Budget Breakdown

his year, Congress and the Clinton administration are celebrating the first federal budget surplus in decades. But at the same time, the process by which that budget is crafted on Capitol Hill is in disarray.

It wasn't supposed to be this way. The 1974 Budget Act was designed to make the trains run on time. It set targets and deadlines for Congress to meet. But now, 25 years later, deadlines are routinely missed-and nobody worries. Provisions of the law are regularly waived-with the approval of budget hawks. And spending caps are evaded through myriad gimmicks and tricks.

Congress has had a particularly rocky time during the past few years passing budgets and implementing them through appropriations bills-making it all the more difficult for federal agencies to predict spending levels for many programs. The government shutdown of 1995-96 was the biggest budget horror show in recent memory. In 1997, Congress had a slightly easier time, since congressional leaders and the Clinton administration agreed on a balanced budget plan that provided more money that year for several administration priorities. But last year-for the first time since the Budget Act was passed-Congress failed to pass a budget resolution and only completed the appropriations process by passing a huge omnibus spending bill that simply declared more than $20 billion to be "emergency" spending outside mandated caps.

The collapse of the congressional budget process, ironically, comes on the silver anniversary of the law that was designed to make that process more coherent. That law, many say, was designed solely to bring the federal budget deficit down. Now that a surplus has been achieved, they argue, the law is outdated and needs to be rewritten. But any attempt to do so will raise serious turf and power issues.

Appropriators' Accountability

At the time it was written, the 1974 Congressional Budget and Impoundment Control Act received little public fanfare and few members of Congress understood its vast consequences. But its enactment was one of the most important legacies of that year's epic confrontation between President Nixon and the Democratic-controlled Congress-which resulted in Nixon's resignation on the eve of what appeared to be his certain impeachment and removal from office as a result of the Watergate scandal.

The political impetus for the revised budget procedures came from Nixon's 1973 decision simply to not spend funds that had been appropriated by Congress. While Nixon claimed constitutional authority for his decision, federal courts largely ruled that the President did not have the power to withhold congressionally appropriated money. Still, a wide array of lawmakers-liberals fearful of the impact on favored programs, appropriations committee members concerned about their clout and congressional purists worried about the constitutional balance-grew alarmed about the threat to their power of the purse.

"A Congress that cannot control spending cannot effectively control the executive branch either," said Sen. Sam Ervin, D-N.C., who chaired the Watergate investigation. So the new law laid out detailed procedures with which the President must comply if he wanted to "defer" or "rescind" appropriations that had been signed into law; in each case, Congress retained the power to override presidential efforts to use such measures to "impound" spending.

The 1974 law also had several provisions dealing with how Congress handled the annual budget that would have more significant long-term consequences. The idea behind these provisions, which were largely unrelated to the impoundment crisis, was to force accountability on the appropriators.

For decades, the 13 House and Senate Appropriations subcommittees had separately considered the bills under their control-with jurisdictional lines that reflected historical factors rather than a rational organization of government, budget dollars or workload. Only when they completed their work, and Congress also accounted for separate action on taxes or changes in entitlement programs, could lawmakers total up the bottom-line impact of their decisions on the federal Treasury. In their desire to overhaul the budget process, the reformers decided to require that Congress approve a budget resolution early each year that laid out the broad outlines for spending and revenue for the coming fiscal year.

When Nixon signed the Budget Act into law on July 12, 1974, he commended the new procedures. "This bill will allow the Congress to step up to full and equal responsibility for controlling federal expenditures," he said. Although he raised concerns about the new anti-impoundment procedures, the beleaguered Nixon evidently determined that this was not the right time for him to stir a fuss; the House had passed the House-Senate conference report on the bill, 401-6, and the Senate approved it on a unanimous roll-call vote. When Gerald Ford-who had been the House GOP's minority leader for nine years-took over as President a month later, he too supported the new law.

By 1981, when the new Reagan administration used the law as a tool to quickly implement its plans to reshape the federal budget, the Budget Act had become a major part of Washington's policy-making process. As they wrote tax or spending legislation, both the appropriators and the tax-writing Ways and Means Committee were required to comply with limits in the annual budget already approved by Congress. The new law created in the House and Senate a competing center-the Budget Committee-to shape fiscal policy. The third leg of the budget process-the House and Senate authorizing committees-saw their power weakened considerably. In addition, the 1974 law created the Congressional Budget Office as an independent source of budget expertise, so lawmakers would no longer have to rely on the White House Office of Management and Budget.

Top-Down Approach

Over the subsequent quarter-century, Congress has made numerous informal changes in the workings of the Budget Act, including its timetable and key players. But the original intent of its authors has, if anything, been strengthened. The new process "has allowed for a more 'top-down' or centralized approach to budgetary decision-making," political scientist Randall Strahan wrote in 1990.

