June 23, 2004

June 23, 2004 | Commentary on Federal Budget

Budget Process That's Spent

Calls for Congress to get serious and rein in its spendthrift ways once and for all are nothing new. Surprisingly, though, lawmakers may be on the verge of doing just that. And if they do it properly, they can do more than just avoid budget "train wrecks." They can inoculate future Congresses against a relapse into their old ways.

That second point is crucial. Pundits are right to pillory lawmakers for their wasteful, pork-laden ways, but those same pundits don't seem to appreciate the fact that the budget process is skewed toward higher spending. Changing the process is key.

Back in January, congressional leaders were anxious to turn over a new leaf on their spending habits. It's no wonder: Several extravagant spending years saw the cost of the federal budget skyrocket to more than $20,000 per household last year, and it's only projected to get worse. So Congress hammered out a budget agreement that takes a good (though quite modest) first step in that direction.

The House passed this agreement and has moved on to the important, though arcane, matter of the budget process - the foundation that governs the way Congress spends taxpayer money. House leaders have a real opportunity to make bold changes to this foundation, changes that could bring the taxpayer, instead of the lobbyist, into the halls of Congress.

How did the budget process break down in the first place?

To begin with, the incentives are perverse. Members of Congress aren't rewarded for protecting the taxpayers' pocketbooks. Instead, they're under tremendous pressure from special interest groups and powerful lobbyists to pass new spending, special programs and lucrative subsidies. They're rewarded for bringing special projects to folks who hail this windfall of "free" federal money.

But it's not free money - it's the taxpayers' money. As President Reagan wrote to Bob Dole in 1985 requesting the line-item veto, "The House [has made] no meaningful effort to shrink this gargantuan federal spending machine that gobbles up your taxes and divvies them out to a multitude of special interests." Not much has changed.

Spending is also out of control because the budget process is 30 years old and has been riddled with creative escape hatches that enable this bad spending habit to fester. Growth in spending is guaranteed, and budgets that don't grow enough to keep up with prescribed formulas are said to be "cut."

Hey, it makes sense in Washington. But one thing is clear to all: It's a budget process run amok.

What are needed are bold reforms that will fundamentally change lawmakers' incentives. This means much more than putting a new twist on old budget rules. Congress should focus on four core principles:

  • Total spending - not just a small part - should be capped. The real fiscal threat comes from entitlement programs such as Social Security and Medicare, whose growth must be contained if we're to avoid saddling future generations with large tax hikes or enormous debt.
  • The budget should include a full measure of the government's financial obligations. Congress ignores commitments made to Social Security and Medicare in the budget; meanwhile, the bills continue to mount.
  • The president should be involved throughout the budget process - not only at the end, when he has no choice but to sign or veto entire bills sent to him. Taxpayers deserve a binding budget resolution with the force of law behind it.
  • Budget decisions should include strong enforcement. Congress shouldn't be allowed to use procedural loopholes to wiggle out of the rules and limits they impose on themselves.
If Congress adheres to these principles, they could make real changes that will bring sound planning and responsible spending to the nation's capital. This will involve tough choices, but as President Reagan knew, changes that are easy cannot be effective.

Easy changes mean yielding to the interests of various turf-holders. The real test of any reform is not how smoothly it sails through Congress, but whether it upsets the applecart along the way. In the case of the budget, it boils down to a struggle to maintain power over the federal checkbook.

As Congress reflects on the Reagan legacy, let's hope they stick to higher principles. House leaders should allow a full and open debate on tough, meaningful reforms that will change the incentives for spending - and then create a system that puts the taxpayer, not the lobbyist, in the room when they write the nation's spending plans. These steps will help regain the trust of the American people.

Alison Acosta Fraser is director of the Roe Institute for Economic Policy Studies at The Heritage Foundation (heritage.org).

About the Author

Alison Acosta Fraser Senior Fellow and Director of Government Finance Programs
Domestic and Economic Policy

Related Issues: Federal Budget

Originally appeared in Washington Times