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Public budgeting is always a blend of politics and analytics. When it works, the budget process is our way of reconciling unlimited demands with limited resources. It yields a recurring set of provisional decisions about the best way to finance the pursuit of our shared dreams—those things we cannot do or buy for ourselves but must make together. As others have said, “show me your budget, and I’ll show you your values.”
Budgeting, at the core of our nation’s governing processes, is failing. The “Big Beautiful Bill” recently passed by Congress may be objectionable on substantive grounds, but its development and passage also illustrate the degree to which the budgeting process itself has broken down. Members of Congress were asked to vote on a 330-page bill whose provisions they did not have time to read or scrutinize. By yielding bad decisions and undermining public trust, the malfunction of a central element of the governing process undercuts the whole enterprise of democratic governance.
The current budget process has contributed to our leaders’ collective failure to make the tough choices needed to put federal finances on a sustainable path, and may be on the verge of total collapse. An obvious symptom is the fact that annual appropriations acts have been adopted after—often long after—the start of the fiscal year in all but four of the last 50 years. They have missed that deadline for the last 25 of those years. Procedural checks added to provide discipline—such as pay-as-you-go scoring, spending caps, and the costing of legislation against a baseline—are routinely ignored or brushed aside. Periods of impasse are punctuated by leadership agreements negotiated in secret before being folded into omnibus legislation offered with little time for debate and little opportunity for amendment. Lately, the executive has unilaterally reduced or frozen spending for many programs at a level below the authorized amounts, in many instances violating legal requirements for deferrals or impoundments and setting up a direct political challenge to Congress’ “power of the purse.”
We can no longer pretend that all is well with the budget process, much less that it is serving its intended purpose or meeting the nation’s needs. The old order is collapsing, and it is time to consider how to respond when the inevitable happens.
Approaching reform
How do we respond? We can choose to patch up the current process. Or, as things fall apart, we can take the opportunity to give fresh thought to what the nation needs and what new process could be built to that end—keeping in mind the practical constraints arising from the broader political environment, or those rooted in human nature and our limited individual and collective capacity for rational choice.
If we start with a clean slate, where do we begin? We can first ask: What budget process would enable, abet, and empower officials to carry out their fiscal responsibilities properly? More specifically, what process would help them make the informed resource choices needed to advance their policy priorities, to sustain current commitments, and to prepare for and meet future challenges?
A central challenge for all budgeting is how to reconcile the selfish pursuit of personal or parochial short-term interests with the need to sustainably fund existing financial commitments, meet the nation’s highest and most urgent priorities, and invest in greater fiscal capacity going forward. Budgets must also include costs for preparing for and dealing with unpredictable future shocks.
To support such choices, processes and concepts should clearly frame for policymakers the implications of their choices. Information should incorporate the best evidence and analysis on the relative benefits and costs of those choices, acknowledging risks arising from knowledge gaps and uncertainty. To the extent it is possible, procedures should align with the short-term incentives of elected officials while rewarding choices that help us meet longer-term challenges.
Institutional constraints
The constitutional requirement that budgets be enacted into law forces Congress and the president to work together, frequently producing dramatic conflict and necessarily blurring accountability for budget outcomes. The current situation, in which the executive takes unilateral action to withhold or redirect authorized spending, is not sustainable. Nor is a process in which Congress exerts its authority through detailed micromanagement of spending through appropriations. For any reform effort to succeed, the current tug-of-war between Congress and the executive must be replaced by constructive collaboration.
The problem arises from the inherent nature of Congress, a body whose members represent subnational geographic jurisdictions. Legislatures are designed to represent parochial interests and, by forcing legislators to confront and deal with their differences in order to pass budgets and other legislation with majority support, to support negotiated compromise. But a legislature is ill-equipped to develop a budget—if by this we mean a comprehensive plan prioritizing how resources will be raised and used and effectively resourcing the many statutory mandates that Congress has assigned to the federal executive.
Congress cannot develop a budget of this sort for two fundamental reasons: incentives and capacity. With regard to incentives, members are elected to represent geographically-based interests. They must carefully attend to the interests of their own constituencies if they expect to be reelected. Their short-term perspectives are reinforced by the one-year-at-a-time focus of the annual appropriations process and ever-looming political campaigns. Members seek committee appointments that help them serve their constituents; they work to insert provisions in appropriations, tax, and other budget legislation that direct resources to those interests.
With regard to capacity, the executive branch—aided by a new performance framework and planning tools provided in legislation—has gradually developed a greater ability to use systematic evidence to guide and manage its budget choices, focusing on major policy objectives and increasingly being able to learn from experience. Within the statutory framework enacted from 1993, the executive has deployed an integrated set of routines intended to drive improved performance for major policy objectives. These reflect a national perspective and a somewhat longer political horizon than that of Congress.
