	this new alternative that will be presented to the President
	and Congress in the coming weeks. I have already discussed this
	priority with influential Members of this body and the Senate,
	and enjoyed a recent conversation with President Bush about
	this important issue. Our proposals will be supported by all
	the economic sectors on the island, be fiscally responsible,
	simple and targeted to promote competition with foreign
	jurisdictions. For now, I ask you to be open to these kinds of
	incentives that are so necessary for our economy as a whole and
	for the creation of sustainable and decent-paying jobs for
	Puerto Rico.
	Again, thanks, Mr. Chairman, ranking member and other
	members.
	Chairman Nussle. Thank you very much for your testimony.
	Are there questions for our colleague? If not, thank you.
	The next witness who was scheduled to testify today is the
	Honorable Felix Grucci from New York. It is our understanding
	that his mother-in-law passed away and, as a result, he will
	not be here to testify today. Our thoughts and prayers are
	certainly with the entire Grucci family and with his wife's
	family.
	Without objection, his testimony will be submitted for the
	record at this point.
	[The prepared statement of Congressman Grucci follows:]

	Prepared Statement of Hon. Felix J. Grucci, Jr., a Representative in
	Congress From the State of New York

	Mr. Chairman, ladies and gentlemen of the House Budget Committee,
	thank you for giving me the opportunity to submit this written
	statement on behalf of the citizens of the First Congressional District
	of New York. Unfortunately, I am unable to attend today's proceedings,
	due to the death of my mother-in-law.
	Our Nation is at a critical juncture. Over the last several years,
	small business owners, entrepreneurs, and hard working middle class
	families fostered a strong national economy, and created a historic tax
	surplus projected by the Congressional Budget Office to be an estimated
	$5.6 trillion.
	However, economic storm clouds are on the horizon. Storm clouds
	that threaten the economic viability of hundreds of business and
	thousands of jobs and opportunities.
	Our mission is certain.
	While our small business owners, high-tech industry leaders,
	manufacturers, farmers and hard working families do their part day in
	and day out, from sunrise to sunset, to sustain a vibrant economy, it
	is up to their government--this Congress--to proactively implement
	reasonable tax relief, reduce our national debt, and protect critical
	programs like the Social Security Trust Fund.
	We must prioritize the allocation of Federal funds to where they
	will best serve our citizens. We need additional resources to improve
	our education system, protect our environment, improve our
	infrastructure, strengthen our national defense, and enact a Medicare
	Lock Box that ensures affordable health care is available to each and
	every senior citizen.
	As a locally elected town supervisor, I saw first hand how tax cuts
	and controlled spending helped spur our local economy in the First
	District of New York. By placing the taxpayers money back where it
	belongs--in their pockets--we were able to create more than 20,000 new
	jobs on Eastern Long Island.
	The time is now to give the taxpayers back their money. They
	created the tax surplus. They should have it returned. And in the
	process, we should once and for all eliminate unfair taxes that
	penalize middle class working families, small business owners, farmers
	and our newest entrepreneurs.
	The time is now to repeal the marriage penalty tax, which would
	save the average working family about $1,400 per year. The time is now
	to protect farmers and small business owners from being taxed twice by
	finally eliminating the death tax.
	And the time is now to remove obstacles from young entrepreneurs
	who emerge from colleges, universities, and trade schools with bright
	ideas and the business ventures for the 21st Century.
	This surplus belongs to the people. They created it. It's
	responsible and the right thing to do to return it to them.
	We can do more. We can provide reasonable tax relief, and take the
	necessary actions of protecting the Social Security Trust Fund, by
	locking it away from bureaucrats who, would rather use the people's
	money on wasteful programs, and ensuring it is there for seniors today,
	and the retirees of tomorrow.
	We can take this opportunity to improve the educational system in
	our nation so no child is left behind. With additional resources to our
	schools, we will be able to reduce class size and put our parents,
	school boards and teachers back in charge of the classroom.
	Our national surplus affords this Congress the unique opportunity
	to enter into public/private partnerships to protect and preserve our
	environment. By working hand in hand with property-owners, and State
	and local governments, we can pool our resources to acquire more open
	space from Long Island to the pacific coast.
	It's a successful formula that has worked to protect our drinking
	water on Eastern Long Island, and one that will prove beneficial
	throughout all of the communities and neighborhoods of our great
	nation.
	With a commitment to take these critical steps today, in this
	Congress--the people's House--in conjunction with the Senate and
	President Bush, will jump-start our economy, decrease unemployment,
	create jobs as well as new opportunities. Put more money in the hands
	of the taxpayers, because they know better than any government
	bureaucrat how best to spend it. Foster an environment where ideas grow
	into successful new businesses, new jobs, and new opportunities.
	By taking these steps now, we will successfully meet the challenges
	we all face. It will be a journey along a path of new promise, new
	hope, and a strong vibrant economy.
	Mr. Chairman, ladies and gentlemen of the House Budget Committee,
	and my fellow colleagues, thank you for this opportunity.

	Chairman Nussle. The next witness is a colleague from the
	committee, Mr. Henry Brown from South Carolina, who, as I
	stated earlier, was the former chairman of the Ways and Means
	Committee which handled budget issues in South Carolina. I
	certainly hope that he will be able to share with us some of
	the wisdom of the States. We often look to States as the
	laboratories.
	We are certainly honored to have you in the Congress and on
	this committee and look forward to your testimony. Your entire
	testimony will be made a part of the record and you may
	summarize.
	Mr. Brown.

	STATEMENT OF HON. HENRY E. BROWN, JR., A REPRESENTATIVE IN
	CONGRESS FROM THE STATE OF SOUTH CAROLINA

	Mr. Brown. Thank you very much, Mr. Chairman and Mr.
	Spratt. It is certainly a pleasure and a special honor for me
	to serve on this committee.
	It was a significant time in my life to have the privilege
	to chair the Ways and Means Committee for South Carolina for 5
	years. We found South Carolina in a state of flux. We had lost
	our triple A credit rating. We were having mid-year budget
	cuts. The economy was going great, but the government was
	spending more than the revenue coming in, so we were in a state
	of real confusion.
	It is a real pleasure to come and try to address some of
	those same needs here at the Federal level. Because we did
	regain our triple A credit rating, we were able to balance the
	budget and, at the same time, we were able to make tax cuts.
	And I think that is significant as we take a look at the budget
	process here.
	I am pleased that we will be able to send back some of
	those revenues that those taxpayers have sent to us in excess
	of the amount that is needed to fund government. I am pleased,
	Mr. Chairman, to work with you to try to make some of those
	things happen.
	Our freshman president summed up a lot of the priorities
	that we established in the freshman class. I won't belabor the
	committee by going through this again; neither will I present
	my formal presentation, which I submitted in writing earlier,
	but I did want to come just to say that I am pleased to be a
	part of this process, and I recognize that there are a lot of
	issues that we need to deal with, like the marriage penalty
	tax, the inheritance tax, and the death tax.
	Also, I would hope that the committee would look at the
	process of returning some of the monies back to the taxpayers--
	that tax increase that was imposed upon the seniors which taxed
	85 percent of their Social Security proceeds. I would hope this
	committee would take a look at trying to repeal that or at
	least go back to 1993, where 50 percent of those proceeds were
	taxed.
	With that, Mr. Chairman, I am open for any questions.
	[The prepared statement of Congressman Brown follows:]

	Prepared Statement of Hon. Henry E. Brown, Jr., a Representative in
	Congress From the State of South Carolina

	Mr. Chairman, I appreciate this opportunity to share with you and
	this committee the legislative priorities of my constituents in the
	First District of South Carolina. Just a few years ago, our Federal
	Government was facing huge annual budget deficits and an ever
	increasing national debt. Because of the hard work and productivity of
	millions of Americans and fiscal discipline of recent Congresses, we
	are looking at an unprecedented level of surplus revenues.
	First, let me state that my constituents in South Carolina's Low
	Country expect this Congress to continue to spend their hard earned tax
	dollars wisely and responsibly. This is not the time to reverse course
	and embark upon another spending spree that would jeopardize the
	progress we have made in paying down our national debt and
	strengthening the foundations of our economy.
	There is no question we have serious challenges before us,
	improving the quality of education throughout this land, safeguarding
	Medicare and Social Security for today's senior citizens and future
	generations, and rebuilding our military. It is my view, Mr. Chairman,
	we can meet these challenges without risking a repeat of budget
	deficits and a national debt out of control. I am also convinced we owe
	our fellow citizens a more effective, responsive Federal Government,
	and finally, long overdue tax relief.
	As a former Chairman of South Carolina's House Ways and Means
	Committee, I have seen first hand that it is possible to deliver
	substantial tax relief without compromising the quality of much needed
	government services and programs. With the Congressional Budget Office
	projecting total surpluses of $5.6 trillion over the next 10 years, I
	believe this Committee has an opportunity to take the first steps
	toward reducing individual income taxes which are at the highest level
	ever. The fact is that my constituents' taxes are growing faster than
	our economy. According to the CBO, tax revenues increased by 10 percent
	last year while our economy grew at 5 percent. No doubt we have Federal
	programs and services that will require additional resources. It is
	difficult to explain why Americans are continuing to pay record high
	taxes at a time of peace and prosperity.
	Like many of my colleagues, I believe we have a great opportunity
	to reduce the tax burden and work for more fairness in our tax code.
	Let's finish the job that was begun in the last Congress to eliminate
	the marriage penalty. As Congressman Schrock mentioned earlier, this
	change ought to be one of our highest priorities. Also, the death tax
	needs to be buried once and for all * * * why should we penalize the
	millions of small business owners and farmers who have worked hard all
	their lives? Finally, Mr. Chairman, I want to work with you and my
	colleagues in taking a hard look at repealing the 1993 tax increase on
	Social Security benefits. It seems to me that this is another example
	of our Federal Government discouraging hard work and initiative.
	Once again, Mr. Chairman, thank you for this time for me share my
	views. I look forward to working with you and the other members of this
	committee in fashioning a responsible and forward looking budget.

	Chairman Nussle. I thank you. Are there questions for this
	witness?
	Mr. Sununu. Mr. Chairman.
	Chairman Nussle. Yes, Mr. Sununu.
	Mr. Sununu. Congressman, can you talk a little more about
	the scope of the tax cut that was put into place in South
	Carolina, what the implications of that tax relief were when it
	went into place, how revenues changed in the years following
	the tax relief, and an assessment of the current state of the
	budget in South Carolina?
	Mr. Brown. We took a look at the total tax system and we
	felt like one of the erroneous taxes we had was the school
	operating property tax, particularly as it impacted the senior
	citizens. So the first rush of returning some of the taxpayers'
	money was to give them relief. For the first $100,000 of the
	assessed value of their home, we would return back to those
	locals the tax equivalent of $100,000, which the first year was
	like $202 million and last year, $264 million. That was the
	first cut.
	Then, of course, we had several other cuts we made through
	that 5-year period when I chaired the committee. One was to
	raise the tax relief on senior citizens at 65, that they would
	not have to pay income tax on the first $15,000 of their
	income, which was a real boost to that segment of the society.
	We also did something with the child tax credit; we doubled
	that.
	Anyway, there were several initiatives, and it really did
	spur the economy because all of a sudden the taxpayers had $200
	million more they could spend to stimulate the economy, to
	enhance the economy, rather than go into the growth of, say,
	government. So it was a boom.
	I will have to report though that this year South Carolina
	is faced with a budget shortfall for the first time in probably
	7 or 8 years. So I am real pleased to be up here where there is
	lots of money.
	Congressman Spratt, down in South Carolina, now is a good
	time to leave.
	Mr. Spratt. You left town just in time.
	Mr. Brown. Yes, sir, I think so.
	Mr. Spratt. Listen, what is the problem in South Carolina?
	Is it because of tax cuts that there is a diminishment of
	revenues, or is there a downturn in the economy that is causing
	this fall-off in revenues in South Carolina? Our State
	legislator right now, Henry, is glad to be here because we are
	coping with the problem of 15 percent across-the-board cuts as
	we speak.
	Mr. Brown. I think what happened is we had gotten too
	complacent in our good economy, Congressman Spratt. We were
	having surpluses of a couple hundred million dollars; every
	year we would have to make supplemental appropriations to be
	able to spend those surplus items. And I think what happened,
	the legislature got caught in the thought that we were always
	going to have $200 million worth of surplus each year, so they
	started spending recurring revenue in one-time appropriations.
	And I think this is where we have come to.
	We actually have now about $500 million worth of those
	recurring items that is built into the base of government,
	which is not really recurring each year. I think that is the
	real shortfall in the process. It is--the lack of budget
	restraints is what has actually brought us into this position.
	Chairman Nussle. Mr. Gutknecht.
	Mr. Gutknecht. Could I tag onto that? I was reminded,
	though, of the story of the old Indian chief who once said the
	effectiveness of a rain dance is determined largely by the
	timing.
	Mr. Brown. That is a good saying.
	Mr. Gutknecht. As the former chairman of the Ways and Means
	Committee down in South Carolina, how much did you allow the
	total State budget to increase by in those years? Do you
	remember the numbers or the percentage?
	Mr. Brown. Probably somewhere in the 6 percent range.
	Mr. Gutknecht. Per year?
	Mr. Brown. Yes.
	Mr. Gutknecht. Because I have this crazy notion that
	government's budget should not grow any faster than the average
	family budget.
	Mr. Brown. That's correct, 3 percent. I think we were
	growing faster than the CPI.
	Mr. Gutknecht. That is something I hope we can--as members
	of this committee, can get back on course. Because for several
	years this committee did a pretty good job of reining in some
	of our friends on other committees as well as some of our
	colleagues in the other body. The last couple of years we have
	slid backwards just a bit.
	It seems to me this committee ought to sort of hoist that
	banner high, that there is no reason the Federal budget ought
	to grow any faster than the average family budget.
	Thank you.
	Mr. Brown. I think that is the exciting thing about this
	budget process here. We actually can now, by reducing the tax
	tables, require less income coming in so that we can adjust
	that exceeding growth.
	Chairman Nussle. Thank you.
	Any other questions for members?
	I have a question. I was just curious how you handle
	emergencies in South Carolina? Do you have a rainy day account?
	Some States do that. And what would be your advice with regards
	to handling of emergencies?
	Mr. Brown. We have two trust funds we set up. One we call
	the capital reserve fund, which is 2 percent of the revenue
	from last year. The other is a general reserve fund, which is 3
	percent. And those monies are held in trust in case there is a
	shortfall.
	We have a balanced budget amendment, which means we are
	required to balance that budget each year. This prevents any
	shortfall that might come. We attach those trust funds before
	we actually make the budget cuts.
	Chairman Nussle. What are the safeguards on the general
	fund, emergency funds? In what ways do you either define
	emergencies, in order to prevent raiding of that fund; or how
	is it managed so that it is not just dipped into without
	discretion?
	Mr. Brown. The general reserve fund is pretty restricted.
	You can only qualify to spend those monies if in fact there is
	a midyear cut.
	The capital reserve fund is a different item. It is 2
	percent money we set aside. In fact, if we don't have a
	shortfall in that particular budget year, then we are able to
	appropriate those items at the end of the year, call them
	capital reserve, which means they should only be spent for
	capital items.
	But this is the problem--in answer to Mr. Spratt's question
	earlier, this is a problem we have gotten ourselves into. We
	did not adhere to the rules of that fund, so they started
	spending those; instead of on one-time items, capital items,
	they started spending them on recurring items, and this is
	where we got ourselves into trouble.
	Chairman Nussle. Any other questions for this witness?
	Thank you very much for your testimony and for your service
	on the committee. We look forward to that.
	Mr. Brown. Thank you. My pleasure.
	Chairman Nussle. Because of Mr. Grucci's cancellation, and
	one other, we are waiting for a couple of members that are on
	their way, and as soon as they arrive, we will accept their
	testimony. [Brief pause.]
	Good morning.
	Mr. Flake. Good morning.
	Chairman Nussle. The next witness before the committee is
	the Honorable Jeff Flake from Arizona. We appreciate your
	coming before the committee to give us your thoughts about
	budget priorities for the year. Your entire testimony will be
	submitted for the record, and without objection you may use
	your time to summarize what you would like to tell us.
	So welcome to the Budget Committee. We look forward to your
	testimony.

