Budget Reform: Diagnosing the Problem

Laura Blessing | May 3, 2018

The federal budget process is broken.  There are few things that political actors across the spectrum agree on; the deep dysfunctionality of congressional budgeting is one.  This topic has received considerable attention in recent years, most recently via a joint select committee created to seek reforms.  The  need for such an investigation is borne out by a closer look at the budget process, metrics for its performance, and recent developments.  The committee’s final recommendations, along with legislative language, are due by November 30.  The potential reforms will be discussed in the next newsletter; this promises to be a heavy lift.

A quick review of what the budget process should look like reveals a complex, multi-stage process with many veto points.  The 1974 Budget Act took a previously ad hoc process of appropriations bills and created a comprehensive one for discretionary spending, along with new resources (like the Congressional Budget Office) and committees (the Budget Committees).  It imposed a timeline and created new procedural tools.  According to the Act, the President releases a budget in February, the Budget Committees create a budget resolution with the total amount of discretionary spending (and possibly reconciliation instructions) that Congress passes in April, and the House Appropriations committees decide how much of that total (302(a) allocations, in budget parlance) the twelve appropriations committees each get (302 (b) allocations). The House gets to work on their bills in May, finishing in June, followed by the Senate’s work on the same bills, conference committees and final congressional passage, and the President’s signature by October 1st, the start of the new fiscal year.  When Congress doesn’t meet this schedule, they can use a Continuing Resolution (CR) to continue spending at current levels (with the occasional exceptions, called “anomalies”) to avoid a government shutdown.  When individual appropriations bills cannot be passed, they are often combined into must-pass omnibus legislation.

While imposing a more comprehensive process was an improvement, there are a number of difficulties with the current system.  First, this process only applies to discretionary spending (about a quarter of federal spending); it doesn’t address entitlement spending, like Social Security and Medicare, that is the major driver of deficits.  It is also tailor-made for major political contestation at every stage.  The budget resolution does not have the force of law and has become a political messaging document in recent years, rather than a true starting point for negotiations.  Each of the twelve appropriations bills is itself an occasion for a fight.  In other words, this is a process ripe for problems under conditions of partisanship, as well as intra-party conflict; the latter manifesting in recent years, particularly with the rise of House Freedom Caucus.

There are a number of metrics by which one can compare how well the process has worked.  The last time the entire process, with all appropriations bills, unfolded on time was 1994.  There are congressional staffers working now that were not yet born then; it’s easy to see why there’s been a deep loss of both institutional knowledge and habit in this arena.  Perhaps more importantly than passing appropriations bills on time (lawmakers often used CRs for a few days to complete their work, which was not a major breakdown of the process)  is passing them, individually as intended, at all—.  The number of appropriations bills passed per yeardeclined in the 1990s, but the most precipitous drop has come in the wake of 2010, with the influx of Tea Party fiscal hardliners and the earmarks ban.  In recent years budget resolutions sometimes don’t have enough votes for passage—they’ve been “deemed” instead.  A Continuing Resolution used to be seen as a failure; today it is often trumpeted as a success.  As governance via CR and omnibus has become the norm, brinksmanship and delays have become normalized.  The failure to complete a budget on time has ill effects for government agencies, who must plan and execute their budgets without knowing how much money they have.

This dysfunction has itself driven additional procedural and policy phenomena.  In a gridlocked atmosphere where lawmakers have taken a shine to legislating through crisis, members have created some worrisome tools.  The 2011 failure of the Super Committee, a bipartisan, bicameral committee tasked to find $1.5 trillion in savings over 10 years or face sequestration, a system of automated cuts that nobody wanted, resulted in precisely the outcome no one desired.  Ever since, a series of biennial budget agreements have prevented the full force of sequestration, raising the budget caps set for defense and non-defense discretionary spending, and introducing additional hurdles to the process.  Most worrisome is the inclusion of the debt ceiling in all of this budget haggling, as well as coming to the razor’s edge of default in 2011 and too close for comfort in 2013.

Something that all of these tools have in common is that they do not have to be tied to the budget process, which was already becoming more difficult before requiring debt reduction.  The quest to rein in deficits is important, but the decisions that would have the biggest impact (raising revenue and cutting entitlement spending) are not a required part of the budget process.  Worse, Congress is so gridlocked that Members’ inability to have a voice in other legislation makes appropriations bills, a rare example of relatively “open rules” where many amendments can be considered, a tempting target to make a stand.  These controversial amendments are often designed to force other members into uncomfortable votes rather than make policy.

The new joint select committee has an important but difficult task ahead.  The budget process, always challenging, has reached new levels of dysfunction.  There are a number of potential reforms available that we’ll address next time.  The recent passage of the Republican tax cuts, with their projected deficits, do not help this picture.  Ultimately, if Members of Congress want to get out of the hole we’re in on either debt reduction or budget reform, they need to first stop digging.

Laura Blessing is a Senior Fellow at the Government Affairs Institute

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