Last week, Senate Budget Committee Chairman Mike Enzi (R-WY) released a discussion draft containing a series of reforms to fix the broken congressional budget process. Senator Enzi will be retiring next year and has pledged to make fixing the congressional budget process a priority before he leaves office.
Before we get into how Senator Enzi would fix the process, let’s dive into what’s wrong with it.
How is the congressional budget process supposed to work?
The budget process is very involved, but here are a few key components. The House and the Senate are supposed to agree to and pass a joint budget resolution by April 15th of each year. This resolution sets out the spending and revenue levels along with any particular budgetary rules that each chamber must abide by (for example creating a point of order against a budget gimmick). The budget is not legally binding and does not spend or collect any money, it just provides the framework for how Congress and committees make budgetary decisions.
It’s non-binding? So what does it actually accomplish?
Typically, not much. Though if a single party controls both the House and the Senate along with the White House, then the budget’s reconciliation instructions – which is a special process that can bypass the Senate requirement of 60 votes to pass legislation – is very relevant. It’s how the GOP passed the tax cuts in 2017 and it’s how the Democrats passed the final pieces of Obamacare.
The budget resolution also establishes points of order against bills that exceed spending limits or contain gimmicks. But those can easily be waived with the same number of votes as it takes to pass the bill – so they aren’t really that restrictive.
Other than that, does the budget resolution actually guide the process?
Instead, the budget resolution is either a highly partisan document or just completely ignored.
Congress can just ignore it?
Yep. The law mandates that the resolution be passed by April 15th, but there is no mechanism to enforce it. So, Congress can just decide not to pass one.
How often does that happen?
Six of the last 11 years, including this year.
What happens when they do draft a budget?
It’s usually a farce. The majority writes a resolution that hems closer to a campaign platform than a governing document. For example, Republican majorities will draft a resolution that calls for balancing the budget within a decade without raising any additional revenues or providing any mechanisms to reach that goal. Aspirational for sure, but there is no political reality where it can occur.
Okay, so budget resolutions are either partisan documents or not drafted at all. How does that impact government spending?
The budget resolution is supposed to be the initial step where Congress sets the amount of discretionary spending each year.
Stop. What is discretionary spending?
It’s the type of spending that Congress has to approve each year. These programs include defense, education, research, national parks, foreign aid, and a whole host of other activities. The other type of spending is mandatory spending, which is when Congress passes a law that sets spending based on a formula and the spending goes out regardless of congressional action. Roughly two-thirds of federal spending is mandatory spending (mainly Social Security, Medicare, and Medicaid).
You said the budget doesn’t actually spend money. What does?
Appropriations bills. These are divided up into 12 different bills that are supposed to be passed prior to the beginning of the fiscal year on October 1st.
Let me guess, that doesn’t happen.
You’re starting to pick up on this. Since 1977, there have only been four instances when all 12 appropriations bills have passed by the start of the fiscal year. The last successful year was 1997.
Only 7 out of the 120 appropriations bills in the last decade were enacted on time.
What happens when these don’t pass on time?
One of two things. There is a funding lapse that causes a government shutdown (remember the long shutdown in December and January?).
Or Congress passes what is called a continuing resolution (CR) which keeps the money flowing at the exact same levels as the prior year while restricting new projects. CR’s are regarded by all as a horribly inefficient way to fund the government. Yet, Congress has enacted one or more CRs in all but three of the last 43 fiscal years.
As for mandatory spending, that’s set on autopilot. Neither the budget resolution nor the appropriations bills impact spending for those programs. Even during a shutdown, funding for mandatory programs continue.
If we ran our own budgets like this, what would that look like?
Let’s say a family (Congress) has to set a budget each year. At the beginning of the year, they put together a master document that includes expected income (tax revenues) along with expected expenses (federal spending).
The family separates spending on rent and bills (mandatory spending) from spending on groceries, entertainment, travel, and other expenses (discretionary spending).
Despite the fact that rent and bills consume 70 percent of the family budget and is growing at a substantially faster rate than their income coming in, the family decides to solely focus on tinkering with the grocery, travel, and entertainment budget.
The family puts the mom (budget committee) in charge of enforcing the limits the family placed on their spending habits at the beginning of the year. But, the mom can be overruled as long as 3 of the 5 family members (including the mom) agree to spend more.
This family budget process was actually put into place 55 years ago. While they know that it’s a family tradition that they should follow, frankly, they don’t always bother doing it.
When they do, it’s usually the dad writing a plan to turn three-quarters of the house into a man-cave knowing full well that it’s not realistic nor going to fly with the rest of the family.
Whenever it’s time to pay for things other than their rent and bills, they just scramble to do it all at once and usually at the last second.
Often they just decide to spend the same amount for the same items regardless of how well that worked out the year before. Each family member has their own Netflix account that could easily be shared (duplication) and they keep buying Costco-sized peanut butter jars even though everyone in the family is allergic (improper payments).
Any spending that is not covered by their income is put on the credit card, whose interest costs the family also does not consider. Nor do they even have a process to limit new debt, other than signing off on a credit limit hike every other year (debt limit).
And everyone knows that the kids are going to wind up dealing with the bill.
So how can we fix it?