Testimony: Senator Torricelli said the Commission is, in part, a result of Congressional debates led by Congressman Wise, Congressman Gephardt, and himself in questioning why the Federal budget doesn't have any provision for capital expenditures. He believes the current budget process evolved over two centuries without anyone contemplating its impact on the country's planning or investment spending. He said now is the time to analyze which budget process can allocate resources to meet the economic and political needs of the 21st century.
Senator Torricelli said capital spending should be budgeted and be limited to what the country can afford. He mainly discussed four related issues: 1) public perception of the appropriate Federal debt level; 2) desperate need for more infrastructure investment; 3) two steps to address capital budget opponents' concerns; and 4) New Jersey's bipartisan Capital Budgeting Commission.
He believes the public perception that there should be no Federal deficit deserves further scrutiny. He believes debt financing is appropriate if properly invested, because the current economic growth is built on a foundation that was debt financed by prior generations.
The Senator believes the country desperately needs more infrastructure investment, because we have serious repair and upgrade needs for roads, bridges, major ports, and school buildings. He feels the issue of how much investment is appropriate needs further study, but strongly believes our current investment is clearly insufficient. He pointed out the lack of investment adversely affects the safety of people and our international competitiveness.
Capital budget opponents have reasons to be cynical because a capital budget might result in massive deficits. These concerns can be addressed by requiring a strict definition of capital investment and that a capital budget should require a super majority to ensure a consensus. He said annual budget resolutions could have caps or limitations for capital spending.
He said New Jersey has a bipartisan Capital Budgeting Commission that reviews all of the State's capital investment requests. The Commission also sets debt and capital expenditure targets to ensure the targets are consistent with current tax revenues and projected growth. He said this process is a good working example how to run a capital budget.
Questions from the Commissioners: The questions focused on the problems of the current budget process, the Budget Enforcement Act, borrowing to finance capital investment at the expense of private investment, limiting capital budget to physical infrastructure spending, the New Jersey Capital Budgeting Commission, and the target level of appropriate capital investment.
Q. How does the current budget process hinder capital
A. Under limited budget constraints, members of Congress deciding between immediate consumption and long-term investment will never choose long-term investment, because people demand immediate results.