Budget

Fiscal Speed Bumps: Challenges, Risks, and Opportunities

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In the coming months and years, lawmakers will face a number of important budget-related deadlines, or Fiscal Speed Bumps, that will require legislative action. These Fiscal Speed Bumps will present challenges, risks, and opportunities. Addressed irresponsibly, they could cause serious disruptions and/or add as much as $3 trillion to the debt over the next decade above what current law would allow. But if dealt with thoughtfully, they offer an opportunity to pursue reforms that would grow the economy, improve the policy landscape, and reduce the risk of an uncontrollably growing national debt.

We have identified six major speed bumps this year and one next year that is significant enough that it should be dealt with in 2015. These speed bumps include:

    • Expiration of the CR funding Homeland Security (February 27, 2015)
    • Reinstatement of the debt ceiling (March 16, 2015/Fall 2015)
    • Expiration of the “doc fix” and return of the SGR (March 31, 2015)
    • Expiration of the highway bill, insolvency of the Highway Trust Fund (May 31, 2015)
    • Expiration of 2015 appropriations, return of sequestration (October 1, 2015)
    • Deadline to renew tax extenders retroactively (December 31, 2015)
    • Insolvency of the Social Security Disability Insurance Trust Fund (late 2016)

In Fiscal Speed Bumps: Challenges, Risks, and Opportunities we discuss each of these moments in detail, put them into historical context, and explain the options available to policymakers as they navigate these speed bumps.

Each of these Fiscal Speed Bumps must be addressed to avoid a major disruption and in each case, unfortunately, addressing the issue irresponsibly could substantially worsen an already unsustainable fiscal situation.

Instead, policymakers should use these speed bumps as opportunity to pursue responsible changes that result in better policy, a stronger economy, and a more sustainable long-term debt path.

Read the full paper below, or download a printer-friendly version here.

Note: The paper has been updated from its original posting to clarify that the $3 trillion difference in debt is above what current law allows (assuming trust funds cannot borrow) rather than CBO's baseline.

CROmnibus Would Avoid Shutdown but Includes Budget Gimmicks

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Click here to read more about the budget gimmicks in the CROmnibus bill.

The Budget Act at 40: Time for a Tune Up?

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For additional budget process resources including specific options for reform, visit our Better Budget Process Initiative home page.

 

Forty years ago, President Nixon signed the Congressional Budget and Impoundment Control Act of 1974 (“The Budget Act”) into law, establishing the modern budget process and institutions. Enacted to settle ongoing clashes between the executive and legislative branches, the Budget Act established procedures and institutions to allow Congress to establish its own budget priorities independent of the executive branch and provide a framework to guide and coordinate legislation affecting spending and revenues within overall budgetary limits.

At first, the new budget process established by the Budget Act gave Congress a stronger framework with which to budget and govern much more effectively. But after 40 years, the Budget Act is starting to show its age.

There is a growing consensus that the budget process is broken. After functioning relatively well for more than two decades, Congress has increasingly moved to dealing with budget issues on an ad hoc basis. Congress adopted an annual budget resolution, approved by both chambers, each fiscal year from 1976 through 1998. Since then, however, there have been eight fiscal years in which Congress has not approved a budget resolution. Furthermore, Congress has increasingly relied on temporary patches to fund parts of the federal government rather than full-year appropriations.

Statutory deadlines throughout the budget process are regularly ignored. Budget resolutions are rare. Fiscal controls that are in place are routinely circumvented, waived, or ignored. Temporary policy fixes, often involving gimmicks, are legislated at the last minute.

Congress remains preoccupied with the next crisis or deadline, while the majority of spending and tax policies are on autopilot, leading to a system where our national priorities are neither fully thought out nor fully funded. Not only has Congress not complied with the Budget Act, but the Budget Act has not kept up with Congress and the changing nature of spending programs and the tax code. Items such as emergency spending, government-sponsored enterprises, credit programs, tax expenditures, budget baselines, and temporary provisions all impose challenges to sound budgeting under our current practices. The country’s substantial long-term challenges underscore the problems with the budget process, as an increasing portion of the budget is on autopilot and continues to grow at an unsustainable rate that threatens long-term fiscal sustainability.

To be sure, lawmakers have made some improvements to the budget process and created new rules for fiscal responsibility – including the establishment of pay-as-you-go laws, discretionary spending caps, and a host of other rules. But the process is increasingly outdated and overly complicated, and Senate and House rules and points of order have merely been layered on top of a statutory process that few understand.

Reform is needed, but deciding how to reform the process to make it work better first requires understanding the problems and flaws with the current system. This paper aims to outline those issues.

See the full paper below, or download it here.

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