Back to Fixing the Federal Budget Process: While Politicians Work to Secure Agreement on Fiscal Policy, Public Managers Can Help Restore Confidence in Government by Making Their Budget Decisions Disciplined and Transparent

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Budget experts have watched the federal government's budget process fail over the last few years as the policy choices required to put the budget on a sustainable path grew more challenging.

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The darkening long-term outlook, masked by investors' willingness so far to lend to the U.S. government at low rates, could at any time be greatly complicated by rising interest rates, or by unpredictable but inevitable future economic or other emergencies demanding higher spending. The publicly held federal debt is racing past 70 percent of the nation's gross domestic product (GDP) and is projected to grow even more rapidly in coming decades, driven by the long-forecast retirement of the baby boomers and continuously rising healthcare costs--two of the biggest factors in what fiscal commission co-chair Erskine Bowles calls, "the most predictable economic crisis in U.S. history."

Last fall, the Joint Select Committee on Deficit Reduction (popularly, the Supercommittee) created by the Budget Control Act of 2011, tested the possibility that our fiscal challenges could be met by bypassing the regular process. Its collapse just before Thanksgiving pointed everyone back to the drawing board. We now must reconsider whether it is possible to reform the regular budget process to help support those leaders prepared to make the tough choices needed to put the federal budget on a sustainable course.

Many have concluded that the federal government's governing institutions--and in particular the way they go about budgeting--are not up to the task. The Peterson-Pew Commission on Budget Reform issued a report in December 2010, Getting Back in the Black (http://budgetreform.org/document/getting-back-black), calling on Congress and the president to pass a new Sustainable Debt Act that would establish a new budgeting regime. The commission is made up of former directors of the Congressional Budget Office and the Office of Management and Budget, former budget committee chairs, and other distinguished and seasoned federal leaders. Their approach to reform was realistic and practical. It also was bold and consistent both with the extent to which the process is broken and the scale of the fiscal challenges ahead.

Others recognize the depth and political difficulty of the policy changes required to align spending and revenues over future decades and are looking at ways to repair the process. Old ideas such as a balanced budget amendment (BBA) to the Constitution or "biennial budgeting" received fresh attention. Some experts endorsed devices to bypass the broken budget process. Some favored a base closings commission model that delegated detailed negotiations over the budget to a special body and provided fast-track congressional procedures to facilitate enactment of whatever plan a majority of that group could agree on.

Fiscal Rules and Discipline

The basis for budget process reforms and for progress in stabilizing the debt must be a new national agreement on a rule or target for fiscal policy. Sitting down to prepare a federal budget without reference to a fiscal rule or target is like setting sail without a compass. Countries facing similar challenges--including Australia and Sweden--found it helpful to enact a fiscal rule as the first step in righting the fiscal ship.

In the United States, the traditional consensus that budgets should be balanced has evaporated.

Therefore, the first task of American leaders is to help restore a national norm of fiscal responsibility. Otherwise, any newly enacted rule will quickly succumb to the siren call of urgent demands for government to do more than it is prepared to pay for.

A balanced budget requirement is an example of a fiscal rule, but not a practical one in the immediate future--both because there is nothing close to a consensus on some version of a BBA and because balance is now far out of reach. …