Congress has set aside time this summer to work on budget process reform. This is not a moment too soon. Created in 1974, the current budget process has been subjected to over 30 years of abuse from lawmakers trying to exploit its structural flaws. Instead of providing an orderly roadmap for deter­mining the nation’s annual spending and revenue pri­orities, the current budget process stifles debate, prevents cooperation, and frequently breaks down.

The flaws in the budget process are numerous. No statutory spending caps exist that require lawmakers to set priorities and make trade-offs. Even modest congressional budget restraints are routinely overrid­den by a simple majority vote in the House of Repre­sentatives and a three-fifths vote in the Senate. When crafting annual budgets, the President and Congress are not brought together to agree on a basic frame­work until the end of the process. Once the appropri­ations process begins, two-thirds of the budget is deemed “uncontrollable” and excluded from the oversight of annual appropriations. Emergency spending is also typically excluded from annual appropriations bills and is instead relegated to ad hoc budgeting outside of normal budget constraints. Static tax scoring and baseline budgeting create biases in favor of spending increases and against tax cuts. Budgeting by credit card, Congress does not even measure its own long-term financial commitments. Overall, the broken budget process has enabled Con­gress’s spending spree and hindered rational alloca­tion of taxpayer dollars.

While the entire budget process needs an over­haul, three reforms deserve priority attention. Members of Congress should:

• Enact government-wide statutory spending caps that force lawmakers to set priorities and make trade-offs. These caps should apply to both entitlement and discretionary spending.
• Begin measuring the federal government’s long-term unfunded obligations, particularly in Social Security and Medicare. They should also pass rules to prevent Members from adding to these unfunded obligations and then develop a plan to address the $44 trillion in current debt and unfunded social insurance obligations.
• Strengthen budget rule enforcement by clos­ing the plethora of loopholes that currently render most budget restraints meaningless.

The following list provides 10 elements for reforming the federal budget process. Most ideas are drawn from the think tank community, House Republican Study Committee, House Republican Tuesday Group, House Democrats Blue Dog Coa­lition, and Senate Steering Committee.[1]

Element #1: Statutory Spending Caps

• Taxpayers’ bill of rights cap. The most prom­ising budget reform would be to cap federal spending increases at the inflation rate plus population growth (economic growth rates could be another, albeit more loose, target). Lawmakers could allocate federal spending however they wish as long as total government growth does not exceed this predetermined rate. Such a cap could save $3 trillion over the next decade by forcing lawmakers to set priori­ties and to make trade-offs. (See Chart 1.)

• Omnicap. Like a taxpayers’ bill of rights cap, an “omnicap” would apply a single cap to all fed­eral spending (including mandatory). Rather than cap spending increases by a preset for­mula, lawmakers would manually set omnicap levels every few years, similar to the discretion­ary spending caps of the 1990s.
• Discretionary spending caps. Discretionary spending caps successfully restrained discre­tionary spending while in effect from 1990 through 2002. Bringing back these caps would help to rein in federal spending, although law­makers should improve on previous caps with supermajority enforcement and by closing the “emergency” loophole.
• Entitlement spending caps. With entitlement spending projected to consume the entire federal budget eventually, the country cannot afford to allow entitlements to remain on autopilot. Law­makers could write one cap for total entitlement spending or write a formula that would apply to each program individually (such as inflation plus beneficiary population). This could be enforced by requiring Congress to reform excessive enti­tlement spending or face an across-the-board sequestration.

Element #2: Realistic and Honest
Budget Scoring

• Accounting for unfunded liabilities in the budget. While businesses compute their long-term liabilities, Congress does not. Budgets should include a calculation of all future explicit and implicit taxpayer liabilities and lawmakers should create a point of order against increasing these liabilities.
• Dynamic scoring of taxes. Currently, Congress evaluates tax policies by “static scoring,” a method that assumes changes to tax policy have almost no economic impact. History, economics, and common sense prove this assumption false. Dynamic scoring would more accurately estimate the economic and budgetary impact of tax changes.
• Ending baseline budgeting. Baseline budgeting keeps enti­tlement spending on autopilot and creates the false impression that anything less than a large, previously assumed spending increase is a “cut.” That is a rec­ipe for rapidly accelerating spending.

