How to Have an Honest Budget

Op-EdHow to Have an Honest Budget

Budget & Tax  | Quick Takes
Dec 15, 2016  | By  | 6 min read

Now that Congress has effectively kicked the can down the road, once again, by passing a continuing resolution that will fund the government through April, I’d like to take this moment to ask the members of the 115th Congress to agree to one simple but important request: Let’s have an honest budget.

While there are many reasons for our nation’s $20 trillion debt, using budget gimmicks to find imaginary savings is a perennial problem. Whether it’s tax extenders or “off-budget” spending, Congress has a menu of tricks it uses to spend money it doesn’t have. But the numbers eventually have to add up, and that usually means piling on more debt.

Here are some do’s and don’ts that the next Congress can refer to as it grapples with some harsh budgetary math. It isn’t exhaustive, but it does touch on some of the favorite tactics used by both parties to hide the ball long enough to fund whatever priorities they didn’t actually budget for. If these steps seem like no-brainers, it’s because when it comes to the federal budget, Congress needs to get back to basics.

Measure honestly

 A favorite gimmick of some in Congress is the magic of so-called dynamic scoring. Though Congress has been warned about the danger of assuming dramatic increases in economic growth and revenue thanks to policies like tax cuts, some members just can’t let it go. After House and Senate Republicans installed Keith Hall as director of the Congressional Budget Office (Congress’ scorekeeper) for the express purpose of including dynamic scoring in the office’s analyses, many of them complained that his scores were not dynamic enough. Just about everyone agrees tax cuts don’t pay for themselves. Claiming increased revenue from economic growth many years after initial revenue losses is just fiscally irresponsible. Other examples of magic revenue include overly optimistic savings from using block grants to disburse funds to states, or rosy assumptions about unspecified cuts in other parts of the budget, sometimes called the “magic asterisk.” Simple rule of thumb: Be realistic.

Maintain discipline

 At times, Congress talks tough about deficits and debt (usually when Congress and the White House are not held by the same party). This led to the Budget Control Act of 2011, which created the specter of across-the-board spending cuts known as “sequestration.” After the first year of sequestration (fiscal year 2013), Congress had to adhere to budget caps set by the agreement. Over time, not surprisingly, Congress has cooled to these spending limits, resorting to renegotiating the caps upward each year with often specious offsets and even worse spending through off-budget accounts, like Overseas Contingency Operations or other “emergency” spending measures. Like a teenager, Congress puts these goodies on the nation’s credit card, year after year, with no plan for how to pay them off. This obviously can’t go on forever, so now would be a good time to stop.

Don’t be cute

The so-called Byrd Rule allows any senator to block a piece of legislation if it will significantly increase the federal deficit beyond the 10-year budget window Congress uses. In other words, shifting spending out past the 10-year limit so it doesn’t get counted is such a common practice that there is a specific procedural rule designed to stop it! And yet, examples abound of imaginary savings created by moving spending out into the future (see: pension smoothing, eliminating accelerated depreciation, dividend repatriation). Similarly, Congress likes to count one-time receipts as pay-fors for permanent policy changes like tax cuts, when they really only cover the first decade. Pretending like spending outside the budgetary window doesn’t exist is not just bad policy, it is disingenuous. And even within the window, using 10 years of revenue to pay for one or two years of spending is irresponsible.

Observe regular order

 Passing budgets can be the worst kind of Congressional sausage making. It is where good intentions go to die. To his credit, Speaker of the House Paul Ryan began his tenure by promising a return to regular order, whereby appropriations bills are brought to the floor and debated and amended every year. No continuing resolutions. No omnibuses that no one has read. The reality has been different. Hopefully, Ryan can rekindle his enthusiasm for passing a budget in an orderly way, because it is not going to happen without leadership spending some political capital on it.

An honest budget process may be politically complicated, but technically, it is pretty straightforward: Don’t spend money you don’t have. Don’t pretend you have money you don’t. Don’t act like spending doesn’t count if it happens more than 10 years from now. If Congress does these simple things, and commits itself to an orderly process, then taxpayers will be far better off in the long run.

Originally published on October 27, 2017 in U.S. News & World Report