The Budget Quagmire

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The New York Sun

This week, both houses of Congress will try yet again to pass budget bills that stalled last week. After consuming precious months haggling over changing the federal budget, Congress will pass a budget for next year that looks rather like the last. While some blame moderate Republicans for blocking leadership plans, the real culprit is a federal budget process that serves little purpose other than to tie Congress in knots.


The budget ritual once was different. Until 1974, Congress quietly passed appropriations bills and tax bills. The chairmen of the appropriations committees in each house, as well as the chairman of the House Ways and Means Committee and Senate Finance Committee, controlled the budget. The political leadership of each house as well as the president might influence the direction of budget decisions.


Although not publicly visible, the pre-1974 congressional budget process was predictable, and leadership was accountable. If something went wrong, there was no doubt about whom to blame. After the Budget Impoundment and Control Act of 1974, the budget system became neither predictable nor accountable. The 1974 act describes in excruciating detail a budget process that has never happened. Each January Congress pretends that it will follow the budget process; by May it has missed several deadlines. During the summer, a few appropriations bills will pass, but rarely all of them.


Both legislators and lobbyists now know that few major bills actually pass through the normal legislative process of authorizing committees. While these committees hold public hearings, the real opportunities to pass legislative language are usually greater with the annual omnibus spending bill, stitched together from August through December. This bill sweeps together unrelated detritus of legislation, much of it unrelated to the budget. For example, this year we have drilling in the Arctic National Wildlife Refuge and spectrum for public safety.


This form of legislation in one big annual bill effectively transfers power from congressional committees to congressional leadership, which ultimately controls the omnibus bill. Paradoxically, omnibus spending bills also transfer power from Republicans to Democrats.


Exactly 10 years ago, Republicans willingly trimmed hundreds of billions of dollars from the budget for the following five years. President Clinton refused to sign the bill and cleverly won the public relations battle about responsibility for shutting down the federal government for a few days. Since then, Republicans have had little stomach for budget battles. Rather than insist on their legislative priorities, the Republican leadership in each house usually formulates an omnibus spending bill that is little different from one that Democratic leadership might have crafted.


Federal tax policy and tax rates have varied over time, but the overall rate of federal spending has been remarkably constant. For much of the past several decades, federal spending has hovered around 20% of GDP. Federal spending was as low as 17.2% of GDP in fiscal year 1965 and as high as 23.5% in fiscal year 1983. But Congress has lost control over how federal funds are spent. A generation ago, national security and discretionary spending dominated spending. Relatively few programs were beyond the review of Congress. Today, “nondiscretionary” entitlement and social programs account for the vast and growing majority of federal spending. The 1974 act has reinforced the rapid growth of nondiscretionary spending.


Each year, Congress finds little and less in the budget that it believes it can change. Deprived of the power of the purse, Congress – and the electorate – loses much of its purpose. This year, in the current process, Congress balks at trimming federal social programs by even $50 billion over five years, or less than 0.1% of GDP. These programs grow inexorably and uncontrollably, regardless of powerless congressional review.


There is more than one way Congress could sensibly manage the federal budget. Congress could go back to the system of more powerful committees and chairmen. Or Congress could adopt any of several simpler budget systems that free it from endless budget deliberations. But the current process is not a rational way to manage the federal budget, and it is doomed to failure.



A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.


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