lly, the House of Representatives has resisted the idea of mittee on the Budget. This is understandable. That body nitiation of fiscal measures is its exclusive prerogative. te has special constitutional rights with respect to the I Presidential nominations and treaties so the House has maintained its right to initiate money bills.

38 of the Legislative Reorganization Act of 1946 provided Committee on Fiscal Policy, consisting of the full memberwo revenue and appropriations committees of each House, report to their respective Houses not later than Februach regular session a budget report and concurrent resoon the reports.

re of that joint committee, with its 102 members, is well as resented by the House, was unwieldy, and lacked the ols to develop a rational fiscal policy.

there is no reason not to have two separate standing on the budget-one for each House. This would be conrecommendation 7 of the Joint Study Report.

seem logical that each committee be comprised of three om the Appropriations Committee, three members from ing committee, and nine members at large who are not these committees.

arrangement, I would assume that the three members propriations and tax-writing committees would be the e ranking majority member, and the ranking minority hese committees. This would assure powerful representabudget committees of those most vitally concerned. members at large would be selected as they are for other mittees, assuring representation of the membership at airmanship of the two budget committees could be rotated members of the appropriations and tax-writing commitiscuss the role of the budget committees in a moment. ct to a new Congressional Office of the Budget, I believe a much stronger body than the joint staff mentioned in ion No. 8 of the Joint Study Report, or the office under nomic Committee in Senator Humphrey's bill.

mphasize this strongly. It should be equivalent in impore, and expertise to the General Accounting Office. While ional Budget Office could utilize information developed ccounting Office, the Library of Congress, and the various agencies, its function should be more concerned with ing and revenue matters and fiscal effects of programs, pecific investigations such as those conducted by the Genng Office.

that the Comptroller General has a 15-year term and, the past there has been some bad experience with the eneral who stay for a long time and are not as responsive Congress as they should have been.

Houses of Congress, no satisfactory method of selecting a congressional agency has yet been developed, which present a problem in selecting the Director of the Conce of the Budget.

In the case of other congressional officers such as the Comptroller General and the Librarian of Congress, this selection is made by the President.

Since the purpose of the Office is to enable Congress to develop independent judgment, this does not seem appropriate in case of the Director of the Congressional Budget Office.

I believe the selection should be made by the Speaker of the House. The Speaker is the highest officer in the House which maintains authority to initiate money bills. Moreover, the Speaker ranks just behind the Vice President in Presidential succession.

The staff itself, of course, should be selected solely on the basis of competence without regard to partisan affiliation.

Based on the budget estimates and the estimates and recommendations of the Congressional Office of the Budget, the two budget committees could hold hearings and consider what level should be set for total expenditures and revenues for the ensuing fiscal year, what the budgetary surplus or deficit should be and what limit should be placed on new spending authority and tax reductions.

This is similar to Senator Brock's legislative budget. I believe Senator Nunn's bill contains the proposal. Senator Percy's bill, S. 346, has this concept, and I think Senator Humphrey's bill, S. 1030, envisages something of this type.

This process could begin within 10 days after the submission of the Federal budget by the President.

7 Within a month or so, say March 1 of each year, each budget committee could report to its parent body a concurrent resolution which would:

1. Estimate total revenues for the ensuing fiscal year.

2. Recommend a relationship between total spending and revenues which is appropriate to the maximum growth and stability of the national economy.

3. Establish a limit on total budget outlays and spending authority which is consistent with such relationship between spending and

revenues.

4. Establish a limit for each committee on new spending authority and tax cuts.

5. Defend in the report the rationale for its recommendations. When Mr. Schultze and I were in the Government we served on what was called a "Troika." the Treasury Department, the Office of Economic Advisers, and the Budget Office.

I believe at least the staff phase of this function could be performed by the Office of the Budget.

To implement Joint Study Recommendation 1, the concurrent resolutions could be considered in each House under rules of limited debate.

But once adopted after conference committee reconciliation, any 'measure affecting totals would have to be offset by provision for changes in revenue or spending levels to avoid breaching the approved deficit or surplus level. This takes into account Joint Study Recommendation 5.

In the light of changing economic circumstances, such limits could be subject to a midyear review and altered if appropriate. This would be consistent with the Joint Study Recommendation 3.

bika meets periodically, at least four times a year. It did were involved in it.

udy Recommendation 4 calls for allocating the appropriate f expenditures and budget authority ceilings to various s having jurisdiction over the legislation affecting the

e such allocations would be included in the concurrent resoolution. This could be done by allocating ceilings to each ed by an appropriation bill. Other categories of spending could be allocated to each of the standing legislative comhich have jurisdiction over legislation enacting such

I us students of Congress underestimate the power and of subcommittee chairmen of the Appropriations Commitnk, though, if the allocations were developed, the subcomirmen would still play a very powerful role in allocations t ceiling.

the course of the congressional session, the Congressional he Budget could provide reports on how new legislation ct spending and tax levels.

her implement Joint Study Recommendation 2 and get a > on "back door" spending, the budget committees could ongress with a "second crack" at this type of new spending

y, a new program must be authorized by legislation, and d by the appropriations committees before spending can e double look could be provided in the case of "back door" by giving jurisdiction to the budget committees to review ams before allowing expenditures-and also tax cuts-to

ack door" spending, which permits expenditures to be made view by the appropriations committee, could get a review get committees. So, also, could programs involving expendicannot be altered by the appropriations committees, that reases, veterans' benefits, and other programs which commit ment to higher expenditures.

way to deal with new "back door" spending would be to programs reviewed by the appropriation committees, alse committees normally deal with spending matters en bloc specific bills.

idy Recommendation 10 would require new budget authorenacted a year in advance of permitting outlays for them. be very helpful in providing sufficient time for the budget to review them before putting them into effect.

