Budget Dysfunction: Potential Reforms

Laura Blessing | July 11, 2018

The federal budget process, laid out in the 1974 Budget Act, is a complex, multi-stage process with many opportunities for partisanship and intra-party divisions to derail it. And derailed it has been, with workarounds like omnibus appropriations and Continuing Resolutions (CRs) becoming the new normal. The myriad challenges in the present-day process were discussed at length in our last newsletter.  Here, I’ll turn to the new joint select committee created to reform the budget, as well as what options exist — from the gimmicky, to big transformations with little politically viability, to lower-hanging fruit.

The joint select committee created by the Bipartisan Budget Act of 2018 has a very heavy lift if it’s expected to create any meaningful reform. Its recommendations are due by November 30: after the midterm elections, to give the committee political insulation. The committee, headed by Rep. Steve Womack (House Budget Committee Chair and an appropriator) and Rep. Nita Lowey (House Appropriations Ranking Member), was selected by party leadership and has held four public hearings, with a fifth scheduled for tomorrow.

In its first public hearing, former CBO Director Douglas Holtz-Eakin questioned the committee’s ability to achieve transformative change, given their short time frame, and suggested they aim instead at more minor changes.  Mr. Holtz-Eakin is right to suspect a committee with little time and chosen by party leadership with an outsized role in budgeting, might not achieve comprehensive reforms. As such, potential reforms are worth considering both for their efficacy and political viability.

The first category is one that relies on, frankly, gimmicks that receive perennial attention but do not affect the underlying dynamics that make budgeting difficult.  Biennial budgeting, the idea that budgets (appropriations bills, not budget resolutions) be made over two-year periods, has been proposed for nearly 40 years. The main incentive for improvement here is additional time, an uncertain advantage in a Congress with a long-term habit of kicking the can down the road.  Higher-stakes negotiations for longer budget periods and less flexibility to address developing challenges make this reform dubious.

Similarly, moving the beginning of the fiscal year to January 1 or right before the winter holidays, while it has its advocates, does not affect the underlying budget process. While the holidays do motivate legislators to finish work, they can just as surely motivate them to complete a short-term Continuing Resolution (CR). Another suggestion has been to increase buy-in by different political actors  by changing institutional roles (such as placing leadership on the budget committees).  But this proposal does not grapple with the fact that the process is already heavily leadership-driven, often at the expense of stymied committees. Finally, some have suggested punitive tools such as withholding pay or recess for Members should Congress fail to fund the government. Cathartic or not, this action has a similar problem: it does little to address decisions made mostly by party leaders.

A second category of more general budgetary reforms could address underlying dynamics but would be very difficult politically. The inclusion of all revenues and spending in the budget process, for example, would be a more comprehensive approach that dealt with deficits in a more serious way. Both parties, however, oppose this in predictable ways: Republicans do not want to include revenues because they oppose tax raises, while Democrats oppose the inclusion of entitlement spending, as it would effectively sunset those programs, ending their entitlement status and making them politically vulnerable. Similarly, efforts to bring back the Conrad rule, which would prevent using reconciliation to increase the debt in the first decade after legislation, would face powerful political and electoral incentives against this reform. In a deeper sense, Congress has been unable to solve the math problem of balancing the budget because they, and their voters, do not like those hard decisions. Other suggestions stem from the justified frustration over increasingly unrealistic, messaging-oriented budget resolutions.  However, willing people to be more realistic is unenforceable and forcing them to be so (say, by making the budget resolution a joint resolution, requiring the President’s signature) would further hamstring the process.

There are a few reforms that represent lower-hanging fruit that are getting the attention they deserve, even though they would not fix the budget process itself in a more direct way.  One such improvement would be to end debt ceiling brinksmanship, such as by the reinstatement of the Gephardt rule, which automatically raised the debt ceiling without requiring a (potentially toxic) vote, until it was eliminated in 1995.  Another such improvement would be increasing expertise and institutional capacity for budgeting in Congress.

A third example of low-hanging fruit would be to allow earmarks again. Giving Members something to vote for (and leadership carrots to corral their co-partisans) could help to get the process back on track. However, given that the earmarks ban is enshrined in the majority’s rules for both chambers, there is not a legislative fix for this reform. While there has been talk of very modest earmark reform (allowing them for Army Corps projects, for example), any change is unlikely to happen while the majority party remains in the majority.

A promising idea that may have some political traction would be to regularize the ad hoc pattern of biennial budget agreements, which would provide an element of stability and predictability by establishing discretionary spending limits. This general idea appears to have bipartisan support.  We’re likely to see another such budget agreement in 2019 until the sequestration caps end in 2021, and it’s worth considering what happens at that point.

It’s unlikely that the new joint committee’s work will result in substantial reforms this year, but perhaps they will start a necessary dialogue. We’ll need those ideas soon enough.

Laura Blessing is a Senior Fellow at the Government Affairs Institute

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