The primary reason the U.S. federal budget deficit is out of control is that the people don’t really want it to be in control. They might say they do in general, but when asked which categories of spending they support cutting, they reply, “Foreign aid!” and little else. That leaves 99 percent of the budget for which the people want spending to stay the same or increase, and the people’s elected leaders act accordingly.
But let’s say for the sake of argument that the people actually did want the deficit to get under control. That would require the evaluation of trade-offs between spending and revenue, analysis of which programs would be cut and by how much, and a complete picture of the federal fiscal situation. In the budget process that currently exists, there is no place for that to happen.
Every year, the president issues a budget request to Congress. This is treated as a joke by Congress and by political media. The document is little more than partisan cheerleading by the administration, a messaging effort that lays out the president’s policy ambitions, most of which are never achieved.
Some years, Congress passes a budget resolution. About half the time, Congress doesn’t. When it does, this too is treated as a joke by Congress and by political media, or as the means to reach budget reconciliation, the legislative outcome of a bypass of the Senate filibuster. Reconciliation is not budgeting. Past reconciliation bills include the Tax Cuts and Jobs Act and the American Rescue Plan Act.
After the budget resolution sets some top-line goals, Congress is supposed to pass twelve appropriations bills to flesh out spending for the government. Congress does not do this. The last fiscal year all twelve bills were enacted on time in accordance with the law was 1997.
The real kicker: Even if Congress and the president did follow the process as currently laid out under law, the “budget” they’d pass would account for about a quarter of the spending and none of the revenue.
The Congressional Budget Act of 1974 lays out a very detailed and specific process for annual appropriations. Those cover what is often called “discretionary spending,” which includes the military, the courts, law enforcement, education, transportation, foreign aid, agriculture programs, national parks, anti-poverty programs, veterans’ benefits, and regulatory agencies — in other words, most of the stuff we think of the federal government as doing.
The problem is that three-quarters of the federal government’s spending is on just three things: Social Security, major health care programs, and interest payments. That spending happens outside the appropriations process, according to existing law, without any annual votes from Congress.
“Almost every provision in the ’74 act was written for 1974,” says Paul Winfree, president and CEO of the Economic Policy Innovation Center, a think tank. Winfree, who worked on budget policy in government before running EPIC, has also written a book on the history of the U.S. budget process.
In 1974, discretionary spending was about half of federal spending, so the same process meant more then than it does today. That year was also near the midpoint of 40 years of Democratic dominance of Congress. When Republicans talk about their commitment to “regular order” in the appropriations process, they are pledging fidelity to a process designed by Democrats in response to political and fiscal conditions that no longer exist.
The Congressional Budget Act was designed to take back some power for the legislative branch in response to overreaches by President Richard Nixon, and the process has basically been stuck there ever since. “As the evolution of the budget process has slowed down, that has increased tension over the budget process that the current process is actually unable to solve,” Winfree says.
When it seems like Congress is tearing itself apart over foreign aid or some other small fraction of the budget, it’s because those small fractions are the only parts it even has a chance to debate. The drivers of overall spending grow unchecked.
The most recent time Congress did chime in on entitlement programs, in December, it expanded Social Security benefits for public-sector workers in a bipartisan vote, to the delight of government unions. That law will add about $200 billion to the debt over the next ten years, and it brings the insolvency date for the Social Security trust fund, set to arrive in 2033, about six months closer.
Even if all spending were included in the budgeting process, the other side of the ledger, revenue, is completely outside it. Congress treats revenue as a separate question from spending. No part of the tax code is subject to annual votes. There are sporadic fights over “tax extenders,” provisions in the tax code that are de facto permanent but need to be re-upped at seemingly random times.
This year Congress will obsess over taxes in a way it hasn’t since 2017. That’s because almost the entire individual portion of the tax code expires at the end of this year, in accordance with the timeline set by the Tax Cuts and Jobs Act. The expiration deadline is this year because that’s the way the math worked out to allow Republicans in 2017 to pass the TCJA through the reconciliation process. Both parties game the budget-scoring rules in this way when needed, which creates more arbitrary and sporadic deadlines.
Household analogies for countries are always imperfect, but one is useful here to illustrate the point. According to the Bureau of Labor Statistics, about one-quarter of the average U.S. household’s annual expenditures are on transportation and health care. Imagine that you were making a budget for your household, and the only expenses you regularly considered were transportation and health care. Your much larger expenses — housing, food, and everything else — get pushed aside.
