Testimony: Representative Wise has supported establishing a Federal capital budget for many years. He introduced stand alone legislation and constitutional amendments to balance the Federal budget using a capital budget. In 1994, he began introducing legislation to establish a Commission to study capital budgeting.

He believes the Federal budget should be divided into an operating budget and a capital budget. The operating budget would include all programs that meet the immediate obligations of running the government, while the capital budget would include long-term, tangible investments in infrastructure. The operating budget would be balanced, but the Federal government could borrow for spending in the capital budget. With Representative James Oberstar, Representative Wise is proposing a capital budget pilot program that is consistent with his belief.

He said the current budget process should be changed because it makes no distinction between money spent on investments and money spent for consumption -- it is biased for consumption at the expense of investment. The current process leads to poor information for decision-making.

He said a capital budget is feasible, because many industrialized countries and most State and local governments and businesses have capital budgets.

To budget for the future, he believes a capital budget would force better policy decision-making, benefit the public by providing better information, and provide long-term investment planning critical to economic growth.

Questions from the Commissioners: Questions focused on the cost-benefit analysis impact on capital budgeting, the proposed capital budget pilot program, issues over defining capital, and concerns over adverse impact of incurring more debt on private investments.

Q.    Are you suggesting that a capital budgeting process would require CBO cost estimates that indicate investment benefits outweigh their costs?
A.    The Corps of Engineers has to go through a process of cost benefit analysis. I think that's reasonable. I have no problems with that.

Q.    What's the intent of a capital budget pilot program?
A.    The pilot should put the Congress and the Federal government in a better position to evaluate the impact of capital budgeting. Congress has debated capital budgeting in a vacuum, because concrete information on the capital budget impact has not been available. The pilot would provide this desperately needed information.

Q.    Would you include school buildings in your definition of capital?
A.    No. I believe the definition should be limited to physical infrastructure and Federal buildings.