Element #3: Strengthening the Budget Resolution

• Joint budget resolutions signed by the President. Because concurrent budget res­olutions do not carry the force of law, appropriators can easily bypass them. A joint budget resolution would not only add the force of law, but also allow the White House and Congress to negotiate spending levels in the spring, rather than waiting until the completed appropria­tions bills reach the President’s desk in the fall.
• Dividing budget resolution by committee, not function. The budget resolution’s func­tional breakdowns have no binding effect and can be altered by the Appropriations Commit­tees. Dividing the budget resolution’s discre­tionary spending by appropriations subcom­mittee makes more sense, especially since Congress uses this breakdown when filling in the discretionary budget.

Element #4: Enforcing Existing Budget Rules

• Requiring a roll call vote to waive a point of order. The House Rules Committee has rou­tinely reported rules automatically waiving all points of order against excessive spending. Rules that can be so easily circumvented quickly become irrelevant.
• Requiring a supermajority to waive a point of order. Budget rules are supposed to prevent a simple majority from violating predetermined budget standards. Yet allowing the same simple majority in the House to vote to ignore its own rules effectively eliminates all enforcement. Raising the bar to three-fifths would make it harder to violate budget rules.
• Requiring a caucus majority to waive a point of order. If the majority party fears a three-fifths requirement would give the minority party a veto on bypassing budget rules, they could enact an internal party rule requiring a majority vote of the caucus before bringing to the floor a motion to waive a point of order.
• Budget Committee enforcement of spending limits. The Budget Committees should be empowered to enforce the budget resolutions that they write. Spending bills that exceed the 302(a) or 302(b) allocations should be sent back to the Budget Committees for approval, modification, or rejection.

Element #5: Tools for Accountability

• Requiring a roll call vote for authorizations. Lawmakers often pass expensive authorization bills by voice vote, thus removing individual lawmaker accountability with voters. Roll call votes should be required to pass legislation authorizing $50 million or more over five years.
• Congressional Budget Office cost estimate for every bill. The CBO does not provide cost esti­mates for all bills and only rarely for conference reports. Lawmakers should always know the cost of a bill before they vote.
• Repealing the Gephardt rule. House lawmak­ers should not be able to hide debt limit increases by automatically including them in the budget resolution. Lawmakers who truly believe in policies to increase federal debt should be willing to publicly vote that way.
• Term limits for appropriators. Long-time appropriators have some of the highest spend­ing records in Congress. Even appropriators who may wish to restrain spending are often required to vote for runaway spending to remain on the committee long enough to build seniority. Placing a term limit on membership on these committees would help to tear down the barrier between appropriators and other Members of Congress, and free appropriators to vote for less spending.
• Caucus election of appropriations subcom­mittee chairmen. Currently, only the chairman of the House Appropriations Committee is elected by his peers. Yet chairmen of appropri­ations subcommittees also have enormous power and have been accused of wielding that power in ways detrimental to Congress as a whole. Basic accountability requires that sub­committee chairmen also be elected by their peers in a caucus vote.
• Biennial budgeting. Lawmakers rarely finish all budget bills by October 1, when the federal fiscal year begins. Biennial budgeting would free lawmakers to spend more time overseeing federal programs and reforming failed or unnecessary programs.

Element #6: Tools for Spending Restraint

• Including mandatory spending in the appro­priations process. Entitlement program bud­gets are currently left on autopilot outside the normal budget process, growing each year with little or no congressional oversight. Bringing entitlements into the appropriations process would improve accountability and force lawmakers to set priorities and make trade-offs.
• Ending advance appropriations. Lawmakers can currently appropriate spending that does not become available until future years. This loophole encourages spending by making it appear “free” today. The justification that cer­tain education programs need advance appro­priations because of the school year’s unique calendar has been proven false.
• Family budget protection accounts to cut spending on the floor. Lawmakers who cut appropriations bills on the House or Senate floor typically see those savings automatically allocated to other spending. This reform would create a deficit reduction account to protect any such savings.
• Ending “such sums” authorizations. Authori­zation laws are supposed to cap the amount that can be annually appropriated to particular programs. Authorizing “such sums as neces­sary”—which basically means no cap at all— ignores that duty and encourages runaway spending.
• Point of order against funding unauthorized programs. Lawmakers continue to fund unau­thorized programs despite their non-existent or expired statutory guidelines. If lawmakers can­not decide how to run a program, they should not fund it.
• Point of order against adding to unfunded lia­bilities. Medicare and Social Security cur­rently have $44 trillion in unfunded future liabilities. Lawmakers should not be able to put trillions of new spending on the credit card and then dump the payments in the laps of the next generation.
• Point of order against entitlement expansions. Entitlement expansions permanently push up the long-term spending baseline and worsen the fiscal picture. Lawmakers should create some roadblocks for these unaffordable policies. This provision is broader than the one covering only unfunded liabilities.
• Enhancing presidential rescission. President George W. Bush’s line-item veto proposal is actually an enhanced rescission bill that would require Congress to vote up or down on presi­dential rescission requests. This would provide another tool to rein in spending.

