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305 November 11, 1983 GIVING THE BUDGET PROCESS TEETH INTR ODUCTION A decade of experience with the Congressional Impoundment and Budget Control Act of 1974 has shown it to be neither a procedural nor a fiscal cure-all. For the seventh year in a row Congress has failed to complete its budget bills by the start of the new fiscal year in Octobef omnibus continuing resolution was sent to the President's desk on September 30. The perennial use of the continuing resolution fallback epitomizes the lack of procedural and fiscal discipline in Congress Consequently, once a gain an Continuing resolutions usually contain legislation and appropriations thrown together without careful consideration.
They tie the hands of the President, who must accept every dollar or shut down the government with a veto as President Reagan did in November 1981 This is not the only sign of the inadequacy of the process.
The Senate was more than six weeks late in passing a first budget resolution this spring. What is more, Congress regularly breaches the budget ceilings it sets in its resolutions and waives the procedural guidelines set forth in the Act There is a growing chorus melding such usually dis harmonious voices as House Democrats and Senator Barry Goldwater R-Ariz proposing dozens of substantive changes in the budget process. A bipartisa n House Task Force, chaired by Anthony Beilenson (D-Cal has recommended changes to the House Rules Committee, while Senator Goldwater has introduced a bill (S.1739) that virtually would repeal the Budget Control Act of 19
74. Goldwater unfairly blames budget delays and fail ures on the process itself, yet the process merely provides the institutional and procedural framework. Budget decisions are 2 political, and ultimately depend on the will of Congress.
Failures reflect the number and complexity of decisions facing Congress, struggles over priorities, and a lack of restraint on the power of the appropriations and authorization committees.
Despite its shortcomings, the 1974 budget process has led to some significant improvements in budget information and fiscal order. Nevertheless, certain key refinements of the general structure are needed to give it teeth. For example, Congress should restore the integrity of the budget document and process by explicitly accounting for all spending and lending within th e unified budget and closing procedural loopholes. Congress must reallocate its spending decisions so that power over aggregate spending rests with such general interest bodies as the budget committees, the full Congress, and the President, and consolidate the fund distribution process within the program committees.
Moreover, it is time to combine authorization and appropriations institute a binding First Concurrent Resolution, enforce spending limits at subcommittee levels, possibly grant the president a line-item veto, and restrict waivers and supplementals.
Such modifications would strengthen the Budget Act and tighten fiscal control. The congressional budget process is complex. And since Congress cannot be bound tightly with laws reform of the process c an best be achieved with a package of technical changes, rather than by sweeping but unworkable reforms PROBL~MS WITH THE PRESENT PROCESS The Congressional Budget Act of 1974.was designed to address three issues: 1) the determination of aggregate governme nt spending levels 2) the locus of budgetary power: and 3) the timeliness and efficiency of decisions.
Previously, total spending was determined by the summation of individual appropriation bills passed by congressional subcommittees. There was no mechanis m for considering total spending as such, or for making tradeoffs between competing priorities. In addition, appropriations bills were often enacted late in the fiscal year to which they applied.
Congress did not have the information to assess" the full i mpact of its budgetary actions. The executive branch controlled the principal sources of budget information and analysis (there was no congressional counterpart to the Office of Management and Budget), and reserved the threat of budget impoundment--that i s not to spend money appropriated by Congress. Consequently, the President's budget became the benchmark for all budgetary decisions, and budgetary power was vested primarily in the executive branch. 3 The Intent of the Budget Control Act In response to.th is situation, and in particular to President Richard Nixon's attempts to use impoundment as a spending control, Congress enacted the Congressional Budget Act.
This Act created the budget resolution, the budget committees the Congressional Budget Office (CB O), and reconciliation, the process used by Congress to force its committees to comply with the fiscal policy of the budget resolution significantly restricted the President's budget power.
The Act Concurrent budget resolutions, emanating from the new bud get committees, were to set targets for aggregate levels of spending and revenues. under this procedure, the First Concurrent Budget Resolution (FCR) due May 15, is only a guide for the appropriations committees. The Second Concurrent Resolution, due Sept e mber 15, is meant to be a binding limit on total spending The creation of the budget committees and the CBO provided Congress with a wealth of budgetary information on which to base analysis and decision,making. The Budget Act also created a schedule or b udgetary activities and mechanisms intended to enforce that schedule.
