July 17, 1998
HEARING AND MEETINGS OF THE PRESIDENT'S COMMISSION TO STUDY
Hearing and Meeting of Friday, June 26, and Meeting of Saturday,
The hearings and meeting were transcribed. Copies of the transcriptions
are available upon request to Dick Emery, the Executive Director of the
Hearing and Meeting of Friday, June 26
Introduction. Co-chair Kathleen Brown opened the meeting at 9:15
a.m. at One New York Plaza (Broad and Water Streets), The Annex, 43rd Floor,
New York, NY 10004. Commissioners not present for the entire day were Mr.
Stein and Mr. Kramer. Sitting at the table with the Commissioners was William
Dinkelacker, Designated Federal Official from the Department of the Treasury.
As required by the Federal Advisory Committee Act, the meeting had been
announced in the Federal Register, and the meeting was open to the public.
Several items were distributed to the public and the Commission or were
available at the meeting:
biographical information about the witness, G. Edward DeSeve, Acting Deputy
Director for Managment at the U.S. Office of Management and Budget, who
testified before the Commission;
the fact sheet about the Commission;
a list of written testimony and statements received by the Commission;
the Federal Register notice announcing the meeting;
the press release announcing the meeting;
the recently released study by the Congressional Budget Office, The
Economic Effects of Federal Spending on Infrastructure and Other Investments
Proposed Work Plan (June 23, 1998);
The Supplemental Nutrition Program for Women, Infants, and Children (WIC);
the synopses and other materials sent to the Commission June 19;
"A Fiscal Strategy for This Parliament" (June 11, 1998), a statement about
plans for the United Kingdom to institute distinct current and capital
a memo from Herb Stein to the Commission (June 24, 1998);
a revised draft outline of the Commission's report (June 23, 1998);
a paper, "Economic Issues Relating to Capital Budgeting" (preliminary draft,
June 26, 1998); and
Purpose. The purpose of the meeting was to take testimony from Mr.
DeSeve about capital budgeting, and discuss capital budgeting issues.
draft minutes of the May 8 and 9 meetings.
Discussion. At the beginning of the meeting the Comission approved
hiring Bob Litan as the writer for the Commission's report, and approved
the minutes for the May 8 and 9 meetings. The Commission also discussed
briefly the "Proposed Work Plan (June 23, 1998)." As part of this discussion,
the Commission decided to cancel the meeting scheduled in Washington for
Friday, September 18, and to meet all day Saturday, September 19.
Dick Emery, Executive Director, then presented items from a matrix of
possible capital budgeting problems and options, which had been sent to
the Commission in advance. After a brief presentation of each item, there
was general discussion among the Commissioners. The possible problems were:
1) there is little long-term planning for capital in a life-cycle context
outside of the Department of Defense; 2) no one is fully responsible for
capital planning; 3) information about physical and financial characteristics
of assets is inadequate; 4) accounting standards do not include current
cost or imputed interest; 5) pork barrel projects are often chosen over
projects with higher returns; 6) dedicated revenues are not fully used
to finance designated investment; 7) there are no goals or targets for
any category of investment; 8) funding is not always assured to complete
projects efficiently; 9) projects often take more than one year to complete;
10) spikes in necessary funding sometimes deter justified investment; 11)
programs are not charged uniformly and fully for their use of capital;
12) programs are not charged uniformly for their use of labor and support
services; 13) inappropriate choices are made in regards to leasing or buying;
14) cost overruns, delays, and poor quality plague many acquisitions; 15)
government often buys hi-tech, custom projects that are not wise choices;
16) capital is often poorly maintained; and 17) capital is often poorly
At 11:00 a.m., Mr. DeSeve presented testimony to the Commssion that
included a slide presentation. His presentation ended about 12:15, at which
time the Commission had lunch.
The meeting reconvened at 1:00 p.m. Ms. Brown announced that the Commission
would begin its Saturday meeting at 8:15 a.m. and try to conclude about
10:45 a.m. The Commissioners continued to discuss the material presented
in the morning. Beginning about 1:45, Mr. Emery and the Commissioners discussed
for about an hour the synopses of how decisions are made for individual
Federal programs, which had been mailed to the Commission in advance. The
programs were: 1) Coast Guard; 2) the recently enacted surface transportation
legislation; 3) the Department of Defense acquisition processes; 4) the
campus for the National Institute of Standards in the Department of Commerce;
5) the Space Station; 6) the Department of Energy; 7) research in the National
Science Foundation; 8) the Internal Revenue Service; 9) the women, infants,
and children's program (WIC); 10) the Ronald Reagan building; and 11) water
resources development projects.
The Commission took a break about 2:45, then reconvened about 3:00 p.m.
Mr. Marvin Phaup, of the Congressional Budget Office (CBO), discussed for
about ten minutes the recently released CBO paper, The Economic Effects
of Federal Spending on Infrastructure and Other Investments (June 1998).
Mr. Levy then discussed the work his group had done on macroeconomic
issues. This was followed by a discussion by Mr. Penner of the work his
group had done on depreciation and intergenerational/timing issues.
Mr. Brittain then distributed a revised draft outline for the Commission's
report, which was for discussion the next day. The meeting adjourned at
Meeting of Saturday, June 27
Introduction. Co-chair Jon Corzine opened the meeting at 8:20
a.m. The meeting took place at One New York Plaza (Broad and Water Streets),
The Annex, 43rd Floor, New York, NY 10004. Mr. Stein and Mr. Rattner were
absent. Sitting at the table with the Commissioners was William Dinkelacker,
Designated Federal Official from the Department of the Treasury. As required
by the Federal Advisory Committee Act, the meeting had been announced in
the Federal Register.
The same handouts were available to the public as those on June 26.
Discussion. A draft outline for the Commission's report had been
distributed at the end of the previous day's meeting. Woody Brittain led
a discussion of the outline, which lasted until the meeting adjourned.
Commissioners were asked to send proposed potential recommendations to
the co-chairs, who planned to meet July 15 or 16 with Bob Litan and Dick
Emery to discuss them. The potential recommendations would be sent to the
Commissioners prior to the next meeting, scheduled to be held in Washington
on July 24 and 25, when the Commission planned to take a preliminary vote
on the recommendations.
The meeting adjourned at 10:45 a.m.
President's Commission to Study Capital