o BUDGET FIRST, SPENDING SECOND: Congress and the President will decide
on overall budget levels early in the budget year-making macroeconomic
policy decisions in 20 broad spending categories-before considering levels
of spending for individual programs.
o A LEGALLY-BINDING BUDGET: The budget will be in the form of a simple one-page joint resolution, passed by both the House and Senate and signed by the President, rather than a hyper-detailed non-binding concurrent resolution. Making the budget a law will ensure that it is enforceable; enacting it up front will prevent last-minute arguments at the tail end of the process. To ensure on-time performance, no appropriations can be considered until the simplified, one-page budget has become law.
o ENFORCEMENT OF BUDGET LIMITS: Congress will no longer be able to "waive" the spending levels of the budget resolution. A 2/3 supermajority vote will instead be required for over-budget spending. Additionally, the President will be given the power to make line item reductions, for the limited-and constitutional-purpose of bringing spending back to the levels originally set by Congress in that year's budget.
o TRUTH IN BUDGETING: Codifies and strengthens 1995's "baseline budgeting" change in the House Rules. Instead of calling a scaled-back increase a "cut," the budget will use real dollars to compare last year=s actual spending to this year=s proposed spending-ending the pernicious bias in favor of increased spending.
o "RAINY DAY" FUND FOR NATURAL DISASTERS: Creates a specific budget function for reserves against the costs of relief from floods, earthquakes, fires, and other natural disasters-so that "unplanned" expenses don't bust the budget.
o "LOCK-BOX" FOR SPENDING CUTS: Ensures that budget savings from floor amendments to appropriations bills result in actual spending cuts, rather than higher spending on other programs.
o NO MORE BLANK CHECKS: Blank-check spending through "such sums as may be necessary" appropriations will be abolished. Fixed-dollar spending will be required for all accounts, except Social Security and interest on the debt.
o "PAY AS YOU GO": Requires that over-budget supplemental spending be offset by reductions elsewhere in the same budget category, not by new taxes.
o NO MORE GOVERNMENT SHUTDOWNS: If Congress and the President cannot agree, an automatic Continuing Resolution will keep the government from shutting down by freezing total government spending at last year's levels. This will encourage cooperation by eliminating threats to shut down the government as a negotiating tactic.
Deficit spending has plagued American taxpayers for years. But only recently in American history has over-spending threatened to swallow up the entirety of our income tax receipts. In fiscal 1996, payments for interest on the national debt consumed more than half of the $650 billion in income taxes paid by all 114 million U.S. taxpayers.
During the Clinton-Republican Congress years of "deficit reduction," the national debt has grown by more than three-quarters of a trillion dollars. (It topped $5 trillion early in 1996.) And while deficits-the annual increases in the debt-are moderating, inherent costs on the ever-larger national debt are rising steadily, and ominously.
It's long past time that we put an end to the federal government's mismanagement of our nation's fiscal affairs. Massive federal borrowing has given us permanent inflation and higher interest rates. It has raised the cost of capital for American business, crowding out entrepreneurs and large firms alike. It has hijacked our national savings from private to government use, destroying job creation in the process. As a result, senior citizens' savings are being eroded; young couples seeking a first home can't obtain a mortgage; laid-off workers trying to find new employment find there are no jobs available.
Getting our national budget mess cleaned up would go a long way toward putting America's free enterprise economy back on track. And while the current budget mess in Washington appears to offer little hope of this, straightening out our nation's fiscal affairs is not nearly so difficult as it first appears.
The simple truth is this: the chronic failure to balance the budget is the inevitable result of a poorly designed Congressional budget process, which not only permits but encourages violation of the very laws designed to force rational choices among competing priorities. The current process virtually guarantees wasteful spending and financial chaos.
Not least among the reasons that the system is subject to manipulation and abuse is that very few people understand how it works. Even within Congress itself, terms like "current services baseline," "602(b) allocation," and "undistributed offsetting receipts" often produce blank stares. The budget committees, whose members at least have the incentive and opportunity to understand the process, are powerless to enforce its requirements.
