Latest House Budget Resolution is a Sham

The House of Representatives on Wednesday finally passed the Fiscal 2007 Budget Resolution, with all Democrats and 12 of the 230 House Republicans voting no. But for all practical purposes, the Resolution was almost completely meaningless.

Its principal purpose was to set a cap for discretionary spending by the House Appropriations Committee. Yet because the measure was more than a month late in winning passage in the full House, the Appropriations Committee had already moved forward with a self-imposed spending cap and had in fact reported two of the 11 appropriation bills out of committee.

What’s more, the overall budget for fiscal 2007, which begins in October, assumes additional tax changes at a cost of $228 billion over five years. That means the federal government will continue to run massive deficits into the indefinite future.

But the resolution passed by the House is, in an unintended way, important for what it says about the budget process itself. From early January to May 17, the House of Representatives has been attempting to produce a document that specified the level of discretionary spending for the coming year. The only other major activity during that period was the consideration of a supplemental appropriation bill that violated the cap imposed by last year’s budget resolution by nearly $100 billion.

This process has been cumbersome and time consuming and has produced very little other than a single number — a number that everyone knows is unrealistic, misleading and will be violated by tens of billions (if not hundreds of billions) of dollars.

Worst of all, there is virtually no prospect that the House and Senate conferees will reach agreement between the two chambers. The Senate budget allows about $16 billion more in appropriations than the House version does. That means not only is the budget process broken for this year, but there is virtually no chance that the two chambers will be able to reach accommodation on many of the appropriation bills — at least before going home for the fall elections.

The upshot: Government program officers will once again get the funds to run the activities of their agencies well after the beginning of the fiscal year and will be forced to let contracts and make purchases in a six-month period rather than the 12 months they are supposed to have. That will mean less transparency, less competition and more waste in government procurement.

There has to be a better way, and one possible improvement would be to simply jettison the current Congressional budget process altogether. For more than 180 years Congress got its work done and kept the public books in reasonably good balance without passing budget resolutions. For 29 years following the end of World War II the public debt as a percentage of GDP (the measure of fiscal balance most frequently used by economists) declined steadily. It dropped from 117% of GDP in 1945 to only 26% in 1974. The decline ended in 1974, and by the early 1990s debt as a share of GDP crept back up to nearly 50%.

What else happened in 1974? We passed the Congressional Budget Act.

For more details on how the budget process should work, see:

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Scott Lilly

Senior Fellow