	STATEMENT OF HON. JEFF FLAKE, A REPRESENTATIVE IN CONGRESS FROM
	THE STATE OF ARIZONA

	Mr. Flake. Well, thank you very much. I really appreciate
	the opportunity. I was just elected this past year, and so I
	think what the voters and Americans need is fresh in my mind.
	Certainly, in this case, I think that we are standing on
	the verge of great opportunity concerning fiscal policy. We
	need dramatic and substantial tax reform and relief, and I
	believe that the President's package is a great place to start.
	I think the President is right when he says that all
	Americans who pay income taxes ought to get tax relief. I think
	that is a statement that we can all live with. It certainly
	cuts across the class warfare that will certainly come as these
	budget priorities are discussed. Federal tax revenues consume
	more than 20 percent of the economy's output. That is the
	highest since World War II. We are certainly in line for tax
	relief.
	Also, if we look across the country--and this is true in my
	district in Arizona as it is elsewhere--companies are laying
	off workers. We are in a downturn here, and we need substantial
	tax relief, not just because it is not right for government to
	take 40 percent of one's income, but because giving people some
	of their money back is the best way to jump-start the economy.
	So I am definitely in favor of that as the highest budget
	priority, to actually return money into the taxpayer's pocket.
	There will doubtless be people who say we cannot afford to
	do this. I think if we cannot afford to now, there will never
	be a time when we can afford to cut taxes. The planets are
	aligned just right. We need employers to employ, investors to
	invest and consumers to consume, and the best way to do that is
	to return money. We have a projected surplus of $5.6 trillion
	over the next 10 years and that begs for substantial relief.
	I encourage you to follow the lead of the American people.
	When they set their household budgets, they say, we need relief
	here and relief there and we have these priorities. I think our
	priorities ought to be the same. We ought to pay off debt when
	we can, and we also ought to put money aside, and we also ought
	to do those things we know are going the start the economy. I
	hope that this committee considers as it prepares the budget
	that we need to leave room for this substantial tax cut.
	This morning, along with a number of my colleagues, we
	launched an initiative to actually have a bill much larger than
	the President's tax cut. I think that the President's tax cut
	is a great place to start, but that we shouldn't stop there. An
	area that could use some relief is in the area of capital
	gains. We learned in 1997 that when we cut capital gains rates
	then the economy is spurred, and it doesn't have a negative
	impact on revenue coming in for government.
	I would just summarize by asking the committee to support
	this kind of tax policy as it sets the spending limits for the
	coming year, and I appreciate this opportunity. Thank you
	again.
	[The prepared statement of Congressman Flake follows:]

	Prepared Statement of Hon. Jeff Flake, a Representative in Congress
	From the State of Arizona

	Mr Chairman, I am pleased to speak to you and the rest of the
	committee as you consider the policies and priorities that will guide
	the shaping of the Federal budget.
	I believe this country is standing at the verge of a great
	opportunity concerning fiscal policy. We have the opportunity as a
	Congress to reverse and undo some of the most stifling policies in our
	Nation's history.
	I'm referring of course to our tax code. Mr. Chairman it is clear
	to me that the American people are taxed far too much.
	Federal tax revenues consume more than 20 percent of the economy's
	output.
	This is the highest percentage of taxation the country has ever had
	in peacetime.
	There will doubtless be objections to even the idea of cutting
	taxes, with one of the cries heard in these halls being ``we can't
	afford to cut taxes.''
	Leaving aside the obvious fact that this is just another way of
	saying ``We don't want to spend less money,'' as we move into what is
	undoubtedly a period of economic slowdown, the clear answer to that cry
	is
	``We can't afford not to cut taxes.''
	We need to empower employers to employ, investors to invest and
	consumers to consume.
	There is nothing about having more money in the Federal coffers
	that helps the economy grow.
	With a projected surplus of 5.6 trillion dollars over the next 10
	years, it would be criminal not to enact a substantial, across-the-
	board tax cut.
	We must cut taxes because we can, and because we should. It truly
	is, the right thing to do by our economy.
	I wanted to make this presentation to the House Budget Committee
	because of the crucial role you play in setting the tone for this
	process.
	Mr. Chairman, I respectfully encourage you to follow the lead of
	the American people when they set their household budgets.
	Our constituents don't determine how much money they want to spend,
	and then go out and try to generate the income to match it. They look
	at their income level and then determine how much they can spend.
	Of course, the added rub of this is that the ``income'' we get is
	taken straight from the labors of the American people, and the more we
	take, the less they are able to do the things that drive our national
	economic state.
	I hope the committee will consider this as it prepares the budget,
	and that the revenue allocations you allot will reflect the need for a
	major tax cut.
	Our national economy is crying out for a large, pro-growth tax cut.
	This morning I have, along with a number of my colleagues,
	announced the drafting of such a bill. It protects Social Security and
	Medicare and is fair, comprehensive and substantial.
	Most importantly, it is needed.
	I ask that the committee support this kind of tax policy as it sets
	spending levels for the coming fiscal year. Thank you.

	Chairman Nussle. Thank you very much.
	In addition to taxes, do you have any advice for us on
	priorities when it comes to programmatic changes or priorities
	for either additional spending or reforms that you would like
	to point out from your testimony?
	Mr. Flake. I certainly think that the area of defense and
	the military needs to be strengthened. I think it has been
	discussed in the Conference and in just about every forum I
	have been in that we need to make that a priority, of
	strengthening the military and making sure our men and women in
	service are treated fairly. So I would certainly think that is
	a priority.
	In the area of education, I would hope that the priority
	isn't so much to see where we can spend extra money, but
	actually to see where we can increase flexibility for the
	States as they carry out their own priorities in education. So
	education is a major area.
	I would also like to see, as we move forward with some of
	the entitlement programs, that we leave room to get a start on
	what President Bush talked about during the campaign; that we
	actually move toward allowing Americans to invest some of their
	own savings in personal retirement accounts. So to the extent
	we need to set aside money to jump-start that process, I
	certainly think that is a great place to start.
	Chairman Nussle. Coming from Arizona, you have a lot of
	folks from Iowa that went down there to retire. You have more
	than we would like to send you, I might add. We would like to
	keep a few of them in the State, but your weather is slightly
	better than we have, during this time of year in particular.
	Do you have any advice for us in the areas of Social
	Security and Medicare? Clearly you have a constituency there
	that I would suspect would be concerned about those two
	programs as we move forward. Do you have any advice for us in
	those areas?
	Mr. Flake. Sure. I think the budget priorities that have
	been outlined so far, that we protect the Social Security
	surplus and use it only for Social Security, and the same with
	Medicare, I think that is something that ought to be honored.
	My constituents, a number of whom are your constituents
	part of the year, and many other Members of Congress here,
	certainly have voiced that to me throughout the campaign; and I
	continue to hear that. So, yes, that is a priority.
	Chairman Nussle. Thank you.
	Are there any other members who have questions?
	We appreciate your testimony and welcome to the Congress.
	We look forward to working with you as we try to formulate our
	priorities.
	Mr. Flake. Thank you.
	Chairman Nussle. Thank you very much.
	Our next witness is a new member--not only a new Member of
	Congress, but a new member of the committee from the State of
	Florida, Adam Putnam.
	And we not only welcome you to the Budget Committee as a
	member, but we welcome you here as a witness to give us your
	thoughts on budget priorities for the year. Your entire
	testimony will be made part of the record, and you may proceed
	during your 5 minutes as you would like. Welcome.

	STATEMENT OF HON. ADAM H. PUTNAM A REPRESENTATIVE IN CONGRESS
	FROM THE STATE OF FLORIDA

	Mr. Putnam. Thank you, Mr. Chairman, ranking member, and
	fellow members of the committee. I really am old enough to be
	here, I promise you.
	Mr. Spratt. I just said, Mr. Putnam, to the chairman that
	either we're getting older or they're getting younger; I'm not
	sure which. But welcome.
	Mr. Putnam. Well, the view from this witness table is no
	different than it is from the freshman spot on the committee.
	It is a long way up there.
	I thank you for providing me this opportunity to share my
	interests and priorities for this committee with you. Put
	simply, my priority is not a request for any new program but a
	request that we begin a process, the fruits of which may not be
	seen for decades.
	Just as we seek a bipartisan consensus on critical budget
	issues, such as the use of the existing tax surplus to fund
	national priorities, tax reform and reduction, and keeping
	Social Security and Medicare solvent and relevant, so we should
	also seek a generational consensus on these same issues.
	We particularly need to seek this consensus on Medicare and
	Social Security because together they consume 33 percent of the
	Federal budget and constitute the largest and most
	comprehensive public program in the United States. Social
	Security is part of nearly every American's life and an
	important source of income for most of today's older Americans.
	It provides more than half of the total income of two-thirds of
	today's retirees. Social Security provides nearly all of the
	income of one-third of the elderly. The Social Security
	Administration estimates that, without benefits, 47 percent of
	individuals 65 and older would live in poverty, four times as
	are in poverty today.
	My concern for developing this new consensus on Social
	Security and Medicare goes beyond the issue of a generational
	wealth transfer and straight to the heart of a relationship
	between a democratic government and the people. Pundits and
	politicians alike wonder at the decline in political
	participation and the rise in cynicism about government among
	today's young people. Let me suggest that a significant factor
	in this cynicism and lack of interest in political
	participation among young people--and baby boomers, too, for
	that matter--is a belief that government is incapable of
	fulfilling its responsibilities to programs like Social
	Security and Medicare because we in the Congress are incapable
	of moving beyond the polarizing rhetoric of campaigns to
	address the root of the problem: making Social Security and
	Medicare solvent and relevant beyond the 10-year projection.
	We can change that if together we seek and find a
	bipartisan and cross-generational consensus on reforms to the
	funding mechanisms for these programs. As a first step in that
	process, allow me to outline a few points where I think we can
	and should reach a consensus:
	First, let us agree that the surest way to secure Social
	Security and Medicare benefits for existing and future
	beneficiaries is to boost economic growth. Surely there is
	already a consensus among us that if the economy is larger, the
	unavoidable burden of supporting benefits for ever-larger
	numbers of retirees will be more feasible, economically and
	politically.
	Let us agree on the timing. I believe that we can reach a
	bipartisan and cross-generational consensus on these issues if,
	as we deliberate on the budget, we will commit ourselves to
	look beyond the next fiscal year and consider the next 50 years
	as well. We have an obligation to act now before the cash flow
	into the system turns negative, to put the system on a more
	economically and actuarially sound basis, to allay the fears of
	those who are counting on its benefits.
	Third, we must agree that we will review previously
	authorized programs for efficiency, effectiveness and
	relevance. Surely there can be a consensus among us that if
	government is efficient and economical in discretionary
	spending, it will free up resources for the nondiscretionary
	spending required to provide benefits to the growing numbers of
	retirees leaving the work force.
	Fourth, let us agree that as we seek to allay the fears of
	existing beneficiaries we will also act now to allay the fears
	of those just entering the work force as well. We can do that
	by seeking a bipartisan cross-generational consensus on reforms
	that will provide opportunities for a fairer return on
	contributions, while still preserving the traditional safety
	net features of the present system for existing beneficiaries
	and those who may prefer that system in the future.
	And finally, let us agree to tone down the rhetoric and be
	honest with each other and the American people. Honestly
	spoken, the challenge of dealing with Social Security and
	Medicare is a challenge too easily put off because it is a
	challenge that most of the people in this room will never have
	to face--present company excluded, of course.
	We all know that although outlays will begin exceeding
	receipts as early as 2013, depending on which projection you
	accept, the present system can serve unchanged until at least
	2030, long past the political and actuarial lifetime of most of
	today's voters and beneficiaries, if not their children. Thus,
	it is our challenge to act now to reach across the aisle and
	the generations to ensure that 30 years from now the
	government's commitment to future retirees is relevant and the
	system for making good on that commitment is solvent.
	If we work together, I am confident we can reach a
	bipartisan and generational consensus that will restore the
	faith of the American people that their tax dollars are wisely
	invested for their future retirement and that their government
	wisely anticipates and solves future problems on their behalf.
	Thank you, gentlemen.
	[The prepared statement of Congressman Putnam follows:]

