MacGuineas to Senate Subcommittee: Budget Process Reform Needed

The Senate Homeland Security and Governmental Affairs Subcommittee on Federal Spending Oversight and Emergency Management held a hearing on Tuesday, February 6, on continuing resolutions (CRs), omnibus spending bills, and government shutdowns. Committee for a Responsible Budget president Maya MacGuineas testified alongside CRFB board member Alice Rivlin, Clinton Brass of the Congressional Research Service, and Heather Krause of the Government Accountability Office.

The hearing, titled "Terrible, No Good, Very Bad Ways of Funding Government: Exploring the Cost to Taxpayers of Spending Uncertainty caused by Governing through Continuing Resolutions, Giant Omnibus Spending Bills, and Shutdown Crises," focused on fixing the budget and appropriations process to prevent recent years' experience with last-minute government funding crises. Witnesses noted that such brinkmanship not only signals a failure of leadership and causes costs and uncertainty for agencies, but it also diverts attention away from fiscal goals such as putting the debt on a more sustainable course.

Chairman Rand Paul (R-KY) began the hearing by criticizing the heavy reliance on CRs and omnibus appropriations bills to fund the federal government. CRs cause uncertainty in agencies and delay plans, he said, but omnibus bills make it difficult for Congress to ensure proper oversight of spending. Ranking Member Gary Peters (D-MI) expressed similar concerns about the broken budget process, arguing that Congress is failing to do one of its key jobs. He highlighted the damage and waste caused by CRs, noting that federal agencies regularly stop normal work to gear up for shutdowns.

MacGuineas highlighted four major points in her testimony:

1. Budgeting is one of the most basic functions of governing, and we are failing.
2. CRs and omnibuses represent a failure of the budget process.
3. Our fiscal situation is approaching dangerous territory, and we are not only failing to address it, we are making it worse.
4. There are multiple ways to improve the budget process. None can replace political will.  

She noted that the budget process that we have on paper is completely different from what we practice in reality, arguing that both are qualitatively and quantitatively problematic. MacGuineas also underscored the fiscal hazards of must-pass legislation that becomes a vehicle for other costly priorities, such as the addition of $31 billion in health care tax delays that were added to the January CR. While the fiscal outlook was already bad a year ago when debt was at a near-record level, she described the current situation as a fiscal free-for-all, noting that upcoming trillion-dollar deficits will be self-imposed and not the result of an economic downturn.

MacGuineas told the subcommittee that she favors a major overhaul of the budget process, but incremental changes could improve the process. Specifically, she highlighted auto-CRs; biennial budgeting;  joint budget resolutions that would have the force of law; "No Budget, No Pay" policies for members of Congress; canceling of August recess if certain budget process milestones aren’t reached; requiring the Senate to be in session and subject to certain proceedings during a shutdown, as proposed by Sen. Michael Bennet (D-CO) and Cory Gardner (R-CO); and major budget process recommendations from the Peterson-Pew Commission on Budget Reform and CRFB’s Better Budget Process Initiative. 

Rivlin agreed that the preoccupation with short-term CRs has made it difficult for policymakers to face the long-term challenges, including the national debt. She argued that consensus-building must be a normal part of the decision-making process and not just a response to deadlines, and that bipartisan budget process reforms could help. 

Krause said that federal agencies have delayed contracts, grants, and hiring during CRs, noting that CRs can result in agencies spending on lower-priority items that can be acquired quickly and not pursue contracts that would result in lower prices. Brass discussed the frequency and restrictions of CRs.

Paul highlighted his bill that would prevent shutdowns by implementing an automatic CR at 99 percent of the previous year’s spending levels if Congress has not completed appropriations work by the beginning of the fiscal year. He also discussed other forms of punishment, such as forcing lawmakers to forgo August recess. Senator Doug Jones (D-AL) said he was intrigued by the idea of a one percent spending cut penalty. Sen. Rob Portman (R-OH) has sponsored a similar bill that shares many aspects of Paul's legislation, but the spending cuts would not start until 120 days after the start of a fiscal year in which regular appropriations have not been enacted.

MacGuineas and Rivlin expressed support for Paul's bill. MacGuineas added that when thinking about triggers and defaults in the budget process, the most effective enforcement mechanisms include policies so awful that both parties want to avoid them. Defaults that include policies that one side wants may not provide the right incentives, she said.

Paul also asked about biennial budgeting and how much of the problem could be fixed by spreading out the budget process to two years. MacGuineas said that she could support it, particularly as part of broader process reform, but there would be a risk of Congress procrastinating on a two-year cycle rather than on a yearly basis. Rivlin said she would support it. 

Peters asked about the potential of a proposal from fellow subcommittee member Sen. James Lankford (R-OK) to package three or four appropriations bills at a time into so-called “minibuses,” rather than one large omnibus, that would be subject to a set time agreement with amendments. MacGuineas said it would be an improvement, noting it is important to consider appropriations bills under a process where more people are engaged and have more chance understand the details.

In addition, Peters asked about how the current process complicates the long-term deficit problem. MacGuineas said it takes the oxygen away from examining the budget issues that drive the debt, including an aging population, health care costs, and increasing interest payments. A comprehensive economic strategy, she said, would address an eventual slowdown in growth stemming from demographic changes and sound fiscal policy where debt is not growing faster than the economy. 

Both Peters and Jones brought up the impact of the tax bill on the debt. MacGuineas told the panel that while tax reform was needed, tax cuts do not pay for themselves and revenue-neutral tax reform with more base broadening would have been better fiscally.

A Jones inquiry about entitlements prompted a discussion of the challenges of even discussing changes to the programs. MacGuineas said fixes to Social Security could include gradual increases in the retirement age and the slowing of growth of benefits for people who do not depend on them. Paul said that finding solutions for health care programs, especially Medicare, is more difficult than Social Security.

Pointing to his recent experience on the campaign trail, Jones asked about whether issues surrounding the debt and deficit resonate with the average voter. MacGuineas said that voters understand the issue with the right type of engagement from elected officials, including through the use of tools from budget groups such as CRFB.

As Congress continues to revisit reforming the budget process, we stand ready to assist elected officials with design, implementation, and communication. Changing the budget process cannot replace the difficult decisions inherent in budgeting, but we can improve the way we make decisions. CRFB has put forward many suggestions for possible budget process reforms through our Better Budget Process Initiative.