Budget Process Reform: Stop Me Before I Spend Again

By :: December 22nd, 2009

Congress is having one if its periodic infatuations with the idea of using an independent commission to push it to do what it clearly does not want to do—tackle the deficit and long-term debt in the only ways possible, by cutting spending and raising taxes.


One plan would charge a bipartisan fiscal task force made up of members of Congress and the Administration with developing a deficit reduction plan. Senators Kent Conrad (D-N.D.) and Judd Gregg (R-N.H.) have introduced this in the upper chamber, while Representatives Jim Cooper (D-Tenn.) and Frank Wolf (R-Va.) have their own version in the House. Each would give a panel broad authority to write a deficit reduction plan that would get a fast-track vote in Congress. 


Then there is the idea of delegating authority to propose Medicare cost savings to a separate independent panel. Versions of this are included in both the House and Senate health bills. The specific recommendations of this board would be adopted by the Department of Health and Human Services unless Congress affirmatively voted to reject them. In that way, the commission would operate much like the 2005 base-closing panel that gave Congress the cover it needed to shut obsolete military facilities. While the House and Senate versions of the Medicare panel differ in important details, both would empower the commission if future health costs exceed certain limits.


Process-driven deficit reduction is hardly new. That was the goal of the original 1974 Budget Act, the Gramm-Rudman Hollings Act in 1985, and the 1990 law known as PAYGO that was intended to offset tax cuts and expanded entitlements with revenue increases or spending cuts.


The histories of both Gramm Rudman and PAYGO are dishearteningly similar and instructive. Both laws actually worked, for a while. Then Congress found ways to first manipulate them and then avoid them entirely. Watching the Senate finagle PAYGO in the ‘90s and early 2000s was as depressing as it was predictable: Someone would move to waive the law, there would be the requisite mumbling on the Senate floor, and the deficit would grow by billions of dollars. These process-oriented attempts at fiscal discipline probably reached a low point in George W. Bush’s administration. Four bills—the massive tax cuts of 2001 and 2003, the Medicare Part D drug law, and the TARP bailout completely blew away procedural roadblocks to budget-busting. More recently, President Obama ignored the deficit consequences of his $787 billion stimulus bill.


Obama's stimulus is a perfect example of how tough it is to erect these barriers. Budget process rules shouldn't be immutable and must give Congress flexibility to respond to economic realities. For instance, it would have been insane to mindlessly raise taxes or cut spending in the midst of the recent massive financial crisis and economic recession. Unfortunately, that very plasticity will ultimately doom any process reforms.


They may help for a bit. But process won't change the mindset of lawmakers who believe the key to their success is the toxic mix of tax cuts and spending hikes that drives ever-more consumption. As long as politicans believe that fiscal discipline is career suicide, little will change. For instance, the CBO predicts the Senate version of a Medicare commission will reduce deficits by between 0.25 percent and 0.5 percent in the decade after 2019. In CBO-speak: Don’t hold your breath. When it comes to deficits, as TPC's Rudy Penner has said, the problem is the problem, not the process.