Tweaking the budget process won't accomplish much

In 2014, SAFE reprised several then-recent budget battles and suggested some sweeping adjustments to the government’s budget process. Some of our ideas were admittedly radical, but we thought big changes were needed given the severity of the problems. Time to get serious about budgeting, 1/20/14.

Are these ideas a bit over the top? Maybe, but remember a saying from the 1980s (or maybe earlier): “If you always do what you always did, you will always get what you always got – and that’s just not good enough.”

Lo and behold, Congress recently established a bicameral/bipartisan committee – the Joint Select Committee on Budget and Appropriations Process Reform (hereinafter JSC) – to review the current budget (and appropriations) process and recommend improvements.

It struck us that (1) there were too many JSC members for effective discussion and decision-making, (2) the judicious balancing of congressional interests (Republicans vs. Democrats, House vs. Senate, budgeters vs. appropriators) would favor preservation of the status quo, and (3) the executive branch had been left out of the equation despite the crucial role that it plays in the budget process. We resolved to follow the action with an open mind, however, and hope for the best. DC braces for another legislative deadline,

As the JSC does its work, SAFE will follow the details of the review that are made publicly available and contact JSC members when this seems appropriate, much as we did re the Fiscal Commission in 2010 and the Joint Select Committee for Deficit Reduction in 2011.

Since a “meet and greet” session (March 8) of the 16 newly appointed members, the JSC has held three sessions (April 17, May 9, & May 24) to hear testimony from and dialog with expert witnesses.

#APRIL 17 - Hearing: Opportunities to significantly improve the federal budget process, featuring opening statements by the JSC members followed by a dialog with Martha Coven, JD and Dr. Douglas Holtz-Eakin.
Video (2h, 26 min., action starts at 13 min). For a recap: Reviewing the government’s budget process, 5/14/18.

#MAY 9 – Hearing: Bipartisanship in budgeting, featured a dialog with witnesses from (1) Bipartisan Policy Center (Bill Hoagland & Don Wolfensberger, both former congressional budget staffers), and (2) Building a Better Budget Process Convergence Project (Emily Holubowich & Matt Owens), which is focused on how the public can become engaged in the budget process and contribute to better fiscal outcomes.
Video (1 h, 48 min., action starts at 14 min).

#MAY 24 - Hearing: The budget resolution – content, timeliness and enforcement, featured a dialog with: (1) Maya MacGuineas, president of Committee for a Responsible Federal Budget, prior experience at Brookings Institution and on Wall Street; (2) Jim Capretta, fellow at American Enterprise Institute, former associate director at OMB; (3) Bill Dauster, long-time Senate staffer, retired in 2017; and (4) Professor (political science) Joe White, Case Western University.
Video (2h, 12 min., action starts at 33 min).

The JSC has until November 30 to submit its report and isn’t likely to act before the elections, so look for additional meetings. However, this seems like a good time to assess where the study is headed and offer any suggestions that occur to us.

A. General observations – The JSC sessions have been marked by civility and a spirit of collegiality. All concerned seem to agree that the budget process is working poorly, but there haven’t been obvious attempts to play the blame game.

Attendance has been excellent for House members, but spotty for Senate members. Thus, only 4 of the 8 Senate members (Sens. Joni Ernst, Mazie Hirono, Brian Schatz & Sheldon Whitehouse) attended the May 24 session.

Time limits (five minutes per speaker) are being faithfully observed, although time clocks aren’t visible in the videos.

The JSC members have tended to carry over their ideas from session to session. No instance comes to mind of a member changing his (her) position as a result of the discussions.

Witnesses have offered a range of viewpoints, agreeing on some points while differing on others. It’s been repeatedly suggested that the JSC shouldn’t try for too much, lest (to use an analogy suggested by Bill Dauster) the proposed reforms turn out like a New Year’s resolution that the maker would like to forget by the time February rolls around. To the extent that bad budget outcomes are due to the growing partisan divide, it’s idle to expect that a new set of rules will be more “foolproof” than the present rules have proven to be.

