Hearings of the Committee on Rules
"Biennial Budgeting: A Tool for Improving Government Fiscal Management and Oversight"
Roy Meyers
Associate Professor, Department of Political Science,
University of Maryland, Baltimore County
1. As you know, the current budget process only accounts for changes in mandatory spending and revenues that result from legislative action. OMB and CBO hold the budget harmless for changes in spending or revenue levels caused by administrative, economic or technical changes. Do you think it would be possible and advisable to utilize this existing mechanism (or a modification thereof) as a way of handling such changes in the budget under a biennial process? Is this a way to address part of the difficulties with long term projections?
A biennium is a relatively short time compared to the period used in long-term budget projections--typically 10 years for the aggregate budget and up to 75 years for selected programs like Social Security. Budget projections made over such long time periods tend to be quite inaccurate, for two reasons. First, the projections are highly sensitive to changes in underlying assumptions (e.g., the rate of wage growth). Second, the ebb and flow of political forces in society, and the responsiveness of our political leaders to these forces, cause strong demands each year to adjust budgetary policies.
Reducing the first difficulty would require better data and better modeling. However, because extensive data is already collected and budget forecasters are already quite professional, a significant reduction in long-run forecasting errors is unlikely. The major difficulty in this regard is to convince political decision-makers to take seriously the fact that estimates are likely to be wrong. An automatic adjustment procedure for a many-year budget agreement may prevent that agreement from becoming wildly unrealistic. On the other hand, the availability of such an adjustment procedure may also encourage political decision-makers to extend budget agreements for longer periods than are politically realistic. Elections always shift the balances of partisan power within the Congress and between the branches. Because elections occur every two years, any budget agreement planned to last for more than 2 years is likely to be challenged successfully. Biennial budgeting therefore would establish a more realistic time frame for negotiating budget agreements than would current practice.
2. In your prepared testimony you state that "biennial budgeting may be more realistic from the economic perspective." Would you elaborate on how this may be the case?
In my testimony, I argued that many-year budget agreements implicitly expect budget forecasts to be highly accurate for much longer than two years. When those forecasts are made at the peak of the business cycle, as is the current experience, they show large amounts of uncommitted financial resources. Some political decision-makers have responded by proposing to allocate, in just this year, all of those resources that are expected to materialize over a much-longer period. Yet there is a significant risk that those expectations are overly optimistic. This risk receives little mention in public debate, which is probably due in part to the fact that official estimates made in the early-to-mid 1990s were overly pessimistic.
I am not arguing that the Congress should neglect what might happen in the outyears beyond the biennium. Far to the contrary, for much of what the federal government does in the budget has long-term impacts, whether as capital investments, loan obligations, tax provisions, debt burdens, or benefit commitments. The most realistic approach to budgeting would attempt to project the long-term effects of these decisions while taking uncertainties into account through the use of sensitivity analyses. A focus on the biennium would be second-best to this approach, compared to the even worse approach of assuming that the U.S. has entered a new golden eon of economic growth.
3. You discuss the issue of which of the two years should be devoted to consideration of budget-related legislation. You raise concerns about using the odd-numbered year for consideration of such bills. Do you think the even-numbered year would be a better approach? Could you elaborate more on these concerns?
If one purpose of biennial budgeting is to require that most budget decision-making take place in one calendar year of a Congress, then the odd year should be the preferred year. The odd year follows the election, enabling quicker legislative action in response to an electoral mandate than would the even year. The odd year also allows more time for legislative action than the even year does, because of the practice in the even year to adjourn a month before the November election and the associated pressure on individual Members during their primary elections.
However, it is unrealistic to expect all budgetary actions to be completed in the odd year. Every legislature on earth tends to postpone some major decisions until shortly before sine die adjournment. Some budget issues would therefore be delayed until the even year. In addition, unanticipated events would likely create a need for even-year amendments to the budget that was just enacted in the odd year. And last, but certainly not least, an upcoming election would tempt Members to propose budget amendments in order to help them campaign effectively.
If the Congress is to budget biennially, it needs rules that would prohibit most non-emergency budget amendments from being adopted in the even year. At the same time, it would also have to use flexible scorekeeping to allow selected, major legislative proposals with budgetary impacts to be considered during the even year. A current example of the latter might be the possibility of enacting a prescription drug benefit in Medicare.
4. What role do you see the authorization process currently playing in the budget process and do you think that role should change? Do you think changing or strengthening its role would improve the role and condition of programmatic oversight?
Based on rate of passage of authorizations bills, the process has significantly weakened over several decades. I also suspect that the authorizations process has become worse in its review of the "big picture"–the attention to strategic direction called for by the Government Performance and Results Act (GPRA)–and consequently, in the connection of the oversight of administration to statutory goals.
Unfortunately, improving the authorizations process would require more significant changes than simply reserving more time for authorizations committees to draft bills and for the floor to consider these bills. I suggested in my testimony that the crucial needed change is a commitment by Members to emphasize this responsibility; this is out of the range of Rules Committee influence. However, I do suggest that organizational restructuring could make it more likely that the authorizations function could be carried out much better.
In practice, appropriations bills "must pass" if agencies are to operate. In theory, authorizations bills also "must pass" if appropriations are to be enacted without facing a point of order. However, in practice, this requirement is waived so often, or made irrelevant by permanent authorizations, that the appropriations process has captured much of the importance intended for the authorizations process. Those practices are partially justified by the tendency of negotiations over authorization bills to reach impasses over sticking points. For example, a President might safely assume that disagreeing with an authorizing committee will not prevent an appropriations committee from enacting an unauthorized appropriation.
My suggestion for improving on this situation is to end any separation of authorizing and appropriating responsibilities. Committees with mandatory spending jurisdiction already combine these functions. The separate authorizing and appropriations committees on the discretionary side of the budget could be similarly combined. In practice, this would require a redistribution of authority between different committees. For example, the irrational split of jurisdiction for health programs could be realigned within a health committee. Though the political barriers to this reform are immense, it is also the case that the Congress faces a continuous challenge to its capacity if it refuses to improve on an internal structure that encourages excessive conflict.
It might be argued that one of the dangers of combining authorizing and appropriating functions within one committee is that budgeting would drive out other activities. Of course, from the perspective of some authorizing committees, this is already the case. When the two responsibilities are combined, each committee would be able to determine the proper balance of budgetary and other activities. Moreover, the message of GPRA is that the two activities are inextricably linked.
