America’s budget process swallows time but achieves too little

WRITING a budget should be about imposing order. In America, it frequently causes chaos. By letting funding for the federal government lapse on January 20th, Congress demonstrated, again, how hard it is for it to approve spending. The disruption might be worth it if America’s budget showdowns led to better policy. But they do not. Budget-making does not bring income and outlays into line. It does not allow lawmakers much opportunity to weigh competing claims on resources. And it fails to make long-term planning easier. It is time for a shake-up.

The constitution gives Congress the power of the purse. Four things are odd about the way it uses it. First, annual budgets cover only the roughly one-third of federal spending that Congress has decided needs reapproval each year. Most entitlement programmes, such as Medicare, health care for the elderly, are automatically funded. So while budget-making provides opportunities for grandstanding by Congressmen about long-term fiscal problems, the process affords few chances to tackle the principal cause: swelling entitlement spending.

The second oddity is that the process rarely follows the script, written in the mid-1970s. Congress is meant to pass 12 separate bills funding each area of government, like housing, defence and agriculture. Each is penned by the appropriate committee. If spending gets out of hand, or is too measly, Congress can instruct committees to write so-called “reconciliation” bills to redress the imbalance.

In reality, Congress has not passed separate appropriations bills since 1996. Doing so takes too many controversial votes. Instead, it tends to pass mammoth bills which fund everything. Often, it cannot even manage that. So it resorts to “continuing resolutions”, like that enacted on January 22nd, which simply keep spending flowing at its current level while lawmakers try to work out a deal (see timeline). Because continuing resolutions mostly preserve the status quo, their prevalence makes it difficult for government departments to rejig their operations (which usually have specified funding streams). This lack of flexibility is particularly bothersome for the Pentagon.

Reconciliation, meanwhile, is not used to enforce fiscal discipline. Instead, it is primarily a ploy for getting legislation through the Senate with just 51 votes, rather than the more usual 60. Many significant laws from recent decades, from Bill Clinton’s welfare reform to President Donald Trump’s tax cuts, relied on the procedure. Lawmakers reverse-engineer the process, estimating the cost of what they want to pass in advance, and then issuing the necessary instructions. For example, at the start of 2017, Congress passed a budget resolution the sole purpose of which was to facilitate the attempted repeal of Obamacare via reconciliation.

The third strange thing about the system is lawmakers’ tendency to try, unsuccessfully, to tie their own hands. For instance, in recent years, budget-making has been particularly painful because of the “Budget Control Act” of 2011, which mandated deep and indiscriminate cuts to spending should lawmakers fail to reform entitlements. They did fail. The result has been a biennial struggle to lift the law’s spending caps temporarily, as happened in 2013 and 2015. Under a separate law from 2010, designed to deter unfunded legislation, Mr Trump’s tax cuts might have triggered automatic offsetting cuts to Medicare and other programmes. Congress found a way to avoid that in December.

The last and worst aspect of the system is the leverage it gives minority interests. It only takes 41 or more votes in the Senate to block a budget bill, as Democrats demonstrated last week. The budget process has become a conduit for whatever dispute lawmakers are determined to have, says Molly Reynolds, of the Brookings Institution, a think-tank. In mid-2015 John Boehner, then Speaker of the House, had to pull a budget bill from consideration after a late-night amendment to ban the Confederate flag from federal cemeteries.

Proposals for reform abound. Some want Congress to move to two-year budgets. Others want continuing resolutions to apply automatically, making shutdowns impossible. But many suggested reforms would require lawmakers to limit their own bargaining power. For politicians, that is the budget that really matters.

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