A Broken Government Budget Process and What to Do About It

Nearly five decades ago, the Congressional Budget and Impoundment Act of 1974 was passed into law. Since then, this law has governed how members elected to the U.S. Congress draft and pass the U.S. government’s budget.

Except Congress doesn’t seem to follow its own law, as Veronique de Rugy explained in an op-ed at Reason:

Since Congress designed and implemented the last budget process in 1974, only on four occasions have all of the appropriations bills for discretionary spending been passed on time.

It’s common knowledge among budget experts that the budget process is “broken.” Anyone who regularly reads this column knows about debt limits, government shutdowns, and out-of-control spending and borrowing. The list goes on. Well, part of the problem is that almost 50 years since the last budget process reform, it needs a serious update. However, when we do that, let’s not miss the elephant in the room: Things would work much better if Congress agreed to follow its own rules.

But as she recognizes, what passes for the actual budget process in Washington D.C. is dictated by politicians with the power to make up rules as they go:

Congress has, among other indiscretions, waived budget points of order, circumvented spending caps, and used budget reconciliation to bypass the traditional legislative process. This has caused the budgeting process to be more reactive, ad hoc, and in many cases chaotically last-minute in preventing government shutdowns.

This undisciplined process is exactly the problem with governance Fitch Ratings cited when they downgraded the U.S. government’s credit rating in July 2023.

After 50 years of failing to follow a lawful budget process, it’s safe to say it’s time for a major reform in Washington, D.C.

What Should Budget Reform Look Like?

But what direction should that reform take? That’s the subject of a follow-up op-ed by de Rugy:

What we need is a comprehensive budget process under which programs like Social Security, Medicare, and Medicaid are no longer permitted to grow without meaningful oversight. Combined with other mandatory, more-or-less automatic spending items, they make up more than 70 percent of the budget. Thus, they must be included in the regular budget process and subjected to regular review. Only then will our elected representatives be forced to stop ignoring the side of the budget that requires their attention the most.

This would also help deal with the fact that entitlement spending is, as every serious observer knows, unsustainable. Unless reformed, these programs will drain wealth not only from the government but from the economy. Ensuring their sustainability must be part of any serious budget process reform.

Enter a “Base Closure and Realignment Commission (BRAC)”-style fiscal commission, an idea promoted by the Cato Institute’s Romina Boccia. This commission would be staffed with independent experts appointed by the president. It would be “tasked with a clear and attainable objective, such as stabilizing the growth in the debt at no more than the GDP of the country, and empowered with fast-track authority, such that its recommendations become self-executing upon presidential approval, without Congress having to affirmatively vote on their enactment,” Boccia explains.

The Base Closure and Realignment Commission is perhaps the only example of a successful budget policy reform enacted in the past 50 years. That may be because it is limited in scope, so it’s an open question of whether a similar condition with greater sway over more spending could succeed.

There’s also no guarantee that the politicians who benefit from the current broken system would go for it. De Rugy highlights another reform proposal that could also work:

Making continuing appropriations automatic in case of a lapse could remove the threat of shutdowns. As explained in one senator’s proposal, if appropriations work isn’t done, “implement an automatic continuing resolution (CR), on rolling 14-day periods, based on the most current spending levels enacted in the previous fiscal year.” Further, to avoid overrelying on CRs, “all Members of Congress must stay in Washington, D.C., and work until the spending bills are completed.”

Eliminating the kabuki theater of federal government shutdowns would be a bonus. But would it make sense for the continuing automatic appropriation to only be for 95% of previously enacted spending levels? That small reduction should be sufficient to allow the federal government to continue operating while providing more incentives for politicians to get their budget act together.

Regardless, it’s long past time for serious budget reform on Capitol Hill.