How Can We Do It? Past Lessons for Paul Ryan on Budget Resolution

The House leadership and House Budget Committee Chairman Paul Ryan have set April 4 as the day to begin devising the Fiscal Year 2012 budget resolution, the blueprint for spending the next five years. The challenge both Speaker John Boehner and Chairman Ryan face grows as gridlock and a possible short-term government shutdown because of the Fiscal Year 2011 spending bill threaten.

The cliché, “a perfect storm,” seems apt for Ryan and his plans.

On the one hand, Congress continues to wrangle over fiscal trivialities in the fight over the Continuing Resolution for Appropriations for FY11. On the other, deadlines for passage of the FY12 budget approach. There is also the need to pass an increase in the present $14.3 trillion national debt ceiling. That should occur in May.

What kind of budget must Chairman Ryan and his committee pass?

Certainly it must be one that shows dramatic improvements in projected deficits and debt accumulation. Yet to make those improvements more than fond hopes and pious wishes, the House majority must give new GOP members some assurances that the numbers are more than figures on a piece of paper, but will lead to real change in underlying laws, especially those governing entitlements.

So, how does Chairman Ryan do that in his committee? And, how does Speaker Boehner do it in order to get votes to pass the debt ceiling increase?

This challenge has precedent, thank goodness, that Chairman Ryan and Speaker Boehner may draw on.

In 1985, Congress faced a tough vote to increase the federal debt ceiling. Congress didn’t have the votes. So, the Senate embarked on an adventure known as Gramm-Rudman-Hollings (GRH). Without going into the mind-numbing details, fights, innumerable sub-conferences, and general mayhem, suffice it to say that the Congress passed GRH and President Reagan signed it into law.

What did the new law do?

It said, in short, that Congress had to pass legislative changes to current spending laws in order to meet a specific deficit target. If Congress failed to do that, then automatic cuts across-the-board would occur. These cuts, for reasons still unknown, were titled “a sequester.”

In the first year, Congress failed to meet the targets and a very small sequester occurred.

In the second year, it became clear that the targets were much too tough to meet, so eventually GRH was simply eviscerated. No one went to jail for ignoring the law and deficits continued.

If GRH failed, what worked? In 1990, 1993 and 1997, further “global budget agreements” received Congressional approval and, in fact, the famous 1997 compact led to four balanced federal budgets in a row—a feat unprecedented during the earlier half century.

Combining these four experiences leads one to conclude that a GRH-type process reform, but one that concentrates on the real change in spending and taxation, is necessary to cut $5 trillion off debt accumulation in a 10-year period.

Congress cannot, fundamentally, determine what level of spending and taxation will be necessary to reach a deficit target anyway. Why? Because Congress can only roughly (at best) estimate what economic and international conditions might prevail in any given future year. Rather than focus on percentages of deficits and debt that it cannot possibly accurately forecast, Congress should focus on what it really can do—change underlying laws that provide spending and raise taxes.

The outcome might not be that Congressmen send home press releases saying, “we balanced the budget in 2016,” but a more believable, “we just cut spending and reformed taxes enough that we have cut $5 trillion in our debt.”

As I write, a group of Senators has begun tackling both the process question and enforcement of that process. It may well be that if genuine fiscal sanity begins, that it will begin with the “Gang of Six” in the Senate. The two-step process is just one of several ideas bouncing around the private Senate discussions, but it seems to be in the mix.

Much work would have to be on any two-step process and then enforcement regime I have outlined. But, it can be done. And for Chairman Ryan and Speaker Boehner, and their counterparts in the Senate, it may have to be done.

The views expressed in this post are Mr. Bell’s and his alone. They do not necessarily match the views of the BPC or the Debt Reduction Task Force.

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