Budget Process Reform 2023

 HBUD: Budget Process Reform Member Day Hearing December 6, 2023

I know that I am intruding on Member’s day, however having members of Congress propose solutions to the budget process, to of all places an overly politicized Budget Committee, is like asking the local pack of foxes to consult on chicken house security.

The Process is Broken

The budget process has been badly broken for the last 49 years - since the passage of the Budget and Impoundment Control Act of 1974, which created the Budget Committees.

The sad truth is that the more hands are in the kitchen, the more opportunities multiply for members of Congress and the Senate to grandstand and stop the process. Exhibit A is this hearing. Were it not for the budget process, the Appropriations Committee could set its own spending targets for the various Subcommittees to hit, with the House going low and the Senate restoring cuts made by the House. 

Procurements that should be made throughout the fiscal year can only begin in February of most years. This frustrates the work of program offices and government contractors and requires overstaffing of contract and budget activities for the time between the passage of the budget and the end of the fiscal year. Congressional dysfunction costs huge amounts of money.

Tax and entitlement policy can be made by the revenue committees without help, especially since Reconciliation has been used to bypass normal procedure and cut taxes in a manner that can only be regarded as reckless. 

Let Tax Cuts Expire

Prior to the Pandemic, the Tax Cuts and Jobs Act had reduced revenues and increased speculation on Wall Street, which resulted in a reduction in economic growth by one percent in the fiscal year following the passage of the Act. 

Funds that had been going to households through pay went to the CEO/donor sector and its “financial innovations,” i.e. garbage such as mortgage backed securities for single family home rentals and crypto currency, all conveniently buried in Exchange Traded Funds. Now that the pandemic is over, such flawed paper is coming due and may just lead us into a recession yet. COVID bailouts to the financial sector by the Federal Reserve hid the damage - but it will not stay hidden.

Luckily for the nation,  the TCJA cuts for individuals will expire in 2025. This will take money out of the speculative investment sector and, because of greater consumption, will result in more real investment in plant and equipment. Any tax reform (and I am in favor of reforms such as the Fair Tax - but in the form of a value added tax and a net business receipts tax, as well as an asset value added tax) should be pegged to the 2025 revenue laws, not those of the current year.

Enact a reasonable budget control act

Aside from nature taking its course, how do we solve the problem of a dysfunctional budget process which results in a bloated bureaucracy? First, do another Budget Control Act, which will include spending caps that can also function as a budget resolution should no resolution be enacted on schedule. This time, however, the caps should be realistic rather than punitive. Realistic caps will result in lower spending. The recent caps simply forced compromises which drove spending up. 

Second is to either enact a budget resolution (which should be joint rather than concurrent) or use the new budget act levels to trigger automatic appropriations derived from the Current Services Budget at the start of the new fiscal year should they not pass by October First. While Congress could still pass supplemental appropriations, it could not withhold money for either pet projects or to grandstand about cutting spending.

Joint Budget Committee

Another option is to replace both budget committees with an ex officio joint committee made up of the chairs of Ways and Means, Finance and Appropriations in each house who would agree to budget allocations and any tax and entitlement changes, inviting ranking members only when the chambers are controlled by different parties. In other words, turn back the clock to when the system actually worked. 

Try bipartisanship

The final option is for the Budget Committees to do their jobs, which in this case would be for members and staff from this committee to sit down with their opposite numbers in the Senate to work out a realistic compromise. It is the only way the House Budget Committee can really be relevant and allow the bloat to be taken out of government procurement in all sectors (including government contractors whose workloads are held hostage to the congressional calendar).

Would the Appropriations Committee allow the Budget Committees to actually do this? I am doubtful. It is why Budget Committee leadership is always given to the most partisan members. These committees are expected to fail, which preserves the power of the older committees.

Hyper-partisanship is not a good career move. Members of the House generally run for leadership, seek state office or run for the Senate. It used to be that leadership would compromise. Now, not so much. Serving in the Senate, as Governor or working on K Street require the ability to reach across the aisle.  Grandstanding on wokeness is not a good resume item. There is a lot for the Budget Committee to do if it gave up grandstanding. I have already suggested some of these options.

