EXTENSIONS of REMARKS May 19, 1992 EXTENSIONS of REMARKS

11836 EXTENSIONS OF REMARKS May 19, 1992 EXTENSIONS OF REMARKS CAPITAL BUDGETING AND A . the Capital Budgeting Act of 1992 (H.R. 4420). is my intention that no defense expenditures BALANCED BUDGET AMENDMENT The focus of this testimony will be on H.R. whatsoever are included in the capital ac 4420. Absent its enactment, I am hopeful that count under H.R. 4420. There might be legiti it can, at a minimum, prove to be something mate exceptions to this rule, the one that HON. WAYNE OWENS of a guideline for future deficit reduction ini comes to mind being an elementary school at OF UTAH tiatives. a military base. But a defense structure IN THE HOUSE OF REPRESENTATIVES BILL SUMMARY which might be categorized as "capital" be Tuesday, May 19, 1992 H.R. 4420 bill is similar to legislation intro cause of its useful life does not have the eco nomic impact of a road, bridge, airport or Mr. OWENS of Utah. Mr. Speaker, today I duced by Senator Kohl in the lOlst Congress, (S. 1572) but with some important additions wastewater system. Besides, the Congress submitted testimony to the Committee on the and revisions. has yet to show an unwillingness to fund Budget in which I focused not on a balanced The Capital Budgeting Act of 1992 directs such defense projects. budget amendment itself, but on its aftermath. the President, in his annual budget request, (3) Critics rightly note that the capital ac Specifically, I outlined how a capital budgeting to divide the unified budget into capital and count has the potential to invite a great deal plan could and should be incorporated into a operating accounts. The capital account in of gimmickry. Quality control measures would be needed to maintain the integrity of postamendment budget process. cludes the nonadministrative expenditures of the Federal government vital to our nation's the capital account. As mentioned above, the Make no mistake about it, I support a bal GAO would be incorporated into scrutinizing anced budget amendment. But the current economic health. These expenditures include commercial infrastructure, education and all items in the capital account, and rules budget structure is procedurally biased against job training, and civilian research and devel could be enacted which enforce the provi physical and human capital investments in the opment. The operating account includes all sions of capital budgeting on the House floor. domestic discretionary budget. These struc other operating and consumptive expendi Admittedly, these are very broad directives, tural flaws will only be exacerbated under a tures, including transfer payments, deposit but if a system of capital budgeting is en balanced budget amendment. My testimony insurance, defense and international spend acted, it must have these and other safe ing. guards against abuse. outlines these concerns. Regardless of the Another admitted shortcoming of H.R. 4420 type of balanced budget amendment we have, The bill further directs the Budget Com mittee to submit, to the House, legislation is that it does not specify, outright, the we must immediately shift the debate toward which would require the eventual elimi bookkeeping behind the capital account. In the tough decision of its aftermath. nation of deficits in the operations account. the case of physical infrastructure, this over Capital budgeting should be an integral part Were this submitted legislation fully imple sight can easily be addressed. Mr. Wise, the of that debate. I have introduced two capital mented, the operations account would be distinguished member of this Committee, budgeting proposals, H.R. 3914 and H.R. held in balance annually, and the total an has put forth a useful proposal in H.R. 4558, 4420, and other Members have introduced nual deficit would equal the total of the in The Infrastructure Investment Accounting Act. H.R. 4558 would alter the way that in similar legislation. I urge my colleagues to vestments in the capital account. The gov ernment would be able to borrow a limited vestments in physical infrastructure are paid read this testimony, which is included at the for by paying for infrastructure over the end of these remarks, and give capital budget amount only for the long-term investments mentioned earlier. course of its useful life rather than all at ing serious consideration. Without quality control measures, the cap once. Federal bookkeeping currently under TESTIMONY OF HON. WAYNE OWENS ital account has the potential to become a values the lasting worth of physical infra Thank you, Mr. Chairman, for holding dangerous pork barrel loophole. But com structure, thus exacerbating our nation's these important hearings and for the oppor pared to the gross gimmickry and manipula underinvestment in roads, bridges, airports, tunity to submit testimony for the Commit tion of today's budget process. that in