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tion Act in its final form. Without the Reconciliation Act, sequestration is assured, is it not?

Senator GRAMM. Again, I believe if you look at the original Budget Act itself, that we have strengthened that act in virtually every way. We do not have as strong a bill as I would like to see adopted, but our problem was that we had to have adoption by both Houses in order for Gramm-Rudman-Hollings to become law.

In terms of the same kind of binding constraints that we imposed on the Senate rules, we could not get the House to accept those constraints.

Senator STEVENS. But those restraints only apply to the appropriations process. There is no congressional restraint on the reconciliation process, and I was informed last year that it was due to an error in the final engrossing of the Gramm-Rudman-Hollings amendment. If there was a point of order prior to the adoption of that amendment, there was no longer a point of order in the act. It was knocked out by an error, they tell me. Are we going to have support that Gramm-Rudman-Hollings will restore that point of order for the Reconciliation Act procedure?

Senator HOLLINGS. If we can get it in and hold it in, fine business. It is going to be difficult, I can tell you that, on the House side.

Senator STEVENS. If it is difficult, then it wasn't an error.
Senator HOLLINGS. I don't think it was an error, oh, no.

Senator STEVENS. We were told last year it was an error strictly in the way it was engrossed. If you look at your amendment, you didn't touch that.

Senator HOLLINGS. We intentionally didn't touch that. There is another amendment in there that you can't go on the July 4 holiday until you pass certain bills.

Senator STEVENS. That was the one when they engrossed it and knocked out the whole section before.

Senator HOLLINGS. Every one of those killer provisions, Senator, in all respects, and many things in here-you know, the majority of the U.S. Senate would have sequestered Social Security. But we had to be realists and so we just set that aside. There were a lot of things that we had to give and take in order to get this far down the road.

Senator STEVENS. Mr. Chairman, I don't want to belabor it, but I think that the problem right now is that we are working hard in the appropriations process to try and avoid sequestration. There is no mechanism left in this act to avoid sequestration through the reconciliation process. Unless that is put back in there, we are just tilting at windmills. There is no way that this act can work without some meaningful sanction against the Congress going home and leaving the reconciliation bill on the table.

Senator HOLLINGS. Can I give just one comment, please, Mr. Chairman? In response to the distinguished Senator from Alaska's misgiving about that failure of the bill, and also the matter on the discretion of OMB, we all are operating within the arena of an attentive public. We said at the time, and Phil adopted this description, that we weren't Dale Carnegies; in other words, we didn't pass this because we were super salesmen.

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This bill was got together not by politicians around the conference table, but by the American families around the kitchen table. Now, with respect to that description, if I were in the democratic arena giving a political answer-but it would be a pretty good one, and a true one-I'd say, "That is what you rascals have been trying to do since the beginning of Ronald Reagan, is fix the responsibility for that deficit on him."

You take a poll in South Carolina or in Alaska and ask, "Who is responsibile for the deficit," and they will say, "The Congress. They don't say President Reagan. I'll have to oppose Reaganomics and Gramm later. I am his buddy now.

Senator GRAMM. Your signing.

Senator HOLLINGS. When I said we were going to have a $200 billion deficit, I hated to put up a fight and make the hard votes and then go around being blamed for the result. Mr. Chairman, under the discretion to be given OMB, let's say, if you are talking in extremes and the Director of the Office of Management and Budget comes in and says, "There is going to be 6 percent real growth next year," and CBO and the GAO says it is going to be 1 percent and all the economists, Kaufman and the others, Solomon Brothers, say it is going to be 1 percent. Then coming to the final judgment, when it is passed on to the President, the OMB still says, "It is going to be 6 percent. I am going back to my original figure," he is going to have to assume the responsibility for it, and then all the Democrats are going to be happy anyway, because they didn't want to cut anything. [Laughter.]

So what is everybody complaining about? [Laughter.]

Senator STEVENS. I am basically complaining that you have an unworkable procedure, and you are trying to deal with who enforces the procedure after it fails.

Senator HOLLINGS. It worked in the House just this past week. Senator GRAMM. Our problem was that this was not a marriage of love with the House.

Senator HOLLINGS. Yes.

Senator GRAMM. This was a marriage of necessity, and they weren't at all happy about being at the alter. [Laughter.]

