10 Elements of Comprehensive Budget Process Reform
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:
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.
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.
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.
Statutory Spending Caps
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.)
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.
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
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
Realistic and Honest
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.
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.
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
Element #3: Strengthening the Budget Resolution
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.
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.
Enforcing Existing Budget Rules
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.
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.
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.
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
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.
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.
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.
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
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.
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
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.
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.
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
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
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.
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.
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.
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
Element #7: Tools
for Eliminating Wasteful Spending
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.
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.
"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.
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.
Element #8: Pork and
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.
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
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.
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.
|Many of these
proposals are explained in greater depth in the following Heritage
Brian M. Riedl, "What's Wrong with the Federal Budget
Process," Heritage Foundation Backgrounder No. 1816, January 26,
2005, at http://www.heritage.org/
Brian M. Riedl, "Restrain Runaway Spending with a Federal
Taxpayers' Bill of Rights," Heritage Foundation Backgrounder
No. 1793, August 27, 2004, at http://www.heritage.org
Brian M. Riedl and Alison Acosta Fraser, "Four Principles of
Budget Process Reform," Heritage Foundation Backgrounder No. 1746,
April 8, 2004, at http://www.heritage.org/Research
Fraser, "Time for the Federal Budget Process to Include Unfunded
Entitlement Obligations," Heritage Foundation Backgrounder No.
1818, February 3, 2005, at http://www.heritage.org/
Brian M. Riedl, "Better Budget Reform: A Guide to the Federal
Budget Protection Act," Heritage Foundation Backgrounder No. 1758,
May 14, 2004, at http://www.heritage.org
Brian M. Riedl, "The Blue Dog Democrats' Budget Process Proposal:
An Emerging Bipartisan Consensus," Heritage Foundation Web
Memo No. 670, February 18, 2005, at http://www.heritage.org/
The House Republican Study Committee, House Tuesday Group, House
Blue Dog Coalition, and Senate Steering Committee could
provide more detail on many of these proposals.
Element #9: Rational
"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.
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
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.
across-the-board emergency offsets. This would
automatically trigger an across-the-board rescission if emergency
spending exceeded designated emergency reserve funds.
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
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
Show references in this report
For a proposal
from the Republican Study Committee, see Office of Representative
Paul Ryan (R-WI), "The Family Budget Protection Act," 2004, at
/family_budget_protection_act.htm (June 12, 2006). For a
set of joint principles authored by the Republican Study Committee
and House Republican Tuesday Group, see press release,
"Conservatives & Moderates Come Together: Announce Consensus
Principles to Reform the Budget Process," Republican Study
Committee and House Republican Tuesday Group, February 11, 2004, at
(June 12, 2006). For a summary of the Blue Dogs' proposals, see
Centrist Policy Network, "Blue Dog Coalition 12-Point Reform Plan
for Restoring Fiscal Sanity," at http://www.centristpolicynetwork.org/pages_2005/02/blue_dog_
budget_reform/blue_dog_12_point_plan.html (June 12,
Brownback's bill is the Commission on the Accountability and Review
of Federal Agencies Act (S. 1155). The Abolishment of Obsolete Agencies and
Federal Sunset Act of 2005 (H.R. 3282) is authored by
Representative Brady. The Commission on the Accountability and
Review of Federal Agencies Act (H.R. 2470) is authored by
bill is the Federal Funding
Accountability and Transparency Act of 2006 (S. 2590). Senator
Ensign's bill is the Website for American Taxpayers to Check and
Help Deter Out-of-control Government Spending (WATCHDOGS) Act (S.