The Congressional Budget and Impoundment Control Act of 1974, which sets out the current process, is routinely ignored; and there is no remedy at hand to enforce it. As in the Old West, the man with a gun can make his own law-and too often Congress has done just that.
Back in January 1989, on my very first day in Congress, then-Speaker of the House Jim Wright announced from the chair that he intended to break the law. This may shock most Americans, but in fact it is routine business in Washington. Speaker Wright pledged at the start of the 101st Congress that the House would complete work on the required 13 appropriations bills by the August recess. The law requires final action on these bills by June 30.
Imagine the consequences if you were to ignore the April 15 deadline for filing your income tax return. Yet when it comes to more than $1.9 trillion in annual spending, that is precisely what is now done-and has been done routinely each year since the passage of the 1974 Act. The utter mismanagement of the federal budget is nowhere better illustrated than in the fact that Congress repeatedly violates almost every one of its legal deadlines.
The Current Non-System
In place of the process mandated by law, the current Congressional leadership is forced to ride on top of the totally extra-legal system that has been built over the past two decades. The sheer complexity and incomprehensibility of this budget-making system shield it from effective public scrutiny. Virtually no member of Congress-let alone the public-even reads the huge spending bills the Congress adopts.
The current non-system also produces budgetary gridlock and threats of government shutdowns on almost an annual basis. Too often, these budgetary games of "chicken" end with Congress presenting the President with a take-it-or-leave-it decision on a hastily crafted omnibus continuing resolution or an 11th-hour reconciliation bill running into the thousands of pages and comprising virtually all federal spending for the entire year.
Such a system serves only the interests of those who seek to guarantee that government spending is uncontrollable. This was evidenced most recently in the fiscal 1997 budget debate, by Congress' last-minute accession to an additional $7 billion in spending to avert another government shutdown. This was not, however, the intention of those who drafted and passed the 1974 Act. Rather, this law represented an effort to place taxing and spending decisions within the context of an overall budget.
Until 1974, Congress never voted on a budget. The federal "budget" was simply the sum of the separately enacted annual appropriations bills, along with whatever financial commitments had been enacted into law in prior years. To rectify this, the 1974 Act established the House and Senate Budget Committees, and provided for an annual budget to be adopted by Congress. The act required the passage of a non-binding first concurrent resolution on the budget early in the budgeting year, and a binding second concurrent resolution toward the end of that year. Additionally, it was intended that the second resolution would be enforced through reconciliation instructions that would require the various congressional committees to report to the floor whatever legislation was necessary to achieve the established targets. (In practice, Congress simply ignored the requirement that it pass a second budget resolution, and the requirement of two resolutions was done away altogether in the first Gramm-Rudman-Hollings law, enacted in 1985.) Finally, the act set up a legally binding timetable to ensure the timely adoption of individual spending bills.
Certainly, providing for a floor vote on overall budget targets, mandating the timely adoption of spending bills, and enforcing overall budget limits through reconciliation represented positive steps. It is thus not for lack of a workable concept, but rather of effective enforcement mechanisms, that the 1974 Act has failed to bring order and coherence to the budgeting process and, thus, failed to bring discipline to Congressional decisions to spend money.
To repair the broken-down Congressional budget process, we must design a system with teeth in it to make sure that neither Congress nor the President abandons it for some less restrictive expedient. Beginning as a member of President Ronald Reagan's Working Group on Budget Process Reform, and continuing through to my present service as Chairman of the Republican Policy Committee, I have spent nearly a decade in developing and refining a comprehensive proposal to rewrite the 1974 Act that would do just that.
