June 23, 2004

June 23, 2004 | WebMemo on Federal Budget

Is This Finally the Week for Budget Process Reform?

Real federal spending is at its highest level, per person, since World War II, and the problem keeps getting worse, as Congress directs more and more money every year to wasteful, pork-barrel projects. How do they continue to get away with it? Blame the outdated and dysfunctional budget process, which stacks the deck in favor of spending increases. A small band of fiscally responsible Representatives has identified this problem and is leading the charge for reform of the budget process, including spending caps and statutory enforcement to make them stick. Because Congress has shown that it is easier to spend taxpayers' money than exercise fiscal discipline, it must undertake serious and significant budget process reform if federal spending is to be reined in.


The Budget

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 modest) first step in that direction.


The conservative core of process reformers also won a guarantee from the House leadership for a vote on budget process reform. Time has been carved out of a busy legislative calendar to deal with this important-though arcane-issue. Unfortunately, the leading process reform bill reworks old spending control mechanisms without the necessary strong changes, but even that may not see the light of day on the floor. Conservatives, recognizing the need for systemic change, are frustrated that the major issues are being ignored.


Budget Process and Reform

The budget process is 30 years old and has been riddled with creative escape hatches that enable Congress's spending habit. Growth in spending is guaranteed every year, and budgets that don't grow enough to keep up with prescribed formulas are said to be "cut." Such incentives for spending growth are sending the wrong message to Congress and to spending advocates.


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-entitlement and discretionary spending-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 able to use procedural loopholes to wiggle out of the rules and limits imposed by the budget.

There principles are discussed in greater detail in the paper "Four Principles of Budget Process Reform."


If Congress adheres to these principles, it could make real changes that will bring sound planning and responsible spending to the nation's capital. This will involve tough choices.



The House leadership is advocating easy changes, inoffensive to the interests of various turf-holders, especially appropriators. 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.


House leaders should allow a full and open debate on tough, meaningful reforms that will change the incentives for spending, and Congress should 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 and return some spending sanity to the Capitol.


Alison Acosta Fraser is director of the Thomas A. Roe Institute for Economic Policy Studies, and Keith Miller is a research assistant, at The Heritage Foundation.

About the Author

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