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Section 206 of the act outlined the full range of responsibility the GAO was to have in keeping members informed during the budget process. However, Congress has not invoked all of the GAO's duties that were assigned to it by the Reorganization Act.

While I have called for the creation of a new agency, the GAO might well be reorganized and expanded to fulfill the present congressional need. In the course of its reorganization, I would strongly urge that the Comptroller General become a legislative appointee, rather than Executive one, as he is currently. This would centralize the General Accounting Office under the wing of the Congress.

(2) The institution of longer term fiscal periods would allow for greater care and preparation of each budget. Some budget measures must be considered yearly, but many expenditures can be appropriated up to 3 years in advance. Other continuing programs might require only 5-year evaluation.

The annual budget is certainly not rewritten from scratch each year, since many expenditures are carryovers from previous years.

The annual approach to fiscal affairs distorts evaluation of programs because the spending appropriation review ignores the effectiveness of the program over time. The institution of longer term fiscal periods would permit program review with regard to trends that may be surfacing over a period of years.

Looking to the future, if the GAO or a comparable arm of the Congress were to be as beneficial as I think it could be, we might contemplate extending fiscal review from 1 year to 2 or 3.

At this time, such a suggestion seems somewhat impractical, but given time, a GAO-type agency might provide legislators with enough preliminary information to enable longer term planning.

Economic trends and revenue-producing plans could be accounted for, and provisions made to accommodate national fiscal policy.

In addition, if the Congress were to authorize more programs on a 3-year basis, the budget could be divided into three parts. Each part would be reviewed every third year, and the depth of examination would surpass in degree any that we are now capable of. The load of the budget review would be considerably lightened and members would be better able to evaluate individual programs.

(3) The careful scrutiny of Federal programs will solidify congressional grasp on priority determination. There are a number of programs funded annually that should be reviewed for effectiveness and appropriateness of moneys spent. Congress should know where and how funds are spent. In union with increased powers of fiscal policy that its own budget agency would provide, increased regulatory review would restore substantially to Congress its power of the purse.

I have heard and read of some who would label this committee and its reform effort a "toothless tiger.' We are in the position to be much tougher than that.

I fervently hope that these proceedings will result in a condensation of ideas on the subject of congressional reassertion and be the impetus behind constructive, practical legislation to develop in Congress the mechanisms and expertise which we lack, yet which we so vitally need.

Thank you

I would like to express my appreciation to Mr. Steven Teffet of the University of Rochester who has been most helpful in researching this material.

I want to commend you on the work you are doing and I look forward to voting for legislation that will assist us in meeting our budgetary problems in this Congress.

Chairman ULLMAN. Thank you very much, Dick.

As usual, your remarks are short and to the point. You have hit the primary areas of responsibility. This committee, I want to assure you, is dedicated to the purpose of bringing to Congress as rapidly as possible a proposal to establish the kind of budgeting procedures that you and others have recommended.

I will say to Senator Curtis, in my judgment, under existing procedures it is not possible to be fiscally responsible, but if we establish the right procedure I am satisfied we will exercise fiscal responsibility and we will recapture again the control of budgeting which we have long ago lost to the executive.

Are there any questions?
Mr. SCHNEEBELI. I just want to make one remark.

I welcome the testimony of my colleague before the committee and I am glad we have his vote because I think we will need every vote we can get.

As one of the regional whips of your party, I hope you can whip a lot of other fellows into line because we need your help.

Thank you.

Senator FANNIN. I want to commend the Congressman. It is certainly an excellent statement and I will read it very carefully.

Senator CURTIS. No questions.
Thank you.
Chairman ULLMAN. Thank you.

Now we come to our distinguished former colleague, the Honorable John Williams, former Senator from Delaware, a man who spent a great deal of his time while he was here in the Congress fighting for the very thing that this committee is dedicated to do.

So we very much appreciate your coming back and testifying befor the committee.


Senator WILLIAMS. Thank you, Mr. Chairman.
I appreciate the opportunity to appear before this committee.

First, I would like to say I think this is one of the most encouraging developments that I have seen take place in the Congress, at least during the period when I was working with it-namely, where you see the appropriations committees and finance committees sitting down together and trying to work out solutions to this problem.

I don't think it can be done by either of the two committees working independently of each other.

In recent years considerable controversy has developed as to the powers of Congress versus the powers of the President to regulate the level of spending.

93-764–73_-15 .

· As a former member of the legislative branch I want to express my strong support of the position that Congress not only has the authority to control the level of spending, but it has the responsibility to do so.

The Constitution also delegates to the Congress the authority and the responsibility to provide the method by which it will raise the revenue to finance these expenditures.

These powers to spend and to tax are inseparable. Congress cannot expect to exercise its jurisdiction over spending unless at the same time it accepts its responsibility to provide the means to raise the necessary revenue to pay for its programs.

That is why I welcome this opportunity to appear before this committee today and to urge Congress to reassert its powers and establish its own ceiling on expenditures.

First let me state, however, that in view of the serious threat of inflation and the precarious position of the American dollar today I do not think that expenditure controls alone can solve our financial dilemma any more than it could be solved by an increase in taxes.

In my opinion, it is going to take a combination of both expenditure controls and increased taxes in order to eliminate the staggering deficits and to restore international confidence in the American dollar,

That is why I am emphasizing the importance that both approaches be tied together-just as we did in 1967 when the first congressional ceiling on expenditures was adopted and at a time when the American dollar was confronted with its first serious postwar threat.

I realize that the mere mention of increased taxes or the suggestion that some of our favorite programs be curtailed or eliminated flashes a red light both to Congress and to the American public, but let us not overlook the fact that the devaluation of the American dollar has an even more drastic mathematical effect on the American consumer through inflated prices.