Joint Study Recommendation 9 calls for review of the difs in which budget authority and expenditures are, in fact, or incurred. This highly useful exercise could be prepared posed Congressional Office of the Budget and reviewed by committees.

Mr. Chairman, as I stated in my book, "Congressional Control of Federal Spending":

The role of Congress in the spending process should be one of determining the limits, scope and direction of administrative programs, and Congress should make this determination in the light of enough data to be able to ascertain the results of its actions.

I had reference, then, to the examination of the items in appropriations bills. Today, the need to determine the details of appropriations items is transcended by the need to preserve the economic and financial strength of the United States of America.

This means controlling the size of budget deficits to promote sound growth and prevent inflation.

The congressional reforms I have outlined have been drawn from the joint study recommendations and other sources. I have tried to spell out how these reforms could be put into effect.

I know full well that further details must be developed, but I submit that we must "get this show on the road."

In the midst of current inflationary forces and the President's initiatives in the area of congressional spending authority, the political environment is ripe for action. Let us move now.

By way of summary, the material I have covered, as I say, is largely in the interim report of the Joint Study Committee, which I thought was an excellent report. The main departure would be the establishment of an Office of the Budget.

In that office, I believe you would have to have a very strong agency to provide Congress with the necessary tools to deal with this highly complex issue.

Thank you very much.

Senator METCALF. Thank you very much, Dr. Wallace.

Dr. Schultze, I hope you will give us the benefit of your statement at this time.

As I understand it, all three of you are authors of books. My colleague and coauthor on the committee, Vic Reinemer, advises me that Dr. Schultze authored "Setting National Priorities in the 1973 Budget," published by the Brookings Institution.

Dr. Wallace is the author of "Congressional Control Over Government Spending," published by Wayne State University Press.

Dr. Horn, our last witness, is the author of "Unused Power." He worked with the Senate Committee on Appropriations. That was published by the Brookings Institution.

STATEMENT OF DR. CHARLES SCHULTZE, BROOKINGS INSTITUTION (FORMERLY DIRECTOR, BUREAU OF THE BUDGET)

Mr. SCHULTZE. Thank you, Mr. Chairman.

The chairman may not remember this, but one of my most treasured communications when I was Director of the Bureau of the Budget after having had a slight altercation with the chairman over some matter, was a very neatly done piece of paper from him which purported to be a memorandum dated March 1491, from the Spanish Budget Bureau to their Excellencies Ferdinand and Isabella. pointing out why Christopher Columbus should be turned down on his project. proposal.

talking of the mechanics of procedures, I would like to me of the basic substance that I think any congressional dures will have to cover.

art with the proposition, perhaps overstated, that it will ress more harm than good, and perhaps do the country han good, if the Congress simply develops a procedure to Hiture ceiling.

gress having set such a ceiling continues by its individual rovide funds in appropriations, in back door authority, , in excess of the ceiling it sets, what that ceiling really v give the President a directive to impound.

nd perhaps more important, if all the Congress does is set en over the long run I can guarantee that the Congress' rity over priorities and its power over the purse will

ressman can go on to the floor and on the one hand get a -n an appropriation bill for a particular project, knowing esn't really make a bit of difference anyway because he an economy vote by voting for a low overall ceiling, then un the appropriation and authorization process will come and less, and responsibility in those matters will gradually IETCALF. Now you can get a cheaper vote on the authoriza

LTZE. My point is you could have your cake and eat it. ote for a high authorization, a high appropriation, and at e vote for a nice tight overall ceiling.

point is that the central issue involved in congressional he budget is the development of procedures to make sure ividual actions of the Congress add un, in their spending , to the same total as a congressionally imposed overall iling. That is the central process which has to be done. the requirements to do this? What is going to be involved find a mechanism to do this?

look at the three kinds of ways in which Congress directly ling. First, the normal appropriation bills. I might point ery rough count, not exhaustive, would indicate that in budget for 1974 (excluding the Defense budget), of the 0 billion worth of spending there, approximately $65 bil7 from appropriations bills.

inder will flow from two other kinds of congressional is back door spending. These essentially are all the legis s which directly authorize spending, social security, highion control and the like without requiring appropriations. e is a third category for which there is no technical or legal want to call mandatory appropriations, where the Conabstantive legislation act, forces the Appropriations Compropriate.

pensions are annually appropriated, but with respect to propriations Committees have little leeway. That is mancommittee. Hence, the three areas, appropriations, back ty, and mandatory actions, actions which mandate spendnehow be brought into this process.

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