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And it would seem to me this last concern is a very serious one, in light of the bipartisan support demonstrated this year in the budget process, Mr. Chairman and colleagues, by the House and the Republican controlled Senate to reject the priorities of the administration. So thus, even though both bodies have clearly rejected in the budget process this year, the priorities of the administration and of the OMB Director, we might be putting back into the OMB Director's hands the ability to reestablish those same priorities that all of us bipartisanly disagreed with.

I seriously question the wisdom of that approach. And I think it would be folly, to say the least, to follow that approach because again it is looking for an easy way out. Look, Ma, no hands. I did not do it to you. It was that nasty gentleman over there, at OMB, named Jim Miller.

I do not think that that is the appropriate way and I think that those concerns have not been adequately answered for me by the Gramm-Rudman II solution.

Therefore, I tend to favor very strongly, until someone can show me a better mechanism, the fallback procedures where Members of Congress have to do exactly what they were sent here to do. And that is to vote, to show where they stand, and to make the hard, painful decisions and cut out some of the rhetoric and do it.

Therefore, I tend to favor, as the trigger, not OMB's finger pulling it, not someone else pulling it, but collectively the fingers of the House and the Senate making those tough decisions. That is what we were sent here for. And I think basically the Gramm-Rudman II approach is a faulty one that raises serious constitutional questions, in terms of the role of the OMB Director, as well as the Congress giving away its legislative authority to set priorities, particulary when we know the Congress-in the last-in this year especially, but also last year-bipartisanly rejected the policies of the administration.

Finally, let me conclude, Mr. Chairman and colleagues, by talking about some of the economic realities we face. One of the reasons why I opposed Gramm-Rudman was because of its inflexibility in dealing with changing economic circumstances. With the hard fixed targets, $144 billion, $109 billion, $72 billion, et cetera, there was no real provision made for the changing moods of our economy, which Congress certainly does not control.

I said that in December, when I voted against Gramm-Rudman. And now it appears that those words are becoming a reality. In May we announced that, as we looked at economic growth the anticipated rosy scenario was not taking place. Economic growth was going to be very sluggish, far below even the realism of the CBO figures that we used this year, and greatly below the OMB economic assumptions.

And as a result, there would be a loss of revenues and therefore an increase in the deficit.

Gramm-Rudman cannot provide an answer for all of our problems because of its inflexibility in dealing with economic circumstances, factors beyond Congress' control. And I submit to this body that I suspect that despite all of our hard work in developing a budget, even if we implement every iota of that budget, because of the failed fiscal policies that have led to sluggish economic growth,

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in essence, Mr. Chairman and colleagues, I think that there is a very good chance that there is going to be a sequester-not because of anything Congress did or did not do, but primarily because economic growth has not been all that it was predicted.

And therefore, I suspect that one of the glaring faults of GrammRudman will come out. And I would hope that Members would understand the reason for any loss of revenue, the reason for sequester. It will not be necessarily because of anything that the Congress has done. It is just that we do not control the $3 plus trillion economy and all the worldwide factors that do have an impact upon our estimates, our assumptions, and what the deficit will be, and also what will happen under Gramm-Rudman.

Thank you, Mr. Chairman. I will be glad to answer any of your questions.

[The prepared statement of Mr. Gray follows:]

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The Honorable William H. Gray, III
Testimony Before the Committee on Government Operations

July 24, 1986

I appreciate Chairman Brooks inviting me to testify before the Committee on Government Operations on the impact of the recent Supreme Court decision on Gramm-Rudman.

Automatic Sequestration Versus the Fall-Back Procedures

As you know, I voted against Gramm-Rudman last year. I believed then, as I do now, that Congress is elected to decide which programs are worthy of funding and which are not. The automatic sequestration process that was at the heart of Gram-Rudman represents to me an abdication of congressional responsibility and accountability: it took a "look, no hands" approach to making hard budget choices.

In contrast, the fall-back procedure that requires Congress to vote on budget cuts, as we did in reaffirming the 1986 sequestration last week, forces us back into reality: we must take responsibility after all. No philosopher king, grand executioner, or fairy godmother can stand in for us.

I believe that Members of Congress should see and feel the consequences of their decisions. For this reason, I tend to find the fall-back position more appropriate than an automatic triggering mechanism that tempts us to hide behind a subterfuge and abdicate Congressional decision-making. It leaves much to be desired in terms of setting priorities--which is why Gramm-Rudman is fundamentally a bad law--but it at least makes us accountable for our actions.

Indeed, I have serious concerns about the Gramm-Rudman "fixes" that the bill's original sponsors are now proposing in "Gramm-Rudman-Hollings II". They would have the OMB Director replace the Comptroller General as the ultimate grand executioner and fairy godmother. OMB and CBO would estimate the deficit and compute any required cuts, which would be reviewed by the Comptroller General, as under the original law. The Comptroller General, then, would forward it to OMB for a final determination. One sponsor has said that OMB's function would be "just a green-eyeshade `calculation". Another has noted that OMB would inevitably have some discretion in projecting the deficit and allocating cuts.