Although the jury is still out, and budget decisions in the current administration seem driven more by ideology than by evidence, the complex analyses and decision routines used by the executive to deliver an integrated set of budget proposals are supported by statements of priorities and expected benefits as well as estimated costs. Congressional committees and member offices, by contrast, are thinly staffed. Congressional Budget Office staff analysis, which could augment Congress’s meager analytical capacity, is largely consumed with scorekeeping; its focus is almost entirely on estimating budget effects rather than the broader economic benefits and costs of proposed legislation.
Essential reform goals
We can define some essential, and necessarily ambitious, goals for reformers. Each of these addresses a central weakness of the current process and points the way to a better one. Reform goals addressing major weaknesses include the following:
Keep eyes on the horizon. Right now, budgets are considered a year at a time, at best. To help counter this, many countries have adopted a multi-year framework, and the United States should consider adopting this approach as well.
Budget for strategic goals. For a select group of major policy goals, a reformed process would identify the relevant portfolio of spending, tax, and other policies constituting the implicit current strategy to achieve the goal, then use evidence to identify alternatives that promise major gains in productivity.
Give the public a role in setting budget priorities. The public currently lacks a meaningful role in prioritizing the use of public resources. A simplified vocabulary and more transparent procedures would open doors to greater public involvement.
Put everything on the table. Right now, major entitlements and large tax expenditures (provisions of the income tax code that favor certain sources or uses of income) escape regular review. A different process would give full attention to all parts of the budget on a recurring basis and facilitate tradeoffs between so-called mandatory and discretionary actions.
End the bias against investments. Requiring appropriation of the full cost of a capital project up front has penalized spending that could yield long-term efficiency gains or other benefits, leading to chronic underinvestment in government capacity and critical infrastructure. A reformed process would give equal attention to social benefits and costs when weighing budget alternatives.
Use budgets to empower the executive and strengthen management. Right now, the federal government’s management capacity and performance are largely ignored in the process. A different approach to appropriations would increase management discretion within the law and reward performance.
Refocus financial reporting on results. Federal financial reporting could refocus in ways that promote transparency, stewardship, and trust. Greater simplicity and clarity must be accompanied by continued rigor to help citizens hold leaders accountable for using budgeted resources appropriately and effectively.
Ensure continuity and stability. The damage to performance and capacity caused by recent unilateral executive actions to reduce appropriation amounts and disrupt agency operations is certain to be substantial and long-lasting. We should consider full-year authority for basic operations from the start of the fiscal year when appropriations bills are not enacted by October 1. The process for raising the legal limit on federal borrowing should be revised to reduce the risk of default.
The current process might be patched, but it is already a patchwork. We should not waste energy on incremental changes that would not address fundamental weaknesses. Instead, we should take the collapse of the process as an opportunity to reimagine, reconstruct, and rebuild, providing policymakers with the tools to meet the nation’s commitments and future needs.
Reform prospects
Sustainable process reforms will respect the constitutional division of responsibility for the nation’s finances while recognizing that the executive must play the primary role in shaping the budget. A different budget process could leverage the national multi-year strategic perspective of a new administration, informed by the executive’s great and growing analytical strength, and formally acknowledge the necessity for executive-legislative cooperation in the form of an agreed-on budget framework to guide more detailed work on annual budgets. This scheme would give Congress a meaningful role in filling in the details and adjusting to crises and new challenges as they arise. It also would provide for congressional oversight to ensure legal compliance with laws, including provisions of the Congressional Budget and Impoundment Control Act of 1974 that are designed to avoid abuses and increase the integrity and transparency of the government’s finances.
Roy Meyers has summarized both the pessimistic and optimistic cases for budgeting reform. As he says, “The adoption of any proposed reform is to some degree a leap of faith. That process begins with advocates convincing politicians that they should experiment with reforms, by describing how the reforms could create results that politicians value. If these projections turn out to be accurate, then these positive experiences will create new norms. Over time, major reforms that were once viewed as pipe dreams are seen as essential.”
Reforms involve dislocation, redistribution of power, and unforeseen consequences. The road to reform is often, therefore, long and winding. However, we must recognize the possible consequences of waiting too long or moving too slowly. We must hope events do not overtake thoughtful efforts to reimagine the process. The current process is leading us toward a possible fiscal catastrophe, with consequences too painful to contemplate. From that dystopian perspective, our successors may well ask why today’s leaders could not bring themselves to experience the relatively minor discomforts of process reform while they still had the opportunity to ward off disaster.
Steve Redburn is a professorial lecturer in the Trachtenberg School of Public Policy and Public Administration, George Washington University. He spent much of his federal government career as a senior career executive in the Office of Management and Budget. He is part of a small group now monitoring developments in the federal budget process and developing ideas for process reform. This piece benefits from a series of exchanges with other members of the group including Ed DeSeve, Phil Joyce, Doug Criscitello, Roy Meyers, and Teri Gullo.
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