November 29, 2005

November 29, 2005 | Commentary on

U.S. Budget Process Needs an Off Switch

Fifth in a Series

 

Sometimes just taking the first step in a long journey proves impossible. Recently, Republican moderates in the House of Representatives revolted when their leadership attempted to take the smallest of steps: trimming federal spending by $54 billion over five years.

 

That $54 billion is about four-tenths of 1 percent of the federal budget over the next half-decade, a mere drop in an ocean of red ink. It's like demanding a family cut spending by 40 cents for every $100 it spends. They could accomplish that by switching to a cheaper brand of coffee.

 

Still, even this tiny measure was a bridge too far for some. "You're denying resources to programs that serve the middle class and neediest of the needy," is how Rep. Sherwood Boehlert, R-N.Y., described the proposed savings.

 

Well, we've got to start somewhere. Instead of simply shooting down plans to trim spending, the so-called moderates ought to offer their own list of proposed cuts. Any step to reduce spending would be a start on that long journey. But Congress no longer appears able to separate the important from the trivial.

 

The best way to fix that would be to reform the way it makes out a budget.

 

The federal budget process is like the electrical wiring in a house. Nobody sees it, but if it's not working properly, nothing else will. Today our federal budget lacks an off switch. Lawmakers face far more pressure to increase spending than to manage it prudently. And if a member of Congress manages to eliminate a wasteful program, the government doesn't actually save any money. Any savings are automatically used for other spending.

 

Last year, Rep. Paul Ryan, R-Wis, and several conservative allies tried to improve the process. Ryan's proposal was to create "budget protection accounts." As Rep. Randy Neugebauer, R-Tex., explained, "Members would be able to direct savings resulting from their amendments to debt reduction or tax relief. Imagine being able to go back to your district and actually tell your constituents that you saved them some money."

 

Imagine, indeed. The senior Democrat on the House Budget Committee, John Spratt of South Carolina, derided Ryan's amendment as "maddeningly complicated," so much so that it "taxed all my concentration here on the House floor to make it from the first page to the last page."

 

Ryan's straightforward effort to simplify the budget process proved too much for Spratt's colleagues as well; the amendment failed by a two-to-one margin.

 

That debate spotlights the real problem: The process is set up to reward new spending while making it impossible for well-intentioned members to do the right thing. We need a new process to encourage lawmakers to find ways to limit spending.

 

This could be done automatically through a formula that would limit spending increases to the inflation rate plus population growth. States such as Colorado have done this successfully. It also could be done manually, with annual caps set by lawmakers.

 

In either event these spending limits would be laws -- the only way for Congress to break through them would be with a two-thirds vote. This would force lawmakers to set priorities and stick to them.

 

Congress also should be forced to play by some of the budget laws it subjects private companies to. That means it should begin accounting for the future costs of the promises it's making today.

 

Through entitlement programs such as Medicare and Social Security, lawmakers are vowing to provide prescription drugs and retirement benefits that will cost tens of trillions of dollars in the years to come, yet they account only for the five- or 10-year cash flow cost. For example, the Medicare prescription-drug bill will cost "only" $400 billion over 10 years, but in the long run it will require the government to spend some $8.1 trillion, more even than Social Security's outstanding obligations.

 

Adding a payment measure for long-term liabilities and obligations to the annual budget, just as the private sector does, would force Congress to acknowledge the cost of federal obligations and begin to balance near-term spending patterns with long-term realities by reducing spending growth today.

 

These simple changes would give us a budget process that makes sense, and allow Congress to get spending under control. Next week, we'll look at a more difficult step: Reforming entitlements before they bankrupt us.


Ed Feulner is president of The Heritage Foundation (heritage.org), a Washington-based public policy research institute.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office

First Appeared in Investor's Business Daily