The most commonly suggested goal for the JSC has been smoothing the operation of the budget process so as to avert (a) delays in establishing overall spending limits for government programs (administrators need to know how much money will be available in order to manage a program intelligently), (b) periodic government shutdowns, and (c) potentially adverse market reactions if the debt limit isn’t raised when and as needed.

The co-chairs (Reps. Steve Womack & Nita Lowey) and others have repeatedly stated that the JSC recommendations should not be designed to achieve any particular policy goal, e.g., cutting spending or averting tax increases. Policy outcomes should be a function of political leadership as informed by election outcomes, not the applicable procedural rules.

Bipartisan agreement for changing fiscal policies is said to be essential, as changes that are rammed through by the party that happens to be in the majority won’t last. To this end, Maya MacGuineas stressed that the fiscal “grand bargain” envisioned by the Committee for a Responsible Federal Budget (separate and apart from her testimony on the budget process) should provide for an equal amount of spending cuts and tax increases.

It seems to be assumed that the fiscal problem will take years if not decades to solve. No one at the JSC hearings has seriously suggested that the budget should be balanced any time soon, and Sen. Sheldon Whitehouse is advocating an annual deficits as a % of Gross Domestic Product goal (which would effectively ensure deficits “as far as the eye can see”).

B. Biennial budgeting – One process change that has received near universal support is switching from annual to biennial (two-year) budgeting, thereby hopefully speeding up the budget process. It’s noted that Congress has often failed to adopt budget resolutions (BRs), e.g., in 2018, so the existing requirement clearly isn’t working.

To usher in biennial budgeting, the 116th Congress (2019-20) could pass a BR by 4/1/19 that would establish overall funding limits (by appropriation bill category) for fiscal years 2020 (starting 10/1/19) and 2021 (starting 10/1/20). Congressional attention would then shift to funding specific organizations/programs/activities within the overall funding levels.

There is considerable disagreement as to the associated details. For example, how could the BR be made binding vs. aspirational unless it was enacted into law, thereby activating the Senate filibuster rule, necessitating presidential approval, and quite possibly derailing the objective of speeding up the process? If there was a convincing answer, we missed it.

Some BRs have served as technical props for initiating a reconciliation process to avert a Senate filibuster of a desired piece of legislation, e.g., tax cuts (2001, 2017) or healthcare “reform” (GovCare in 2010, attempt to repeal & replace GovCare in 2017). Several witnesses (e.g., Maya MacGuineas) suggested limiting the reconciliation process to its classic purpose of facilitating deficit reduction proposals.

To provide more time for the appropriations part of the budget process, it has been suggested (e.g., by Martha Coven) that the fiscal year be adjusted to a lagged calendar year basis. Thus, in the above example, fiscal year 2020 would begin on 1/1/21.

In addition to passing biennial budget resolutions, time might be saved by making appropriation bills biennial. Opponents of this idea have argued, however, that (a) funding levels for specific organizations/programs/activities need to be monitored on a year-by-year basis, and (b) the appropriating committees have speedily produced appropriation bills once overall funding limits were set.

Given that the president’s budget proposals (BPs) are now routinely ignored in favor of congressional BRs or nothing, there was discussion as to whether the BPs serve any valid purpose. However, the consensus seemed to be that BPs should be continued because they provide appropriators with useful information on the administration’s budget priorities

C. Longer-term perspective – As has been repeatedly pointed out in the JCS sessions, the prime driver for the fiscal problem is rising entitlement spending (Social Security, Medicare, etc.) due to long-term demographic trends (e.g., retirement of the Baby Boomers). Even a 10-year budget projection, which has been de rigueur since 2009 (5-year projections were previously used), is arguably too short to communicate how spending for national defense and other “discretionary” government spending will be progressively crowded out by the growth of “mandatory” entitlement outlays plus rising interest on the government’s debt.

The “house of cards” that is being built will predictably collapse at some point unless adjustments are made to close the fiscal gap. And there is no shortage of information - in the form of reports by the OMB, the Congressional Budget Office, trustees of the Social Security and Medicare plans, and nonprofit groups like Cato, Heritage, and SAFE – for those who choose to look into the matter.

It's said that this body of information isn’t accessible to the public, however, for which reason something more must be done to remind everyone that deficits/debt are a long-term problem that requires far-reaching action. Query: Is the real motive to tamp down expectations for quick action?