Congressional Budget Timetable On or Before 15th day after Congress reconvenes in January March 15 April 1 April 15 May 15 7th day after Labor Day September 15 Action to be Completed President submits his version of the upcoming budget to Congress.
Committees submit views and estimates to budget committees.
CBO submits annual review to budget committees Budget Committees report First Concurrent Resolution to their Houses.
Committees report bills authorizing new budget authority and Congress completes action on FCR.
Congress completes action on bills providing budget and spending authority.
Congress completes action on second Concurrent Resolution. 4 September 25 Congress completes action on reconciliation.
October 1 Fiscal year begins.
Results of the Budget Control Act The Budget Control Act has not lived up to its name. The budget resolutions have become political documents, without effective mechanisms for enforcing fiscal restraint.
Congress knowingly breaches spending limits it has set in the First Concurrent Resolution.
The new structure also has not resolved the issue of where power should reside. It stripped the executive branch of nearly all overt budgetary power, but did not provide an appropriate substitute. Unencumbered by presidential impo undment, budgetary power shifted towards the appropriations committees, the House Ways and Means Committee and the Senate Finance Committee, who now determine both the composition and size of government spending.
This power shift has not been conducive to spending restraint. Members of the authorization and appropriations committees are under special interest and lobbyist pressure to expand program spending. Members take less note of the costs of legislation than does the executive branch with its broader national constituency. Moreover, the budget schedule remains unenforceable. Deadlines are waived as budget legislation endures seemingly endless debate by committee after committee.
Criteria for Reform Despite their deficiencies, budget committees and congressional budget resolutions are still the best tools available for controlling aggregate federal spending. The process itself is not to blame for the explosion of federal spending.
Congress is side-stepping its own procedure.
Power to determine aggregate spending must be taken from the authorization and appropriation committees and vested in institutions less subject to special interest manipulation, such as the budget committees (which consider the entire spending plan, rathe r than narrow segments Further, the executive branch should be brought back into the budget process to check congressional spending To restore balance, incentives are needed to speed congressional action, and enforcement mechanisms to keep program spending within the limits set by Congress itself. 5 ALTERNATIVE STRATEGIES BEFORE CONGRESS To improve the budget process, several remedies have been proposed. Among them 1 Biennial Budgeting: Senators William Roth (R-Del.) and Dan Quayle. (R-Ind.) propose a bienn ial budget cycle.
Authorizations would be passed the first year of the cycle, and appropriations the second. They claim that, by stretching the process over two years, legislators could meet procedural deadlines, consider budget decisions more carefully, a nd spend more time on other legislation.
The difficulty with this plan is that it ignores the problems of spending restraint and missed deadlines. Notes Senate Budget Committee (SBC) Chairman Pete V. Domenici (R-N.M Instead of decongesting the congression al calendar, the calendar might be filled even more than it is now with supplemental appropriations, revi ions of budget resolutions and other corrective actions A two-year cycle also means that a new President and Congress would be forced to wait a gear a nd a half before they could make major changes in spending 2) Abolition of the Budget Process: Senator Goldwater proposes to abolish the budget process and budget committees, and replace them with a constitutional amendment to balance the budget. Except f o r preserving the CBO, Goldwaterls bill essentially would restore the pre-1974 process. Even if a balanced budget amendment could be passed, however, it would be difficult to enforce, and as such, would not end up limiting spending. Repudiating the budget c ommittees and reconciliation would grant the appropriations and authorization committees enormous budget power--with little control from the executive branch E 3) Omnibus Appropriations Bill: The Beilenson Task Force, a bipartisan congressional group crea t ed to analyze the budget process, endorsed Rep. David Obey's (D-Wisc.) proposal that the House should adopt an omnibus appropriations bill. According to this plan, the appropriations committees would present recommendations to the House floor. Congress wo u ld then determine subcommittee limits and draft a first budget resolution. The subcommittees would make detailed allocations and then the spending and tax bills would be combined into one omnibus resolution. The budget committees would have priority in of fering amendments to reconcile spending bills with the budget resolution.