	Prepared Statement of Hon. Adam Putnam, a Representative in Congress
	From the State of Florida

	Mr. Chairman, Mr. Ranking Member and fellow members of the House
	Committee on the Budget, thank you for providing me with this
	opportunity to share my budget interests and priorities with you. Put
	simply, my priority is not a request for a new program, but a request
	that we begin a process, the fruits of which may not be seen
	conclusively for decades. Just as we seek a bipartisan consensus on
	critical budget issues, such as use of the existing tax surplus to fund
	national priorities, tax reform and reduction, and keeping Social
	Security and Medicare solvent and relevant, so we should also seek a
	generational consensus on these same issues.
	We particularly need to seek this generational consensus on
	Medicare and Social Security because together they consume about 33
	percent of the Federal budget and constitute the largest and most
	comprehensive public program in the United States\1\. Social Security
	is part of nearly every American's life and an important source of
	income for most of today's older Americans. Social Security provides
	more than half of the total income of two-thirds of today's retirees.
	Social Security provides nearly all of the income of one-third of the
	elderly. The Social Security Administration estimates that, without
	Social Security benefits, 47 percent of individuals aged 65 and older
	would live in poverty, four times as many as are in poverty today.\2\
	Just as importantly we need to seek this generational consensus on
	Social Security and Medicare because for the first time in the history
	of these programs, significant populations from five generations of
	Americans have a claim on program benefits.

	CHART OF NOVEMBER 1, 2000, FIVE-YEAR AGE GROUPS
	[Total population 276,059,000]\3\
	------------------------------------------------------------------------
	Age group Population
	------------------------------------------------------------------------
	Under 5 years........................................... 18,945,000
	5 to 9 years............................................ 19,681,000
	10 to 14 years.......................................... 20,017,000
	15 to 19 years.......................................... 19,894,000
	20 to 24 years.......................................... 18,693,000
	25 to 29 years.......................................... 17,625,000
	30 to 34 years.......................................... 19,564,000
	35 to 39 years.......................................... 22,044,000
	40 to 44 years.......................................... 22,769,000
	45 to 49 years.......................................... 20,059,000
	50 to 54 years.......................................... 17,626,000
	55 to 59 years.......................................... 13,425,000
	60 to 64 years.......................................... 10,757,000
	65 to 69 years.......................................... 9,414,000
	70 to 74 years.......................................... 8,758,000
	75 to 79 years.......................................... 7,425,000
	80 to 84 years.......................................... 4,968,000
	85 to 89 years.......................................... 2,734,000
	90 to 94 years.......................................... 1,196,000
	95 to 99 years.......................................... 369,000
	100 years and over...................................... 68,000
	------------------------------------------------------------------------

	Today, there are over 45.6 million Americans aged 60 and older, and
	over 1.5 million Americans aged 90 and over--including my grandfather,
	Dudley A. Putnam. Many Americans who are now retired, or who plan to
	retire in the near future, fear that benefits will be reduced, or the
	retirement age raised, because there are not enough young workers
	entering the work force to fund Social Security and Medicare through a
	``pay as you go'' payroll tax based system.
	As one assesses the impact on the system as members of the ``Baby
	Boom Generation'' stop paying payroll taxes and start claiming benefits
	it is clear that their fears are not unjustified. Over 76.5 million
	Americans belong to the Baby Boom Generation, that's almost one-third
	of our present population of 270 million and the core of our work
	force.\4\ Needless to say, as the Baby Boomers begin to retire the
	impact on the economy and Social Security and Medicare will be
	staggering. Without immediate action on our part, Social Security and
	Medicare, as now funded, are not sustainable.
	In 1945 the ratio of workers to beneficiaries was 41.9 to 1.
	By 1950 it had decreased by more than half to 16.5 to 1.
	By 1960 it had again decreased by more than two thirds to 5.1 to 1.
	By 1975 the ratio had decreased down to 3.2 workers for each
	beneficiary.
	The ratio of workers to recipients has held fairly steady since the
	mid-1970's. Currently the ratio stands at about 3.4 workers to each
	recipient. As the Baby Boom Generation begins to retire this ratio will
	continue to decrease, eventually reaching a level of two workers for
	each recipient by approximately 2030.\5\
	Just as many older Americans look upon the retirement of the Baby
	Boomers and fear benefit reductions or an increase in the retirement
	age, so many Americans of my generation look at the retirement of the
	Baby Boomers and rightly doubt the future viability of a ``pay as you
	go'' system. Many younger workers question the fairness of a retirement
	system where three out of every four dollars that they and their
	employers send in go to pay for their parents' and grandparents'
	benefits.\6\ Workers aged 22 to 34 already pay the highest Social
	Security tax rates, an effective rate of over 10 percent in some
	cases,\7\ yet they do not receive a market-based return on their
	contributions. Is there any wonder that they doubt the relevance of a
	system that taxes them at 10 percent, yet produces a declining rate of
	return on their cash contributions that is far lower than they could
	earn through investing their contributions in a simple certificate of
	deposit?
	Indeed, young workers can expect future returns from Social
	Security of from only 0.58 percent (for high-wage earners) to 2.93
	percent (for low-wage workers) if the system somehow manages to pay all
	future benefits without raising taxes\8\ and young workers rightly fear
	that to fund a pay as you go system, payroll taxes will be raised to
	ruinous levels as the ratio of workers to beneficiaries decreases. As
	the following chart illustrates, their fears are not unjustified
	because, as might be expected, as the ratio of workers to recipients
	has fallen, the tax rates paid by workers have risen.
	In 1945 the FICA tax rate was 1 percent.
	By 1950 it had risen to 1.5 percent.
	By 1960 it had doubled to 3 percent.
	By 1975 it stood at 4.95 percent.
	Since 1975 the tax rates paid by individuals for Social Security
	have risen to 6.2 percent, plus an additional 6.2 percent paid by their
	employers, making a total of 12.4 percent. Perhaps even more
	importantly, the taxable earnings bases have also risen steadily since
	the inception of Social Security, from a low of $3,000 to the current
	high of $80,400.\9\
	When the ratio of workers to beneficiaries was over 40 to 1, and
	the tax rate was 1 percent on the first $3,000 of income, a pay as you
	go system was a viable option. When the ratio of workers to recipients
	approaches 2 to 1 and the effective tax rate is at 10 percent and
	rising, the need for a new consensus is clear.
	My concern for developing this new consensus on Social Security and
	Medicare goes beyond the issue of a generational wealth transfer and
	straight to the heart of the relationship between a democratic
	government and the people. Pundits and politicians alike wonder at the
	decline in political participation and the rise in cynicism about
	government among today's young people. Let me suggest that a
	significant factor in this cynicism and lack of interest in political
	participation among young people--and Baby Boomers too for that
	matter--is a belief that government is incapable of fulfilling its
	responsibilities to programs like Social Security and Medicare because
	we in the Congress are incapable of moving beyond the polarizing
	rhetoric of campaigns to address the root of the problem--making Social
	Security and Medicare solvent and relevant beyond the 10 year
	projection. We can change that if together we seek, and find, a
	bipartisan and cross-generational consensus on reforms to the funding
	mechanism for Social Security and Medicare.
	As a first step in the consensus building process, please allow me
	to outline a few points where I believe we can and should reach
	consensus.
	First, let us agree that the surest way to preserve Social Security
	and Medicare benefits for existing and future beneficiaries is to boost
	economic growth. Surely there is already a consensus among us that if
	the economy is larger, the unavoidable burden of supporting benefits
	for ever larger numbers of retirees will be more feasible economically
	and politically.\10\
	Second, let us agree on the timing. I believe that we can reach a
	bipartisan and cross-generational consensus on these important issues
	if, as we deliberate on the budget, we will commit ourselves to look
	beyond the next fiscal year and consider the next fifty years as well.
	We have an obligation to act now--before the cash flow into the system
	turns negative--to put the system on a more economically and
	actuarially sound basis to allay the fears of those who are counting on
	its benefits.
	Third, we must review previously authorized programs for
	efficiency, effectiveness and relevance. Surely there can be a
	consensus among us that if government is efficient and economical in
	discretionary spending it will free up resources for the non-
	discretionary spending required to provide benefits to the growing
	numbers of retirees leaving the work force.
	Fourth, let us agree that as we seek to allay the fears of existing
	beneficiaries we will also act now to allay the fears of those just
	entering the work force, too. We can do that by seeking a bipartisan
	and cross generational consensus on reforms that will provide
	opportunities for a fairer return on contributions while still
	preserving the traditional safety net features of the present system
	for existing beneficiaries and those who may prefer that system in the
	future.
	Finally, let us agree to tone down the rhetoric and be honest with
	each other and the American people; honestly spoken, the challenge of
	dealing with Social Security and Medicare is a challenge too easily put
	off, because it is a challenge that most of the people in this room
	will never have to face.
	We all know that, although outlays will begin exceeding receipts as
	early as 2013, depending on which projection you accept, the present
	system could serve unchanged until at least 2030, long past the
	political and actuarial lifetime of most of today's voters and
	beneficiaries--if not their children. Thus it is our challenge to act
	now to reach across the aisle, and the generations, to ensure that 30
	years from now the government's commitment to future retirees is
	relevant and the system for making good on that commitment is solvent.
	If we work together I am confident we can reach a bipartisan and
	generational consensus on Social Security and Medicare that will
	restore the faith of the American people that their tax dollars are
	wisely invested for their future retirement, and that their government
	wisely anticipates and solves future problems on their behalf.

	Footnotes
	1. CBO estimate for fiscal year 2000 (Social Security + Medicare =
	$622 billion)
	2. Thomas F. Siems, senior economist and policy advisor, Federal
	Reserve Bank of Dallas, January 23, 2001 for the CATO Institute
	3. Population Estimates Program, Population Division, U.S. Census
	Bureau, Washington, D.C. 20233
	4. US Census Bureau, Characteristics of Baby Boomers
	5. Office of the Chief Actuary, Social Security Administration,
	June 16, 1998 (historical data), April 9, 1999 (projected data)
	6. Robert D. Reischauer (Director of CBO 1989 to 1995) in AARP
	Bulletin Online, January 2000
	7. The Heritage Foundation, Average Effective Social Security Tax
	Rates, 1999: Note the average effective OASDI tax rate is total OASDI
	taxes divided by total income. This differs from the OASDI statutory
	tax rate of 12.4 percent on earned income below the taxable wage cap
	($76,200 in 2000) because the share of earned income to total income
	can differ from worker to worker. Likewise, not all workers are subject
	to the OASDI tax, so the average effective Social Security tax rate can
	vary significantly from worker to worker. Other sources of income,
	besides wages and salaries, include public assistance, Social Security,
	private pensions, alimony and child support, interest, rent and
	dividends, all of which affect the average effective OASDI tax rate.
	8. Thomas F. Siems, senior economist and policy advisor, Federal
	Reserve Bank of Dallas, January 23, 2001 for the CATO Institute
	9. Social Security Bulletin, Annual Statistical Supplement, 1999
	10. Robert D. Reischauer (Director of CBO 1989 to 1995) in AARP
	Bulletin Online, January 2000