• It could remedy inflation in the public sector by awarding COLAs on an equal dollar basis rather than as a percentage of current salary. It could even do so based on a lower average percentage than inflation. This would still make most civil servants better off. Only the overpaid would suffer. This limit should also apply in Congress.
• Cut back on federal leave entitlements, but balance this with closing the government between Christmas and New Years, as many other professional offices - especially government contractors, do.
• Cut the budget by one percent under the inflation adjustment, rather than one percent over current spending (which is a huge cut).
• Cut Defense spending, but increase spending by some lesser amount for NASA, with the Defense Appropriations Subcommittee responsible for the agency. This would keep funds in the same sector (aerospace) rather than having NASA fight with the National Science Foundation, the Department of Commerce and the Department of Justice for funding.
• Make the Affordable Care Act actually work using a public option, but ending pre-existing condition reforms and subsidizing the public option with an employer-paid subtraction value added tax (which it could offset partially by providing insurance or direct health services to employees - including those who now function as contractors).
• Lead a serious discussion of the Fair Tax (but as a series of consumption taxes as I suggest - including an employer paid subtraction VAT designed to be offset by a generous child tax credit and health insurance coverage of employees. The option of having the IRS distribute the Child Tax Credit as it did under the American Recovery Plan Act or through Social Security as currently proposed turns the federal government into a paymaster for too many people.
• Reorganize budget line items and appropriations committee jurisdictions to make programmatic sense, rather than codify old personality disputes between chairs. A proposal for doing so is attached.

Budget Act Line Item/Appropriations Subcommittee Reorganization

Agriculture

Add consumer protection functions performed by Consumer Product Safety Commission and Federal Communications Commission. Transfer the Commodity Futures Trading Commission to the Commerce, Financial Services and the Treasury Subcommittee. 

Commerce, Financial Services and the Treasury 

• Add the Department of the Treasury; Financial Service agencies, including CFTC,  Federal Trade Commission, Federal Deposit Insurance Corporation (Office of the Inspector General), the National Credit Union Administration, (Community Development Revolving Loan Fund), the Securities and Exchange Commission, Small Business Administration and the United States Tax Court. 
• Transfer the Department of Justice and related agencies to the  Justice and General Government Subcommittee. 
• Transfer NASA and the National Space Council from CSJ to the Defense Subcommittee so that reductions to defense research and procurement would be offset with increased budget for space exploration.

Energy, Water Development, Transportation and Related Agencies

Add the Department of Transportation to create synergies between energy and transportation activities, especially research.

Homeland Security - No change unless some agencies are spun off to Justice and General Government.

Justice and General Government

• Add the Department of Justice and related agencies from CSJ. Transfer Treasury to CSJ. Transfer Financial Services agencies to CSJ. 
• The following general government agencies are included: Administrative Conference of the United States, Federal Labor Relations Authority, Federal Permitting Improvement Steering Council, General Services Administration, Merit Systems Protection Board, National Archives and Records Administration, Office of Government Ethics, Office of Personnel Management and Related Trust Funds, Office of Special Counsel, Privacy and Civil Liberties Oversight Board, Public Buildings Reform Board, Selective Service System, United States Postal Service, Payment to the Postal Service Fund and Office of Inspector General, General Provisions, Government-wide.
• Transfer District of Columbia, the Executive Office of the President and the Judiciary to the Legislative Branch Subcommittee so that the DC budget will be passed by the start of its fiscal year without interference, the White House is funded with the same staff levels as the Congress in case of government shutdown and the Judiciary is respected as a co-equal branch whose salaries may not be reduced (or unsupported) by Congress. Add D.C. related agencies now funded by the Interior and Environment Subcommittee to Legislative Branch.

Labor, Education, Housing and Related Agencies

• Add Housing and Urban Development and Veterans Affairs Housing functions to reinforce synergies between housing, education and workforce development.  
• Transfer out Health and Human Services to decrease the size of the LHHSE Appropriation package.

Health and Human Services and Veterans Affairs

Create synergies between human services and veterans health and other DVA functions.

Military Construction and Veterans Affairs

Remove Veterans Affairs

State, Foreign Operations, and Related Programs - no change

Transportation, Housing and Urban Development and Related Agencies 

Disband. Sever the link between developing freeways and warehousing the poor.