Congress should have to re-authorize every federal program – including Medicare and Social Security – on a regular basis, according to Phil Gramm.

Gramm, who served as a Republican representative and senator from Texas, testified today during the second of two days of hearings on the “broken budget process” organized by the House Budget Committee.

“One of the best ideas ever on the budget came from former President Jimmy Carter,” said Gramm, a co-author of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999. “That
was zero-based budgeting.”

Using zero-based budgeting would require Congress to re-authorize all discretionary spending on a regular basis.

Any new president ought to submit re-authorizations of all discretionary programs at the beginning of the second year of that president’s administration, Gramm said.

“This would mean that every program would be reviewed and reauthorized or it would sunset and not be eligible for funding,” Gramm said. “There should be no exceptions to this rule.”

“Unearned entitlement programs” — entitlement programs not based at least in part on beneficiary contributions — should sunset every 10 years starting in 2014, Gramm said.

Entitlement programs funded at least in part with beneficiary contributions, such as Medicare and Social Security, should also undergo a comprehensive review every 10 years, he said.

Gramm cited a study indicating that the Medicare law has undergone major changes once every 3.5 years and that the Social Security law has been changed once every 4.4 years.

A combination of sunset provisions and regular comprehensive reviews would make program changes more systematic, Gramm said.

Gramm added that all federal entitlement programs should be maintained on the books using the kind of accrual accounting required in the private sector, rather than using pay-as-you-go cash-basis accounting. Using accrual accounting would reveal that many federal programs that appear to have cash-basis surpluses are running massive deficits, he said.

“Further, we should require states to use the same accounting methods for their pension programs and health care retirement benefits,” Gramm said. “Only then can we ensure transparency and accountability in the process.”

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