Better Budget Process Initiative
There is a growing consensus that the budget process is broken. Deadlines are missed, controls circumvented, gimmicks employed, and the long-term ignored. The Better Budget Process Initiative aims to address this problem through concrete ideas to reform and improve the way the budget is developed, including placing greater focus on the long-term fiscal outlook, dealing with the debt limit, strengthening statutory budget enforcement, revising the content and structure of the Congressional budget resolution, biennial budgeting, and addressing the treatment of tax expenditures.
Budget baselines are among the most important – but widely misunderstood – elements of budgeting and policymaking. The budgetary impact of a given legislative change can be measured in several ways. Baselines allow us to measure the future effect of changes relative to projections under the status quo. Budget baselines are produced by the Congressional Budget Office (CBO), Office of Management and Budget (OMB), and a number of outside organizations. In general, they serve two purposes – to provide projections of current fiscal policy and to offer a measuring stick to compare policy changes. CBO describes its baseline as a “current law” baseline, meaning it projects spending and revenue assuming no legislative changes. In reality, it is a current law baseline modified with CBO’s default assumptions. For example, the baseline assumes discretionary appropriations are passed each year (and grow with inflation), various expiring mandatory programs continue, trust fund depletion does not constrain spending on programs paid from those funds, and the debt limit continues to be raised over time. These departures from current law intend to allow CBO’s baseline to better serve as a neutral benchmark. However, within the current baseline framework there are opportunities for gimmicks and other fiscal mischief as well as unnecessary confusion. As part of our Better Budget Process Initiative, we have identified six potential changes to baseline rules that would better serve policymakers and the public.
Before the Senate adjourned in July for summer recess, Senate Budget Committee Chairman Mike Enzi (R-WY) released an outline recommending changes to the current budget process. The outline includes fundamental reforms of the budget process such as establishing enforceable fiscal targets, establishing a budget concepts commission, and moving to biennial budgeting. It also includes smaller procedural changes that Congress could act upon as soon as this fall.
One of the key elements of the Congressional Budget Control and Impoundment Act of 1974 (Budget Act) was the provision to adopt a budget resolution, which sets out Congressional priorities on the budget and provides a framework for legislation affecting spending and revenues. The budget resolution is a concurrent resolution, which means it is adopted by the House and Senate but not signed by the President. It establishes internal rules and procedures for legislation that impacts spending and revenues. But currently, the budget resolution mechanism has not been an effective tool in providing a framework for legislative action or imposing fiscal discipline. Congress has repeatedly failed to pass budget resolutions in recent years, and when it does adopt a budget resolution it fails to follow through and enforce the budget.
In 2010 and 2011, policymakers enacted two important budget process improvements: statutory caps on discretionary spending and the statutory pay-as-you-go (PAYGO) law to prevent tax cuts or mandatory spending increases that are not offset by other changes. Although neither of these laws will prevent the unsustainable growth of the debt, both are designed to prevent policymakers from worsening the overall fiscal situation. Unfortunately, policymakers have negated these rules’ effectiveness by finding ways to circumvent them on many occasions.
The experience with the discretionary spending caps and PAYGO requirements originally enacted as part of the 1990 Budget Enforcement Act demonstrated that when lawmakers took these rules seriously, they were more likely to abide by the rules. With debt at a modern record high and projected to grow unsustainably, it is unacceptable for policymakers to avoid hard choices by relying on gimmicks and loopholes. Congress should therefore reaffirm its commitment to strictly enforced budget rules, and enact reforms strengthening these rules to make it harder to evade the letter and spirit of the rules. We recommend several improvements to help them do so.
The debt ceiling was first created in 1917 and established in its current form around 1940. Prior to that, Congress had to approve each issuance of debt, whereas the new ceiling allowed debt to be issued regularly as long as it stayed below a nominal limit. Because spending has generally exceeded revenue collection causing the government to borrow each year, the country has regularly bumped up against the debt limit. As a result, the debt limit has been increased, extended, or suspended a total of 92 times. A number of these increases, in the past, have been used as an opportunity to address our growing national debt or enact Fiscal reforms. As one of the only fiscal speed bumps in the budget process, it has served the purpose of helping to focus Washington’s attention on our fiscal situation. This paper outlines options to reform the debt limit.
The budget process focuses on the short term, often at the expense of longer-term considerations. This distortion allows policies to be crafted in ways that mask their true costs, and produces results that downplay looming fiscal challenges. The short-term focus leads to many poor outcomes, such as emphasis on short-term deficit reduction (with little improvement in the long-term fiscal outlook), the use of “timing gimmicks” designed to obscure the budgetary impact of policy choices, and the reliance on one-time savings are to ensure “deficit neutrality” within a budget window but deficit increases beyond it. The short-term emphasis is the result of both an overreliance on ten-year budget windows for scoring and analysis, and insufficient enforcement of long-term fiscal goals. Modifying the rules governing the budget process could be a powerful tool to help correct this myopic thinking. We suggest several possible remedies in this paper.
Forty years ago, President Nixon signed the Congressional Budget and Impoundment Control Act of 1974 (“The Budget Act”) into law, establishing the modern budget process and institutions. Enacted to settle ongoing clashes between the executive and legislative branches, the Budget Act established procedures and institutions to allow Congress to establish its own budget priorities independent of the executive branch and provide a framework to guide and coordinate legislation affecting spending and revenues within overall budgetary limits.
There is a growing consensus that the budget process is broken. After functioning relatively well for more than two decades, Congress has increasingly moved to dealing with budget issues on an ad hoc basis. Congress adopted an annual budget resolution, approved by both chambers, each fiscal year from 1976 through 1998. Since then, however, there have been eight fiscal years in which Congress has not approved a budget resolution. Furthermore, Congress has increasingly relied on temporary patches to fund parts of the federal government rather than full-year appropriations.
As part of our Better Budget Process Initiative, the Committee for a Responsible Federal Budget recently hosted a briefing on Capitol Hill called “Fixing the Budget Process.” The event featured remarks from the House Budget Committee Chairman Tom Price (R-GA) and a panel of experts, including our president, Maya MacGuineas; Paul Posner, former federal budget managing director at the Government Accountability Office; Dr. Stuart Butler, senior fellow in economic studies at the Brookings Institute; and Dr. Marvin Phaup, public policy & public administration professor at The George Washington University. The event was moderated by Kelsey Snell, a reporter for The Washington Post. It aired live on C-SPAN and can be viewed here.
Just before summer recess, Senate Budget Committee Chairman Mike Enzi put forward a set of budget process reform recommendations. Chairman Enzi kicked off this event with a keynote followed by a panel of experts, including Charles S. Konigsberg, Principal, Federal Budget Group (@budgetreport); Ed Lorenzen, Senior Advisor, Committee for a Responsible Federal Budget (@CaptainPAYGO); Dr. Roy T. Meyers, Professor of Political Science and Affiliate Professor of Public Policy, University of Maryland, Baltimore County; Dr. F. Stevens Redburn, Professorial Lecturer in Public Policy and Public Administration, The George Washington University, who discussed Enzi's recommendations in the areas of Senate budget procedures, biennial budgeting, a budget concepts commission, and portfolio budgeting. The event was moderated by Ben Weyl, Editor of POLITICO Pro's Budget & Appropriations Brief. It aired live on C-SPAN and can be viewed here.