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Federal Budget Process Reform: Key Issues, Proposed Fixes

By Tim Shaw, Sandy Davis

Thursday, March 8, 2018

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Flaws in the federal budget process have become self-evident over the past decade, with delayed federal funding and government shutdowns turning into an annual tradition. Last month’s budget deal established the Joint Select Committee on Budget and Appropriations Process Reform to consider substantive reforms that improve the efficiency and effectiveness of how Congress funds the government.

This joint committee, like other efforts before it, has a chance to advance modest but meaningful improvements to how policymakers develop the federal budget. But what are the fundamental problems with the process that the committee will need to address? And what types of reforms should the committee consider?

BPC has advocated improvements in the budget process for years, and through this work we have identified five key needs that should be addressed in budget process reform. Solving all of them would be setting unrealistic expectations for this committee, but any reforms that the members can reach agreement on should seek to advance these principles.

Timeliness. Congress has not completed the full budget process on time since 1997, and these delays resulted in government shutdowns four times. Funding delays make it difficult for decision makers at federal agencies to use taxpayer resources efficiently and effectively. Defense Department officials have frequently testified that delays in funding harm military readiness. The Government Accountability Office has testified on multiple occasions that government shutdowns and delays in annual funding make government less efficient.

Long-term Planning. The current budget process does little to focus attention on the long-term fiscal health of the federal government. This has contributed to an outlook of trillion dollar deficits as far as the eye can see despite one of the longest U.S. economic recoveries in history. Fixing our long-term fiscal myopia needs to be a key focus of the joint committee.

Simplicity. One quick look at a flow chart shows why the federal budget process is so difficult to manage. On top of the multiple layers of congressional committees and subcommittees, numerous procedural points-of-order have evolved over the years, providing an additional level of complexity that can further slow the budget process.

Transparency. The complexity of the process also leads to a lack of transparency, furthering public distrust in the institutions that safeguard their tax dollars. As the late Sen. Pete Domenici and former Office of Management and Budget Director Alice Rivlin stated in their report on this issue, the most dangerous byproduct of an opaque and convoluted process is that “the public observes these complex proceedings without comprehension and concludes that their government is dysfunctional.”

Comprehensiveness. While the process was originally designed to be comprehensive, an increasing portion of the budget has escaped annual review over time. More than two-thirds of federal spending is on auto pilot, not subject to the annual appropriations process. In addition, more than $1 trillion worth of tax expenditures do not receive regular review from Congress, meaning that large swathes of the federal budget live outside of the budget process.

Sorting through these various shortcomings will be a difficult task for the joint committee, but the work is long overdue. A good place to start would be the Domenici-Rivlin proposal from 2015, which contains a comprehensive set of recommendations aimed at each of these issues. In 2016, BPC compiled a report by a series of budget experts on how to account for the long term in federal budgeting. BPC’s Commission on Political Reform has also weighed in with key proposals for reform. These recommendations, summarized in the table below, should help the committee as it strives for a solution that makes the federal budget process work better for the American people.

Focus AreaRecommendations
Timeliness• Enact a biennial budget and appropriations process. Domenici-Rivlin Report, P. 16, Commission on Political Reform, P. 68
• Automatically enact continuing resolutions in the absence of timely appropriations. Domenici-Rivlin Report, P. 16
• Automatically cancel planned congressional recesses in the absence of a conference agreement on the budget resolution. Domenici-Rivlin Report, P. 16

Long-term Planning• Enact long term budgets for mandatory programs (i.e. Social Security, Medicare, etc.) and limit automatic growth with pay-as-you-go rules. Domenici-Rivlin Report, P. 13
• Establish in law a specified debt-held-by-the-public goal. Domenici-Rivlin Report, P. 16
• CBO should measure impact of past-year’s policies on long term projections. Fiscal Myopia, P. 72
• Establish a target debt-to-GDP ratio for long term fiscal planning and/or annual deficits. Fiscal Myopia, P. 75
• Establish an annual spending limitation to address debt. Fiscal Myopia, P. 75
• Include policy proposals to achieve specific fiscal targets in the president’s budget. Fiscal Myopia, P. 76
• Include 25-year current policy projections in the president’s budget. Fiscal Myopia, P. 77
• Include a projected current policy baseline over at least five years for all federal agencies, similar to the Department of Defense’s Future Year’s Defense Program. Fiscal Myopia, P. 77
• Include 25-year cost estimates in CBO and JCT projections of the impact of changes to major entitlement and revenue programs. Fiscal Myopia, P. 79
Complexity• Restructure and streamline key budget committees and offices. Domenici-Rivlin Report, P. 18
• Establish a presidential/congressional commission on budget concepts, with a particular focus on credit programs and activities creating unfunded long-term liabilities for the federal government. Domenici-Rivlin Report, P. 20
• Include a plain language summary in the president’s budget. Fiscal Myopia, P. 77
• Treat all spending alike, remove “protections” that privileges some spending over other types. Fiscal Myopia, P. 79
Transparency• Upon adoption of a biennial budget resolution, automatically deem enacted an increase in the debt limit, subject to presidential veto. Domenici-Rivlin Report P. 16
• Outline fiscal risks to current and future generations in the president’s budget. Fiscal Myopia, P. 77
• Require the president to address GAO’s “high risk list” in the budget or elsewhere. Fiscal Myopia, P. 78
• Require the budget resolution to show how Congress proposes to meet established fiscal goals. Fiscal Myopia, P. 78
• Require House and Senate Budget Committees to prepare an “End of Congress” report detailing congressional budgetary actions. Fiscal Myopia, P. 79
Comprehensiveness• Establish periodic review of federal tax expenditures and incorporate into budget process. Domenici-Rivlin Report, P. 14
• Set caps on discretionary spending through the budget resolution and subject non-discretionary spending to intense review. Domenici-Rivlin Report, P. 12
• Impose separate caps on programs and categories of spending, for most discretionary and mandatory spending. Fiscal Myopia, P. 72
• Implement an annually-balanced budget accounting for the business cycle. Fiscal Myopia, P. 74
• Require the president to propose a government-wide performance plan as part of the budget. Fiscal Myopia, P. 78
• CBO and JCT analysis of president’s budget should be extended to a 25-year window. Fiscal Myopia, P. 78
• Require GAO to produce a high-risk list, defining high-risk as programs and revenue sources equivalent to one-half percent of GDP, as well as other programs GAO deems worthy of inclusion. Fiscal Myopia, P. 79
• Enforce House and Senate rules limiting “legislating on an appropriations bill.” Commission on Political Reform, P. 69