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Mr. Chairman, I frankly worry about what this does to our system of government. We were sent to Washington to make the very choices that Gramm-Rudman takes away from us. Is this really the way to run the country? To me, at least, this makes a mockery of representative government? It says that we have reached the point where we simply do not know how to allocate our national resources, and will not do the job we were elected to do.

Nor do I accept the argument that Gramm-Rudman was necessary. During the debate on Gramm-Rudman I offered an amendment that provides an alternative. It placed the responsibility for budget discipline where it belongs: with the President. The amendment said that the President must either offer a balanced budget or give us the information on how to get there. Unlike Gramm-Rudman, my amendment went beyond 1991. It imposed a permanent requirement on the President.

Why the President? The President is the person who initiates the budget process, and it is here that the initial responsibility for exercising budget discipline lies. The job of Congress is to work from the President's proposal and fashion a budget that reflects congressional priorities.

Over the years, Congress has performed its job well. In fact, for the five completed fiscal years of the Reagan Administration, Congress has actually appropriated three billion dollars less than what the President asked for. Mr. Chairman, I would like to insert into the record at this point a table, prepared by then Joint Economic Committee, showing the Presidential requests under each of the 13 appropriations bills, and the amounts appropriated by Congress, for fiscal years 1982 through 1986. Those who try to pin our budget deficits on Congress, therefore, are simply wrong. They should look at the other end of Pennsylvania Avenue, where we have a President who has proposed the largest deficits in history, and who, in six brief years in office, has more than doubled the national debt.

Mr. Chairman, I intend to re-introduce my amendment when the debt ceiling legislation is brought to the floor. It will bring fiscal discipline to the right place. In the meantime, however, we are left with current law-Gramm-Rudman. Let me just make a few remarks about proposals to amend this law.

I believe it would be a step backwards either to change the removal powers of the Congress and the President regarding the Comptroller General, or to invest the Office of Management and Budget with additional powers over Gramm-Rudman cutbacks. The former course would damage the unique and objective relationship that GAO maintains with its client organization, the U.S. Congress. Over the years, GAO has performed numerous audits of executive branch agencies and at times has uncovered facts, and wasteful expenditures, that are embarrassing at the least and sometimes even have criminal implications. Any agency performing this delicate and important task must have absolute independence from the branch of government that it examines.

With regard to investing the Office of Management and Budget with additional sequestration authority, I again urge caution. The OMB is situated within the Executive Office of the President and has substantial leeway for imposing its judgment on budget proposals. Whatever the Congress sends the President with regard to Gramm-Rudman cutbacks must be explicit enough that OMB cannot substitute its own view of how, and where, the cutbacks will be allocated. Otherwise, this arrangement will deteriorate into giving the President an effective line-item veto.

Let us remember that Congress has a better record on fiscal responsibility over the past 5 years than the President. Our differences with the President have centered more about spending priorities than spending amounts. I see no purpose,

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therefore, in giving the executive branch additional authority in deciding where Gramm-Rudman cutbacks will fall.

There may be a valid need to re-examine the impacts the Court's decision could have on certain functions that GAO and the Comptroller General currently perform. However, I caution this Committee that any "quick fix" legislation may have far graver effects over the long haul. I don't want to see Gramm-Rudman revived at the expense of GAO.

In conclusion, if it's broke and it ain't worth fixin', why bother.

Opening Statement of Senator DurenbergER

Thank you Mr. Chairman. I am happy that the Committee members have taken time out of their busy schedules to pause for a moment and critically consider the Supreme Court's ruling in Bowsher v. Synar. The issues raised by that ruling and their implications both for the deficit reduction procedure and for the General Accounting Office are very important and extremely complex. They deserve our close examination today.

When Gramm-Rudman was originally drafted it contained a fallback procedure which anticipated the possibility that the General Accounting Office's role in the sequestration process might be unconstitutional. That fallback would have required Congress to vote on the cuts needed to meet deficit reduction targets-to actually take a stand on where the cuts were to be made rather than rely on an automatic mechanism which dilutes responsibility.

I supported that fallback and hoped that we might one day have a chance to see it in action. I believe it is our responsibility to make the necessary cuts. We should not abdicate that responsibility.

As the same time, I understand the concern of my colleagues that the fallback mechanism would create uncertainty and induce Congress and the President to delay facing up to the deficit. An automatic process may allow Congress to transfer some of its responsibility, but it also forces us to meet our goals.

And that's what Gramm-Rudman-Hollings was all about-meeting our goals. One way or another, this Congress is going to reduce the deficit. If we cannot agree, then a mechanism we created ourselves will do the job for us.