When President Bush and Democratic congressional leaders spent months in 1990 negotiating the painstaking budget deal that began the decade-long process of reversing the string of huge federal deficits, they essentially expanded the framework of the 1974 law to include the President in the process of crafting a budget plan. And in 1997, when President Clinton and Republican congressional leaders wrote the legislation that finally envisioned an era of federal surpluses (though, even at that recent date, they forecast that deficits would not end until 2002), they crafted a detailed spending blueprint without the participation of congressional committees.

The consequences of the Budget Act for Congress have been profound-and hardly what the 1974 drafters envisioned. Institutionally, committee power has eroded to the point where it now has largely collapsed. Although that collapse has been partially caused by factors that extend beyond the purview of the Budget Act, the annual budget resolution the act mandates has become a document that reflects the views of party leaders and-occasionally-rank-and-file members, not the authorizing committees. Even when the budget resolution has been written without the President's participation, it has become apparent that many members who voted for it have not understood its consequences. Recently, for example, moderate House Republicans voiced objections to the terms of a tax cut that was anticipated by the budget resolution for which they had voted three months earlier. The moderates complained Congress had failed to implement other components of the initial plan.

The current process calls for the President to submit his budget in February. That is followed by passage of a congressional resolution setting discretionary spending targets, targets for tax legislation and instructions for committees to find entitlement savings. Authorizing committees work on the tax and entitlement legislation, while the appropriations committees work on the 13 appropriations bills. Those bills are supposed to be completed by the beginning of the fiscal year on Oct. 1, but in recent years, Congress has been unable to complete all of them, resulting in last-minute deals that evade, break and ignore spending caps called for in the budget resolution by resorting to various budgetary devices, such as designating large amounts of spending as "emergency" spending.

"Once you go down the road of winking and nodding through the process, you erode the credibility of the process," says Richard E. May, a principal at Davidson & Co. and a former Republican staff director of the House Budget Committee. The last-minute haggling results in helter-skelter lawmaking, one analyst argues. "Lately, the closing days of the session have deteriorated into a very costly and unstatesmanlike cross between a food fight and a game of budgetary chicken in which the aim of each side seems to be to inflict maximum political embarrassment on the other while getting as much as possible for one's own spending or tax priorities," Martha Phillips, former executive director of the Concord Coalition, a group that advocates fiscal restraint, told the House Rules Committee earlier this year.

Legislators who wrote the Budget Act wanted the budget committees to be "leadership" committees, rather than panels made up of members of the spending and taxing committees, says Rep. David Obey, D-Wis., ranking minority member of the House Appropriations Committee and a protege of the late Rep. Richard Bolling, D-Mo., who was instrumental in passage of the law. At the time, Bolling acknowledged "this would never work unless the party leaders lead," Obey says. That has not happened, Obey argues. "The budget resolution has become a political document," he says.

Instead of the President's budget and a congressional budget resolution reflecting priorities, Obey says, analysts "ask only one question: Does it hit the number?" As long as the budget reaches a deficit or surplus target, no one pays attention to the policy assumptions behind the document. "So what you have is two parties saying, 'My surplus is bigger than your sur- plus,' " Obey says.

The 1997 balanced budget deal exacerbated the situation, because it was based on several years worth of deep spending cuts that Congress is unlikely ever to approve. "It was a set of phony, unrealistic promises" based on "assumptions that were never really talked about except in the back rooms," Obey says. "The process rewards those who tell the biggest lies." He argues that since Republicans took control of Capitol Hill in 1995, budget resolutions have become even more political. "We've never been able to get the reality horse back on track," he says.

Under GOP control, the House Budget Committee has taken two approaches to budget resolutions. Some years, committee chairman John R. Kasich, R-Ohio, produced a document filled with illustrative cuts that appropriators and authorizing committees could make to meet the budget targets. That drew fire from many members-particularly appropriators-who argued that Kasich was overstepping his jurisdiction. In recent years, Kasich simply has produced a document that sets spending targets. May says appropriators often believe they understand the programs better, adding it "was never intended for the Budget Committee to dictate [cuts] to the appropriators."

Designed for Deficits

Aside from confusion of what role each committee should play, congressional aides who have worked through-and sometimes evaded-the budget process acknowledge that the Budget Act may well be out of date and in need of rewriting. For example, a key result of the act was the creation of the budget reconciliation process, whose sole purpose is to find savings in entitlement programs in order to keep federal deficits from spinning out of control.

Ultimately, the only goal of the process created by the Budget Act was to "get the deficit down," says Stanley Collender, managing director of the federal budget consulting group at Fleishman-Hillard who also writes a weekly column appearing on Government Executive's Web publication, GovExec.com. "Does the Budget Committee have anything to do anymore?" he asks. But, Collender adds, the new system has one benefit: "The budget process has created some order and some deadlines so that at least you know when you're late."