The Solution: The Budget Process Reform Act
The Budget Process Reform Act, which by the end of the 104th Congress had gained the support of a majority of members of the House of Representatives, is based on the premises that an effective budget process must do each of the following:
o Encourage early consultation and cooperation between Congress and the President.
o Produce binding decisions on overall budget levels early in the budgeting year.
o Be evenhanded with respect to the President and Congress, not giving either an advantage in dealing with the other or in establishing spending priorities.
o Tie each individual spending decision to an overall, binding budget total.
o Require explicit decisions on spending levels for all federal programs, not just those arbitrarily deemed "controllable."
o Prevent actual or threatened annual shut-downs of the federal government.
o Be as simple as possible in concept and means of implementation, so that the process is clear and understandable to Congress and the public.
o Not raise difficult questions of constitutionality.
o Contain a bias in favor of spending restraint that could be overcome only if both the President and Congress wish to do so.
o Protect individual members of Congress against the political fallout from tough spending decisions by placing the burden to cut spending on the process rather than on specific legislators.
To accomplish these objectives, the Budget Process Reform Act will completely overhaul the existing process. The most basic of these reforms deals with the nature of the budget itself.
Using the Budget as a Planning Tool
Most people and organizations use budgets as planning and forecasting tools. By its very nature, a budget must be adopted before the spending it is meant to control. The federal government, however, routinely fails to adopt its budget on time, in advance of spending bills. In fact, the federal budget process often isn't completed until the same time that all of the underlying spending bills are finished-often well beyond the deadline for which the budget is required.
The misuse of budgets in federal financial planning has even corrupted the language. Ask anyone in Washington, D.C. what is the budget for the Pentagon, and they'll tell you how much we're currently spending on the Pentagon. Because federal "budgets" are agreed upon only at the eleventh hour (or later), they have no significance independent of the appropriations process itself.
To address this problem, the first and most fundamental reform of the Budget Process Reform Act is that Congress will be required to budget first, and spend second. Specifically, the Act requires that Congress enact a simplified budget, in the form of a legally binding joint resolution signed by the President (as opposed to the present non-binding concurrent resolution), before any spending legislation can even be considered. By deciding on overall budget totals instead of individual programs, it is much more likely that Republicans and Democrats within Congress will come to agreement. Likewise, since the budget will be presented to the President for his signature or veto, it will be more likely to reflect a decision on overall government spending that combines the priorities of both the President and Congress.
Second, the Budget Process Reform Act contains enforcement mechanisms to keep Congress within budget ceilings for all spending. (Social Security, with its earmarked taxes and trust fund, and interest on the debt, with a constitutional guarantee of "full faith and credit," are excepted.)
Third, the Act provides a sustaining mechanism that would be triggered in the event Congress and the President fail to act, so that the federal government will not be shut down because of political deadlock.
How the Act Works
These are the basic elements of the Budget Process Reform Act, which together form a coherent system that will bring long-overdue discipline to Congressional fiscal management:
Budget First, Spending Second: The Budget Process Reform Act will require that Congress approve a legally binding budget (in the form of a joint resolution) by April 15 of each year. Until the budget is signed into law, no authorization or appropriation bill could come to a vote in either the Senate or the House, or in any committee or subcommittee. The budget will set ceilings on all federal spending (except Social Security and interest on the debt) for the coming fiscal period.
One-Page Budget: Unlike the current system, in which the "budget" is so detailed it is the size of a phone book, the Act calls for a budget that will fit on a single page-setting specified ceilings on government spending within 20 categories. (One of these categories will be for natural disaster relief, so that Congress and the President will be forced to budget and pay for these unforeseen contingencies.)
Because the budget will focus on macroeconomic choices rather than particular programs, it is far more likely that Congress and the President will agree. By focusing first on how much the federal government should spend in the coming year-relative to the economy, and in light of available revenues-wrangling over the more detailed breakdown presently required in the President's budget submission (and routinely included with the Congressional budget resolutions) will be avoided. (The President's budget in its present detailed form will continue to be provided, but only after passage of the more general, and binding, budget blueprint.)
The result will be the establishment of a binding budget, jointly reached by Congress and the President early in the budgeting year-the cornerstone of rational reform.