This hearing is also about meeting our goals. The goal in this case is to figure out a way to "fix" Gramm-Rudman-Hollings-to fix the automatic triggering mechanism so that it will pass constitutional muster. There are many ways we can do it. The combinations and permutations seem endless-let's give GAO to the President, let's make GAO independent of everyone, let's eliminate GAO from the sequestration loop... all of these are interesting options and all deserve our consideration. I am particularly interested in the proposal being articulated by Senators Gramm, Rudman and Hollings which leaves intact the initial sequence of reports from CBO and OMB to GAO and then requires that OMB issue the final sequestration report based on those GAO recommendations. Though this approach has sparked concern that too much power is granted to OMB-an agency which has an unsavory a reputation for "cooking the books"—

I think such criticism may exaggerate the ability of OMB to act unilaterally. First, OMB is required to state its recommendations at the beginning of the process. It must go on the record at the outset. The GAO is then given the opportunity to critique the initial report and to recommend critical changes in the sequestration numbers. Such a mechanism clearly puts the burden on OMB to explain any divergence from the GAO recommendations when it issues its sequestration report. Second, the Comptroller General may challenge improper sequestration orders in court. Again, there is pressure on OMB to use valid assumptions and keep a clean set of books.

Finally, Gramm-Rudman-Hollings already inludes of number of controls which restrict the ability of the Director of OMB to operate unilaterally.

The end result of these provisions is to circumscribe the arena in which OMB may act. Their effect is to ensure that OMB may not use its sequestration_authority to achieve policy ends not approved by Congress. I can only thank David Stockman for providing us with an understanding of what needs to be done.

I look forward to the testimony on this option and on other possible mechanisms for restructuring the triggering mechansm.

The Bowsher v. Synar decision also raised another problem by calling into question many of the other functions now assigned to GAO. While the Gramm-RudmanHollings proposal would not deal with this problem, some of the other options would.

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The proposals that have been put forth to address the problem with GAO must be evaluated carefully. While I understand the need to preserve the right of GAO to carry out functions Congress has assigned to it, I am very concerned that any move we make will not undermine the role of GAO as a watchdog. We cannot afford to solve one problem and create an even worse one in its stead.

Again, I look forward to the testimony and discussions with the witnesses on this issue and I hope that the Senate will not act precipitously when it considers options to remedy GAO.

Chairman ROTH. At this time, I call forward, Hon. Charles Bowsher, the Comptroller General, and Milton Socolar, Special Assistant to the Comptroller General.

TESTIMONY OF HON. CHARLES A. BOWSHER, COMPTROLLER GENERAL OF THE UNITED STATES, ACCOMPANIED BY MILTON J. SOCOLAR, SPECIAL ASSISTANT TO THE COMPTROLLER GENERAL

Chairman ROTH. Gentlemen, we are very glad to have you here today. Please proceed.

Mr. BOWSHER. Thank you, Mr. Chairman. I believe that many of the issues that I have in my prepared statement have been discussed this morning, and so what I would like to do is just give you a very quick summary of some of the issues as we see them coming out of the Supreme Court decision.

The first thing to say is that it did take GAO out of this automatic trigger role that we had been put into in the original legislation. The court provided for the fallback position, the position that we would recommend for the Congress to consider, so that the Congress would make the decision.

Under that backup role, GAO can certainly audit and review the numbers in an advisory role to the Congress, as we do in so many other areas.

If it is deemed advisable to have an automatic trigger mechanism in the process, why, we think there are two or three alternatives that could be considered.

One is the changing of the 1921 act, which was considered earlier. I am very pleased that all of the witnesses today, and you, Mr. Chairman, have been a strong supporter of this act. Changing the act would not be the right way to go. I think the role that GAO plays historically in advising the Congress and auditing the executive branch, with a great deal of independence-which is what the original framers of the 1921 act had in mind-is absolutely essential. That is where a very high percent of our work is and has been for many, many years. So we would like to keep it that way, and we would like to continue to serve the Congress as we have in this audit and program evaluation.

A second idea might well be the independent board or commission, somewhat patterned after the Emergency Financial Control Board in New York City or the Chrysler Loan Board. You have reduced that idea, I think today, down to one person, namely myself. I want you to know, I am not volunteering for that added duty. Chairman ROTH. Will you serve if drafted?

1 See p. 87 for Mr. Bowsher's prepared statement.

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Mr. BOWSHER. If drafted, that is right, but I think a commission might well give it a broader base and give us all more expertise, not only the 5,000 people at GAO; maybe the staff of the Federal Reserve or some other group like that could back up one of the other members, as it did the Chrysler Loan Board.

