Budget experts frequently stress the importance of strong leadership from the White House and Capitol Hill in getting control of spending, but a blue-ribbon panel said Wednesday that tougher, long-term budget rules and enforcement powers may be even more important.
The Peterson-Pew Commission on Budget Reform issued its latest report today, entitled “Getting Back in the Black,” that proposes to overhaul the federal budget process by moving from an annual to multi-year spending plan and to impose stronger enforcement mechanisms to enable the administration and Congress to achieve specific fiscal targets.
“The current process involves incremental, annual decisions that lack coherence and discipline, leaving the nation ill-equipped to deal with the current fiscal challenge,” the report states. “Budgets are created with a fiscal target to constrain the result. The process contributes to unsustainable policies because it does not require policymakers to lay out a fiscal plan with feasible limits or to consider the long-term implications of their decisions.”
Bill Frenzel, a former Republican House member and a co-chairman of the commission, said that while “We know that no process will put what [legendary House Speaker] Sam Rayburn called iron in the spine” of lawmakers, the new proposals would give them a lot more support and political cover in making tough choices on spending and taxes.
The report was funded by the Peter G. Peterson Foundation and the Pew Charitable Trusts. Pete Peterson, chairman of the Peterson Foundation, also finances The Fiscal Times.
With the federal budget deficit now running well in excess of $1 trillion a year, the accumulated national debt is likely to reach 80 percent of the nation’s gross domestic product by 2035, and would continue to grow faster than the economy thereafter, according to the Congressional Budget Office. The Peterson-Pew commission previously recommended that Congress and the White House adopt a specific fiscal target of stabilizing the publicly held debt at 60 percent of GDP by 2018, and then continue to reduce the debt as a share of the economy over the longer term.
In order to achieve that goal, the commission members are recommending passage of a Sustainable Debt Act. The new law would establish a medium-term debt target along with annual fiscal targets and new enforcement mechanism. The medium-term fiscal target would specify when, and at what level, the public debt would be stabilized as a percentage of the GDP. Annual debt targets would provide a path to the medium-term debt target.
The administration and Congress currently operate under an annual budget process, with little authority or incentive to plan for the future. Under the Peterson-Pew commission approach, the president would submit a budget that meets statutory targets, and Congress would adopt a budget resolution that included multi-year savings allocations and recommendations to other committees for spending, tax expenditures and revenues to meet that year’s debt target, putting the budget on a path to the medium term fiscal target.
“The report makes fundamental changes to try to refocus the U.S. budget out to the middle-term and long term,” said commission member Barry Anderson, former acting director of the CBO.
This new approach would include strong enforcement mechanisms, including multi-year discretionary spending caps and a strengthened pay-as-you go statute that would provide additional budgetary discipline. If a budget passed in any year did not meet the target, the president could propose spending rescissions to help meet it. If the targets were still missed, spending reductions and tax increases – such as a surtax on income tax--would be imposed through automatic trigger mechanisms.
Congress has tried similar approaches in the past, including the Gramm-Rudman-Hollings balanced budget and emergency deficit law of 1985, but had mixed success because of gaping loopholes in the law. Moreover, Congress has frequently bypassed legal spending strictures for political or economic reasons.
“Past automatic triggers have failed in part because so many programs were exempt from the trigger and it was so easy to bypass the restrictions,” the study states. “The Commission recommends that its proposed triggers apply to the broadest base possible, including all discretionary and mandatory programs and all taxes.”
The report also recommends strengthening the membership of the House and Senate Budget Committees, by including House and Senate leaders and the chairs and ranking members of both the appropriations and revenue committees and other major authorizing committees. And it calls for greater transparency in the budgeting process as a way of enlisting more public support for the process.