	Chairman Nussle. Thank you.
	Are there questions for this witness?
	Mr. Spratt. Mr. Putnam, we have a surplus according to CBO
	of about $5.6 trillion; 2.5 of that is Social Security and
	another $400 billion is Medicare. Do you think that the non-
	Social Security, non-Medicare surplus ought to be apportioned
	so maybe a third of it at least is set aside in some kind of
	strategic reserve, in some kind of fund for the eventual use of
	Social Security and Medicare's long-term solvency? Is that
	unreasonable?
	Mr. Putnam. Well, without assigning a specific number to
	it, I think it is reasonable for us to set aside dollars to
	ensure that those programs are solvent and relevant. But I
	think that the past recent history of this body shows us that
	it is also important that we contain spending, and the best way
	to do that is to take the money out of Washington and put it
	back in the hands of the consumers, families, the workers; and
	I think that responsible tax cuts are a way to do that.
	But, clearly, we also have an obligation to ensure that the
	debt reduction scenarios continue to play out and we will
	indeed be on course to eliminate that debt which is redeemable;
	and that we will also continue to have reserves for Social
	Security and Medicare in the sense that those will continue to
	be solvent.
	Mr. Spratt. OK.
	Chairman Nussle. Mr. Sununu.
	Mr. Sununu. Thank you, Mr. Chairman.
	Congressman, as someone who has been campaigning recently
	and sort of for the first time, I think there is no question
	that in an initial congressional campaign you approach it
	without any biases, I think in many respects, on issues; and
	maybe your ear is a little more closely attuned to voters and
	constituents.
	I am curious to know what your impression was on taxes in
	particular when you spoke to voters and potential constituents
	during the campaign. What was highlighted as being a priority,
	not just for tax relief, but also for tax reform or
	simplification? In other words, what elements of the Tax Code
	do you think engendered the most frustration from taxpayers
	that you would highlight as a priority to try to address in a
	broad tax relief proposal to eliminate some of the frustration
	with the unfairness in the code?
	Mr. Putnam. Thank you, Mr. Vice Chairman. There were a
	number of issues that came up that--let me describe for you my
	district to sort of set the stage.
	I represent central Florida. I don't have any part of the
	coast. It is an interior district, predominantly rural,
	suburban, large agricultural holdings. The death tax, the
	estate tax, probably engenders the most concern among small
	farms, particularly as the older generation is approaching the
	point at which they are incapable of managing the day-to-day
	affairs of their business, their farm, their grove operation,
	their ranch; that they are looking for ways to pass that on to
	their heirs in a way that they will be able to continue in that
	business. With the inflated land prices in Florida, the
	combination of capital gains, and the death tax is the single
	greatest killer of small agriculture in my State.
	But you also raise an important point that I heard an awful
	lot about on the campaign trail, that is tax simplification.
	There is a tremendous frustration with government when you can
	take 10 of the best CPAs money can buy that present the same
	tax question to them that get 7, 8, 9 different answers from 10
	different CPAs; or you can call the IRS hotlines several times
	in a row and get a different answer to the same question.
	The frustration is that when the code has become so complex
	that the very agents who are employed to enforce it aren't in
	agreement on how to enforce it, that when our professionals who
	are paid to consult us on how to present our taxes are not in
	agreement on it, then we have a major problem that undermines
	people's faith in the system. It undermines people's belief in
	the fairness of the law, that it forces ordinary, hard-working
	law-abiding citizens to come afoul of the law--in other words,
	to be criminals. That is a very, very frustrating predicament
	that a lot of those folks find themselves in.
	So the combination of the estate tax and a call for some
	tax simplification were the two most frequent things I heard on
	the trail.
	Mr. Sununu. Thank you.
	Chairman Nussle. Thank you very much for your testimony. We
	appreciate your testimony here today and we look forward to
	your service on the committee. We understand you also will be
	serving on the Agriculture Committee.
	Mr. Putnam. I will.
	Chairman Nussle. And as you pointed out--and it is true for
	my district; I know also for Ranking Member Spratt's district,
	a number of others--agriculture is going to be a key priority
	and issue we are going to have to discuss this year. So we
	appreciate your service and look forward to your advice on that
	as well.
	Mr. Putnam. Thank you, Mr. Chairman and Mr. Ranking Member.
	Chairman Nussle. Thank you.
	The next witness we will hear from today is a colleague
	from Indiana, a new member, Mike Pence. And we welcome you to
	the Budget Committee. We would like to incorporate your
	testimony in its entirety in the record, and during your 5
	minutes we would invite you to summarize and give us your
	advice on budget priorities for this fiscal year.
	Mr. Pence. Thank you very much, Chairman Nussle, and senior
	members of the committee. It is quite an honor for a small-town
	boy and a member of the freshman class to be able to address
	this committee.
	Mr. Spratt. You are talking to someone from York, South
	Carolina, so we come from the same background.
	Mr. Pence. I want to indicate that I am part of the gray
	hair caucus in the freshman class. My predecessor and colleague
	is holding forth on the good looks and the youthfulness. But it
	is an honor to be here before you to share my thoughts on the
	budget for the coming fiscal year.
	As hundreds of layoffs in my Indiana district attest, this
	economy, in my judgment, Mr. Chairman, is listing badly under
	the weight of 8 years of increased taxes and regulation. I come
	to the committee today to urge the Republican Congress to
	become the Congress of economic recovery by passing tax relief,
	significant tax relief, quickly for the American people.
	As President Bush has argued in his tax proposal and as
	others and I have argued in the Economic Growth and Recovery
	Act, a tax reduction will allow families, small businesses and
	family farms to exercise the entrepreneurial spirit that is
	imperative to restoring the economic vitality of east central
	Indiana and the country as a whole. It is appropriate that the
	revival of that spirit begin here in this committee where tax
	relief will be reflected in the next budget.
	If Congress is to repeal the death tax and the marriage
	penalty and enact marginal rate reductions, the new budget must
	reflect the fiscal discipline that is necessary for such cuts.
	The $5.7 trillion surplus that CBO has projected must not be
	the victim of Members of Congress eager to appease special
	interest groups. Rather, Congress should follow the lead of
	President Bush and begin the charge to trust the people with
	their money. After saving Social Security, Congress should pass
	a substantial--in my judgment, in excess of $2 trillion--tax
	cut. A failure to cut taxes by Congress would not only be a
	lost investment in the long-term economic success of the United
	States, it would bequeath future generations a legacy of
	irresponsibility. We must set a new precedent in a time of
	unprecedented surpluses.
	As I mentioned earlier, the zero growth economy has already
	begun to disrupt the lives and businesses of east central
	Indiana's businesses, Mr. Chairman. Cummins Engine Company in
	my hometown of Columbus, Daimler Chrysler in Newcastle,
	Indiana, have both, as major employers, announced layoffs that
	not only affect the lives of the companies' workers but the
	small businesses whose economic success hinges on the health of
	the local economy. For that reason, I feel that any action
	taken by Congress must foment economic recovery in our local
	communities by enacting tax reductions quickly and completely.
	Budget spending should in turn reflect this goal. Any
	marginal tax rate reduction that Congress enacts should be
	across the board and, in my judgment, retroactive to 2001,
	January 1. Additionally, the marriage penalty and death tax
	reduction should be more inclusive and phased in sooner than
	even what our President has requested.
	Such a tax cut may be attacked as too risky or
	irresponsible, yet a $2 trillion tax cut would represent only
	1.5 percent of GDP. Opponents of a significant tax cut do not
	recognize that the current tax rate on work, savings and
	investment penalizes productive behavior and impedes economic
	growth. At the same time, the growing budget surplus represents
	lost investment that would undoubtedly cause economic growth.
	Anti-tax cut proponents, Mr. Chairman, argue that cutting
	taxes will signal the return of deficits, a premise
	contradicted by the Clinton administration's own budget
	documents. In early 1995, nearly 18 months after enactment of
	the 1993 tax increase, the Office of Management that Budget
	projected budget deficits of more than $200 billion for the
	next 10 years.
	Critics also argue that a big tax cut would make it harder
	to reform Medicare or modernize Social Security by allowing
	younger workers to shift some of their payroll taxes into
	personal retirement accounts. Given the magnitudes of the
	projected budget surpluses, there is no conflict between those
	goals. Moreover, entitlement reform would be desirable even
	without a budget surplus because it would significantly reduce
	the long-run unfounded liability of both programs. Large
	projected surpluses simply make it easier for legislators to
	implement the necessary policies.
	Finally, Mr. Chairman, as I said today, with friends
	gathered around the endorsement of the Economic Recovery and
	Growth Act in the sunshine at the foot of the steps of the
	House of Representatives, I simply believe that it is morally
	wrong for the Federal Government to become wealthy while some
	Americans are becoming poor.
	In summary, I urge the committee to set revenue levels that
	assume a substantial tax cut like the one offered by the
	President and that is crafted in the Economic Recovery and
	Growth Act from my friend, the distinguished gentleman from
	Pennsylvania, Representative Pat Toomey. In addition, it is my
	hope that the Budget Committee resolution will include a
	reconciliation instruction for the Ways and Means Committee to
	report out a bill that will keep our promise to significantly
	cut taxes for all Americans.
	[The prepared statement of Congressman Pence follows:]

	Prepared Statement of Hon. Mike Pence, a Representative in Congress
	From the State of Indiana

	Thank you Chairman Nussle for inviting my freshman colleagues and
	me here today to share our thoughts on the budget for the coming fiscal
	year. As hundreds of layoffs in my Indiana district attest, this
	economy is listing badly under the weight of eight years of increased
	taxes and regulation. I come to the committee today to urge the
	Republican Congress to become the Congress of economic recovery by
	passing tax relief. As President Bush has argued in his tax proposal,
	and as others and I have argued in the Economic Growth and Recovery
	Act, a tax reduction will allow families, small businesses and family
	farms to exercise the entrepreneurial spirit that is imperative to
	restoring the economic vitality of east central Indiana and the
	country. It is appropriate that the revival of that spirit will begin
	here in this committee where tax relief will be reflected in the next
	budget.
	If Congress is to repeal the death tax and the marriage penalty and
	enact marginal rate reductions the new budget must reflect the fiscal
	discipline that is necessary for such cuts. The $5.7 trillion surplus
	that the CBO has projected must not be the victim of members of
	Congress eager to appease special interest groups. Rather, Congress
	should follow the lead of President Bush and begin the charge to trust
	the people with their money. After saving Social Security, Congress
	should pass a substantial $2.2 trillion tax cut. A failure to cut taxes
	by Congress would not only be a lost investment in the long term
	economic success of the United States it would bequeath future
	generations a legacy of irresponsibility. We must set a new precedent
	in a time of unprecedented surpluses.
	As I mentioned earlier, the zero growth economy has already begun
	to disrupt the lives and businesses of East Central Indiana's
	residents. Cummins Engine and Daimler Chrysler have already announced
	layoffs that not only affect the lives of the company workers, but the
	small businesses whose economic success hinges on the health of the
	local economy. For that reason, I feel that any action taken by
	Congress must foment economic recovery in our local communities by
	enacting tax reductions quickly and completely. Budget spending should
	in turn reflect this goal. Any marginal tax reduction Congress enacts
	should be across the board and retroactive to January 1, 2001.
	Additional, the marriage penalty and death tax reductions should be
	more inclusive and phased in sooner than what President Bush has
	requested.
	Such a tax cut may be attacked as too risky or irresponsible, yet a
	$2.2 trillion tax cut would represent only 1.5 percent of GDP.
	Opponents of a significant tax cut do not recognize that the current
	tax rate on work, savings, and investment penalizes productive behavior
	and impedes economic growth. At the same time, the growing budget
	surplus represents lost investment that would undoubtedly cause
	economic growth.
	Anti-tax cut proponents argue that cutting taxes will signal the
	return of deficits, a premise contradicted by Clinton Administration
	budget documents. In early 1995, nearly 18 months after enactment of
	the 1993 tax increase, the Office of Management and Budget projected
	budget deficits of more than $200 billion for the next 10 years.
	Critics also argue that a big tax cut would make it harder to
	reform Medicare or modernize Social Security by allowing younger
	workers to shift some of their payroll taxes into personal retirement
	accounts. Given the magnitude of the projected budget surpluses, there
	is no conflict between these goals. Moreover, entitlement reform would
	be desirable even without a budget surplus because it would
	significantly reduce the long-run unfounded liability of both programs.
	Large projected surpluses simply make it easier for legislators to
	implement the necessary policies.
	In summary, I urge the committee to set revenue levels that assume
	a substantial tax cut like the one offered by the President and our
	colleague Rep. Pat Toomey of Pennsylvania. In addition, it is my hope
	that the Budget Committee resolution will include a reconciliation
	instruction for the Ways and Means Committee to report out a bill that
	will keep our promise to significantly cut taxes for all Americans.