The third, of course, would be Gramm-Rudman II, which has been put forth, and that satisfies the separation of powers situation by moving the automatic trigger mechanism over to OMB in the executive branch.

We would like to make one fairly technical suggestion on that piece of legislation, and that is in the original legislation. When we issued the order, we were asked, then, also to calculate, by all the B.A. structure, namely, 700 and something odd accounts, what that would do to all the accounts.

We think that, if Gramm-Rudman II is adopted, as it is now presently drafted, the action should be moved over to OMB, because all that calculation shouldn't really be done until the final order, as I think the original intent was, and so we would recommend that change.

We would certainly, in that Gramm-Rudman II, play the role of reviewing the numbers and advising both the Congress and the executive branch as to our view of the CBO-OMB numbers and assumptions, and we think we can do that job well. We did it in January; we think we can do it again quite well.

Mr. Chairman, rather than continue with any more detailed presentation, I think it would be better if I opened it up to you and the members of the committee for questions.

Chairman ROTH. Thank you, Mr. Bowsher, for your testimony. You have heard the discussion earlier about the discretionary power that was initially given to the Comptroller General; under the revision that it be given to OMB. I wonder if you would care to comment. Is this clerical, or is it a pretty extensive economic forecast requirement?

Mr. BOWSHER. It is quite different than it was in January on economic forecasts. In other words, you are actually forecasting what the number is that has to be sequestered. Therefore, there is quite a bit of discretion there, I think, that wasn't. But there is no question that if we were reviewing it, if CBO was reviewing it, that that would, I think, tend to hold, hopefully, OMB's ability to go beyond what would be prudent.

Of course, that is the way we looked at it last January. In other words, we did not want to do anything that was not properly justified, and we had a good working relationship with OMB and CBO last January. We did the thing, and so if it could work as well this time around as it did then, why, I don't think you would have too much trouble. The issue, though, I think that Senator Chiles brought up is a very good and important one, and that is, everyone knew that GAO was going to look at those numbers, and when the budget came over in January, some of the things that we had been able to iron out-like the spendout rates in defense-turned out to be much more contentious.

So I don't know how it will work, to be very honest with you. It worked well in January. I would hope it would work well again this time around.

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Chairman ROTH. I would like to turn for a few minutes to the broader question, and that is what happens to General Accounting Office under the Supreme Court ruling. Let me make sure that I understand on your basic testimony. It is your recommendation, your first recommendation, that we leave the Gramm-Rudman law as is and depend on the backup provision?

Mr. BowSHER. That would be our recommendation; yes, Mr. Chairman.

Chairman ROTH. With respect to the more general problem, if Congress does nothing, isn't there a danger that all of the noninvestigatory, nonlegislative powers of GAO would be challenged?

Mr. BOWSHER. There will be some challenges, I suspect, on some of those issues, and there is no question, as Senator Rudman and, I believe, Senator Chiles pointed out. We have submitted to the committee a fairly detailed list, a very detailed list, as a matter of fact, of the other roles that have to be considered, you might say, as a result of the Supreme Court decision.

I think they fall into two categories, and I would like to speak to those two categories. One is the comptrollership functions, and many of those go back to the 1921 act, when we took away from Treasury some of the functions that the Treasury and executive branch did at that time.

Now, I believe, and I know, Mr. Chairman, you have heard me many times, and other members of the committee have heard, too, that the Federal Government today does not have the financial management system that it should have to run a trillion-dollar budget and operation here, and so I think that some of the things that we have on that list have to be considered.

But I think also what we have got to consider here is how to strengthen the overall budgeting and accounting system of the Federal Government, and I think that is going to take a few months although we have given it a lot of thought.

I have met with OMB since the day I came into office, practically, and I could never get David Stockman to meet and see what we could do to strengthen these functions, both in the executive branch and in the role that we play.

I think there are some functions that we play and have played that could be moved over to the executive branch. But I don't think it makes any sense to move it over there unless the executive branch is willing to build a modern budget and accounting system and to know where the funds are. I think this debate that goes on here about the spending rates of the Defense Department is so typical of the debates that go on in the Government today which use up all the time.

In other words, instead of looking at the programs and what programs should be cut, most people are debating what the numbers

are.

I have testified this past year before the House and the Senate on this inflation dividend at defense, and the defense witnesses come over, time and time again, and say, "Mr. Chairman," whichever committee it is, "We can't change" or, "We don't think we should change the accounting system at the Department of Defense. It is doing well as it is."

It is a joke. [Laughter.]