itself and water systems. tee's consideration. should not dissuade us from capital budget R&D facilities and equipment could be I won't dwell on my support for Mr. Sten ing. To address these concerns, the bill di treated in a similar manner. There are other holm's Amendment, because its passage rects the Government Operations Committee programs, such as certain student loan pro might very well be a mere formality. In 1986, to submit, to the House, legislation to imple grams, which I would like to see in the cap when I campaigned to return to Congress ment a regular GAO evaluation of the value ital account. However, the "useful life" of after a twelve-year absence, I opposed a Bal and usefulness of items in the capital ac this sort of human investment is difficult to anced Budget Amendment on the basis that count. quantify. So, the accounting rules would all it takes to balance the budget is courage Finally, the Committee on Rules is di need to be the topic of extensive debate and and tough decisionmaking. When I first rected to report legislation establishing consultation. served one term in 1973-74, that was indeed, rules facilitating the enforcement of the ac In and of themselves, this obstacle should the case. But since that time, the budget counting standards put forth by this bill. not dissuade the Congress from investigating process and the challenges facing Some rules that could be considered are, for the "human capital" component of H.R. 4420 budgetmakers have changed dramatically, example, points of order against consider as an option. Should the Congress opt to con and I saw no other choice but to convert. ation of operations expenditures placed in sider the potential of capital budgeting, we For the purposes of today's testimony. I the capital account; and against capital ex should keep in mind that the role of the Fed will assume that a Balanced Budget Amend penditures that have not undergone scrutiny eral government in promoting economic ment will be enacted this year. But like you, by the GAO. growth is inherently different than that of Mr. Chairman, I believe we must put an end GAO and CBO have disagreed strongly on state governments and businesses. While we to the pervasive sentiment that a Balanced the merits of a capital budgeting system for should carefully scrutinize which specific ex Budget Amendment is a panacea for our na the Federal government. H.R. 4420 is de penditures fall under the capital account, we tion's fiscal woes. And like you, I believe signed to address the criticisms put forth by should not simply impose the bookkeeping that the Congress must have a concrete plan CBO and other opponents of the GAO's cap procedures of a state government or large for the aftermath of its passage. We will ital budgeting approach. some of the provi corporation. have a narrow window of opportunity before sions to address these concerns are as fol RESTRUCTURING FEDERAL ACCOUNTS final ratification to begin the process of real lows: First, I would like to focus specifically on deficit reduction, and we must have some (1) Previous capital budgeting proposals Section 3 of that bill, which deals primarily guide of action before year's end. have exclusively targeted toward "brick and with the presentation of the President's Enactment of an Amendment, though a mortar" investments. I have included cer budget. good first step, does not in itself correct the tain "human capital" expenditures in the Section 3 of H.R. 4420 requires that the procedural and structural flaws of the Fed capital account, such as education and job budget presented by the President be divided eral budget. To try to focus attention on training. into operating and capital accounts. The these flaws. I have introduced two bills, the (2) Previous proposals have included de capital account includes the non-administra Capital Budgeting Act of 1991 (H.R. 3914) and fense expenditures in the capital account. It tive expenditures in commercial infrastruc- •This "bullet" symbol identifies statements or insertions which are not spoken by a Member of the Senate on the floor. Matter set in this typeface indicates words inserted or appended, rather than spoken, by a Member of the House on the floor. May 19, 1992 EXTENSIONS OF REMARKS 11837 ture, civilian R&D, and education and job the exception, and by dividing the unified amendment. According to my friend from training. No defense spending, no entitle budget in such a manner we can establish a Texas, Mr. Stenholm, this will likely take ment programs, no administrative expendi sound framework for future deficit reduction five years or so. tures and no interest payments would be in ini tia ti ves. Assuming that the capital account is kept corporated into the capital account. CAPITAL BUDGETING AND DEFICIT REDUCTION in check, and has reduced the deficit, the Mr.

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