	Chairman Nussle. Thank you.
	Are there questions for this witness?
	If not, thank you very much for your testimony and we look
	forward to working with you.
	Mr. Pence. Thank you, Mr. Chairman.
	Chairman Nussle. The next witness is also from this
	committee, the gentleman from Texas, Mr. Culberson, who is a
	new member of the Budget Committee and who I have had an
	opportunity to already get to know and to work with in the
	early transition of this committee.
	We would invite you to the witness table and we will have
	your testimony as part of the record, without objection, and
	you may use your 5 minutes to summarize your testimony before
	the committee.
	Mr. Culberson. Thank you, Mr. Chairman it is an honor for
	me to be here today, and I want to especially thank you, Mr.
	Chairman, Ranking Member Spratt, for giving each member of the
	freshman class of the 107th Congress this marvelous opportunity
	to speak to you and to all the committee members, to share our
	ideas with you based on our own personal experience in the
	election campaigns we have all just come through.
	I have provided the committee with copies of my testimony,
	as well as some exhibits I would like you to look at as well to
	support the testimony I will be giving here today, and I do
	intend to be brief.
	I am especially privileged to be here as only the third
	Congressman from Texas's District Seven in Houston. The only
	other Congressmen to ever represent this district have been
	George Bush and Bill Archer. George Bush served two terms and
	Chairman Archer served our district for 30 years before
	retiring in the last election cycle. These two great men have
	genuinely created a very special legacy of principled honorable
	leadership in our district that I will do my very best to
	uphold.
	This special legacy, combined with the length of Bill
	Archer's service and the large number of talented, motivated,
	and well-educated citizens in our district, created a very
	competitive election campaign and a field of eight candidates
	last year, which made this campaign especially vivid and fresh
	in my mind, as are the voices and opinions of our voters and my
	predecessors.
	My experience in this campaign and the advice that I have
	obtained from my predecessors, and my own experience in the
	legislature, has given me a lot of valuable insight into the
	question Chairman Nussle has asked us to answer today: What
	budget reforms would I and the voters of District Seven like to
	see the Congress enact?
	District Seven's highest budget priority is to preserve and
	protect America's balanced Federal budget through ongoing
	fiscal discipline, tax cuts to reduce the tax surplus and,
	above all, by approving a balanced budget amendment to the
	United States Constitution.
	We know these principles work in Texas because we have
	proven them and tested it repeatedly in our State government. I
	have just completed 14 years of service to 150,000 of District
	7's residents as their State representative. Over the last 6
	years I served alongside Governor Bush and his staff in helping
	them enact the key elements of his legislative program in
	Texas, public education reform, criminal justice reform, tort
	reform, and tax cuts to strengthen our economy and reduce
	Texas's record tax surpluses.
	We were successful on every count in Texas, and the voters
	in Texas measured the legislature and the Governor against this
	record to make Governor Bush the first Governor to be reelected
	to a full 4-year term in 1998.
	Therefore, Mr. Chairman, I can testify from personal
	experience that statutory and constitutional balanced budget
	requirements have a very healthy effect on every detail of the
	appropriations process and impose fiscal discipline on
	legislators, regulators, public employees, and public agencies.
	Based on this experience, I also want to suggest that
	Congress enact two other proven budget reforms. I am not sure
	exactly what form this would take in the Federal Government,
	but I could point you first for guidance to Article 8, Section
	22 of the Texas Constitution and Chapter 316 of the Texas
	Government Code, which are included in the exhibits I provided
	to the committee. These are speed governors on spending, which
	have had a very healthy effect on our State budget in Texas.
	The core of both of these provisions essentially provides that,
	quote, ``the rate of growth of appropriations from State
	revenues not dedicated by the constitution shall not exceed the
	estimated rate of growth of the State's economy,'' essentially
	limiting spending increases to no more than is brought in by
	natural growth in the State's economy.
	I believe Florida has similar language in your
	constitution, Congressman, by the way, and we visited about
	that before, and I know has worked well in your State as well.
	Again, I am not sure what form that would take in the
	Federal law, but one that I hope we will all work on together
	to implement after we get our budget resolution done.
	Secondly, I would like to direct the committee's attention
	to the performance-based budgeting process we have used in
	Texas very successfully for a number of years. I have attached
	several exhibits which give you some perspective on the opinion
	of members of the legislature on the effectiveness of
	performance-based budgeting, and these exhibits show that it is
	the consensus of every member of the legislature overwhelmingly
	that the adoption of performance-based budgeting has improved
	the accountability and efficiency of State agencies and
	employees, saved taxpayers a great deal of money, and made the
	entire--all of State government more accountable to both the
	legislature and to the taxpayers.
	These are the most important budget reforms that I and the
	people of the District 7 would suggest to you here today to
	ensure that we preserve and protect our balanced budget,
	balanced Federal budget, reduce the tax surplus and strengthen
	our Nation's economy.
	As I learn more about the Federal budget process, other
	ideas based on my experiences in Texas will undoubtedly come to
	mind. In the meantime, I look forward to working with you,
	Chairman Nussle, and with the entire committee to complete our
	budget resolution in a timely manner so we can then move on to
	a detailed discussion of budget reform ideas that I and my
	freshman colleagues have presented here today. I genuinely want
	to thank you for allowing us who are on the freshman campaign
	trail this opportunity to speak to the committee and offer our
	best ideas. Thank you very much.
	Mr. Sununu [presiding]. Thank you very much, John. Any
	questions from your committee members? Thank you for your time
	and your presentation.
	[The prepared statement of Congressman Culberson follows:]

	Prepared Statement of Hon. John Culberson, a Representative in Congress
	From the State of Texas

	Mr. Chairman, Ranking Member Spratt, thank you for giving us this
	valuable opportunity to share our ideas with you and the Budget
	Committee.
	I am privileged to be here today as the third congressman from
	Texas' District 7 in Houston. The only other congressmen to represent
	our district were George Bush and Bill Archer. George Bush served two
	terms, and Chairman Archer served our district for 30 years before
	retiring. These two great men have created a special legacy of
	principled, honorable leadership in our district that I will do my best
	to uphold. This special legacy, combined with the length of Bill
	Archer's service and the large number of talented, motivated and well
	educated citizens in District 7 created an extremely competitive
	election campaign among a field of eight candidates last year.
	This campaign is very fresh and vivid in my mind, as are the voices
	and opinions of our voters and my predecessors on the question that
	Chairman Jim Nussle has graciously asked us to answer today: What
	budget reforms would I and the people of District 7 like to see the
	Congress enact?
	District Seven's highest budget priority is to preserve and protect
	America's balanced Federal budget through ongoing fiscal discipline,
	tax cuts to reduce the tax surplus, and above all, by approving a
	balanced budget amendment to the United States Constitution. We know
	these principles work because we have proven them and tested them
	repeatedly in our state government in Texas.
	I have just completed 14 years of service to 150,000 of District
	Seven's residents as their state representative. Over the last six
	years, I served alongside Governor George W. Bush and worked hard to
	help him enact the key elements of his legislative program: public
	education reform, criminal justice reform, juvenile justice reform,
	tort reform, and tax cuts to strengthen our economy and reduce Texas'
	record tax surpluses. We were successful on every count, and voters
	measured us against this record to re-elect George Bush as Governor in
	1998.
	Therefore, Mr. Chairman, I can testify from personal experience
	that statutory and constitutional balanced budget requirements have a
	very healthy effect on every detail of the appropriations process, and
	impose fiscal discipline on legislators, regulators, public employees
	and public agencies.
	Based on this experience, I also want to suggest that Congress
	enact two other proven budget reforms. The first is a ``speed
	governor'' on spending similar to Article 8, Section 22 of the Texas
	Constitution and Chapter 316 of the Texas Government Code which state:
	``the rate of growth of appropriations from tax revenues not dedicated
	by [the] constitution [shall not] exceed the estimated rate of growth
	of the state's economy.''
	Second, I hope the Congress will enact Performance Based Budgeting
	as the foundation for our budget and appropriations process. As the
	attached exhibits show, Performance Based Budgeting has improved the
	accountability and efficiency of state agencies, according to an
	overwhelming majority of Texas state leaders.
	These are the most important budget reforms that I and the people I
	represent would suggest that the Congress enact to ensure that we
	preserve and protect our balanced Federal budget, reduce the tax
	surplus and strengthen our nation's economy. As I learn more about the
	Federal budget process, other ideas based on my experiences in Texas
	will undoubtedly come to mind. In the meantime, I look forward to
	working with you, Chairman Nussle, to complete our Budget Resolution in
	a timely manner so we can then move on to a detailed discussion of the
	budget reform ideas that I and my freshman colleagues have presented
	today.
	Again, thank you for the opportunity to testify before the
	committee today.

	Mr. Sununu. Our next witness is a new member, of course,
	from New York, the Honorable Steve Israel.
	Welcome, Congressman.

	STATEMENT OF HON. STEVE ISRAEL, A REPRESENTATIVE IN CONGRESS
	FROM THE STATE OF NEW YORK

	Mr. Israel. Thank you very much. Let me thank the chairman
	and the ranking member and all members of this committee for
	affording freshmen the opportunity to be heard. I especially
	want to thank Chairman Nussle for using his first hearing as
	budget Chairman to listen to new members.
	Before coming to the House, I served as town councilman in
	Huntington, Long Island. In my town I led the successful effort
	to reduce and stabilize property taxes for 7 consecutive years,
	slash our debt payments virtually in half, and meet the
	critical needs of our time from child care, to senior care, to
	the environment. And although Huntington's $145 million budget
	is a minute fraction of the Federal Government's budget, the
	same responsible fiscal philosophies have to apply: paying down
	our debt, offering sustained and consistent tax relief, and
	meeting the immediate needs of our citizens.
	I have spoken to thousands of my constituents in New York's
	Second Congressional District, and when I ask them how should
	we budget, they tell you what you would expect to hear: Run it
	like a business. Just as a small business owner would use
	common sense in running a business, so, too, should we use
	common sense in running our government. They say we have to
	live within our means, pay our debts, and invest in our future.
	Just as in a business if there is a surplus, a real surplus, it
	should be returned to the shareholders, and in this case the
	American people, returned to the American people by shoring up
	Social Security and Medicare and providing common-sense tax
	relief.
	Here is how I believe we should do it: First, thousands of
	working families in my district need relief from the marriage
	tax penalty, a perverse effect of the Tax Code that makes a
	married couple pay more in taxes than if they were two single
	people. We need to repeal the marriage penalty.
	Secondly, small business owners need relief from estate
	taxes, taxes that make it virtually impossible to pass along a
	lifetime of work to the next generation. Nationally
	approximately 70 percent of family-owned business are not kept
	in the family once a parent dies.
	Third, we can and should reduce marginal tax rates
	progressively and fairly. These reductions must provide maximum
	relief to hard-working, middle-class families, who are the
	backbone of our economy.
	And fourth, we should continue to pare down our debt.
	Overall I am encouraged by the Federal Reserve Chairman's
	recent comments about the state of our economy. He indicated
	that the current budget surpluses are large enough to
	accommodate both the gradual elimination of the national debt
	and a significant reduction in Federal taxes. Paying down our
	debt means lower inflation and lower interest rates for
	everyone. That is like a tax cut for everyone who has a
	mortgage, a small business, a car loan or student loan.
	In the words of my local newspaper, Newsday, we should
	focus on those elements that have, quote, ``strong bipartisan
	support, eliminating the marriage penalty and a cut in the
	marginal rate for lower and middle-income tax brackets. The
	result would be meaningful cuts for a broad swath of
	taxpayers.'' .
	Above all, Mr. Chairman and Ranking Member and all members,
	Democrats and Republicans can agree on this: Discipline is
	vital. I commend the President for understanding that we have
	to assess the spending side of the ledger as part of any
	comprehensive tax relief plan. At the end of the day, the
	linchpin to any economic blueprint is a balanced budget. That
	is how any household operates, how any business operates. That
	is how my town operated. And that is why any bipartisan fiscal
	plan must include vigilance: a rigorous annual assessment of
	our ability to sustain tax cuts, provide adequate investments
	and eliminate our debt.
	We must continue the economic formula that created the long
	boom of the 1990's: fiscal discipline and investment in the
	knowledge and skills of the American people. Sensible use of
	the surplus will ensure that our Nation reaps the economic
	benefits of both national debt reduction and tax relief for
	working families. And I thank you for your consideration.
	Mr. Sununu. Thank you very much.
	[The prepared statement of Congressman Israel follows:]

	Prepared Statement of Hon. Steve Israel, a Representative in Congress
	From the State of New York

	Mr. Chairman, before coming to the House, I served as a town
	councilman in Huntington, Long Island. In my town, I led the successful
	effort to reduce and stabilize property taxes for 7 consecutive years,
	slash our debt payments virtually in half, and meet critical needs from
	child care to senior care to the environment. Although Huntington's
	$145 million budget is a minute fraction of the Federal Government's
	budget, the same responsible budgeting philosophies apply: paying down
	the debt, offering sustained and consistent tax relief, and meeting the
	immediate needs of our citizens.
	Now we have an opportunity to apply those principles here in
	Washington. In the words of Federal Reserve Chairman Alan Greenspan,
	``The time has come, in my judgment, to consider a budgetary strategy
	that is consistent with a preemptive smoothing of the glide path to
	zero Federal debt or, more realistically, to the level of Federal debt
	that is an effective irreducible minimum.''
	We ought to be running the government like a business. Just as a
	small business owner uses common sense in running a business, so too
	should we use common sense in running the government. We have to live
	within our means, pay our debts, and invest in our future. And just as
	in a business, if there' is a surplus--a real surplus--it should be
	returned to the shareholders, in this case the American people. It can
	be returned to the American people by shoring up Social Security and
	Medicare and providing common sense tax relief.
	Here is how:
	First, thousands of working families in my district need relief
	from the marriage tax penalty a perverse effect of the tax code that
	makes a married couple pay more in taxes than if they were two single
	people. According to the Congressional Budget Office, more than 21
	million married couples have fallen victim to the marriage penalty, at
	an average of $1,400 per year.
	Second, small business owners need relief from estate taxes--taxes
	that make it impossible to pass along a lifetime of work to the next
	generation. Nationwide, approximately 70 percent of family-owned
	businesses are not kept in the family once a parent dies.
	Third, we can and should reduce marginal tax rates progressively
	and fairly. These reductions must provide maximum relief to hard
	working middle class families who are the backbone of our economy.
	Fourth, we must continue to pay down our debt. Overall, I am
	encouraged by the Federal Reserve Chairman's recent comments about the
	state of our economy. He indicated that the current budget surpluses
	are large enough to accommodate both the gradual elimination of the
	national debt and a significant reduction in Federal taxes. Paying down
	the debt means lower inflation and lower interest rates for everyone.
	That's a tax cut for anyone who has a mortgage, a small business, a car
	loan, or a student loan--in effect, everyone.
	In the words of my local paper Long Island Newsday, we should focus
	on those elements that have ``strong bipartisan support * * *
	eliminating the marriage penalty (and) a cut in the marginal rate for
	lower and middle-income tax brackets * * * the result would be
	meaningful cuts for a broad swath of taxpayers.''
	Above all, Mr. Chairman, Democrats and Republicans can agree on
	this: discipline is vital. I commend President Bush for understanding
	that we have to assess the spending side of the ledger as part of any
	comprehensive tax relief plan. At the end of the day, the linchpin to
	any economic blueprint is a balanced budget. That is how any household
	operates, how any business operates, and that is how my town operates.
	And that is why any bipartisan fiscal plan must include vigilance: a
	rigorous annual assessment of our ability to sustain tax cuts, provide
	adequate investments, and eliminate our debt.
	We must continue the economic formula that created the long boom of
	the 1990's--fiscal discipline and investment in the knowledge and
	skills of the American people. Sensible use of the surplus will ensure
	our nation reaps the economic benefits of both national debt reduction
	and tax relief for working families.

