Judd Gregg: Fixing the unfixable — the federal budget

Judd Gregg: Fixing the unfixable — the federal budget
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The Congress has set up a special committee of House and Senate members populated by both Republicans and Democrats. Its charge is to come up with a better budget process.

This seems like a reasonable cause. 

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It has been years since Congress actually passed all the appropriations bills. The government has been essentially run on continuing resolutions and omnibus appropriations over the last decade.

The deficit this year will be between $800 billion and $900 billion. The annual deficit next year, and for the foreseeable future, will exceed $1 trillion.

The size of the national debt as a percentage of the gross domestic product — which is the proper way to determine its impact— will soon reach 100 percent.

It is already at this level, if you include the public debt such as social security and the hospital trust obligations.

This type of debt-to-GDP ratio puts us in a class with Greece, Iceland and Spain.

With the ten-year bond rate now rising to 3 percent (a figure closer to the normal historic range) and probably going up further, the cost of borrowing to cover all these deficits and the overall, ever-rising debt is going to jump exponentially.

Interest payments on the federal debt will soon be $1 trillion per year — a significantly larger expense than the cost of national defense.

It is therefore not only proper, but also incumbent on the Congress, to come up with a better way of managing the federal cash register. This responsibility has been shirked for too long.

In order to address the issue, a few facts need to be acknowledged.

The present budget process is primarily aimed at only managing discretionary spending.

Discretionary spending makes up less then 28 percent of federal activity.

Also, because discretionary spending affects agencies like the departments of Defense, Health and Human Services (HHS) and Justice, the base spending of these agencies is not subject to much movement. It makes up approximately 25 percent of the 28 percent that is spent.

Thus, the basic budget process at best can affect only about 3 percent of federal spending.

There is an exception, and that is the budget reconciliation process, which was used to pass both ObamaCare and tax reform. It is the only real tool of change in the present budget process toolbox. But it is blunt, partisan and often unwieldy, especially when it attempts to drive entitlement reform.

The core of the problem with the present budget process is that entitlement spending makes up 60 percent of federal spending. It is essentially not covered by the budget.

In addition to the fact that the budget does not actually impact the causes of the federal fiscal disorder, there is the fact that the budget is structured to be an entirely partisan product.

The deeply partisan process ensures that a significant number of members of Congress and the population generally have no confidence in or support for the budget as passed — if it is passed.

Further, the primary players who are responsible for producing the budget — the members of the Budget Committee — do not have the legislative power to execute it.

The power remains with the key committees of jurisdiction, which in the Senate are the Finance Committee and the Appropriations Committee. Those committees, their leadership and staff, consider the Budget Committee as interlopers threatening their turf.

Any “fix” of the budget process needs to acknowledge these realities. It therefore has to be dramatically different from what is now the norm if it is to work.

Here are six changes that would make the budget process in the Congress work significantly better. They would lead to a radical improvement in our federal fiscal future. But they would have to work in concert to work at all.

First, make the process bipartisan. This would totally reverse the present structure, tempo and effectiveness of the budget.

The budget to be reported out of committee would need to win two-thirds support. Put everyone’s fingerprints on it. The budget would not be amendable on the floor, except by a limited number of amendments requiring 60 votes to pass, and to be offered only by the Majority and Minority leaders.

Second, the Budget Committee should only be made up of members from the Appropriations and Finance Committees, so they are vested in its outcome and passage. The party leaders would choose the chairperson and ranking member of the committee.

Third, the budget would initially set a maximum number for federal spending as a percentage of GDP and a floor number for the size of revenues as a percent of GDP. It would further set a number for the maximum amount of debt as percentage of GDP. These numbers would drive all fiscal activity.

Fourth, the budget would have the authority to address entitlement and taxes with more flexible reconciliation-type of instructions becoming the essence of the bill.

Fifth, the Budget Committee for discretionary spending accounts like Defense and HHS could set up committees akin to the Base Realignment and Closure Commission (BRAC). They would report restructuring approaches for specific areas needing reform. Their proposals would not be amendable and would be passed on up-or-down votes.

Sixth, and most important, the failure of the Budget Committee to report out — or of the Congress to pass — such a bipartisan bill would lead to the closure of the government within a reasonable timeframe. It would specifically cause the lapsing of payments under Social Security, veterans’ benefits and other politically charged programs.

This may seem like a radical proposal. It is not.  

It is a rational way to bring rational action to a system that is total dysfunctional. It is time. 

Judd Gregg (R) is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee, and as ranking member of the Senate Appropriations Foreign Operations subcommittee.