Department of the Treasury Budget Priorities for Fiscal Year 2004 Hearing
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DEPARTMENT OF THE TREASURY BUDGET PRIORITIES FOR FISCAL YEAR 2004 HEARING BEFORE THE COMMITTEE ON THE BUDGET HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTH CONGRESS FIRST SESSION HEARING HELD IN WASHINGTON, DC, FEBRUARY 5, 2003 Serial No. 108–2 Printed for the use of the Committee on the Budget ( Available on the Internet: http://www.access.gpo.gov/congress/house/house04.html U.S. GOVERNMENT PRINTING OFFICE 84–884 PDF WASHINGTON : 2003 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 VerDate Feb 1 2002 16:58 Apr 30, 2003 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 H:\DOCS\HEARINGS\108TH\108-2\HBU036.000 HBUDGET1 PsN: DICK COMMITTEE ON THE BUDGET JIM NUSSLE, Iowa, Chairman GIL GUTKNECHT, Minnesota JOHN M. SPRATT, JR., South Carolina, MAC THORNBERRY, Texas Ranking Minority Member JIM RYUN, Kansas JAMES P. MORAN, Virginia PAT TOOMEY, Pennsylvania DARLENE HOOLEY, Oregon DOC HASTINGS, Washington TAMMY BALDWIN, Wisconsin ROB PORTMAN, Ohio DENNIS MOORE, Kansas EDWARD SCHROCK, Virginia JOHN LEWIS, Georgia HENRY E. BROWN, JR., South Carolina RICHARD E. NEAL, Massachusetts ANDER CRENSHAW, Florida ROSA DELAURO, Connecticut ADAM PUTNAM, Florida CHET EDWARDS, Texas ROGER WICKER, Mississippi ROBERT C. SCOTT, Virginia KENNY HULSHOF, Missouri HAROLD FORD, Tennessee THOMAS G. TANCREDO, Colorado LOIS CAPPS, California DAVID VITTER, Louisiana MIKE THOMPSON, California JO BONNER, Alabama BRIAN BAIRD, Washington TRENT FRANKS, Arizona JIM COOPER, Tennessee SCOTT GARRETT, New Jersey KENDRICK B. MEEK, Florida GRESHAM BARRETT, South Carolina RAHM EMMANUEL, Illinois THADDEUS MCCOTTER, Michigan ARTUR DAVIS, Alabama MARIO DIAZ–BALART, Florida DENISE MAJETTE, Georgia JEB HENSARLING, Texas [Vacant] [Vacant] PROFESSIONAL STAFF RICH MEADE, Chief of Staff THOMAS S. KAHN, Minority Staff Director and Chief Counsel (II) VerDate Feb 1 2002 16:58 Apr 30, 2003 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 H:\DOCS\HEARINGS\108TH\108-2\HBU036.000 HBUDGET1 PsN: DICK C O N T E N T S Page Hearing held in Washington, DC, February 5, 2003 ............................................ 1 Statement of: Hon. John W. Snow, Secretary, Department of the Treasury ...................... 7 Prepared statement and additional submissions of: Hon. Jim Nussle, a Representative in Congress from the State of Iowa ..... 3 Mr. Snow: Prepared statement ................................................................................... 9 Response to Mr. Scott’s question regarding OMB figures ..................... 31 Response to Mr. Thompson’s question regarding municipal bonds ....... 42 Response to Mr. Ford’s question regarding Medicaid funding .............. 57 Response to Mr. Davis’ question regarding excise taxes on charitable foundations ............................................................................................. 59 Response to Mr. Davis’ question regarding the President’s goal for charitable tax breaks ............................................................................. 59 Response to Mr. Ford’s question regarding the tax cut proposal .......... 63 A submission for the record by Hon. Roger F. Wicker, a Representative in Congress from the State of Mississippi .................................................. 39 (III) VerDate Feb 1 2002 16:58 Apr 30, 2003 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 H:\DOCS\HEARINGS\108TH\108-2\HBU036.000 HBUDGET1 PsN: DICK VerDate Feb 1 2002 16:58 Apr 30, 2003 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 H:\DOCS\HEARINGS\108TH\108-2\HBU036.000 HBUDGET1 PsN: DICK DEPARTMENT OF THE TREASURY BUDGET PRIORITIES FOR FISCAL YEAR 2004 WEDNESDAY, FEBRUARY 5, 2003 HOUSE OF REPRESENTATIVES, COMMITTEE ON THE BUDGET, Washington, DC. The committee met, pursuant to call, at 10:10 a.m. in room 210, Cannon House Office Building, Hon. Jim Nussle (chairman of the committee) presiding. Members present: Representatives Nussle, Gutknecht, Toomey, Hastings, Schrock, Brown, Putnam, Wicker, Bonner, Franks, Gar- rett of New Jersey, Barrett of South Carolina, McCotter, Diaz- Balart, Hensarling, Spratt, Moran, Moore, Neal, Edwards, Scott, Ford, Capps, Thompson, Baird, Cooper, Meek, Davis, Emanuel, and Majette. Chairman NUSSLE. Members and guests will take their seats. I know there is a lot of interest in this hearing, and there is obvi- ously, today, a lot of other interesting things happening around the country and the world, and I know Members, staff and our witness will be needed in other areas of the Capitol, so I want to make sure that we begin on time. This is the full committee hearing on the President’s growth and jobs plan, the tax relief package in the President’s fiscal year 2004 budget. Today’s witness is the Honorable John W. Snow, Secretary, Department of the Treasury. And as I said to the Secretary prior to him taking the witness table, he has spent more time on Capitol Hill this week than he