We were just lucky to get the vows made. You are right. Senator STEVENS. We don't want to continue that much further, because I am not going to get in bed with the House. [Laughter.] Senator GRAMM. I want to be in control of the rules, if I do. Chairman RоTH. Senator Nunn?

OPENING STATEMENT OF SENATOR NUNN

Senator NUNN. Well, I just want to make a brief observation and invite comments from Senators or Hollings or Senator Rudman or Chiles, either one, any of you. The little elves on the Armed Services Committee are having a real problem. We have got a problem because Gramm-Rudman-Hollings has shifted the whole focus of defense to an outlay measurement; how much we spend in 1 year. Now, that is the way you measure the deficit, so I am not saying you had another alternative, and I am not complaining, but the problem is the executive branch, the President's budget, OMB, are not taking outlays seriously regarding defense. They sent up a

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budget that was $15 billion over what they projected in outlays. That has thrown the whole thing off kilter. The American people don't recognize that the President's budget does not even come close to meeting the Gramm-Rudman-Hollings targets, because the outlay number on defense was grossly underestimated.

Whether that was a political game or a mathematical game or simply an economic error, I don't know. Now, we have got another problem. The Budget Committees and the conference, particularly, played games with the outlay budget authority ratio in defense, and that makes an enormous amount of difference. I know what happens in conference. I have been part of the Budget Committee. What happens in there is the way you get a deal on the defense number, you satisfy the Hawks by giving them a high budget authority; you satisfy the Doves by giving them a low outlay number. Senator Goldwater and myself and others are the little elves, as we might call ourselves. We are having to struggle with that.

Now what we face is that there is no way we can come up to the ceiling, $292 on budget authority, and still meet the target outlay. Senator Stevens is in the same situation, and he may have to mop up after we get through giving it our best effort, but we can't come up with the $292 in spending authority for the budget authority on defense and still meet the $279 on outlays. It is impossible. Those two numbers don't go together.

The President hasn't taken it seriously on outlays, and the Budget Committee conference didn't take it seriously on outlays, and now we are having to figure out how to do it. So the result of it is unless we play smoke and mirrors, unless we get into the gimmick game, which I don't want to do; I think that is really basically fraud on the American people. We are going to have to cut that budget authority number, and we are going to have to cut defense much more than people have anticipated in order to meet that outlay number.

I throw that up both as a question and also an observation that when we get down to the sequester process, whoever does, and your OMB would have that, if they play the same kind of games with sequester that they have played with the submission of the budget, then what we are going to have is a sequester that still doesn't meet the goals, because they can easily play a game of saying, "We anticipate if you cut budget authority one dollar, you will cut outlays one dollar," and that isn't going to happen.

So we can have this whole thing thrown into complete chaos by simply fenagling with the numbers over at OMB.

There is a way that we can address that problem, as one who supported your overall effort as an unpleasant but best alternative. I say I am looking for an answer.

Senator HOLLINGS. Your question, and/or observation is right on target. I observed the same in the markup of the budget conference. I was a member of it and voted against the budget, both in the budget conference report and on the floor of the Senate, pointing this out. Your colleague, Senator Glenn, pointed it out that same evening that we were on the floor, opposing and voting against the adoption of the budget conference report.

We've got a real problem. You know, Gramm-Rudman-Hollings just didn't correct all the ills, and we didn't discipline Cap Wein

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berger and the way he spends out. As a result, there is no confidence, and the only answer that could be given by our budget colleagues is, well, if they are really in a jam, then, we have fenced the money over there. They can get $6 billion more by putting up the revenues for it. That was the alternative way the budget was reported and adopted by both Houses.

But I would plead with you: Let's not try to fix that problem here. If you can, I would vote for it; don't misunderstand me. But let's just try to fix our tire again and not go back into the upholstery, because I don't see how you are going to correct it.

We've just got a difference between budget authority and outlays. It has never been straightened out, and I know of no one in Congress who has confidence in the numbers or who can tell you exactly how much money is over there. If you can tell me, I would be happy to talk with you. I can't figure that out.

Senator NUNN. Cap hasn't let me in on it.