	Mr. Sununu. Any questions?
	I have a brief question. You talked about cutting marginal
	rates, and the top marginal rate is 40 percent--a 40-percent
	personal income tax rate. If we are going to cut marginal rates
	in the various brackets--the President has proposed cutting the
	28 percent bracket down to 25, the 15 percent bracket down to
	10--why not provide some relief for the 40 percent marginal
	rate bracket, which is obviously a pretty big disincentive to
	productivity when your next dollar, not quite, but nearly half
	of it is going to go to the Federal Government? Why not cut the
	top--are you opposed to cutting the top marginal bracket? I
	guess that is the question.
	Mr. Israel. In my view nothing is off the table so long as
	we have the ability to sustain those reductions and not return
	to the days of roller coaster tax increases. So I would
	consider virtually everything that is on the table including
	reducing that level of taxation.
	Mr. Sununu. Thank you. Thank you very much.
	We go to the other side of the country for our next witness
	from the great State of Washington, Rick Larsen. Welcome,
	Congressman. We will include all of your written testimony into
	the record. And if you feel free, take the 5 minutes to go over
	the details or to summarize as appropriate.

	STATEMENT OF HON. RICK LARSEN, A REPRESENTATIVE IN CONGRESS
	FROM THE STATE OF WASHINGTON

	Mr. Larsen. Thank you very much, Mr. Chairman. Thank you
	for the opportunity to comment today before the House Budget
	Committee. Thank you as well to Ranking Member Spratt.
	My purpose today is to convey the comments that I have
	heard from my district's constituents regarding the prospects
	of tax cuts in the relation to Congress's work on the budget.
	Just recently I met with a group of small business owners,
	bankers and farmers in Mount Vernon, Washington, which is in
	the heart of my district. The purpose of the meeting was to
	hear how the slowing economy was affecting their businesses and
	to tap into local thoughts and feelings about how best to
	stimulate our economy. The results were, in fact, enlightening.
	First, there seems to be general support for a tax cut, but
	not support yet for any specific tax package of tax cuts, and
	the larger the proposed tax cut package, the more skepticism
	there is about the ability from their perspective of Congress
	to put together a responsible budget. Why was this, I asked.
	The reason for their skepticism was fairly simple.
	Constituents in my district are skeptical about the real size
	of the surplus. Their skepticism seems to be borne out by the
	most recent Congressional Budget Office report which shows that
	over the next 10 years the surplus could range anywhere from
	2.6 trillion to minus $50 billion, that is depending upon
	various assumptions. They don't seem to trust Congress to hold
	the line, period, either on tax cuts or on spending.
	As a result, the message from constituents that I received
	is this: Treat the surplus conservatively and make a tax cut
	affordable. How to do that? The answer is in the second message
	from constituents, and that message is this: Show us the
	budget. Families living in my district would not so much as buy
	school clothes for their kids or order out for pizza without
	looking at their budget. Similarly, talking tax cuts before
	talking budget runs counter to how families in my district
	would approach their own budgets. The best method, in my view
	and their view, seems to be to gain support for tax cuts is to
	show our constituents exactly how much we have to work with,
	again by showing them the budget first.
	Finally, I want to address unfinished business, the
	unfinished business of the debt. In our meeting one local
	banker said in relation to a tax cut package, the public
	doesn't need another political bill. The public wants a
	practical bill. Practicality suggests that Congress should
	finish the unfinished business of paying down the debt, and
	this year's budget should contain a real commitment to this
	goal of fiscal responsibility.
	How do we meet the goal of paying down the debt while
	taking into account the varying ranges of surplus estimates and
	the public skepticism about Congress's ability to be fiscally
	prudent? Three steps. First, again, show the public the budget.
	They need to know exactly how much is at stake and how much we
	can realistically commit to a tax cut.
	Next, keep tax cuts affordable. Americans, at least in my
	district, don't want a tax cut necessarily if it means a sky-
	high national debt. So keeping that in balance.
	And third, I would suggest that we should be conservatives
	and not liberals with estimates of this surplus. Let us not
	spend money that we really do not have. Spending the surplus is
	a one-shot deal, and then it is gone. So let us act
	responsibly, keep tax cuts affordable and maintain the
	commitment to paying down the debt. We owe that at the very
	least to our constituents and to the country.
	Thank you very much, Mr. Chairman.
	Mr. Sununu. Thank you very much, Mr. Larsen.
	[The prepared statement of Congressman Larsen follows:]

	Prepared Statement of Hon. Rick Larsen, a Representative in Congress
	From the State of Washington

	Mr. Chairman, thank you for the opportunity to testify before the
	House Budget Committee this morning. My purpose today is to convey the
	comments I have heard from district constituents regarding the prospect
	of tax cuts and their relation to Congress's work on the budget.
	Just recently I met with a group of small business owners, bankers
	and farmers in Everett, Washington, the heart of my district. The
	purpose of the meeting was to hear how the slowing economy was
	affecting their businesses and to tap into local thoughts and feelings
	on how best to stimulate our economy.
	The results were enlightening. First, there seems to be general
	support for a tax cut, but not support of any specific package. And the
	larger the proposed tax cut package, the more skepticism there is about
	the ability to put together a responsible budget. Why?
	The reason for this skepticism is simple: constituents in my
	district are skeptical about the real size of the surplus. Their
	skepticism is borne out by the most recent Congressional Budget Office
	report, which shows that over the next ten years, the surplus could
	range from $2.6 trillion to -$50 billion, depending upon various
	assumptions. They don't trust Congress to hold the line. Period. On tax
	cuts or on spending.
	As a result, the message from constituents is this: Treat the
	surplus conservatively and make a tax cut affordable.
	How to do that? The answer is in the second message from
	constituents. That message is this: Show us the budget.
	Families living in my district would not so much as buy school
	clothes for their kids or order out for pizza without looking at their
	budget.
	Similarly, talking tax cuts before talking budget runs counter to
	how families in my district approach their own budgets. The best method
	to gain support for tax cuts, it seems to me, is to show our
	constituents exactly how much we have to work with: again, Show us the
	Budget.
	Finally, I want to address unfinished business--the unfinished
	business of the debt. In our meeting, one local banker said in relation
	to a tax cut package, ``The public doesn't need another political bill,
	the public wants a practical bill.''
	Practicality suggests that Congress should finish the unfinished
	business of paying down the debt. This year's budget should contain a
	real commitment to this goal of fiscal responsibility.
	How do we meet the goal of paying down the debt, while taking into
	account the varying ranges of surplus estimates and the public's
	skepticism about Congress's ability to be fiscally prudent?
	This involves three key steps.
	First, show the public the budget. They need to know exactly how
	much is at stake here and how much we can realistically commit to a tax
	cut. Show us the budget.
	Next, keep tax cuts affordable. Americans don't want a tax cut if
	it means sky-high national debt.
	And finally, be conservatives, not liberals with estimates of the
	surplus. Let's not spend money that we don't really have.
	Spending the surplus is a one shot deal and then it is gone. Let's
	act responsibly. We owe it to our constituents and to our country.

	Mr. Sununu. Any questions?
	Thank you.
	Our next witness is Congressman Adam Schiff of California.
	Welcome, Mr. Schiff. We appreciate your taking the time.
	Belated congratulations for all our new members in winning
	your elections.
	Please feel free to take the 5 minutes to summarize your
	testimony or highlight any important points. The entire written
	testimony will be included in the record.

	STATEMENT OF HON. ADAM SCHIFF, A REPRESENTATIVE IN CONGRESS
	FROM THE STATE OF CALIFORNIA

	Mr. Schiff. Thank you, Mr. Chairman and ranking member. We
	very much appreciate the invitation you have extended to all
	the freshmen to have a chance to come and share our budget
	priorities. We recognize how extraordinary it is for you to
	invite us this way and very much appreciate it and hope it is
	repeated frequently by other committees.
	We are at an extraordinary juncture, having the surpluses
	that we do, and I think my luck has been good. I entered the
	State legislature 4 years ago at a time when we first began
	surpluses in California, and I arrived here for record
	surpluses as well. It is an incredible opportunity, and we have
	been the beneficiaries of an extraordinary economy over the
	last 8 years. But it is also an important responsibility that
	we take actions now to foster the continued success of this
	economy and that we don't squander the opportunities that have
	presented.
	When times are difficult, there is an incentive to spend to
	stimulate the economy. It is difficult to continue attacking
	the problem of national debt. When times are good, it is also a
	time where there is a strong incentive to spend either in the
	form of tax expenditures or enough spending and also put
	pressure on our ability to attack the national debt. I think we
	have to keep first and foremost in mind that I think probably
	the most successful thing that we have done over the last year
	in terms of government policy has been a vigorous attack on the
	national debt.
	We are limited in our ability to affect the economy. Small
	business in particular is the engine of growth in the economy
	and more determinative of our success or failure economically
	probably than anything else. But to the degree the government
	can influence the economic cycles, I think probably the single
	most important thing we have done over the last 8 years is to
	get our fiscal house in order, to continue to aggressively
	paying down our debt, to keep interest rates low. I would hate
	to see us in this time of surplus go back to policies that will
	take us into deficit spending and increasing national debt all
	over again. That would be a tragic mistake to make.
	And so I think what we need to do, given that we simply
	cannot rely on fiscal projections, budgetary projections 5 to
	10 years from now, and that is when the strong majority of the
	surplus is anticipated, it would be most prudent to look at the
	near term and not rely on rosy economic assumptions about what
	the economy is going to be doing 5 to 10 years from now, what
	the surpluses are going to be 5 to 10 years from now.
	When we hear figures bandied about about surpluses in the
	neighborhood of $5 to $6 trillion, and we consider half of that
	is Social Security and Medicare and should be off the table;
	when we consider that those figures don't even take into
	consideration tax cuts that are set to sunset, and that if we
	assume that they will be extended, as is the likelihood they
	will be, it further reduces the available surplus; when we
	consider that even dedicating Social Security and Medicare
	surpluses to Social Security, Medicare, we still have enormous
	unfunded liabilities we haven't figured out how to wrestle
	with, to talk about enormous surplus is really somewhat
	illusory. I think we have to keep that in mind, otherwise we
	are going to be headed back down the path of deficits.
	I think we ought to take a very strong look at tax cuts
	that are triggered to a sustained economic growth, to reaching
	debt targets. This is a technique that we employed in
	California where we had an enormous tax cut, predominantly in
	the vehicle license fees. Those were targeted to growth in the
	economy such that if the economy grew at a certain level,
	subsequent tax cuts would automatically kick in. As luck would
	have it, and it was very good luck indeed, the economy was
	strong, and stronger, in fact, than we expected, and we were
	able to pass successive legislation accelerating the tax cuts.
	We didn't even need to wait for the triggers to apply. We were
	able to accelerate further tax cuts. That was very easy to do.
	If the projections turn out to be correct or they are even
	better than we anticipate, it is very easy to accelerate the
	timetable of further rounds of tax cuts.
	On the other hand, if you do not estimate correctly, you
	estimate much better projections than materialize, dealing with
	that problem, as you can imagine, is incredibly difficult, and
	I would urge us to give serious consideration, as difficult as
	it is, to pegging subsequent rounds of tax cuts, the ultimate
	size of the tax cut, to significant targets on debt reduction
	and pick a mechanism that we can assure to the maximum degree
	possible that those numbers will not be manipulated by whatever
	agency is given responsibility for coming up with those debt
	targets.
	I would just in closing emphasize that we don't want to
	find ourselves a few years from now back in deficits. We have
	an extraordinary opportunity to meet our responsibilities on
	prescription drug medication, on education, on military
	defense, and to give a very large tax cut to the American
	people, which we should do. But let's do it sensibly. Let's
	keep our fiscal house in order.
	I want to thank you for this time.
	Mr. Sununu. Thank you very much, Congressman.
	Mr. Spratt. Thank you very much.
	[The prepared statement of Congressman Schiff follows:]

	Prepared Statement of Hon. Adam Schiff, a Representative in Congress
	From the State of California