has spent in his new office. And that is part of the risks of the job, and part of the job description, of course, is to consult with Congress, and we appreciate you doing so in this manner. Today we have a number of issues that we would like to discuss with you, Mr. Secretary. I would like to welcome you. The Secretary, upon his confirmation, became the 73rd United States Secretary of the Treasury. I look forward to working with you, and have every faith that the President has picked the right person to help strengthen and stabilize the economy and help us create jobs for all Americans. Treasury Secretary Snow comes before us today with extensive working knowledge and expertise in economics and job creation. Secretary Snow has had a long and impressive career in both the private sector and public service to this country. He was the chair- man and chief executive officer of CSX Corporation. He has served as the chairman of the Business Roundtable, and was a former co- chairman of the influential Conference Board’s Blue Ribbon Com- mission on Public Trust and Private Enterprise. He also served as (1) VerDate Feb 1 2002 16:58 Apr 30, 2003 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 H:\DOCS\HEARINGS\108TH\108-2\HBU036.000 HBUDGET1 PsN: DICK 2 the co-chairman of the National Commission on Financial Institu- tion Reform Recovery and Enforcement in 1992 that made the rec- ommendations following the savings and loan crisis. Secretary Snow’s previous public service includes serving at the Department of Transportation as the Administrator of the National Highway Transportation Administration; Under Secretary, Assist- ant Secretary for the Governmental Affairs; and Deputy Assistant Secretary for Policy, Plans and International Affairs. Secretary Snow has a Ph.D. in economics from the University of Virginia, a law degree from George Washington University, and has taught ec- onomics in the University of Maryland, University of Virginia, as well as law at the George Washington University. He also served as a visiting fellow at the American Enterprise Institute, and dis- tinguished fellow at the Yale School of Management. Mr. Secretary, yesterday this committee had the opportunity to hear from the President’s Director of the Office of Management and Budget, Mitch Daniels. He came presenting the President’s overall budget. Today we look forward to your testimony with respect to how the President’s budget proposes to strengthen and stabilize the economy and create jobs. At the beginning of the hearing on the President’s budget, I thought it was important to point out an underlying question about the budget. A question that I have, a question that this committee will continue to have as we will review it, and a question that I am sure that all Americans have, and that is: Is it a fiscally re- sponsible blueprint for governing America during some very chal- lenging times? Today as we examine the Treasury Department’s budget pro- posals as well as the President’s proposal to strengthen the econ- omy, I believe the question should be, do these proposals grow and strengthen the economy both now and in the long run? There is no question that our economic recovery needs to gain more traction in order to create jobs and opportunities. The loom- ing question is really how to do it, how to help it. I, for one, think we need to look longer than just this first year, but many years down the road as we consider the proposals that we have to make. Last week, the Congressional Budget Office presented its new economic outlook numbers to this committee which showed that under current conditions, if we do nothing, we will return to sur- pluses somewhere around 2007, according to the Congressional Budget Office. However, if we can increase growth by only half a percent, we might be back in the black roughly a year earlier. And I will show you a chart that I believe depicts just that sentiment. Faster growth can improve or does improve the fiscal outlook. With just a half a percent, we can get back in the black, according to baseline, just in 1 year. Imagine if we can get a full percent or even more. We also learned from the Congressional Budget report that the largest cause for the deficits we faced in the past two fiscal years has been due to a weak economy. I will show you a chart that we believe depicts that; 68 percent in fiscal year 2002, and 55 percent in fiscal year 2003 can be attributed to the economy. It seems only logical then that we must focus on measures that increase long- term growth and strengthen the economy. VerDate Feb 1 2002 16:58 Apr 30, 2003 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 H:\DOCS\HEARINGS\108TH\108-2\HBU036.000 HBUDGET1 PsN: DICK 3 It has always seemed to me that the Washington model is that we should ask families to tighten their belts year-after-year and pay higher and higher taxes to fund additional Washington spend- ing, but we never seem to ask Washington to tighten its belt so that the American people can keep more of their money.