The proposal might seem attractive in that it would place a clear limit on spending. But it is unlikely that the appropriations committees would hold down spending or complete such a massive bill on schedule. While the plan would put some restraint on congressional spending, it would erode executive influence further. Faced with the alternative of rejecting an I I I i i I 6 entire budget, the President virtually would be forced to ru bber-stamp any level of congressional spending.
RECOMMENDATIONS Improvements in the budget process fall into three categories. There are: structural changes that would enhance the financial integrity and information of the budget document changes in the in stitutional arrangements to restrain spending and reduce inefficiencies; and rule changes to expedite decisions and strengthen enforcement.
Chanaes in Budaet Structure 1) Problem: The unified budget "hides" approximately $70 billion per year in government spending. Offsetting receipts, such as loan repayments for instance, are deducted-from budgetary authority and outlays. But this understates federal use of the nation's resources. About 20 billion has been shifted off-budget .I' Beginning with the Export -Import Bank in 1971 Congress has moved various federal agencies off the unified budget-the entire social security program is scheduled to be moved off-budget in 19
93. Such off-budget outlays do not appear in budget outlays or the deficit, and are not sub ject to the ceilings set by congressional budget resolutions Solution: The use ,I of offsetting receipts and off-budget outlays should be ended. All outlays should be reported in gross terms and all accounts reported within the unified budget 2) Problem: M uch of the $170 billion in direct and guaranteed loans appear only in the off-budget credit budget. Morever, loan outlays are represented as the difference between loans tendered and debts collected. This distorts the true cost to the government by hiding the interest and bad debt subsidies.
Solution: A CBO analysis recommends that departments continue to secure loans through the Federal Financing Bank(FFB), but that the FFB shguld sell all direct and guaranteed loans to private investors. The loss the FFB would incur by discounting the below-market loans would equal the government subsidy and would be appropriated to the original loaning agency as an on-budget item.
Changes in the Congressional Structure 1) Problem: The distinction between the authorizati on and appropriations committees has nearly vanished. Authorizing legislation once dealt solely with substantive matters authorizations were for raising "such sums as may be appropriate But authorization committees now recommend specific spending levels, rather than laying out the objective of 7 spending. Often these recommendations are set at unrealistically high levels in order to encourage large appropriations.
The appropriations committees were designed to set funding levels for each authorized program . But there has been a significant increase in the number of legislative provisions contained in appropriations bills and in unauthorized funding tacked on.to such bills.
Solution: Combine 'the appropriation and authorization committees into one set of program committee5, as suggested in 1973 by then Budget Director Charles Schultze. This would reduce special interest leverage, and save both time and money.
Chancres in the Budaet Process 1) Problem: This past spring House Democrats passed a first budget r esolution calling for $25 billion more than the President had requested. The move was a political statement, not a serious budget document. In the Senate, internal political disagreement caused the Senate Budget Committee to be six weeks late with their v e rsion of a resolution. Originally due July 22, the reconciliation package has yet to be passed. There is no incentive to take the budget res'olution seriously. It is not binding, waivers are common, and restraining points of order rare. As such, it afford s the perfect opportunity for political grandstanding.
Solution: First Congressional Resolutions should be binding.
This would close the rhetorical sideshow, enforce aggregate spending limits, and make all further budget decisions subject to a clear fiscal plan. This alone, however, would not restore order. The Second Concurrent Resolution, due each September, is theor e tically binding, but Congress finds ways to skirt enforcement. Consequently, to deal with this and other problems additional measures are needed 2) Problem: The budget is arranged in two ways. The President's budget and the budget resolutions are arranged by functional category. Congressional spending bills, on the other hand, are arranged by subcommittee responsibilities. These conflicting approaches diffuse the power of the budget committees and.lead to unnecessary redefinitions of allocations.
