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

Dear Mr. Chairman:

As required by Section 301(d) of the Congressional Budget Act of 1974, and in response to your letter dated January 28, 2000, 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 2001 which fall within the Committee's jurisdiction.

Recent policies enacted by the Congress and the President have sought to balance the budget, prevent Social Security from financing other government programs, and pay down Federal debt. With the increasing application of information technologies in the U.S. economy, economic productivity has also steadily increased. These factors have contributed positively to the record economic expansion now occurring in the U.S. economy.

The economy experienced strong GDP growth of 5.4 percent in 1999, capping an eight-year period of expansion. Inflation over the past year remained low at 2.2 percent, but is projected to increase slightly next year and beyond. Interest rates are low but projected to rise slightly. The strong economic expansion has brought unemployment to the lowest level recorded in the post-war period. Similarly, enactment of major welfare reform legislation has successfully returned people to work and contributed to declines in the welfare rolls to the lowest levels in 30 years. Last year's enactment of major bipartisan work incentive legislation will provide real opportunities for the disabled to return to productive work and lead self-sufficient lives.

Total Federal revenues exceeded spending in fiscal year 1999 by $124 billion, producing a unified Federal budget surplus for a second consecutive year. Estimates from the Congressional Budget Office (CBO) indicate that the cumulative unified Federal budget surplus over the next 10 years will be between $3.1⁽¹⁾ and $4.2 trillion⁽²⁾ -- about $1 trillion higher than was projected last year. Non-Social Security, or on-budget, surpluses are projected to be between $838¹ billion and $1.9² trillion over the same period. According to CBO, individual income tax receipts fueled the rapid rise in Federal revenues over the past few years. The proper use of expected non-Social Security, on-budget surpluses continues to receive considerable debate.

A key challenge ahead is to sustain and extend the current economic expansion. One threat to continued growth is the lack of progress on an agenda for expanding our markets abroad through trade. Federal revenues in recent years have risen faster than the growth of GDP, as total revenues are at an historic peacetime high of 20 percent of GDP. Also, the major entitlement programs within the jurisdiction of the Committee face pressures to both modernize and sustain these programs in the face of long-term demographic changes, most notably the aging of the baby boom generation. Ensuring continued economic growth, expanding trade, reducing the overall tax burden, and addressing the pressures of changing demographics remain high priorities for the Committee.

I. Major Legislative Issues with Significant Budgetary Impact

A. Social Security - The Committee will continue to work towards achieving bipartisan solutions to address the long-term solvency of the Social Security program. The Committee began its review of the President's most recently revised Social Security framework during a February 9, 2000, hearing on the President's budget proposals. The Committee also will examine Social Security's readiness for the impending wave of baby boom beneficiaries.

B. Tax Issues -- The Committee will work to develop additional tax relief measures focusing on promoting continued economic growth and promoting fairness in the tax code. A high priority will be to address the marriage tax penalty. The Committee also is expected to address other inequities in the tax code along with other appropriate tax provisions. The Committee expects to continue examination of fundamental changes to the Federal tax system.

C. Medicare and Health Reform- The Committee will continue its efforts to strengthen and improve the Medicare program in a way that ensures the long-term financial viability of the program. Among the reform areas to be addressed are expanding seniors' access to affordable prescription drug coverage, modernizing program administration, and giving seniors greater choices in how they receive benefits. In addition, the Committee plans to examine strategies to reduce the number of Americans without health insurance.

II. The Fiscal Year 2001 Budget

The Committee currently is reviewing the President's FY 2001 budget. This process began with a hearing on the President's budget proposals on February 9, 2000, with testimony from Treasury Secretary Summers, and will be continued in subsequent hearings. The President's budget has proposed, among other things, setting aside Social Security surpluses for debt reduction and offering prescription drug coverage to Medicare beneficiaries. The budget includes a number of revenue raising proposals, including reinstatement of Superfund taxes and a $31 billion increase in tobacco taxes. The budget includes numerous targeted tax relief proposals, including marriage penalty and alternative minimum tax relief, and initiatives on education, poverty and revitalizing communities. Final assessments of the Administration's tax and spending priorities will be completed shortly. At that point, we will be prepared to assist you in developing fiscal priorities for the coming budget year.

III. Other Committee Initiatives

A. Trade -- The Committee supports the expansion of trade opportunities, adherence to trade agreements and rules by our trading partners, and the elimination of foreign trade barriers to our goods and services. The African Growth and Opportunity Act and Caribbean Basin Initiative (CBI) enhancement legislation remain top priorities in that regard. Consideration of permanent Normal Trade Relations (NTR) for China and an evaluation of continued U.S. participation in the World Trade Organization (WTO) will be major issues for the Committee.

B. Human Resources -- The Committee will continue its active oversight of the 1996 welfare reform law. A particular focus will be on the adequacy of child protection and child support programs. The Committee expects to review the unemployment insurance (UI) system, including administrative financing of the program. Any resulting legislation would be prepared in a budget neutral fashion. Additionally, the Committee anticipates consideration of legislation implementing the Hague adoption treaty, as well as possible further action on the Father's Count Act (H.R. 3073), now pending in the Senate.

IV. Public Debt Limit

The current statutory public debt limit is $5.95 trillion, a level that would be reached in fiscal year 2009 under CBO's "freeze" and "capped" projections, and in 2005 under the "inflated" baseline. Under the Administration's budget, the debt limit would be reached in 2004.

V. Other

In previous years, we have forwarded to the Committee on the Budget a current copy of our Committee print entitled "Background Materials and Data on Programs within the Jurisdiction of the Committee on Ways and Means." We expect to issue an updated edition later this year.

We look forward to working with you and your Committee as we promote policies to enhance and continue the Nation's prosperity and a bright future for all Americans.

Sincerely,

Bill Archer
Chairman

1. Projection under CBO's "inflated" baseline, which assumes that budget authority for discretionary programs grows at the rate of inflation each year after 2000.

2. Projection under both CBO's "freeze" baseline, which pegs discretionary budget authority to the level enacted for the current year, plus amounts already enacted for 2001, and under CBO's "capped" baseline, which assumes that discretionary spending equals CBO's estimates of the statutory caps through 2002 and grows at the rate of inflation thereafter.