In the first few months of the year, you decide how much money you’ll spend on transportation and health care. Your spouse laughs at the numbers you decide but provides alternative amounts of spending only every other year or so. Then, for transportation and health care, you and your spouse negotiate a level of spending that you both believe to be sufficient. For a decent amount of the time, you just keep the same level from last year.
These negotiations are over expenses only because in this imaginary budget for your household, you don’t consider your income at all. The money you make from your job, any side gigs, any investment income — left out entirely. Your household budget is for transportation and health care expenses only.
Maybe you could make this arrangement work. But if you begin to have financial problems and are rapidly accumulating debt on credit cards or taking out personal loans, you should probably change the way you budget. And with the benefit of hindsight, it should be clear that the way you currently budget doesn’t make any sense.
That’s where the federal government is right now.
For some ideas on what a better budget process would look like, I talked to Kurt Couchman, a senior fellow in fiscal policy at Americans for Prosperity. Before AFP, he worked for members of Congress on the House Budget Committee. He said the key to a better budgeting process is “buy-in.” “To the extent that members are able to participate as real legislators, they’ll be much more willing to support the end product,” Couchman said. “If they don’t feel bought in, they’ll be much less likely to vote for it.”
The problem with the current omnibus process is not that it produces long bills per se. It’s that the long bills are negotiated in secret by congressional leadership and the White House, and then members are told they have to vote for them or else the government will shut down. Couchman said a comprehensive budget “would be a lengthy legislative product, but it would be negotiated, built, developed from each of the committees working through their relative expertise.”
Couchman has worked for House Freedom Caucus members, such as former representative Justin Amash, not known for their cooperative attitude toward legislation. But if they have buy-in in the process, he said, they are more likely to get to yes. He gave the example of Representative Thomas Massie (R., Ky.), nicknamed “Mr. No,” working on a bipartisan effort to legalize hemp research by way of the farm bill. On the other side of the aisle, he pointed to former senator Joe Manchin, who has said he might have supported the TCJA had he been included in the process of crafting the bill.
Most other countries don’t budget the way the U.S. does. “One of the things that’s interesting about Switzerland, Germany, Estonia, and a couple of other places is that they have constitutional requirements to include all spending and all revenue in their budgets,” Couchman said. Those three countries are renowned for prudent fiscal management. U.S. states don’t budget the way the federal government does, either. Nearly all states have some kind of balanced-budget requirement, either in statute or in their constitution.
These aren’t crazy ideas nobody in Congress has heard of. Members proposed legislation last Congress to adopt a measure inspired by the Swiss debt brake, a provision that has helped make Switzerland one of the few rich countries that has reduced its national debt in recent years. They also proposed a comprehensive budgeting bill, requiring all spending and all revenue to be included in an annual budget act. The latter bill was even bipartisan.
Matthew Dickerson, budget policy director at EPIC, wrote a paper in September with 37 ideas for budget-process reform. These ideas are as specific as tinkering with the way the Congressional Budget Office estimates the budgetary baseline and standardizing terminology for budgetary concepts. He suggests replacing pay-as-you-go rules with cut-as-you-go rules, meaning that rather than being required to find revenue for new spending, lawmakers would have to eliminate other spending to offset the cost.
He also suggests a higher vote threshold to waive budget rules. Congress frequently adopts spending caps or pay-as-you-go rules in debt-limit deals, but it can waive them just as easily as it adopts them. Dickerson suggests scaling the vote threshold required to waive the rules by how large the violation is. For example, exceeding a spending cap by $1 billion might be possible with a simple majority, but exceeding it by $100 billion might require a three-quarters majority.
Congress doesn’t suffer from a lack of ideas on the budget process. It suffers from a lack of demand to make necessary changes in the absence of some kind of crisis. “The budget process is endogenous to the political process, so it evolves to meet whatever challenges you have today, rather than the other way around,” Winfree said, drawing on his study of U.S. budgetary history. The challenges of today are not Richard Nixon and discretionary spending. They are entitlement programs and interest costs on autopilot, driving perpetual deficits. When the crisis arrives and the national debt can no longer be ignored, these reforms will be sitting on the shelf.













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