The Never-Ending Budget Battle

January 6, 2012

The budget process is broken, and public interest in reforming it is keen.  But changing the budget rules alone is unlikely to fix our fiscal woes.  Even properly designed constraints, to be effective, would require credible external and internal enforcement backed by public opinion.  This is frustrated by the simple fact that populations have gigantic appetites for both necessities and desires.  A functional budget process should help lawmakers set priorities and distinguish between these two categories.  Our current process fails to do so for several reasons, says Veronique de Rugy, a senior research fellow at the Mercatus Center.

  • First, the budget process fails to keep all possibilities on the table: while discretionary spending is revisited each year, the mandatory spending portion of the budget, which includes programs like Medicare and Social Security, is largely off-limits.
  • Second, because spending is an amalgamated effort between numerous committees that are largely autonomous, a "tragedy of the commons" scenario plays out in which each committee seeks to raise spending at the expense of the whole.
  • Third, Congress sets status quo spending at the previous year's level instead of revisiting the amount as a whole.
  • Fourth, the complexity of the budget process itself contributes to out-of-control spending as it provides the necessary cover for congressmen and women to exploit loopholes to garner spending for their jurisdictions.

Efforts have been made in the past to rein in these trends, but none have been met with success.  This is because all previous efforts have simply been statutes that, by definition, can be redacted or overridden by subsequent Congresses.  Thus, efforts by previous sessions to control the deficits in the long term generate little progress and have created a veritable graveyard of failed deficit-control programs.  So long as Congress feels compelled to increase spending for whatever reason, it can sidestep mere statutory limits.

While this can be taken to call for a constitutional restructuring of the budget process, this should not be seen as the silver bullet to budget woes.  Even constitutional obstacles can be circumvented as members of Congress seek to raise spending levels.  Creative accounting and overly optimistic economic assumptions can thwart even the stoutest of constitutional limitations.

Source: Veronique de Rugy, "The Never-Ending Budget Battle," Reason Magazine, January 2012.

For text:

http://reason.com/archives/2011/12/14/the-never-ending-budget-battle

 

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