The Act's purpose is to end the current chaos of the budget process. But experience has shown that Congress will seek ways to avoid-if not simply violate-any legal requirement aimed at promoting fiscal responsibility.
To make sure that Congress can't escape the discipline of the new budget process, the Act contains several mutually reinforcing enforcement mechanisms that, in effect, lock the doors on all the exits-and even deny Congress the tools to pick the locks. These enforcement mechanisms will end the sad spectacle of Congressional law-breaking, making it far more likely that federal spending will be contained within the agreed-upon ceilings. They are the heart of the Budget Process Reform Act.
The Two-Thirds Requirement: Under the Act, Congress will continue to pass its budgets by simple majority vote. The budget will, for the first time, take the form of a binding and enforceable law. Breaking these laws is not meant to be easy: Congress will be permitted to enact spending legislation in excess of the budget ceilings only by a super-majority vote-two-thirds of both houses.
Such a requirement is constitutional: Article I, section 5, clause 2 of the Constitution gives each house of Congress the power to determine its own rules. Indeed, two-thirds majorities have been required by the rules of the Senate. Senate Rule 22, for example-as amended in 1949-required the affirmative vote of two-thirds of the entire membership to end a filibuster. Furthermore, rules of congressional procedure may be adopted in the form of a statute as well as by mere resolution.
The requirement of a super-majority for spending outside of the budget will provide a strong incentive for both the President and Congress to reach agreement, since neither-although perhaps for different reasons-wishes to be in the situation where all spending requires a super-majority vote. It will also provide a powerful tool to hold Congress to the budget choices it makes-at least for a single fiscal period. Likewise, if Congress and the President fail to enact a budget at all, then all authorizing and appropriating legislation will require a super-majority for passage. The only way to adopt spending proposals by simple majority will be to authorize and appropriate within the ceilings of a duly enacted budget law.
Pay-As-You-Go: The Budget Process Reform Act will also end the bias put in place by the 1990 budget deal in favor of raising taxes as a preferred means of offsetting excess spending. The Act expressly requires that once the budget is enacted in the form of a law, any over-budget spending must be fully offset by cuts elsewhere.
No More Blank Checks: The Act abolishes the budget category of the "permanent and indefinite appropriation." Such open-ended "blank-check" appropriations-which authorize the spending of "such sums as may be necessary"-will be banned, because they are fundamentally inconsistent with the concept of a budget.
There are currently over 260 federal spending accounts in this category, including such programs as the Pennsylvania Avenue Development Corporation, the Special Milk program, the Sport Fish Restoration program, Nutrition Assistance for Puerto Rico, and the Office of the Independent Counsel. Under the current system, any member of Congress who seeks to reduce the growth of spending on a "blank check" program must introduce legislation and obtain an affirmative vote to do so. But anyone who wishes to increase spending on a program with an open-ended appropriation need only sit back and watch it grow. By requiring Congress and the President to decide how much it is appropriate to spend on a program during the coming fiscal period, the Act will do much to ensure that the federal government lives within its means.
At the same time, requiring fixed-dollar appropriations for all federal programs (except for Social Security and interest on the debt) will not in any way mandate reductions in any program. A majority of Congress will be able to decide to spend as much as it wants on each and every part of the budget. But under the Act, instead of autopilot growth, a rational choice will be made within the context of each category of the budget.
The "blank check" portion of the federal budget is often described as "uncontrollable." But no part of the budget is "uncontrollable"-rather a significant part of it is merely uncontrolled.
This is just as true of the so-called "entitlement" programs, such as Food Stamps and the Office of the Independent Counsel. There is nothing in nature requiring that entitlement programs have open-ended appropriations. Indeed, Sen. Richard Lugar proved that fixed-dollar appropriations can be used for entitlement programs with his amendment to the Food Stamp program. As a result of the Lugar Amendment, the Food Stamp program operates within a fixed-dollar annual appropriation, but, nevertheless, entitles eligible households to receive certain levels of benefits. If the Secretary of Agriculture concludes that projected outlays will exceed the amount appropriated, he or she is required to recalculate the allotment to which each household will be entitled in order to keep expenditures within the statutory ceiling.
