2: BUDGET PROCESS

[Institute a] strong annual budget process for the government.

Other Information:

FIXING THE BUDGET PROCESS -- Once we have a plan in place that reduces spending and increases revenues, a strong annual budget process for the government would help us stay on track. During the 1990s, tough budget controls combined with a growing economy to help improve the budget's bottom line. In 1990, when the first controls went in place, the federal deficit was $269 billion, or almost 4 percent of the economy. By 2000, our country was experiencing a surplus of $236 billion, or more than 2 percent of the economy. These controls expired, however, in 2002 while the economy was recovering from a recession and the country was engaged in a new fight against terrorism, all of which made many lawmakers reluctant to re-impose the budget controls. The budget situation in Washington has been out of balance ever since. The current budget process is an annual process—and the attention of policy makers is focused on the next year even though many of their decisions will affect budgets for years to come. As a result, lawmakers are not required to consider the impact of their current budget decisions on future generations. Although budget process changes cannot, by themselves, solve our long-term fiscal challenges, a better process could encourage policy makers to adopt a longer perspective and "lock-in" whatever multi-year savings decisions they make. Lawmakers would always be able to vote to change the budget process and relax any discipline it imposes, but a stronger process would create a high enough hurdle to make budget enforcement measures worthwhile. There are various policy tools that would help reinforce fiscal discipline and maintain budget balance. These so called "budget controls" have been effective in the past. For example, adopting "pay-as-you-go" rules would require that any entitlement spending increases or tax cuts must be "paid for" before they are adopted. In addition, setting "caps" would limit annually appropriated spending, and adopting long-term budget goals would limit future deficit or debt levels. Budget process reforms would be one part of what would be a multi-pronged plan to reduce the budget's long-term, structural imbalances. Policymakers could reinstate the budget controls that were effective in the past, set and adhere to longer-term budget goals, and establish a ceiling for the total amount of the national debt. These types of budget controls, when used in concert with other broad packages of fiscal restraint, could effectively help elected officials stay on the path toward fiscal health.

Stakeholder(s):

• Lawmakers


• Policymakers

Objective(s):

2.1: Spending Caps

2.2: PAYGO

2.3: Budget Triggers

2.4: Debt Targets

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