Reforming the Budget: How to Fix the Congressional Budget Process

There will never be an easy way to decide which activities the United States government should undertake or how to pay for them. Voters and their elected representatives have extremely diverse views about the role and size of government, spending priorities, and who ought to pay how much. Our Constitution makes these decisions especially difficult because both houses of congress and the president have to reach a compromise before a budget—or any other legislation—can take effect.

Nevertheless, federal budget-making does not have to be the ugly mess it has become in recent years. The regular process has completely broken down. Instead of making budget decisions in an orderly, albeit necessarily contentious way, the government has lurched from one artificial crisis to another with irresponsible threats to default on the debt, a costly government shutdown, a manufactured fiscal “cliff”, a failed “super committee,” and valiant, but fruitless efforts of bipartisan commissions, task forces, and “gangs” to broker compromises that never happened.

To their great credit, Senator Patty Murray and Congressman Paul Ryan, chairs of the Budget Committees, finally restored a semblance of regular order by agreeing on budgets for fiscal years 2014 and 2015. Their agreement brought a welcome respite in the budget wars, time to focus on other needed legislative action, and perhaps even an opportunity to reform of the budget process itself.

Make no mistake: improving the budget process will not by itself eliminate partisan polarization, restore civil discourse, or increase willingness to seek common ground. Nor will it make elected leaders more courageous in the face of hard choices. But if the Murray-Ryan agreement presages a new willingness to break out of gridlock and get urgent public business done, then an improved budget process would be a big help.

An overhaul of the budget process should have at least three elements. First, the process should include all spending and revenues. At present, the budget process focuses on “discretionary spending,” the money that congress must appropriate annually to keep federal agencies doing their assigned tasks. Discretionary spending includes hundreds of programs—for defense, aiding education, running prisons and veterans’ hospitals, providing workforce training, controlling the border, collecting taxes—but it includes only a third of federal spending.  Much bigger bucks fund Medicare, Medicaid, Social Security, and other “entitlement” programs, which are essentially left out of the budget process and run on auto-pilot. Congress has the power to change them, of course, but does not review them on a regular basis. Nor does it regularly review the huge volume of expenditures in the tax code. The budget process cannot help congress set priorities, especially for the longer run unless it includes all spending (including spending in the tax code) and all revenues.

Second, the budget process should be easy to understand and complete on time. The process now nostalgically called “regular order,” established in the Budget Reform Act of 1974, was always too elaborate to be workable and its multiple demanding deadlines were regularly missed.  To be sure, the 1974 act was a much needed step forward. Prior to 1974, congress acted on spending and revenue measures separately—never on the budget as a whole. The 1974 legislation, created Budget Committees and a first-ever process for setting total spending by major functions and deciding how much revenue to raise and how much to borrow or reduce the debt. Unfortunately, the new budget process was layered on top of an already complex structure of authorizing, appropriating and revenue actions. The result was a process too complicated to execute in a timely fashion even when partisan hostility was lower than it is now. Simplifying the process could start with eliminating the redundant activities of authorizing and appropriating and substituting a set of program committees with jurisdiction over major chunks of government activity, a revenue committee, and budget committees. Budgeting for two years at a time would make the process more manageable.

Third, budget decisions should have the active participation of congressional leadership and the president. It would help to make the budget resolution a law passed by congress and signed by the president and to turn the budget committees into leadership committees. The leadership of majority and minority parties would serve on the budget committee along with chairs of the program and revenue committees. The budget committees would then become the venue for hammering out compromises and negotiating with the president. 

Restructuring the budget process along these lines would help budget participants work out their policy differences, arrive at long and short-run budget compromises and keep the government functioning—if they want to. But process changes by themselves will not build the will to get the job done.