Following this model, the Act authorizes the heads of the relevant cabinet departments and agencies to adjust benefit levels and eligibility requirements, up or down as Congress instructs, so that by year end, the program will have spent just what Congress approved.
"Baseline Budgeting" Abolished: The Act will codify for both the House and the Senate, and for the Executive Branch, the 1995 change in House rules abolishing "baseline budgeting." Instead of calling a scaled-back increase a "cut," the budget will use actual dollars to compare one year's actual spending to the next year's proposed spending-ending this long-standing confusion in the budget process.
Line Item Reduction: If Congress votes to spend in excess of the budget, then the President will have the authority to rescind the over-budget portion of any spending. Congress, in turn, can override a "line item reduction" by a two-thirds vote.
This new authority serves an entirely different purpose than the line item veto. Line item reduction will be applicable only to the over-budget portion of proposed spending. The President will have the authority only to enforce Congress's own budget decisions, as previously enacted into law, a traditional executive role. In the event that spending is approved in the absence of a budget, the President will have the authority to use line item reduction against any spending in excess of the budget for the previous fiscal period.
Spending Cut "Lock-Box": Under the current budget process, savings from spending cut amendments adopted on the floor of the House or Senate are routinely used to boost spending on other programs covered by the same appropriations bill. The Act will close this loophole.
Under the Act, net spending reductions made by floor amendments to appropriations bills will automatically reduce the 602(a) and 602(b) allocations that determine how much each committee and subcommittee of Congress is permitted to spend. These changes will ensure that spending cut decisions made on the floor of the House and Senate are respected, and that each appropriation bill's total spending is reduced accordingly.
No More Budget Act Waivers: In recent years, one of the most notorious ways that Congress has cheated the budget process is to "waive" the requirements of the 1974 Act. During each of the last two Congresses, 50% of all rules adopted to govern debate on the floor of the House waived all or part of the 1974 Act. To prevent this end-run of the system, the Budget Process Reform Act requires that any waiver must be adopted on the floor in a discrete vote, with a two-thirds super-majority necessary for passage.
Together, these enforcement mechanisms ensure that the budget will be a useful tool of fiscal discipline that can no longer be ignored. By strengthening the Congressional power of the purse, rigorous enforcement of the budget law as written by Congress (and signed by the President) should do much to restore respect for Congress' lawmaking powers.
The third, and final, element in the Budget Process Reform Act is the sustaining mechanism: an automatic continuing resolution. The Act provides a safeguard against the contingency that Congress and the President fail to complete action on any part of the budget by October 1, the beginning of the fiscal year. In such an event, the previous year's funding levels will automatically be re-appropriated for the upcoming fiscal year. The automatic continuing resolution will apply to all spending except Social Security and interest on the debt.
Both the President and Congress will want to avoid this result, since it would deprive each of the opportunity to influence the budget. An added virtue of this sustaining mechanism is its bias in favor of spending restraint: in no year since 1965 has federal spending remained frozen from the prior year.
The sustaining mechanism is not the preferred means of determining federal spending levels, but rather is a form of disaster insurance against the contingency that Congress and the President do absolutely nothing. The government will not shut down, federal spending will not grow on "auto-pilot," the President bill have a powerful incentive to work with Congress, and Congress will not be tempted to lay at the President's feet on September 30 a mountainous appropriations bill that he cannot read and must sign if he wishes to avoid shutting down the government on October 1.
The budget process created in the 1974 Budget Act is not simply an esoteric irrelevancy-it's a basic part of the problem. Our current budget "process" is a major cause of our chronic deficit spending. The Budget Process Reform Act provides a powerful system of reforms to require the federal budget to say what it means and mean what it says.