taxation of capital already in place; it may be meritorious on other grounds, but certainly not as a stimulus matter.

Senator FEINGOLD. And how do you rank the marginal income tax rate cuts as opposed to the payroll tax holiday?

Mr. CRIPPEN. The same way we in our report; it would be lower in terms of bang-for-the buck, not nearly as good as the payroll tax holiday.

Senator FEINGOLD. Thank you, Dr. Crippen.
Thank you, Mr. Chairman.

Chairman CONRAD. Senator Snowe.

Senator SNOWE. Thank you, Mr. Chairman.

As we begin this new year, I hope that somehow we can reconcile our differences and produce a bipartisan budget resolution. I could not help but think as well of the old cliche-what a difference a year makes. When we look back at the CBO report of last year, Dr. Crippen, that report indicated that "The slowing economic data do not as yet constitute a strong reason to expect a recession."

We know that the world is of course radically different from that time a year ago, and certainly an already faltering economy was exacerbated by the devastating attack on September 11. And I think the question is where do we go from here, and I think, like Senator Stabenow, with whom I worked on the trigger, that it is a policy mechanism that I do think is prudent and practical, and I think it is one that we should revive as we consider the budget this year.

Obviously, as Senator Stabenow indicated, the State of Michigan has introduced a trigger mechanism; the State of Maine has done that on occasions. It is a great way of controlling events that you otherwise cannot control because it is very difficult to forecast and to foresee some of the events and circumstances that might be created.

So I hope that we can look at that issue once again on a bipartisan basis-and it did include not only tax cuts, but it also included spending, because as Senator Gramm rightfully pointed out, he referred to the year 2000 and the changes that we made in policy that had an impact over 10 years of an additional $561 billion in increased spending. If you look at the 3-year total of changes in spending, it amounted to an additional $1.24 trillion in additional spending that had an impact over the next 10 years. So that clearly, spending as well has to be entered into the equation to see exactly what has occurred with the surplus.

Dr. Crippen, I was interested in your economic forecast and your projections for economic growth, because I think that clearly, our goal has to be maximizing economic growth. I noticed that in the year 2003, you actually project higher economic growth than in the original forecast of January 2001, higher between the years 2004 and 2007 than the projection of this last year, and the same between the years 2008 and 2011. Are you suggesting, then, that what is affecting our surpluses is in the year 2002 and 2003 alone? Mr. CRIPPEN. No, Senator. Our forecast, which you just cited, is clearly relative to last January. Growth is much weaker now, negative in parts of last year, at least. And the 2003 that you cite is a bounce-back, if you will, from being well below what our normal growth would be. With inventory accumulation and other things,

we forecast that we will get the 4.7 percent or so growth in GDP that I think we suggested for next year.

But the 10-year average is still lower than we forecast last January by several tenths of a percentage points, on average, so we are at a rate of about 3 percent total real growth. But the heart of your question, I think, is whether this is just a problem for the next year or two. In fact, the changes in economics have an effect over the longer term, both the changes themselves-we are starting from a lower base-and the revised data, which says we have less capital than we thought we did before, which would reduce growth as well. So we have taken growth down over the period as well as the revenues produced from that economy.

I do not know if I have been responsive.

Senator SNOWE. I am interested because the report indicates that you expect economic growth to be roughly the same as was projected last January over the 2002-2011 period on an average. So what exactly would-is it the year 2002 and 2003 economic growth projections that are having the significant impact of a loss of 71 percent of the surplus over 10 years?

Mr. CRIPPEN. No. Certainly, the economy is the single biggest factor for the next two or three years. After that, the legislation, for tax cuts and revenue cuts and spending increases, starts to predominate as the single biggest factor. But the change in economics which accounts for some 40 percent of the $4 trillion reduction in the surplus, some of its effects are spread out over the entire period. Economic and technical revisions, taken together, amont to 40 percent of the $4 trillion revision. Many of the revisions labeled "technical" have an economic source.

Senator SNOWE. Doesn't that provide a rationale for a stimulus package, I mean, to try to turn around the short-term nature of this economy? Irrespective of the fact that technically, we may emerge from a recession, the question is what type of recovery, and that could have a predominant influence on economic growth. If we have a jobless recovery that is similar to 1991, clearly, people are not going to feel that they have emerged from a recession, but it is also going to have an impact on our revenue picture as well.

