Five Budget Recommendations

Five Budget Recommendations

Budget & Tax,  | Weekly Wastebasket
Dec 22, 2016  | 7 min read | Print Article

The 114th Congress is over. So we’ll take this moment to ask the members of the 115th Congress to agree to one simple but important request: Have an honest budget.

While there are many reasons for our nation’s nearly $20 trillion debt, using budget gimmicks to find imaginary savings is a perennial problem. Whether it’s rosy revenue projections, tax extenders, “off-budget” spending, or using distant savings to pay for spending today, Congress has a menu of tricks it uses to spend money it doesn’t have. But the end of year deficits don’t count gimmicks, they are based on real numbers that pile on more debt.

For this last Weekly Wastebasket of 2016, here are some do’s and don’ts the next Congress can refer to as it grapples with some harsh budgetary math. These are just a few of the favorite tactics of both parties to hide the ball long enough to fund whatever priorities they didn’t actually budget for. If they seem like no-brainers, it’s because when it comes to the federal budget, Congress needs to get back to basics.

Measure Honestly

 Some members of Congress have looked to the magic of dynamic scoring to make policies look more fiscally sound than they are. 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. Most 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.” There is no avoiding hard choices. Simple rule of thumb: be realistic.

Maintain Discipline

 Tough talk on deficits and debt often comes out of Congress—and this is especially true when Congress and the White House are not held by the same party. Our most recent experience with divided government 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, Congress became unwilling to hew to these spending limits, resorting to renegotiating the caps upward each year with often suspect 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.

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Don’t Be Cute

 Shifting spending out past the ten-year window over which a piece of legislation’s costs are calculated, so that it doesn’t get counted, became such a common practice that there is a specific procedural rule designed to stop it. The Byrd Rule allows any senator to block a piece of legislation if it will significantly increase the federal deficit beyond that ten-year “scoring” budget window. Despite this rule, 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 or new mandatory spending, when they really only cover the first decade. Pretending like spending decisions made today magically stop having an impact eleven years from now is not just bad policy, it is disingenuous. And within the window, using ten years of revenue or savings to pay for one or two years of spending is irresponsible.

Don’t Treat the Pentagon Budget as Sacrosanct

 The Pentagon is by far the largest portion of the discretionary budget. Any attempt at fiscal discipline that excludes defense spending is bound to fail. Let’s have an honest debate about what U.S. strategy should be and then set a budget to fund it. Let’s make the military services share cost estimates for major programs so that Congress and the public will know if (when?) the programs go over budget. And let’s quit setting up phony-baloney new accounts that take the cost of major weapon systems out of the military services where they belong.

Observe Regular Order

Passing budgets and annual spending bills to fund government should be so fundamental that Congress could do it from legislative muscle memory. Instead, there are hardly any lawmakers remaining from the last time all the appropriations bills were adopted individually and on time (1994). 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, Speaker 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 ten years from now. If the next Congress does these simple things, and commits itself to an orderly process, then taxpayers will be far better off in the long-run.

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