Element #7: Tools for Eliminating Wasteful Spending

• Point of order against budget increases for agencies that fail audits. The Government Accountability Office (GAO) has found that several federal departments and agencies can­not pass a basic audit. There is no reason for lawmakers to throw budget increases at agen­cies without sufficient evidence that the fund­ing will not be wasted.
• Requiring congressional committees to pro­duce public oversight reports. Congress is supposed to oversee the executive branch, but few congressional committees produce reports determining whether the agencies that they oversee are effectively and efficiently accom­plishing their goals. Semiannual oversight reports would strengthen oversight.
• GAO “duplication estimate” for each bill. Even with 342 economic development pro­grams, 130 programs serving the disabled, and 130 programs serving at-risk youth, Congress continues to add new programs on top of exist­ing ones. A GAO duplication estimate could help lawmakers to streamline bureaucracy and reduce administrative confusion by reducing program duplication.
• Government waste commission. President Bush, Senator Sam Brownback (R–KS), Repre­sentative Kevin Brady (R–TX), and Representa­tive Todd Tiahrt (R–KS) have each proposed legislation creating commissions modeled on the Base Realignment and Closure commissions. These commissions would write legislation elim­inating wasteful and unnecessary programs that would receive expedited floor consideration and an up-or-down vote with no amendments allowed.[2]

Element #8: Pork and Grant Reform

• Legislative sponsors and written justifica­tions for each earmark. Lawmakers should be required to specify why each earmark is neces­sary and constitutional and to disclose any per­sonal or financial interests in the earmark.
• Requiring earmarks to be placed in the bill itself. Placing earmarks in conference reports, rather than in the bills themselves, prevents lawmakers from amending them out of legislation. No earmark should be placed in a category above congressional debate and amendment.
• Point of order against earmarks added in con­ference committees. Adding earmarks in last-minute conference committee reports prevents lawmakers from having sufficient time to scru­tinize earmarks before voting on legislation. Lawmakers should be willing to add their ear­marks in broad daylight.
• Federal grant database. There is currently no searchable, user-friendly, public database of federal grant recipients. Taxpayers have a right to know who is receiving their tax dollars in the form of grants. Senators Tom Coburn (R–OK) and John Ensign (R–NV) have each authored bills to create such a database.[3]

Element #9: Rational Emergency Spending

• Defining “emergency.” Congress currently skirts budget constraints by classifying regular spending as “emergencies.” Lawmakers should limit emergency spending to only sud­den, urgent, unforeseen, and temporary events.
• Requiring a supermajority for emergency spending. To restrain lawmakers’ appetite for abusing the “emergency” designation, a three-fifths supermajority should be required to des­ignate legislation as emergency, unless the funding comes from a designated emergency reserve fund.
• Reserve fund for emergencies. Just as families are encouraged to keep emergency reserves, so should the federal government follow this sound practice. A good target would be 1.5 percent of discretionary budget authority ($12 billion today), with unused balances rolling over to the following year. This would prevent small-scale emergencies from busting the budget.
• Automatic across-the-board emergency off­sets. This would automatically trigger an across-the-board rescission if emergency spending exceeded designated emergency reserve funds.

Element #10: Reducing Uncertainty

• Automatic continuing resolution. Members of Congress have proven themselves increasingly incapable of finishing appropriations by the start of the new fiscal year (October 1). To reduce uncertainty, Congress should pass an automatic continuing resolution that funds federal pro­grams at a rate slightly below the rate of the pre­vious budget until the funding bills are enacted.

Conclusion

Out-of-control federal spending threatens to force massive tax increases. Furthermore, the Medicare and Social Security costs from the impending retirement of the baby boomers will place an unprecedented strain on the federal bud­get. The current budget process, which dates from the 1970s, makes addressing these budget chal­lenges of the 21st century even more difficult. This antiquated budget process does not cap spending, does not force Congress to set priorities or to make trade-offs, and is heavily biased towards spending and tax increases. The options presented in this paper can create a budget process that better matches America’s budget priorities.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.