Cutting through the layers of the U.S. budget process

Budgets are being published this week in London and in Washington. But the offerings from her majesty’s government and from congressional Republicans are radically different in tone, purpose, and significance.

I have spent most of my professional life reporting on, reacting to, or helping to craft UK budgets. And I have struggled to understand the politics of U.S. budgets, especially when the federal government is divided politically.

In Britain, the budget is agreed within the government, passes the House of Commons (the tight political party system means that every member in the government party or parties votes for it), sails through the House of Lords (which lost almost all its formal power over budgetary matters in 1911), and, finally, in a pro forma constitutional act, is signed into law by the Queen.

While British budgets represent the end of months of negotiation, U.S. budgets are just the beginning.

American budgets are like a layer cake. The top layer consists of partisan measures that stand a snowball’s chance in hell of making into it law. That the opposing party can be counted on to hate them is the point: the ensuing high-profile argument helps to define and differentiate the parties.

President Obama knew that Republicans would never agree to raise the capital gains tax or inheritance tax, or support universal pre-K, free community college, paid parental leave, or a federal minimum wage of $10.10 an hour. These proposals were in his budget as “thought experiments”–a way of imagining a different world. Republicans put forward their own thought experiments this week.

The second layer of the budget cake contains ingredients for potential bipartisanship. Here you find proposals that reflect areas for common ground in terms of new policy. These will be presented in partisan terms but also framed in a way to create the possibility of compromise.

The president’s budget proposals for extending the Earned Income Tax Credit to childless workers, investing in infrastructure, and making administrative data more openly available all fell into this second category. Another noteworthy example was his proposed Upward Mobility Project, which would allow as many as 10 communities to combine funds from four federal revenue streams into a local fund. The money would have to be spent on evidence-based, localized approaches to reducing poverty and promoting opportunity, and each community would also get an extra $1.5 billion over five years.

This proposal is worthy in itself, not least because social mobility is increasingly a metro issue. But it also sends a signal to Republicans such as Rep. Paul Ryan and Sen. Marco Rubio, who have published plans for greater decentralization of funds to fight poverty. Currently, the differences between Democratic and Republican plans outnumber their similarities, but the basic thinking behind them is similar. A key political function of Office of Management and Budget directors and Treasury secretaries is to maximize the number of initiatives where there is scope for compromise and therefore progress.

The budget cake’s third layer is fiscally large but politically thin. It is spending on a vast swath of federal programs that has largely been agreed to–and so is beyond the reach of most day-to-day political debate. Most allocations for education, defense, and tax credits fall into this category. There is another category of “untouchable” spending that does not even feature in most budget-making processes: Social Security, Medicaid, Medicare, food stamps, farm support, most veterans spending, and unemployment assistance. Together, these account for around $2 of every $3 of federal spending. One of the most striking aspects of U.S. budget debates is how small a part of the spending landscape is actually at issue, given how much has been shunted into automatic-pilot funding streams.

The UK government will operate Wednesday what Lord Hailsham famously dubbed an “elective dictatorship,” with its single Budget Day. The U.S. is about to embark on its multi-month series of negotiations, gestures, threats, and deals. Technocrats prefer the former; small-d democrats the latter.