The surplus has changed the entire budget climate, says G. William Hoagland, staff director of the Senate Budget Committee. "When the cookie jar was empty, not too many people were dipping into the cookie jar," he says. "Once there is a perception that the budget is in surplus, people can't understand why they can't have a cookie out of the cookie jar." The surplus also makes it more difficult to simply de-authorize programs, he notes. "In an era of deficits, you could argue for eliminating them," he says.

Obey says the budget process itself hampers authorizing committees. "It takes so long that nobody else's legislation gets considered," he says. "If I were on an authorizing committee, I'd be going mad."

Senate Budget Committee Chairman Pete V. Domenici, R-N.M., argues that the budget process consumes so much time that Congress can't deal with oversight issues. But others say that simply is a cop-out. "The people who do oversight aren't the ones who put the budget together every year," Collender says. A former congressional aide agrees, arguing that the real problem is simply that "members hate to do oversight."

But while oversight has suffered, Congress has been willing to make changes in federal programs for budgetary reasons. In many cases, Congress has tinkered with programs simply to find savings-or appear to find savings-to help offset spending increases in other programs. Changes in federal housing programs, District of Columbia employee pension programs and broadcast spectrum auctions all have been implemented in recent years at the last minute to pay for other spending boosts.

But some contend that the problem is not the process alone. "It does not work because the people who are working it don't want to make it work," says James Dyer, staff director of the House Appropriations Committee. Dyer said problems could be solved more easily if more discipline were built into the system, arguing that the initial budget resolution Congress passes is "soft" and easily ignored. "It provides a road map into the wilderness," he says. And while Congress often has ignored the timetables called for in the Budget Act, "this year we're adhering to a timetable to the detriment of everything else."

Congress simply has not had the political will to strictly follow the requirements of the Budget Act, a House Democratic aide argues. "In the end, Congress can't stop Congress or make [Congress] do something if there's no political will," says the aide, a veteran of the budget wars. Making the budget resolution and budget laws more difficult to evade could provide the political will, but details still would bog down the process, he says. It took Congress months-and several political fights-to implement the 1997 balanced budget deal even after GOP leaders and the White House agreed to a budget framework.

Others see the deeply entrenched appropriations committees as part of the problem. "Because the appropriators have a different committee-funding system, they are not under the control of the Speaker," says a House Republican leadership aide. "The staff has been there for 30 years, and the chairmen are mostly temporary appointments."

Hoagland agrees-to some degree. "The appropriators do the best they can, under difficult circumstances, and granted, we have made it more difficult for them," he says. "But they make problems for themselves." For example, by using such devices as forward-funding, in which program costs are shifted to the next fiscal year, appropriators simply dig themselves a deeper hole.

But Obey says appropriators are put in an impossible position by writers of the budget resolution, who call for spending cuts that are not politically feasible.

Prospects for Reform

Finding a solution to the budget mess is likely to be difficult. The first problem is adjusting to an era of surpluses instead of deficits. "There's so little experience in this country in dealing with surpluses," Collender says.

Asked how he would solve the budget mess, Dyer responds with a quip: "Get a new administration." He criticized Clinton administration officials for remaining disengaged from the process until the last minute, and only appearing to submit balanced budgets by using offsets that Congress would never accept.

But administration officials argue the budget enforcement rules have worked. The 1974 act and subsequent enforcement laws have "imposed an essential discipline on discretionary spending by means of enforceable discretionary spending caps," Office of Management and Budget Director Jacob J. Lew told the House Budget Committee earlier this year. "And [statutory requirements] have ensured that new mandatory spending and new tax cuts are paid for with offsetting spending reductions and revenue increases."

Nevertheless, many in Congress are committed to budget process reform. Congressional committees have come up with various plans, but each infringes on someone's turf. "When you start reforming the process . . . there's a whole new set of winners and losers," May says. For example, the liberal Center on Budget and Policy Priorities has pointed out that many of the reforms circulating on Capitol Hill would squeeze discretionary spending by making it possible to use discretionary money for tax cuts.

The leading House plan would-among other proposals-implement an automatic "continuing resolution" to keep federal agencies operating if Congress fails to pass the 13 funding bills by the end of the fiscal year. Appropriators dislike that provision, arguing it would take discipline out of the system. Likewise, the Clinton administration has made it clear it will not accept any budget reform plan that contains an automatic continuing resolution. That's because the proposal would take some of the power away from Presidents during last-minute spending negotiations, May says. Presidents always hold the trump cards during end-of-year haggling, he argues, because Congress must complete the 13 funding bills for members to go home.

The leading Senate plan would implement two-year budgeting-a proposal that has circulated on Capitol Hill for years. But critics say two-year budgeting won't make the process any easier, but instead, simply will drag it out even more. "I'm not certain whether two-year budgeting is the solution," said a former congressional aide. "If you gave people two years to get their budget stuff done, they're going to take two years to get the process done."

David Baumann and Richard E. Cohen are staff correspondents at National Journal.