Testimony: Secretary Rubin believes we are better off without a capital budget. He laid out pros and cons of adopting a capital budget, but stated he "always comes out on the negative side."
He feels there are two benefits in having a capital budget. First, he believes the capital budget would change the current nonsensical way of treating investment and operating expenditures the same. Second, he feels a capital budget may cause people to think about depreciating assets over time, thereby promoting more rigorous rates of return analysis on capital expenditures.
On the other hand, he believes there are two significant problems that clearly outweigh the benefits. First, he questioned what constraints would be in the capital budget. He believes some constraint on the total amount of Federal debt is absolutely necessary, but determining this would be totally arbitrary. He fears such lack of constraint and budget discipline might adversely impact the economy.
Second, he sees major problems in defining capital. He predicted adopting the capital budget would create a tremendous incentive to define all favorite programs as capital. He said programs producing intangible assets, such as education and law enforcement, have more long-term benefits than physical assets; but including them might cause all programs to be in the capital budget.
Questions from the Commissioners: Questions focused on the current budget process and how capital budget proposals could improve it.
Q. Should we have a quasi-independent board to address
the capital budget issues?
Q. How does the Government Performance and Results
Act (GPRA) relate to a capital budget?
Q. Does the federal budget process have any bias against
programs having long term benefits? If so, would a capital budget
eliminate this bias?
Q. Should we link borrowing to a specific project?