	Chairman Nussle, Ranking Member Spratt, and members of the
	committee, I appreciate the opportunity to testify before your
	committee today as a member of the freshman class of the 107th
	Congress.
	We are at a critical juncture in our nation's history. The last 8
	years have brought enormous prosperity to this country. We have had
	some of the lowest unemployment in decades, the highest rate of home
	ownership, the longest period of uninterrupted growth--the list of
	superlatives goes on and on.
	The benefits of this economy did not reach everyone, but they
	nearly did. More effective than any government program, the nation's
	bustling growth meant the annual ``Misery Index'' of unemployment and
	inflation combined was lower than at any point since the 1960's.
	Not only did the prosperity mean a higher standard of living for
	most Americans, it meant that our nation got its fiscal house in order.
	We went from a period of spiraling deficits, poor market confidence and
	crushing debt service to the unthinkable--surpluses.
	Well-respected budget analysts who wrote books just a short time
	ago with titles like ``Why We Will Never Balance the Budget'' suddenly
	found themselves changing the titles of the reprints, not to mention
	the text.
	No one predicted the dramatic growth in our economy. No one foresaw
	the size of our surplus. Even a year ago, the Congressional Budget
	Office projected a 10-year surplus of $3.15 trillion. Now the figure is
	$5.5 trillion.
	And this is precisely the problem: Who can really say whether the
	surpluses will continue for the next five or 10 years? And yet many in
	Washington would have us bet the farm that they will.
	Whether it is mammoth new spending, or mammoth new tax cuts, or a
	combination of the two, any expenditure plan that presupposes a robust
	economy and ever larger surpluses over the next decade is almost
	certain to send us back to the days of deficit spending and fiscal
	irresponsibility.
	In the late 1980's and early 1990's, when deficits were high and
	the debt service was enormous, it was difficult to muster the political
	will to control spending and aggressively pay down the national debt.
	Even with enormous discipline, government's ability to influence
	economic cycles has its limitations--the private sector is the true
	determinant of growth.
	But if any change in governmental policy can be attributed to
	hastening the end of the last recession and spurring our present
	success, it was the decision of Congress and the last administration to
	balance our books and pay our bills.
	Now that we are in an era of surpluses--may they last forever--it
	is no less difficult and no less important to maintain our fiscal
	discipline and continue paying down our debt. We can and should return
	a portion of our surplus to taxpayers through tax cuts that will
	stimulate our economy and eliminate the inequities of the marriage
	penalty and estate taxes. We can and should make a greater investment
	in education and health care and strengthen our national defense. But
	we must make these expenditures in a balanced and thoughtful way that
	maintains our fiscal discipline, continues to pay down our debt and
	does not rely on rosy and unrealistic long-term projections.
	I am proud to have joined the Blue Dogs, a group that has never
	lost sight of the importance of a strong fiscal policy. I support the
	Blue Dog philosophy of advocating a hawkishness on the debt and a 50-
	25-25 budget framework that allocates 50 percent of the surplus to
	attacking the national debt and the remaining 50 percent to equal
	division between tax cuts and new investment. This framework reassures
	financial markets of the nation's resolve to maintain fiscal
	discipline; preserves the resources to strengthen Social Security and
	Medicare; and provides flexibility in the event of emergencies or
	should projected surpluses prove illusory.
	One method of further assuring that our expenditures do not put us
	on the path back to deficit spending would involve phasing in a long-
	term tax plan or spending measure, or pegging its growth to surplus or
	debt targets. This approach, suggested by Federal Reserve Chairman Alan
	Greenspan in recent testimony before the Senate Budget Committee, is
	not unlike that adopted by California. Legislation I coauthored in
	Sacramento last session enacted major cuts to the vehicle license fee
	and pegged additional cuts to the growth in revenues. When revenues
	grew even faster than contemplated by the bill, we passed subsequent
	legislation to accelerate the tax cuts further.
	I look forward to working with our new President on a budget that
	meets the country's needs for investment and tax relief and one that
	keeps the economy prospering with a sensible fiscal policy.
	The Blue Dogs have reached out to the President in an effort to
	work on these issues in a bipartisan way--and he has reached back. But
	in the process we would be well-advised to keep Greenspan's caution in
	mind and ``resist those policies that could readily resurrect the
	deficits of the past and the fiscal imbalances that followed in their
	wake.''
	Mr. Chairman, once again, I appreciate the opportunity to testify
	today, and I am happy to answer any questions the committee may have.

	Mr. Spratt. Mr. Chairman, Dennis Moore was to testify, but
	he had to be at a committee hearing. I would like to ask
	unanimous consent to submit his statement for the record.
	Mr. Sununu. Without objection.
	[The prepared statement of Congressman Moore follows:]

	Prepared Statement of Hon. Dennis Moore, a Representative in Congress
	From the State of Kansas

	Mr. Chairman, last week the Congressional Budget Office (CBO)
	issued budget surplus projections that will play an important role in
	the upcoming budget debate in this committee.
	The facts remain, however, that budget projections are often
	inaccurate, that spending caps are set to expire in fiscal year 2002,
	and Social Security and Medicare trust funds continue to be counted as
	general fund revenue--even though large majorities of both parties have
	agreed to protect these funds.
	We must be conservative in using the projected surplus for either
	tax cuts or new spending. We should continue to make paying off the
	debt our highest priority for the projected surplus. And, we need to
	remember that these projected surpluses are exactly that--projections.
	Federal Reserve Chairman Alan Greenspan recently warned the Senate
	Budget Committee that ``* * * the risk of adverse movements in receipts
	is still real, and the probability of dropping back into deficit as a
	consequence of imprudent fiscal policies is not negligible.''
	Even CBO acknowledges that there is tremendous uncertainty in their
	baseline figures over long periods, and economic circumstances could
	quickly change projections from surpluses to deficit. If we rush to
	commit all of the projected surplus funds to tax cuts or new spending
	measures and the surplus does not materialize, we will be forced to
	abandon our balanced budget and fall back into deficit spending. We
	cannot afford to let that happen.
	Mr. Chairman, I would like to submit for the record a January 23,
	2001, article from the Kansas City Kansan, a January 24, 2001, article
	from the Salina Journal, and a February 3, 2001, article from the
	Kansas City Star. Each highlights the dangers of relying on optimistic
	economic budget forecasts to make long-term budget decisions. Indeed,
	we do not need to rely on CBO projections, or Federal Reserve Board
	proclamations, we need only to take a look at states across our nation
	to see the empirical evidence that the decisions we make today could
	have drastic economic effects tomorrow.
	Mr. Chairman, before this committee begins to develop the annual
	budget resolution we must agree on reasonable surplus figures that will
	keep us on the track of fiscal discipline and to prevent the errors of
	our states. When we craft the budget, we all need to work off of the
	same page. The following principles are very basic assumptions, already
	agreed to at various times by the leadership of both parties, on which
	I hope this committee will follow in crafting the budget resolution:
	1. Long-term economic forecasts are inherently uncertain;
	2. The size of the available surplus must exclude the Social
	Security and Medicare trust funds;
	3. Realistic assumptions for the growth in discretionary spending
	must be properly accounted;
	4. Surplus projections should incorporate the costs of policies
	that Congress historically reauthorizes;
	5. The baby-boom retirement will place sizable future obligations
	on the Federal budget, and we must recognize that the surplus totals
	include funds generated by retirement trust funds (such as the military
	retirement trust fund), which are already committed to future
	obligations.
	If this committee takes a balanced and prudent approach to managing
	the surpluses now, our nation will have the economic benefits of tax
	cuts, national debt reduction, and common sense investment priorities.

	Mr. Sununu. Our next witness is Congressman Todd Akin, new
	Member from Missouri. Welcome.
	Mr. Spratt. Mr. Akin, I am sorry I can't stay to hear your
	testimony, but I have to go to another meeting myself, but I
	will take a copy of it with me. Thank you very much for
	appearing.

	STATEMENT OF HON. TODD AKIN, A REPRESENTATIVE IN CONGRESS FROM
	THE STATE OF MISSOURI

	Mr. Akin. Mr. Chairman and Ranking Member and members of
	the committee, for the record my name is Todd Akin, Congressman
	from Missouri, Second Congressional District. That is the St.
	Louis area.
	I know that the committee and this Congress must balance a
	lot of competing priorities; however, there are two priorities
	that I believe must receive our highest attention. The first
	priority must be an immediate tax decrease. First of all,
	America has a tax surplus. A surplus comes from a direct tax
	rate on the average American family that is greater than the
	cost of food and clothing and shelter and transportation all
	combined. We have a tax surplus. It is time to give the money
	back where it belongs, and that is to the people.
	In addition, the American economy is in need of immediate
	attention. Our economy reacts to a number of forces, including
	the high taxes and nonexistent energy policy, a troubled stock
	market. Now it is time to provide solutions to that slumping
	economy.
	In fact, Federal Reserve Chairman Alan Greenspan has
	forcefully weighed on this question with two decreases in our
	interest rates. He went further to support tax cut to jump-
	start the economy.
	The solution is straightforward. We must continue to
	protect Social Security and Medicare and return the tax surplus
	through cuts designed to stimulate critical sectors of our
	economy. If we were to accelerate the President's package to $2
	trillion, the overall cut would still be smaller than the tax
	cuts that were passed during President Kennedy's and President
	Reagan's administrations. In fact, the President Reagan package
	in today's dollars would be a $5 trillion package. President
	Bush's tax cut proposal is a modest approach, but I believe we
	need to accelerate his plan.
	We can't let politics get in the way of economics. A strong
	economy is like sunshine. It is kind to all, and it brings hope
	of a new day and a promise of yet more American dreams that can
	become reality.
	The second priority, Mr. Chairman, I would suggest is that
	we must pay attention to our national defense. Through the
	decades and centuries, in fact, America has a perfect track
	record of not being prepared for military conflict, starting
	with the War of Independence and then the War of 1812, World
	War I, World War II. You take any of our major conflicts and we
	have never historically been prepared. In an era of deadly
	weaponry, a lack of preparedness can come at a tragic cost.
	Specifically I believe we should pass a limited
	supplemental defense appropriations bill for fiscal year 2001
	at about the $9- to $10-billion level to meet funding
	shortfalls this year.
	Secondly, the defense budget for fiscal year 2002 must be
	adequately funded and must adequately fund national defense.
	The Congressional Budget Office has identified a $40- to $50-
	billion-a-year shortfall. If these steps are not taken, I
	believe we will see lack of combat preparedness. The ability to
	shoot, move and communicate will continue to deteriorate. The
	flying proficiency of our pilots will deteriorate. Our
	stockpiles of precision-guided munitions, that are already at
	half of their level, will continue to drop, and the highly
	skilled midcareer officers and noncommissioned officers will
	continue to depart the force. If we don't support defense, why
	should they?
	In summary, I believe we must accelerate the tax cut and
	provide for adequate defense. I thank the committee for your
	attention.
	Mr. Sununu. Thank you very much, Mr. Akin.
	[The prepared statement of Congressman Akin follows:]

	Prepared Statement of Hon. Todd Akin, a Representative in Congress From
	the State of Missouri

	Mr. Chairman, ranking member, members of the committee. For the
	record, my name is Todd Akin, Congressman for Missouri's second
	congressional district in the St. Louis area.
	I know that the committee and this Congress must balance many
	competing priorities. However, there are two priorities that I believe
	must receive our highest attention.
	The first priority must be an immediate tax decrease.
	America has a tax surplus. The tax surplus comes from a direct tax
	rate on the average American family greater than the cost of food,
	clothing, shelter, and transportation combined. We have a tax surplus;
	it is time to give the money back where it belongs--to the people.
	The American economy is in need of immediate attention. Our economy
	reacts to a number of forces including high taxes, a non-existent
	energy policy and a troubled stock market. Now is the time to provide
	solutions to our slumping economy.
	Federal Reserve Chairman Alan Greenspan has forcefully weighed in
	on this question with two decreases in interest rates. He went further
	in supporting a tax cut to jump-start the economy.
	The solution is straightforward. We must continue to protect Social
	Security and Medicare and return the tax surplus through cuts designed
	to stimulate critical sectors of the economy.
	If we were to accelerate the President's package to $2 trillion,
	the overall cut would still be smaller than the tax cut during
	President Kennedy's and President Reagan's administrations. In fact,
	President Reagan's package in today's dollars would be $5 trillion.
	President Bush's tax cut proposal is a modest approach, but I believe
	we must accelerate his plan.
	We must not let politics get in the way of economics. A strong
	economy is like the sunshine. It is kind to all, and brings hope of a
	new day--the promise of yet more dreams that become reality.
	The second top priority that must receive attention is defense.
	Through the decades and centuries America has a perfect track
	record of not being prepared for military conflict--War of
	Independence, War of 1812, World War I, World War II, Korea, etc. We
	have been very poor at preparedness.
	In an era of more deadly weaponry, a lack of preparedness can come
	at a tragic cost.
	Specifically, I believe we should pass a limited Supplemental
	Defense Appropriations bill for fiscal year 2001 at about the $9 to 10
	billion level to meet funding shortfalls this year.
	Secondly, the defense budget for fiscal year 2002 must adequately
	fund national defense. The Congressional Budget Office has identified a
	$40 to 50 billion per year shortfall.
	If these steps are not taken we will see:
	1. Combat preparedness--the ability to shoot, move and
	communicate--will continue to deteriorate;
	2. The flying proficiency of our pilots will continue to decline;
	3. Our stockpiles of precision-guided munitions, already at one-
	half their required inventories, will drop lower;
	4. Highly skilled mid-career officers and noncommissioned officers
	will continue to depart the force. If we won't support national
	defense, why should they?
	In summary, I believe we must accelerate the tax cut and provide
	for adequate defense.
	I thank the committee for your attention.

	Mr. Sununu. We have one more Member that wishes to present
	testimony. We will recess briefly so that he has a chance to
	arrive and then take his testimony.
	[Recess.]
	Mr. Sununu. The committee will come to order.
	Good morning. Welcome, Congressman Langevin. We appreciate
	your taking the time to be here. We have, as you well know,
	taken testimony from a number of your colleagues, Democrats and
	Republicans, new Members of Congress, to get their perspective
	having come really fresh from the campaign trail and being in
	the great position of coming to Congress without a lot of
	preconceived notions about what is and isn't achievable, but
	focusing more on what seems to make sense to your constituents
	and the citizens that elected you.
	Without objection, all of your written testimony will be
	included in the record, and we would like to take your
	testimony and allow you the opportunity to highlight important
	points in your written testimony or to summarize. You have the
	floor for 5 minutes. Thank you for being here.

