While a number of people are celebrating the fact that, for the first time in five years, the two houses of Congress agreed on fiscal 2014 annual discretionary spending levels by something other than a continuing resolution, it is clear the current budget process is badly broken as has been for many years.
In addition, the agreement that was recently reached did little to nothing to address the real drivers of our nation’s structural deficit challenge. Specifically, the need for social insurance reform, comprehensive tax reform, and a rationalization of our health care promises while also doing more to control public health care costs.
The truth is that the Congress has only passed a budget and related appropriations bills by the beginning of the fiscal year four times in my 62-year lifetime. That performance clearly deserves a grade of “F”. In addition, expecting the same process to yield dramatically different results given today’s hyper partisanship and great ideological divides is totally unrealistic. As a result, now is the time for real budget process and related fiscal responsibility reforms.
In considering reforms, it’s appropriate to look to the states and other countries. On that basis, a number of reforms should be considered for enactment into law. They include, but are not limited to, the following:
The federal government should move to biennial budgeting. Given the abysmal track record in connection with the annual budget process, it’s time to do what many states have already done by adopting a biennial budget and appropriations process. This won’t guarantee timely action but it will free up time for the Congress to focus more attention on the oversight and authorization processes.
The federal government should adopt a capital budget. Having separate capital and operating budgets is the norm at the state and local level. It’s time for the federal government to do the same. However, safeguards will be needed to prevent attempts to pad the capital budget with projects that are not economically viable and/or to re-characterize operating items as capital expenditures.
We need reasonable and sustainable discretionary spending caps that consider both direct and indirect spending (e.g., tax expenditures). There should also be separate sub-caps for investment- and consumption-oriented spending. The truth is, we need more investment and less consumption spending.
To be both effective and credible, pay-as-you-go (PAYGO) rules need to address both sides of the federal ledger. It’s time to recognize the reality that tax preferences represent back door spending. We need to improve the transparency of these amounts and include them in the budgeting process as well as the government’s annual financial reporting. They need to be subject to the same periodic review and reconsideration as direct spending programs.
The above steps would do a lot to help restore fiscal sanity, but they are not enough. We also need to take some additional legislative steps. These should include, but are not limited to, the following:
In order to accelerate action in connection with needed social insurance, health care and tax reforms, we need to provide more transparency and accountability with regard to the huge unfunded social insurance obligations that lie off the federal balance sheet. These involve many tens of trillions of dollars and they grow with the passage of time absent meaningful reforms that recognize economic and demographic realities. One way to help in this regard is to have the Congress pass and the President sign the Inform Act. This legislation will help policy makers, the press and the American people better understand the nature and scope of our future fiscal challenge. It may also help to spur more timely action by the Congress and the President.
It’s time to implement a process that will help to separate the wheat from the chaff between which spending programs and operational practices are working in an efficient and effective manner, and which ones aren’t.
Unfortunately, much of the federal government’s current organizational and operational practices are long outdated and are in need of reform or rescission. Examples include many of the GAO’s High Risk items, the President’s top management initiatives, and GAO’s duplication, overlap and redundancy reports. In addition to restoring reasonable Presidential reorganization authority, it’s time to implement a statutory Government Transformation Board. This independent board would make periodic findings and recommendations to the Congress that would be guaranteed hearings and action within specified periods of time. Importantly, this board would be a supplement to and not a substitute for the Congress’ normal activities.
In addition, the ultimate decision-making authority regarding the Board’s recommendations would remain with the Congress and the President.
Statutory provisions standing alone won’t restore the integrity and credibility of the federal government’s fiscal policies and practices in the eyes of the American people. We need to take additional steps and at least one will require a Constitutional amendment.
Replace the statutory debt limit with a Constitutional public debt/GDP limit. The U.S. government is the only major nation on earth that has a debt ceiling based on nominal dollars. It is outdated and has proved to be ineffective in forcing action in connection with our structural deficit challenges. Therefore, in addition to statutory budget controls and the other actions noted above, a Constitutional “credit card limit” of public debt/GDP (e.g., 90-100 percent) should be adopted. This limit could only be avoided by a formal declaration of war or a supermajority vote of both houses of the Congress based on specific criteria.
The above reforms will serve to improve the efficiency and effectiveness of the federal budget process and they can also help to restore federal fiscal sanity. They will help to avoid crisis management approaches and across-the-board spending actions. In addition, if implemented effectively, they can help to restore some of the public’s trust and confidence in the Congress and the presidency as institutions.
It’s time for politicians to stop just focusing on today and start making tough budget, spending, tax and other choices that help to keep America great and create a better tomorrow. The time for meaningful budget process and related fiscal responsibility reforms is now.
David M. Walker is the founder and CEO of the Comeback America Initiative, where he leads CAI’s efforts to promote fiscal responsibility and sustainability. He is also the chairman of the GTI Coalition. From 1998-2008, Mr. Walker served as the U.S. Comptroller General and head of the Government Accountability Office.