The Process is Not the Problem; the Problem is the Problem

Here we go again.  In a hearing on Tuesday, as reported by Congressional Quarterly, Sen. David Perdue, R-GA, told the Budget Committee, “it’s almost guaranteed that we will not have a budget process” this year. Treasury Secretary Steven Mnuchin agreed, “it is completely broken.”

Administrations and Members of Congress have been “blaming the budget process” since the current process began in 1974.

Former Congressional Budget Office Director Rudy Penner hit the nail on the head when he observed over 30 years ago, “The problem is not the process, the problem is the problem.”

This year’s “problem” is that the House and Senate Appropriations Committees have started writing the 12 regular appropriations bills for FY 2018, which begins October 1st, without having top-line numbers to work from (see Appropriations Portal).

However, top-line numbers for FY 2018 do exist; the Budget Control Act of 2011 (“BCA”) set top-line statutory spending caps for Defense Discretionary and Non-Defense Discretionary spending for each year through 2021.

The “problem” is that the numbers were never realistic because the drafters of the BCA attempted to solve America’s rapidly increasing debt levels by cutting Discretionary Spending alone – the one-third of the Budget least responsible for growing debt levels. The draconian and unrealistic spending caps in the BCA failed to address health care inflation, the nation’s severely deteriorating infrastructure, growth and aging of the population, and growing international instability.

Consequently, Republicans and Democrats, have twice acted to raise the spending caps.  Congress passed the Bipartisan Budget Act (“BBA”) of 2013, which raised the Defense and Non-Defense caps for FY 2014 and FY 2015; and in 2015, Congress passed another BBA, raising the Defense and Non-Defense Discretionary caps for FY 2016 and FY 2017.

It is almost certain that Congress will eventually raise the caps for FY 2018 and FY 2019.  Defense hawks cannot live with the BCA’s FY 2018 Defense cap that is lower than current spending; while moderates and progressives cannot live with the Non-Defense cap or the draconian cuts proposed by the President’s FY 2018 Budget.

The reason the caps have not been raised for FY 2018 is a political impasse – not a failure of process. Congress could, at any time, adopt a Budget Resolution setting total discretionary spending levels for FY 2018.

The political impasse exists because we have growing defense and non-defense requirements, as well as a growing and unsustainable public debt; and there are no easy solutions.  It is politically difficult to slow the growth of entitlements that people depend on; it is politically difficult to raise revenues; it is difficult to eliminate tax deductions that are baked into individuals’ and business’ financial planning; and it is difficult to eliminate or reduce Defense and Non-Defense programs that don’t work, so that resources can be invested in higher priorities.

These are tough decisions and no change in budget procedures will solve the problem for us.  Only political courage, and backing away from political ideology, will put us on a sustainable fiscal path that meets America’s needs. For examples of how these tough issues can be addressed in a bipartisan way, see the Domenici-Rivlin and Simpson-Bowles plans.

While the budget process is not responsible for the political impasse – and should not be used as an excuse for inaction – there are some tweaks to the budget process that could improve fiscal stability:

  • The Debt Ceiling serves no useful purpose and should be repealed. Public Debt increases when Congress enacts spending bills that exceed revenues. Prohibiting Treasury from raising the cash necessary to fulfill already-enacted obligations is irresponsible. A great nation does not threaten to default; it erodes public confidence and America’s international standing.
  • Government shutdowns likewise serve no useful purpose and are not the behavior of a responsible government. Congress should enact an automatic “continuing resolution” that allows agencies to continue spending at the start of a fiscal year at the previous year’s program levels. Regular appropriations bills would still be necessary and relevant to exercise oversight, change priorities and refocus resources – but our government should not shut down.
  • The Congressional Budget Resolution could be made more useful: jettison the “budget functions,” which no one understands or uses, and replace them with broad spending categories:  Defense, Non-Defense Discretionary; Social Security; Health Care Entitlements; Other Mandatory Spending; and Net Interest Payments.
  • The Budget Resolution could also be more relevant and useful if it required presidential signature, so that key deliberations occur at the front-end of the budget process, not at one minute to midnight.
  • Budget Reconciliation should be repealed. It has become a dangerous device to circumvent the Senate’s two-hundred-year tradition of unlimited debate and amendments.  Reconciliation enables one political party, with a slim majority, to enact fundamental changes to spending, health care, and tax policies with only 50 votes, avoiding any need to negotiate on a bipartisan basis.  Huge changes in taxes, health care, and spending policy should require bipartisan negotiation. Bipartisanship produces better results for America.

Budget process reform also poses risks. There are a slew of bad ideas that keep popping up as panaceas for the budget process:

  • A Balanced Budget Constitutional Amendment would move budget authority from Congress to the courts. The courts are unqualified to make judgments about appropriations and taxes.  The people’s representatives must set spending and tax policy—not unelected judges.  Those who vigorously and sincerely oppose judicial activism should be strongly opposed to the BBA.
  • Biennial (two-year) budgeting has been proposed repeatedly for 30 years. While it might make sense for the Congressional Budget Resolution–which establishes a broad framework for spending and revenue–it is a terrible idea for appropriations. Annual appropriations bills and reports are Congress’ most effective oversight of departments and agencies.
  • Constitutional or statutory limits on spending or revenues as a % of GDP (Gross Domestic Product) are arbitrary and senseless. Budgeting by formula is not policymaking – and would be as ineffective as the failed Gramm-Rudman-Hollings deficit caps were in the 1980s and 90s.

The essential point is this: while the budget process could be improved, the process is not the fundamental problem; the problem is the problem.  It is time for Congress and the Administration to draft a realistic spending and tax plan and stop blaming the process.

Charles S. Konigsberg, the founder of FedWeb.com, served as Counsel to the Senate Budget, Finance, and Rules Committees; and Assistant Director at the Office of Management and Budget.