Senator HOLLINGS. He hasn't let me in on it, or anything else of that kind. It is hard on all of us interested in a strong defense, because he has eroded our confidence in dealing with our colleagues and everybody else. Money is backed up over there and nobody knows how much there is.

Senator STEVENS. Would the Senator yield?

I don't disagree with the Senator from Georgia, but I think that is an unfair characterization of what is going on at the Department of Defense. I spent the last recess traveling around the West looking at production facilities. What is happening is that defense production units of our industry are producing faster now than they did before. They are actually delivering these units of production to the Department of Defense for payment far ahead of what we estimated 18 months ago could happen. And as a consequence, the bills are becoming due and the Department of Defense is paying for equipment and production that was ordered. It was authorized, but it is just being delivered sooner. What is happening is that the industry wants to get in on getting paid now because they think the defense budget is going down.

Senator NUNN. Would the Senator yield on that? I agree with that. I am not suggesting that there has been, necessarily been a monkeying with the figures. What I am suggesting is that we are now in the business of measuring defense outlays, and that is where we are judging the deficit, and that is what is driving Gramm-Rudman Hollings, and that is the key point.

But as the Senator observed, nobody can measure those outlays accurately, and the record on being able to measure defense outlays is very, very bad.

Senator HOLLINGS. And that preceded Gramm-Rudman-Hollings; you and I both know that.

Senator NUNN. Absolutely, but before Gramm-Rudman-Hollings, again as a supporter, we didn't measure that; we didn't pay that much attention to outlays. We let those flow as they might flow. We measured budget authority.

Senator RUDMAN. Mr. Chairman, I wonder if the Senator would yield. I will give him a 30-second answer. I am trying to get through the bill here; I asked a staff member to get to the right page. I wanted to remind everybody that in Gramm-Rudman

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Hollings, as passed and signed by the President and present law, on the sequester order as it regards defense, you will find in the bill, and I will have the language in a moment, in the existing bill, that historical outlay and budget authority ratios and proportions must be used by the Director of OMB in calculating the sequestration. That is part of the law that we passed.

Now, that doesn't fully answer the question and the problem posed by the Senator from Georgia, but I did want to point out that to the extent we could do that, we have already done it. That does not solve the whole problem, but that is in the present law, something that many people are unaware of.

Senator NUNN. I agree you tried to address it, but the problem is that the historical patterns are not accurate to what is happening

now.

Senator RUDMAN. That well may be.

Senator NUNN. We deviated from that historical pattern very substantially, because we had a very large change of budget authority over the last several years.

Senator GRAMM. If I might respond, Senator Nunn, when I first came to the House, I was always amazed that every time we talked about the budget, we talked about outlays for everything else, where there is also some uncertainty with regard to spendout rates-some areas of spendout rates are slower-but we always talked about B.A. in relation to defense.

I would submit that there are no stronger group of defense advocates in the Congress or the country than we have in this room. But ultimately, we had to come down to dealing with outlays, and I think we are going to have a tough year of transition, but we have basically played fast and loose with the figures between outlay and B.A., and this year, it finally caught up with us, and it had to do it. We keep committing to these huge systems for the future, but we know we are not going to be able to pay for them.

Senator NUNN. You are right.

Chairman ROтн. Thank you, gentlemen. I don't want to interrupt, but we do have a number of additional witnesses. We appreciate your time.

Before I call forward the next witnesses, I would like to include two statements in the record, one from Senator Glenn and one from Senator Durenberger.

[The opening statements of Senators Glenn and Durenberger follow:]

OPENING Statement of Senator Glenn

Mr. Chairman, I commend you for providing this opportunity to take another close look at the Gramm-Rudman law.

The Supreme Court decision made parts of that law unconstitutional, and we should re-examine Gramm-Rudman for that reason alone. But we should be thankful to the Supreme Court for having made this hearing necessary, for this reason: With all due respect for the sincerity of its authors, in my view, Gramm-Rudman was, and is, terrible legislation. By passing Gramm-Rudman, Congress added insult to injury in its feeble attempts to balance the budget. What we did was to say, "We can't balance the budget ourselves, and so we'll hand the job over to a fw economic forecasters and a computer." We also placed fiscal policy on hold for five years, and let a formula-rather than human judgment-decide how big or small the deficit should be regardless of other economic conditions.