Most of the witnesses have indicated that the funding levels set for discretionary programs are a relatively small piece of an overall fiscal problem that extends far into the future, wherefore a 20 or 30 year budget window should be provided or at least referenced in BRs. Professor Joe White suggested, however, that the basic purpose of BRs is to set funding levels for current activities so such a presentation might be inherently confusing.

A related proposal of the Building a Better Budget Process Convergence Project is that the US Comptroller General (who heads the Government Accountability Office) should deliver periodic Fiscal State of the Union addresses (presumably to Congress).

Being appointed by a unique congressional/presidential process for a nonrenewable 15-year-term, the Comptroller General (currently Gene
Dodaro) is about as close to a “nonpartisan” official as can be found in the government. No doubt such addresses could be quite informative, but one does have to wonder whether the members of Congress and the American public would pay attention when they seem to be ignoring the information that is already available. Isn’t this the kind of message that must ultimately come from the president or other elected leaders?

D. Debt limit – With chronic government deficits, debt limit increases have been commonplace. The consensus seems to be that this control should either be abolished or “de-weaponized” by automatically raising the limit as and when required by approval of BRs.

E. Suggestions – The main procedural change that is needed, in our opinion, is abolition of the Senate filibuster rule. This rule has been used to frustrate the congressional budget process by preventing appropriation bills approved in committee from being brought up for Senate floor votes. While bipartisan action is desirable on legislative matters, averting legislative gridlock is an even higher priority. And it’s more honest to fix the problem forthrightly than to countenance procedural workarounds like the oft-abused and poorly understood reconciliation process. Time to bin the filibuster, 4/3/17.

Adopting biennial budgeting seems OK, but we don’t agree with changing the fiscal year. The proposed change would increase the existing mismatch between the term of a Congress (e.g., 2019-20) and the time period (e.g., 2020-21) for which it determines funding levels from 9 months to a full year. If overall funding levels are provided on a timely basis, why should the appropriating committees need more time to do their work?

Similarly, we aren’t convinced appropriation bills should be converted to a biennial basis. What real benefit would be achieved?

A five-year budget window would seem sufficient for both BPs and BRs. All that the 2009 shift to a 10-year window accomplished was to add a bunch of numbers to the analysis that have no claim to accuracy and lack significance for the purpose at hand (setting appropriate funding levels for current government operations). Trying to add a 20 or 30 year budget perspective would be a further step in the wrong direction.

It would be great to enact BRs, thereby making them legally binding, but it seems likely that lengthy delays would result. Accordingly, we don’t believe this idea is practical.

Doesn’t something need to be done about entitlement programs to solve the fiscal problem? Sure, so let’s have a bipartisan commission on Social Security, Medicare, etc. to study the matter. Meanwhile, there’s no reason to defer decisions re cutting or eliminating wasteful government spending.

Where to cut? Congress might start by taking a serious look at a supplementary volume that was provided as part of the president’s budget proposal for Fiscal Year 2019. It details numerous proposed cuts in mandatory and discretionary spending cuts. Major Savings and Reforms,
2/12/18 (download PDF).

See also Citizens Against Government Waste’s latest inventory of potential spending cuts, which could reportedly “save taxpayers $336.2 billion in the first year and $2.3 trillion over five years.”
Prime Cuts 2017.

Complaints about the debt limit are well founded in that this control device has lost all credibility and is no longer useful. Our advice would be to abolish the debt limit rather than crafting some make-believe way to perpetuate it.. Fixing the fiscal problem: work on what matters,

If one is serious about stemming the seemingly endless growth of government debt, the obvious course is to tighten up the procedures used to establish and enforce budgets for the government’s revenues and outlays. Setting and monitoring a debt limit is at best a reminder of past errors, equivalent to “locking the barn after the horse has been stolen.”

One more thing: If the JSC is planning to hear from any more witnesses, we would suggest that it invite OMB Director Mick Mulvaney, Tom Schatz of Citizens Against Government Waste, and Michael Tanner of the Cato Institute to testify. SAFE would appreciate an opportunity to attend the hearing as well.

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