Solution: If all budgets, including the President's, were arranged according to the same format, it would be far easier to conform to the process 3) Problem: Although the budget resolutions provide for aggregate as well as functional allocations, only the aggregat e s are enforced by congressional rules. And while points of order can be used only to halt consideration of bills that exceed 8 stipulated aggregate levels, Congress easily evades this constraint. Low priority bills tend to be presented early in the sessio n, when they will not be subject to points of order, and popular or high priority bills are held back until very late in the session, when media and constituent pressure can be used to withstand points of order.
Solution: Points of order should be permissi ble against functional or subcommittee allocations, rather than just aggregates. If they are overridden, bills should still be subject to delayed enrollment (not released to the President until all other bills are passed), thereby increasing fiscal restra i nt 4) Problem: -Supplemengal appropriations make it easy for Congress to increase spending. If a committee feels it cannot receive approval from Congress or the President for a full appropriation it can request less than it believes to be necessary, to en sure passage, and then return near the end of the fiscal year to press for supplemental funds.
Solution: Emergencies do arise, and so Congress must be allowed to supplement earlier funding If a two-thirds majority were needed for approval, however, supplem entals would be less subject to abuse 5) Problem: Senator Goldwater complains that the Senate procedural waivers and ignoring deadlines. "Since 19767" he points out, "the Senate has approved over 250 waivers of just one section of the budget.act. The Sena t e also regularly ignores deadlines for the First Congressional Budget Resolution and reconciliation. constantly evades the requirements of the Budget Act by allowing Solution: Waivers should be granted only by a two-thirds majority. But when committees fa i l to meet deadlines and waivers are denied, there must be a decisionmaker of last resort. If committees cannot make timely decisions, then greater authority should be given to the budget committees 6) Problem: The President's only explicit power if3 the p resent budget process is through rescissions, deferrals or the veto of an entire appropriation bill. A veto is a very serious matter.
Each appropriation bill contains hundreds of spending items, many for essential everyday operations. Congress, however, ad ds pork-barrel appropriations to necessary expenditures, and often passes appropriation bills at the very end of a session, when it is difficult for the President to exercise his veto. Thus, the presidential veto has been reduced to a nullity.
Solution: S enators Alan Dixon (D-Ill.) and Mack Mattingly (R-Ga have proposed legislation S.J. Res. 26, S.J. Res. 178, and S 1921) allowing a presidential line-item veto. This is permitted in 43 states. Congress, however, has been unwilling to accept 9 the shigt in power that the veto would entail. But runaway federal spending, and the repudiation of presidential impoundment in 1974, have now caused the proposal to be considered more seriously.
It could eliminate pork-barrel expenditures, restore the president's veto power, and restrict congressional logrolling.
It would subject the federal budget to detailed presidential review, while maintaining Congress's right to initiate and terminate spending. And there would be less pressure for the Presi'dent to agree to marg inal programs merely to ensure acceptable levels of aggregate spending The presidential line-item veto would have several benefits.
There are problems, however with a line-item veto. Senator Lawton Chiles (D-Fla for example, fears that Congress "would add to program after program, making all our constituents happy and never have to look at the bottom line. We could pass that responsibility over to the President He would cut the bill back down to size and be the ~poilsport The line-item veto, in other word s , might increase pork-barrel appropriations, forcing the President to accept the political liability of rejecting them While this might be an unpleasant prospect f.or the White House, the line-item veto must be seen as a presidential responsibility, and n o t merely a privilege 7) Problem: The figures presented in appropriations bills often underestimate the true cost of a program, for the express purpose of facilitating congressional approval. Once the program is in place, it'is hard for Congress to turn do wn supplemental funding.
Congress has become expert at underfunding entitlement programs. In FY1983, for example, Congress agreed to the President's request for funding cuts in the food stamp program but it did not authorize the entitlement legislation mak ing the cuts possible. Consequently, funding ran out in nine months, and the President was forced to agree to a supplemental to fund the program.
Solution: Out-year figures should be stated explicitly in spending bills. Mandatory and discretionary spendin g should be distinguished. Budget Committee cost estimates and all relevant economic and programmatic assumptions should also be included in the final bill report 8) Problem: "Continuing resolutions" have become vehicles for irrelevant riders and new auth orizing legislation, because the President must either sign such .resolutions or close down the government.
