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Letitia Chambers, President, Chambers Associates
Incorporated
(September 19, 1998)
Testimony: Dr. Chambers noted that the current budget structure
focuses primarily on the pending fiscal year. This has led to an under-investment
in areas that could stimulate economic growth. For this reason, she proposes
that the unified budget be divided into three discrete budgets:
(1) a Capital Investment Budget which reflects investments for
the future and includes expenditures for programs and activities which
have multiple-year life and raise future productivity.
(2) a Pension, Income Replacement Budget which reflects the nation's
commitments made to workers and their employers and investments to fund
those commitments, and includes Social Security, Federal Employee Retirement
Programs, Worker's Compensation Programs, and the Unemployment Insurance
System.
(3) an Operating Budget which contains all other programs and activities
and reflects current consumption by the federal government.
Dr. Chambers said that capital investment programs are defined to be those
programs and activities that have multiple year life and raise future productivity.
This category includes spending on physical capital, research and development,
and could include such human capital as education and training. The physical
capital category does not include defense procurement of weapons because,
like other consumer durables, expenditures for such purposes do not have
the potential for raising future productivity. An Advisory Committee that
included the Comptroller General and the Congressional Budget Office could
be created to advise on recommendations for inclusion of new programs in
the Capital Investment Budget. This budget should be accompanied by a presidential
directive to develop meaningful rate-of-return estimates.
Her testimony noted that the total integration of accrual accounting,
including depreciation, could weaken control. For that reason, such information
should be part of the budget presentation, but not the basis for federal
accounting.
Questions from the Commissioners: Questions focused largely on
Dr. Chambers' proposed three budgets within the unified budget.
Q. Do you think leaving out defense procurement from
capital is a big issue?
A. I don't think so. Including it would mask the
current lack of spending for investment.
Q. Why didn't you put depreciation in the operating
budget and include liabilities for pensions on an accrual basis? Is showing
a surplus in the pension budget misleading?
A. If we had full accrual accounting across government,
we might have some unintended results. The budget presentation I have proposed
is a cash not accrual budget. Showing that the current cash surplus in
the unified budget is attributable to pension programs with long-term future
liabilities is an important element in making the budget more understandable.
President's Commission to Study
Capital Budgeting
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