So wouldn't a stimulus package of some kind that could clearly influence the short-term behavior of this economy make a pronounced difference in the short-term projections and ultimately the bottom line?

Mr. CRIPPEN. If it could make a difference in economic growth, then yes, it would make a big difference to the bottom line. It is the weakness in the next year or two that could contribute substantially, particularly in the short run, to the change in our outlook.

Senator SNOWE. And you mentioned in the CBO Outlook of last year that a 0.1 percent change in growth can clearly have an impact on the surplus of $244 billion over 10 years. Is that pretty much true today?

Mr. CRIPPEN. Right. I think we stayed close to that number. It is in Appendix A. It will be in the first appendix of the report that will be published next week, but yes, it is about the same.

Senator SNOWE. So that obviously, our focus should be on changing those economic growth numbers this year and next particularly; would you agree with that?

Mr. CRIPPEN. I agree absolutely, wholeheartedly.

Senator SNOWE. OK. I appreciate it, Dr. Crippen. Thank you very much.

Chairman CONRAD. Senator Clinton.

Senator CLINTON. Thank you very much, Mr. Chairman, and thank you, Dr. Crippen.

I am sorry that Senator Gramm has left. I thought that his, what I inferred to be an offer to repeal the tax cut and put new restrictions on spending sounded like a good place to begin, because basically, what I heard him saying was that we need to act on both sides of the ledger, which I think many of us around this table agree with. So perhaps, Mr. Chairman, we have the start of an agreement that we can work out.

Also, I think the points made by both Senators Stabenow and Snowe need to be revisited, and I certainly, as someone who supported their work on the trigger, would believe that it should be on both sides-that there should be triggers on spending as well as on tax cuts. That is the way many States have to operate. That is, to reiterate Senator Hollings' point, why Governor Bush is having to postpone tax cuts, because you cannot run those sorts of deficits at the State level. I have long thought that we ought to be looking at similar mechanisms, understanding the more difficult challenges facing the Federal budget, but I still think there is some wisdom in the State that we ought to try to learn from.

I have a couple of questions, Dr. Crippen, and I thank you for your testimony and for the work that you and your staff have been doing. But clearly, it is pretty breathtaking that in less than a year, $4 trillion of the projected surplus has disappeared. I do not think we should lose sight of the fact, as we go back and forth in our discussion, that that is really what you are talking about today. If you were to write a headline, it would be "Four Trillion is Gone" from the time that you sat here a year ago and made the projections with the very fair assessment of uncertainty that you put into those projections, but nevertheless $4 trillion is gone.

Your caution about what that means for us not just in the short term but in the longer term is one that we disregard at our peril. It is something that really haunts me that we would be putting this load of debt and these extremely difficult political decisions on the backs of our children instead of facing up to them ourselves. I do not know whether Senator Gramm's idea of postponing tax cuts or even repealing them, along with stricter spending limits, following in the footsteps of both Senators Snowe and Stabenow will be heeded, but I certainly intend to do everything I can to make that case.

I would appreciate, Dr. Crippen, getting the tax rates on your chart, "Total Revenues as Share of GDP." Several members have made the point that the average of approximately 18 percent has been exceeded, but what I am interested in is that my recollection of tax policy going back 30 or 40 years is that the relative burden borne by different segments of our society has shifted dramatically. I would like to get that information if I could, because I think that

the corporate tax rate and the individual tax rates on the upper end have gone down dramatically, and in fact, middle-income and lower-income Americans are bearing a disproportionately higher share of the tax burden, and this revenue spike is due in large measure to that increased share. Particularly when my constituents pick up the newspaper and see that a company like Enron has paid no taxers whatsoever, that was not the case in the 1950's and 1960's when corporate tax rates were both higher and tax collection was more strenuous.

[The following was subsequently submitted for the record by Mr. Crippen:]

In response to Senators Clinton's request for data on the relative tax burden borne by different segments of society over recent decades, we enclose Table G-la from a recent study, "Effective Federal Tax Rates, 1979-1997" (October 2001). The study contains more detailed data on the distribution of effective tax rates and incomes, and it includes a discussion of methodological issues and a presentation of alternative measures.