Solution: Riders should be prohibited. This would speed passage of a continuing resolution and reduce the opportunities for amendments intended to b oost spending in future years 10 9) Problem: The budget process provides little control over entitlements. Entitlements have permanent authorization so spending continues without.further committee action.
Solution: Reconciliation should target entitlement s and provide multiyear spending levels. Entitlements also should be subject to sunset legislation so that spending would have to be reauthorized on a regular basis. At the moment, spending continues until Congress actually changes a program force Congres s to examine program parameters every year.
This would 10) Problem: The reconciliation procedure is inflexible. In the Senate, for instance, germaneness requirements on reconciliation bills limit debate to changes in the law being reported.
Alternative means of achieving savings cannot be considered.
Solution: Change Section 305(b 2 of the Budget Act to make alternative proposals germane in achieving cuts required in reconciliation. Section 301 (b 2, the "elastic clause," which gives the bud get committees wide discretion to interpret the Budget Act, must be preserved to assure that the budget committees have the power and flexibility to control spending. If the authorization and appropriations committees do not meet the requirements of recon c iliation, the budget committees should be vested with the power to substitute their own provisions 11) Problem: Budget resolutions set floor estimates on total revenues, thus encouraging Congress to cut budget deficits through increased revenues as well a s through cuts..in. government spending.
Solution: Revenue legislation should be taken out of the budget process. Resolutions should include estimates of revenues, and thus of deficits, but reconciliation should not be used to increase taxes.
CONCLUSION T he congressional budget process is not fundamentally unsound. It fails only because Congress has found ways to evade the intent and enforcement procedures of the Budget Act., The process should be strengthened, not abolished. The budget committees and res olutions it creates are the only practical means available of restraining aggregate spending and encouraging economical and punctual budgets.
The steps outlined above would instill procedural discipline and financial integrity into the budget process. By m aking the First Concurrent Resolution (FCR) binding, and by strengthening enforcement mechanisms, these reforms would reduce the politicization now involved in drafting an FCR 11 Power over aggregate spending would be shifted from the authorization and ap p ropriations committees to the budget committees and the'full Congress, and the moderating power of the President would be restored. Though the former committees have jurisdiction over the nature and distribution of federal spending, their current influenc e over total spending is like employing the fox to guard the chicken coop.
Federal spending has more than tripled in the past ten years. Real spending is 50 percent higher in FY 1983 than it was in FY 19
73. The budget process alone cannot be expected to harness this spending explosion, but it can help. By establishing a clear link .between spending programs and the taxes or debt that finance them, it can eliminate an institutional bias towards ballooning budgets. The budget process cannot change congress ional interests, but it can restrain them through institutional checks and balances.
John Palffy Policy Analyst I 12 ENDNOTES 1. A continuing resolution pddes budget authority for ongoing pmgrams and departmnts for which fiscal year appropriations have not been enacted by the beginning of the fiscal year 2 Congress, 2nd Sessim, p. 382 Hearings Before the Task Force on the Budget Process for the ccnrmitm of Rule s, House of Rep resentatives, 97th 3. For instance, if Congress had been on a biennial cycle in 1980, the 96th (1979-80) would have alrem Canpleted budget decisions for FY 1981 and 1982 4.
Federal Credit Activity Congressional Budget Office Marvin Phaup, A New Approach to the Budgetary Treatmnt of 5.
Ist Session, 1973, p. 319.
Hearhqs on the Budget Control Act of 1973, 93rd congress 6. Supplemntal appropriations add funds to a regular annual appropriation. They are usudly enacted when the need is too urgent to be postponed until the next fiscal year 7. Congressional Record, August 4, 1983, S 11729 8 . Deferrals are presidential requests to delay temporarily the budget authority. A deferral may be overturned if either house votes against it. Rescissions are presidential requests to cancel budget authority. Both hauses must approve of the rescission wi thin 45 days 9. Congressional Record, July 30, 1982, 594691.