Congress Must Secure America’s Fiscal Future: Senator Enzi Sets Stage for Budget Process Reform

The growing national debt is an issue largely overlooked in Congress, and the latest budget deal that adds hundreds of billions of dollars in federal spending will exacerbate the problem. The unfolding debt crisis will require drastic reform before severe macroeconomic consequences wreak havoc on the pockets of taxpayers, consumers, and business owners.

To put the issue into context, the national publicly-held debt reached a new milestone earlier this year of $16.6 trillion. That’s more than $130,000 per household. This constitutes 78 percent of the nation’s total economic output, and will continue to grow if Congress refuses to act. The Congressional Budget Office’s long-term outlook sees the debt rising to 144 percent of GDP by 2049 -- but gaps built into the statutory baseline tend to short change the true scale of the budgetary imbalance that will result from remaining on the current fiscal path.

In response to the mounting debt crisis, Senator Mike Enzi (R-WY), Chairman of the Senate Budget Committee, is spearheading a bipartisan effort to fundamentally reform the way Congress devises its budgets and to address the long-term fiscal gap.

The Senate Budget Committee held three hearings to hear from policy experts and legislators from the state and federal level. Comptroller General of the United States Gene Dodaro gave a sobering testimony on the demographic risks threatening the solvency of the federal government. The most pressing of these challenges is the massive influx of retiring “baby boomers” into the Social Security and Medicare systems. An aging population combined with low fertility rates, longer life expectancy, and rising healthcare costs are overwhelming the current funding arrangements for these programs, increasing the risk of insolvency. Interest payments on the rapidly accumulating debt is another main driver of spending growth.

The hearings also explored policy solutions that various experts at the state level found successful in their states. Of those present included Eli Bebout, a Wyoming state senator and Chairman of the Wyoming State Appropriations Committee; John Hicks, Executive Director of the National Association of State Budget Officers; and Benjamin Orr, the Executive Director of the Maryland Center on Economic Policy.

Common points of agreement from those who gave testimony included:

  • A consensus-based revenue forecasting system by which federal revenues would be estimated. Currently, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) prepare revenue estimates for lawmakers upon request. A consensus-based revenue forecasting system would essentially gather work from analysts outside the government and from agencies within to come up with revenue estimates. When gathered, these estimates would be averaged out to one agreed upon number that will then be used for the purposes of legislation. The intention is to improve the accuracy of projections while ensuring independence. This is a tactic that numerous states have adopted.
  • A biennial budgeting process. Both Senator Bebout and Mr. Hicks expressed support for the adoption of a biennial budgeting process., Congress has become notorious for not passing spending bills on time, leading to government shutdowns and large omnibus spending bills. The status quo also prioritizes short-term spending wants over the long-term budgetary impacts. A biennial budget could help lawmakers stick to a reasonable timeline. Chairman Enzi added that a biennial budgeting process would reduce the probability of government shutdowns and allow Congress to spend more time on oversight of federal programs. He also stated that a biennial budgeting process would create predictability in appropriations for federal agencies and for the Americans who rely on the services these agencies provide.
  • Fiscal targets. Chairman Enzi and Senator Sheldon Whitehouse (D-RI) were also in favor of establishing fiscal targets as a share of GDP that Congress would be forced to abide by when making appropriations decisions. Across the aisle, there was agreement that setting binding fiscal rules would be essential in making sure Congress can maintain the federal government’s credit-worthiness, which could be under threat with the rising debt accumulation. While Mr. Dodaro stated that the GAO is still in the preliminary stages of researching how fiscal targets have affected other economies around the world, he still suggested that it was a viable alternative that Congress should be allowed to pursue.
  • The pursuit of better performance-based data. Both Mr. Hicks and Mr. Orr gave the recommendation to improve data collection that is necessary for Congress to make appropriations decisions. Assessing the effectiveness of programs would allow Congress to make decisions more accurately and make cuts where they need to with better justification.
  • Expected deadlines for appropriations legislation. There was unanimous approval from the policy experts in the federal government strictly enforcing a deadline by which appropriations decisions must be made. While the Budget Control Act of 2011 informally creates a deadline by which legislators need to pass budgets by threat of sequestration, there is still no incentive for legislators to prioritize budgeting decisions meaningfully. Mr. Orr suggested that in his experience with the state of Maryland, state lawmakers prioritize a week during their legislative calendar that is spent solely on appropriations decisions.

There was some disagreement among the speakers and Committee members on the necessity of keeping spending below revenue estimates. Senator Bebout and Mr. Hicks expressed their preference for strict adherence to their revenue estimates in determining how much their states are allowed to spend. Ranking Member Tim Kaine (R-VA) and Mr. Orr had a slightly more lenient opinion towards debt, suggesting that it is not necessarily a bad thing in of itself. Senator Kaine explained how during his tenure as Governor of Virginia, the state maintained a AAA bond rating from credit-rating agencies while maintaining a larger amount of debt. He further elaborated that Virginia received consistently high credit scores because debt management was solid and predictable. However, there are concerns about the manageability of the federal debt level as it continues to pile up. Members also debated over two proposals that would help check federal spending.

  • The passage of a Balanced Budget Amendment (BBA). Senator Bebout spoke passionately about his resounding support for a federal BBA in conjunction with the biennial budget process. Mr. Hicks agreed, noting that the fundamental problem Congress has is its inability to regulate itself. Mr. Orr, on the other hand, argued that the government should take into account the types of goods and services it ought to be spending on, instead of constant focus on budget balancing. He also suggested that a BBA would be a hindrance to the government’s ability to respond to an economic downturn. However, a well-designed BBA can include a common-sense pending rule with a simple provision allowing for a supermajority of Congress to waive the amendment’s restrictions in the case of an emergency.
  • The implementation of a line-item veto. Mr. Hicks expressed support for the implementation of a line-item veto by which the President could reject certain aspects of the budgets that Congress ends up passing. Mr. Orr explained that while the governor of Maryland neither approves nor can veto enacted budgets, a three-person committee, which includes the governor can perform a line-item veto of up to 25 percent of the total spending package. Only Ranking Member Kaine proposed that such an option was viable, but with certain restrictions. The previous federal line-item veto was an effective tool against runaway spending before it was knocked down by the Supreme Court. Any successor would have to be carefully designed.

At this point, Members of Congress must act with urgency to get spending under control to prevent the potential fallout from the debt problem that has been allowed to fester for such a long time. Building on the hearings and the work of the last Congress’s Joint Select Committee on Budget and Appropriations Process Reform, Chairman Enzi and other members of the Senate Budget Committee have recently released a discussion draft with reform proposals including biennial budgeting and long-term appropriations planning, accountability for fiscal decisions on the part of lawmakers, making the CBO’s cost estimates and revenue forecasting more transparent, and reforming budget proposals to be more efficient when brought to the Senate floor. NTU Foundation will take a closer look at these policy reforms in a subsequent post.