The role of OMB is critical. If OMB's role is purely ministerial, the constitutionality of the law could be questioned on the same grounds on which it was successfully challenged--the role of GAO in executing the law. If, however, OMB is not just making a "green-eyeshade" calculation, then we need to be concerned about the accuracy of the estimates and, especially, the direction of its policies. Past performance does not augur well. Recall the "rosy scenario" of 1981 or, more recently, the $10 billion "mistake" in estimating defense outlays for fiscal year 1987. Does Congress really wish to give more power to an administration that apparently cares little about

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reducing the deficit and brought us $200 billion "deficits as far as the eye can see in the first place?

There are troubling institutional questions here that go to the heart of our system of government. The Wall Street Journal ran an editorial on Monday, July 21, arguing that the logic of an automatic Gramm-Rudman process is leading us inexorably towards the line-item veto. "The emerging consensus", they write, "is that Congress is no longer capable of exercising the power of the purse..., nor does it wish to exercise that power." In their view, when the Gramm-Rudman-Rube Goldberg machine falls apart, the line-item veto "will be the only proposal on the table."

I have no quarrel with the logic of this argument, but I do reject the premise--that Congress cannot do what it was elected to do. Congress can and should exercise its constitutional powers with respect to fiscal policy. If we do not, those powers will be exercised by others--in the executive branch. As the Journal notes, the logic of an automatic Gramm-Rudman law is the logic of the Tine-item veto, the logic of a transfer of power from Congress to the President. I do not favor such a transfer, nor, I believe, do most Members of the Congress. But we need to understand the implications of our actions before we rush forward to embrace a fairy godmother whose charms may rapidly wither after November.

Let me now take a few moments to summarize how Congress has implemented the fall-back procedure for the fiscal year 1986 reductions, the possible actions with respect to fiscal year 1987 sequestration, and some deficit problems which Gramm-Rudman cannot cure.

Current Status of the Triggering Mechanism and the Supreme Court Decision

Section 274(f) of the Balanced Budget and Emergency Deficit Control Act of 1985 provides that, in the event that any of the reporting procedures under that law are invalidated, there is established a Temporary Joint Committee on Deficit Reduction (TJC), consisting of the entire membership of the House and Senate Budget Committees. The temporary committee then becomes the conduit. for transmittal of the sequestration report to the President.

As you are aware, when the Supreme Court struck down GAO's role in calculating Gramm-Rudman sequestration figures, the "fallback procedure" was automatically triggered. The fallback procedure: (1) establishes the Temporary Joint Committee on Deficit Reduction, composed of the two Budget Committees and co-chaired by their chairmen; and (2) requires the TJC to report a joint resolution setting forth the contents of the joint OMB/CBO report. If passed by both Houses and signed by the President, the sequestrations become law. The Supreme Court's decision provided that its Judgment, restoring monies sequestered in fiscal year 1986, was stayed for a period of not to exceed 60 days in order to permit Congress to implement the fallback provisions of the Act.

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3.

Congressional Action on the Fiscal Year 1986 Cuts

On July 17, 1986, the TJC met to report a joint resolution setting forth the contents of the joint CBO/OMB sequestration report of January 15, 1986. Pursuant to the Gram-Rudman law, the TJC could not amend the report. However, due to the fact that the CBO/OMB report of January 15 contained some technical errors and conceptual disputes, using the fallback provision in its pure sense would not satisfy Congress' objective of reaffirming fiscal year 1986 sequestration actions. These were resolved by the GAO in its report of January 20.

In order to account for technical changes made by the General Accounting Office report (which served as the basis for the President's February 1 sequestration order) and policy changes affecting sequestration enacted since February 1, a separate measure outside the scope of the TJC's powers had to be considered. The joint House Leadership worked with the Senate Leadership to develop an approach modifying the fallback procedures to take into account the special situation caused by the triggering of the fallback procedures in the middle of the 1986 sequestration cycle. As a result of those discussions, a simple one-sentence statement reaffirming all actions necessary to reinstate the status quo was developed.

On the same day that the TJC reported a resolution fulfilling its duty under Gramm-Rudman, the House adopted H.J. Res. 672, which reaffirmed the President's sequestration order of February 1 (including GAO's technical changes) and measures enacted since February 1, which affected that order. The Senate passed H.J. Res. 672 by a voice vote. This shows that Congress can act quickly in a bipartisan manner when a consensus is reached on how best to address the deficit problem.

Fiscal Year 1987 Process

Due to the District Work Period scheduled to begin on August 15, the timetable for the 1987 sequestration process cannot follow that set forth in the Gramm-Rudman law.

CBO and OMB will take their first snapshot on August 15 to determine if the projected deficit for fiscal year 1987 will exceed the maximum deficit amount of $144 billion by more than $10 billion. Under the Gramm-Rudman timetable, their report will be transmitted to Congress on August 20, but Congress will not be in session to officially receive and refer the report to the TJC. The TJC will officially receive such report on the first day Congress reconvenes. After receipt, the TJC will have five calendar days to report the joint resolution setting forth the contents of the CB0/0MB report and Congress would vote on such joint resolution within five legislative days after it was reported.

It should be noted that a problem with the 1987 report similar to the one for 1986 could arise if there are errors or omissions in the joint report of the Directors. Since amendments are prohibited, either by the TJC or on the floor, any corrections or modifications would have to be addressed through