	STATEMENT OF HON. JAMES LANGEVIN, A REPRESENTATIVE IN CONGRESS
	FROM THE STATE OF RHODE ISLAND

	Mr. Langevin. Thank you, Mr. Chairman, Ranking Member
	Spratt and members of the committee. Thank you for giving to me
	and my fellow members of the freshman class, the opportunity to
	testify before you today. I am honored to be here and to be
	participating for the first time in the formation of the
	Federal budget resolution.
	As you know, the budget decisions we make this year will
	have an enormous impact on the lives of Americans for years to
	come, and I am grateful for the committee's efforts to solicit
	input from the newest Members of the House during this critical
	process.
	Let me start by saying that what is most important to me is
	that out of this process comes a disciplined approach to
	spending, a strong focus on and commitment to paying down the
	national debt, and a responsible approach to tax relief.
	Imposing this type of fiscal discipline is not a new one to
	me. When I entered the Rhode Island Legislature in 1989, our
	State was spending 100 percent of its revenue and saving
	nothing to guard against a possible downturn. Unfortunately,
	Rhode Island, like many States, was thrown into a recession
	where we faced annual deficits of 100- to $200 million annually
	on an approximately $2 billion annual budget.
	The State was forced to drastically cut spending on
	critical programs and devote its energies and resources to
	managing a fiscal crisis for much of a decade. Ultimately my
	colleagues and I were obligated to reevaluate our fiscal policy
	and adopt a more responsible budget strategy.
	I was the chief architect of a plan which limited State
	spending to 98 percent of estimated revenues and required that
	2 percent of incoming tax dollars be placed into a budget
	reserve and cash stabilization account, otherwise known as a
	rainy day fund. Now Rhode Islanders can take comfort in knowing
	that the State's budget will only grow as fast as the State's
	economy, that they have protection against future recessions,
	and that they boast a bond rating that is among the best in the
	country.
	Because of my experience in the legislature, I feel
	particularly fortunate to have entered Congress at a time when
	the tough choices made by my colleagues and predecessors who
	balanced the budget in 1997 are yielding tangible results. I
	now strongly believe that it is my duty to maintain the fiscal
	responsibility that led us here and even to ensure that we do
	not recreate massive deficits like those that we have just
	escaped.
	As rosy as the budget surplus projections look right now,
	it is important to remember that they are, in fact, only that,
	projections. We have no choice but to rely on them to a certain
	extent in order to set priorities and make long-term fiscal
	policy decisions; however, we must be wary of assuming that
	these projections guarantee a decade of more windfall revenues.
	If this proves not to be the case, we will all suffer as our
	debt spirals further out of control, funding is scarce for some
	of the basic Federal programs, and the solvency of Social
	Security and Medicare becomes a goal that is no longer in
	reach.
	Let us not forget that it was only until very recently that
	we struggled with annual budget deficits of $200 billion, a
	national debt of $5.6 trillion, and interest only payments on
	that debt of $300 billion annually. To put it into perspective,
	those interest payments represented more than we were spending
	on Medicare and almost as much as we were spending on the
	entire national defense budget.
	Therefore, I hope this Congress will not act hastily on
	individual elements of the budget, but will instead wait until
	we have agreed upon an overall budget framework within which to
	make decisions. I intend to ensure that there is room for a
	range of priorities in our budget picture before I decide to
	support use of the surplus for any one major initiative.
	Retiring the national debt is a paramount concern and
	should inform every aspect of our budget policy. I want to be
	secure in the knowledge that our debt will continue to be
	reduced and that our children and grandchildren will not have
	to shoulder the burden of recklessness. In addition, paying
	down the debt will result in the one of the best tax cuts that
	we can provide to American working families. Reduction and
	elimination of the debt will ensure low-interest rates and a
	sound long-term economic future for the Nation.
	Furthermore, I believe that we should use or current
	prosperity to enhance those Federal programs relied upon by
	some of the most vulnerable members of our society. First and
	foremost, of course, our senior citizens as well as younger
	generations looking toward their eventual retirement deserve to
	know that the Social Security System will be strong and viable
	whether they need it now or in 20 years. Likewise, we must
	reform and strengthen Medicare without slashing benefits or
	increasing costs for seniors, and provide a prescription drug
	component so that no one is forced to choose between medicine
	and groceries or heat for their home.
	We must also set aside a sufficient portion of the budget
	for other critical needs, including reform of our elementary
	and secondary education system, provision of the benefits and
	care America's veterans have earned and deserve, and
	maintenance of a strong national defense with soldiers who
	receive a fair wage for their service to our country.
	Mr. Chairman, would it be your preference that I finish?
	Mr. Sununu. Without objection, feel free to take as much
	time as you need.
	Mr. Langevin. Thank you, Mr. Chairman.
	Also as a former Rhode Island secretary of state who
	presided over a wholesale reform and modernization of the
	State's antiquated voting system, I am also very concerned
	about election reform. Specifically I believe our budget must
	reflect the importance of this issue by including sufficient
	funding to ensure every precinct in this country is equipped
	with modern voting equipment that is reliable and accessible to
	all voters.
	I will be working with many of my colleagues to make
	progress on this issue well in advance of the next Federal
	election. Knowing that there is a place in our budget framework
	for meaningful action on electoral reform will make the road
	ahead much smoother.
	Finally, we all want to reward hard-working families by
	returning some of their tax dollars, but this cannot come at
	the expense of our Nation's future fiscal stability. Therefore,
	I strongly recommend that any tax relief supported by this
	Congress be phased in and contingent upon two important
	conditions: First, the reality of our annual revenues must meet
	expectations created by current projections. Second, we must
	have a defined plan for paying down the national debt, and the
	targets laid out in this plan must be met.
	In other words, I support tax relief that is triggered only
	when those two critical goals are met. I would also favor a tax
	cut that is limited to a certain percentage of the Federal
	surplus so that if surpluses are lower than projected, we will
	not find ourselves trapped by promises it is no longer
	responsible to keep.
	These precautions will ensure that lower tax rates do not
	come at the expense of fiscal discipline and will encourage
	Members eager to give something back to their constituents to
	channel their energies into a responsible course of debt
	reduction and long-term fiscal responsibility.
	Again, Mr. Chairman, thank you for allowing me to be part
	of this important discussion. There are many tough challenges
	ahead, but I believe that with cooperation and an eye toward
	operating within a responsible framework, this Congress can
	develop a budget that will ensure America's needs are met and
	hard-working taxpayers are given the relief they deserve. I
	thank you for your time.
	Mr. Sununu. Thank you, Mr. Langevin. I appreciate your time
	and your testimony.
	[The prepared statement of Congressman Langevin follows:]

	Prepared Statement of Hon. Jim Langevin, a Representative in Congress
	From the State of Rhode Island

	Mr. Chairman, Ranking Member Spratt and members of the committee,
	thank you for giving me and my fellow Members of the freshman class the
	opportunity to testify before you today. I am honored to be here and to
	be participating for the first time in the formation of the Federal
	budget resolution. As you know, the budget decisions we make this year
	will have an enormous impact on the lives of Americans for years to
	come, and I am grateful for the committee's efforts to solicit input
	from the newest members of the House during this critical process.
	Let me start by saying what is most important to me is that out of
	this process comes a disciplined approach to spending, a strong focus
	on and commitment to paying down the national debt, and a responsible
	approach to tax relief.
	Imposing this type of fiscal discipline is not a new concept to me.
	When I entered the Rhode Island Legislature in 1989, the state was
	spending 100 percent of its revenue and saving nothing to guard against
	possible downturns. Unfortunately, Rhode Island, like many states, was
	thrown into a recession where we faced annual deficits of $100 million
	to $200 million on an approximately $2 billion annual budget. The state
	was forced to drastically cut spending on critical programs and devote
	its energies and resources to managing a fiscal crisis for close to a
	decade.
	Ultimately, my colleagues and I were obligated to re-evaluate our
	fiscal policy and adopt a more responsible budget strategy. I was the
	chief architect of a plan which limited state spending to 98 percent of
	estimated revenues and required that 2 percent of incoming tax dollars
	be placed in a rainy day fund. Now Rhode Islanders can take comfort in
	knowing that the state's budget will only grow as fast as its economy,
	that they have protection against future recessions, and that they
	boast a bond rating that is among the best in the country.
	Because of my experience in the Legislature, I feel particularly
	fortunate to have entered Congress at a time when the tough choices
	made by my colleagues and predecessors who balanced the budget in 1997
	are yielding tangible results. I now strongly believe that it is my
	duty to maintain the fiscal responsibility that led us here and ensure
	that we do not recreate massive deficits like those we've just escaped.
	As rosy as the budget surplus projections look right now, it is
	important to remember that they are in fact only that: projections. We
	have no choice but to rely on them to a certain extent in order to set
	priorities and make long-term fiscal policy decisions. However, we must
	be wary of assuming that these projections guarantee a decade or more
	of windfall revenues. If this proves not to be the case, we will all
	suffer as our debt spirals further out of control, funding is scarce
	for some of the most basic Federal programs, and the solvency of Social
	Security and Medicare becomes a goal that is no longer in reach.
	Let us not forget it was only very recently that we struggled with
	annual budget deficits up to $290 billion, a national debt of $5.6
	trillion, and interest-only payments on that debt of $300 billion
	annually. Put into perspective, those interest payments represented
	more than we were spending on Medicare, and almost as much as our
	entire national defense budget.
	Therefore, I hope this Congress will not act hastily on individual
	elements of the budget, but will instead wait until we have agreed upon
	an overall budget framework within which to make decisions. I intend to
	ensure that there is room for a range of priorities in our budget
	picture before I decide to support the use of the surplus for any one
	major initiative.
	Retiring the national debt is a paramount concern that should
	inform every aspect of our budget policy. I want to be secure in the
	knowledge that our debt will continue to be reduced and that our
	children and grandchildren will not have to shoulder the burden of our
	recklessness. In addition, paying down the debt will result in one of
	the best tax cuts we can provide to America's working families.
	Reduction and elimination of the debt will ensure low interest rates
	and a sound long-term economic future for the nation.
	Furthermore, I believe we should use our current prosperity to
	enhance those Federal programs relied upon by some of the most
	vulnerable members of our society. First and foremost, of course, our
	senior citizens, as well as younger generations looking toward their
	eventual retirement, deserve to know that the Social Security system
	will be strong and viable, whether they need it now or in 20 years.
	Likewise, we must reform and strengthen Medicare, without slashing
	benefits or increasing costs for seniors, and provide a prescription
	drug component so that no one is forced to choose between medicine and
	groceries or heat for their home.
	We must also set aside a sufficient portion of the budget for other
	critical needs, including reform of our elementary and secondary
	education system, provision of the benefits and care America's veterans
	have earned and deserve, and maintenance of a strong national defense
	with soldiers who receive a fair wage for their service to our country.
	As a former Rhode Island Secretary of State who presided over a
	wholesale reform and modernization of the state's antiquated voting
	system, I am also very concerned about electoral reform. Specifically,
	I believe our budget must reflect the importance of this issue by
	including sufficient funding to ensure every precinct in this country
	is equipped with modern voting equipment that is reliable and
	accessible to all voters. I will be working with many of my colleagues
	to make progress on this issue well in advance of the next Federal
	election. Knowing that there is a place in our budget framework for
	meaningful action on electoral reform will make the road ahead much
	smoother.
	Finally, we all want to reward hard-working families by returning
	some of their tax dollars, but this cannot come at the expense of our
	nation's future fiscal stability. Therefore, I strongly recommend that
	any tax relief supported by this Congress be phased in and be
	contingent upon two important conditions. First, the reality of our
	annual revenues must meet the expectations created by current
	projections. Second, we must have a defined plan for paying down the
	national debt, and the targets laid out in this plan must be met.
	In other words, I support tax relief that is triggered only when
	these two crucial goals are met. I would also favor a tax cut that is
	limited to a certain percentage of the on-budget surplus, so that if
	surpluses are lower than projected, we will not find ourselves trapped
	by promises it is no longer responsible to keep.
	These precautions will ensure that lower tax rates do not come at
	the expense of fiscal discipline, and will encourage members eager to
	give something back to their constituents to channel their energies
	into a responsible course of debt reduction and long-term fiscal
	responsibility.
	Again, Mr. Chairman, thank you for allowing me to be a part of this
	important discussion. There are many tough choices ahead, but I believe
	that with cooperation and an eye toward operating within a responsible
	framework, this Congress can develop a budget that will ensure
	America's needs are met and hardworking taxpayers are given the relief
	they deserve.

	Mr. Sununu. With that, the committee is adjourned. Thank
	you.
	[The prepared statement of Congressman Simmons follows:]

	Prepared Statement of Hon. Rob Simmons, a Representative in Congress
	From the State of Connecticut

	In addition to the priorities mentioned by freshman class president
	Schrock, I would add the following items:
	<bullet> A Federal prescription drug subsidy for State-based
	programs.
	<bullet> Getting military personnel off food stamps and improving
	the quality of life.
	<bullet> Prioritizing the disposal of our Nation's high-level
	nuclear waste by allowing for its transport to a designated site at
	Yucca Mountain.
	In conclusion, I look forward to working with you and other members
	of the committee on crafting a budget resolution that:
	<bullet> provides tax relief for working families;
	<bullet> strengthens our military and removes personnel from food
	stamps;
	<bullet> improves educational opportunities for all children;
	<bullet> addresses the issue of nuclear waste;
	<bullet> pays down the national debt; and
	<bullet> protects Social Security and Medicare.
	Thank you, Mr. Chairman for giving me the opportunity to address
	the Budget Committee.

	[Whereupon, at 12:40 p.m., the committee was adjourned.]

	<greek-d>

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