The Honorable John Kasich
Chairman
Committee on the Budget
309 Cannon Building
Washington, DC 20515

Dear Mr. Chairman:

As required by Section 301(d) of the Congressional Budget Act of 1974, this letter transmits the views and estimates of the Committee on Ways and Means on those aspects of the Federal budget for the fiscal year 1999 which fall within the Committee's jurisdiction.

During preceding fiscal years, the Committee devoted substantial effort to enacting major reforms within its jurisdiction, and succeeded with welfare and health reforms, and tax relief. With the enactment in 1997 of the Balanced Budget Act and the Taxpayer Relief Act, the Congress and the President sought to end eras of federal government deficits and insure long-term economic growth.

Now, preliminary estimates from the Congressional Budget Office indicate that for the first time in three decades the federal government will have a surplus of $9 billion this year. It is estimated that a robust economy generating increased receipts and fiscal restraint by government could result in surpluses into the next century. Balancing the budget was of paramount importance in the past; preserving a balanced budget will remain a top priority in the future.

During the current economic expansion, more Americans are working than ever before, but family incomes have not risen as they should. Taxes and other government receipts are at an historic peacetime high of 19.9% of Gross Domestic Product. Addressing these challenges remains a high priority for the Committee.

I. Major Legislative Issues with Budgetary Impact

A. Tax Issues -- The Committee will work to develop additional tax relief measures. In February, the Committee held hearings on several tax reduction proposals, including marriage penalty relief, further reductions in death taxes, income tax rate reductions, alternative minimum tax relief, repeal of the 18-month holding period for capital gains, and an exemption for interest and dividend income. The Committee may also consider time-sensitive tax matters, such as tax provisions that will be expiring in the near future, and other appropriate tax provisions.

On November 5, 1997, the House passed H.R. 2676, the IRS Restructuring and Reform bill. The Senate plans to take up the bill shortly. The Committee expects to go to conference on the bill and to send the bill to the President as soon as possible.

The Ways and Means Committee expects to continue a series of hearings on fundamental changes to the Federal tax system. The hearings would focus on issues related to replacement of the current income tax (and other Federal taxes) and design of a new tax system.

Reauthorization of the Intermodal Surface Transportation Efficiency Act (ISTEA) is a primary goal of the Congress this year. At an appropriate time, the Committee will provide the necessary financing mechanism and trust fund provisions needed to complete the bill.

B. Human Resources -- Although it has no direct budgetary impact, the Committee will be diligent in its oversight of the new national welfare system resulting from the 1996 welfare reform law, including oversight of welfare-to-work activities, child support enforcement, and the Supplemental Security Income program. The goal of these efforts is to ensure that the new law is being faithfully implemented by the states and by the federal government, and to monitor whether further changes are needed to help poor families find jobs, stay independent of welfare, and promote the creation and maintenance of two-parent families. The Committee looks forward to enactment of H.R. 3130, the "Child Support Performance and Incentive Act of 1998", which creates realistic penalties for poor state performance for child support computer systems, in a budget neutral fashion. Additionally, the Committee expects to review the unemployment insurance (UI) system, including the administrative financing of the system.

II. The Fiscal Year 1999 Budget

The Committee is currently reviewing the President's FY 1999 budget. Analysis by the Joint Committee on Taxation and the Congressional Budget Office indicates the President has proposed a net tax increase of $79.6 billion over the next five years, $65 billion of which is attributable to unspecified tobacco legislation. The budget also included proposals on child care, education bonds, pensions, and Medicare. Final assessments of the Administration's spending priorities will be completed shortly. At that point, we will be prepared to assist you in developing the fiscal priorities for the coming budget year.

III. Other Committee Initiatives

A. Trade -- The Committee strongly supports the expansion of trade opportunities, adherence to trade agreements and rules, and the elimination of trade barriers. Therefore, the Committee supports prompt action on legislation establishing fast-track procedures for implementing new trade agreements, when the bi-partisan support necessary to pass this legislation is established. The Generalized System of Preferences program is set to expire on June 30, 1998. The cost of extension through 2003 is approximately $1.2 billion.

Although it has no direct budgetary effect, the Committee's oversight of major international trade agreements, such as the NAFTA and the Uruguay Round will be pursued diligently. The annual review of China's MFN status will be the subject of hearings and the Committee will consider if this procedure continues to be effective or whether new options should be proposed. The goal of the Committee is to expand trade and create the economic base and tax system that American firms and workers need to compete in the global marketplace. At the same time, we also must ensure that our trading partners are playing by the rules of fair trade and that American workers are protected from unfair competition. The Trade Adjustment Assistance program for workers, NAFTA-related Transitional Adjustment Assistance, and Trade Adjustment Assistance for firms, are set to expire on September 30, 1998. The cost of extension through 2003 is approximately $246 million.

B. Medicare -- Medicare reforms in the Balanced Budget Act of 1997 will extend the life of the Part A Hospital Insurance Trust Fund until 2010. Through a series of hearings, the Committee will carefully monitor the Administration's implementation of these reforms to ensure that changes are made in the manner that the Congress intended.

C. Social Security -- The Committee will continue hearings to explore fully various proposals to restore the long-term solvency of the Social Security system and maintain retirement income security in the United States. It is the Committee's intention to explore ways to engage the American public in a national dialogue regarding Social Security in order to promote a better understanding of the system's problems and potential solutions.

The Committee also expects to consider legislation to provide real opportunities to Disability Insurance and Supplemental Security Income recipients with disabilities to return to productive and self-sufficient lives.

IV. Public Debt Limit

The current statutory public debt limit is $5.95 trillion, a level that should be adequate until early in fiscal year 2001.

V. Other

In previous years, we have forwarded to the Committee on the Budget a copy of our Committee print entitled "Background Materials and Data on Programs within the Jurisdiction of the Committee on Ways and Means." We expect the 1998 edition to be available in April.

We look forward to working with you and your Committee as we continue to promote those policies that will strengthen the nation's economy and give Americans a brighter future.