Surely, if we cannot live within our income today in a period of relatively high prosperity, then when will we be able to achieve a balanced budget?

Within the past 2 years we have already had three devaluations of the American dollar—two 10-percent devaluations and the more recent upward evaluation of some of the stronger international currencies.

It is my opinion that this floating of the American dollar is just another method of devaluing the dollar and disguising it.

Do not forget that these devaluations of the American dollar are the result of—and not a solution to our financial dilemma. The solution lies in a restoration of international confidence in the ability of our Government to solve its internal financial problems, and that can only be accomplished by a better control over our fiscal policies here at home.

Our deficit for the 3 fiscal years 1971 through 1973 exceeds $70 billion, an average of $2 billion per month beyond our income. Our balance-of-payments deficits in international trade have increased by similar proportions.

The proposed deficit for fiscal 1974 under the administration's recommended expenditure ceiling would still be in excess of $12 billion.

With this background I think it is imperative that Congress take some action, and I congratulate this committee upon the consideration

it is giving toward one of the essential steps; namely, a realistic ceiling on expenditures.

There is a precedent for such action. As former Secretary Barr pointed out, in 1968 Congress adopted a rollback in Government spending and placed a ceiling thereon. This expenditure ceiling was attached to a bill providing a 6 percent surtax, and the important point is that the two were tied together.

In 1968 we were closing a fiscal year's operations with a $25 billion deficit and experiencing one of the first serious runs on the American dollar. Congressional acceptance of that combined expenditure limitation and tax increase was given major credit for the avoidance of a devaluation of the dollar in that period.

Based upon our experience with the 1968 effort to limit expenditures it is my opinion that to be effective both the administration and the Congress must share the responsibility of bringing the expenditures and the revenues of our Government nearer into balance and any expenditure ceiling must be tied to revenues.

To achieve this objective I would therefore make the following recommendations:

1. The President should be required by law as he submits his annual budget message in January of each year to include not only his estimate of revenues and expenditures, but also when such estimates represent a deficit to recommend a surtax to the nearest percentage point sufficient to eliminate any projected deficits.

2. Congress, after considering the President's recommendations, should, not later than May 1, adopt an expenditure ceiling of its own and automatically make any adjustment-upward or downward-in the proposed surtax that would be necessary to eliminate the estimated deficit resulting from its action.

3. The law should further provide that should Congress fail to take any action by adopting its own ceiling prior to May 1, the President's recommendations both as to an expenditure ceiling and surtax would become the legal ceiling and legal surtax rate for that year.

4. Any expenditure ceiling to be effective should carry a bonus as well as a penalty clause related to the final result of either reducing or exceeding the adopted expenditure ceiling.

For instance, after the fiscal year involved has ended and the final figures have been disclosed, then for each percentage point that spending has been reduced below or has exceeded the adopted ceiling and adjustment in the surtax rates would automatically be made on both individual and corporation income taxes for that calendar year.

Thus, every taxpayer would have an incentive in supporting congressional efforts to curtail expenditures.

Now, if Congress or the administration decided that it did not like the surtax principle to finance these deficits it could amend the existing tax rates either for individuals, corporations, or others to raise that amount of revenue. It should be kept in mind, however, that the mandatory raising of additional revenue to offset any deficit is a most essential part of this plan and to make any expenditure ceiling meaningful they should be tied together as one bill.

As a former member of the legislative branch I feel very strongly that it is the Congress which should have a strong voice in the decision as to how much we can afford to spend.

Why is it so important that Congress early in each year establish an overall ceiling on spending? Under the Constitution the President has the duty to submit at the beginning of each new Congress a proposed budget for the fiscal year beginning the following July 1, including a projected estimate of both the expenditares and the revenue under his proposed programs. These recommendations along with an itemized breakdown reach Congress in January of each year.

Under our present method of operation this budget message is then referred to the Appropriations Committees where it is broken down by the respective agencies and referred to the various subcommittees having jurisdiction.

Each subcommittee then considers the requests of the agency under its jurisdiction, holds hearings, and reaches a conclusion as to whether the agencies' requests should be raised or lowered—this decision being made without having the benefit of knowing what action is being taken by various other subcommittees handling the requests of the other agencies.

True, the full Appropriations Committee and later the full House and Senate pass upon the recommendations of these subcommittees, but since in practice these appropriation bills for the various agencies come at staggered intervals-ofttimes months after the fiscal year has started—there can be no correlation as to their effect on the overall expenditure total.

The result is that by the time the final appropriation bills have been enacted and the total expenditure authorization established it is often too late to make the necessary adjusment.

But as I pointed out earlier, the mere adoption of a spending eeiling in itself will serve no purpose unless it is binding both upon the administration and upon the Congress itself.

Today we are confronted with a serious challenge to the value of our dollar. Inflation is no longer a mere threat—it is a reality. In the past 2 years we have had three devaluations of the American dollar, and unless Congress and the administration take prompt action toward more fiscal responsibility these devaluations can become even more frequent.

The adoption of a rigid ceiling on expenditures is going to take some sacrifices and mean some hard decisions for all. It is not enongh for the executive branch to point the finger at Congress, or for Congress to pass the buck to the President.

It is not enough for the American citizen to wash his hands of responsibility and to blame the Congress and the administration. Congress makes appropriations because the people demand more and expanded services.

In conclusion let me add that this will require the cooperation of the President, the Congress, and the American people, working together, if we are to halt this inflationary spiral and preserve the integrity of the American dollar.

We are all in this together. .

Now, to save time, I would ask that we place in the record an example of how this would work assuming it were in effect for this current fiscal year.

Chairman ULLMAN. Without objection; yes.' [Appendix I follows:)

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