Analysis: Pulling agencies back from the cliff

The federal government’s budget process has collapsed.

Routine decisions on annual spending are consistently late, causing uncertainty and disruption across all sectors of the economy. Gridlock has left fiscal destabilization and governmental dysfunction in its wake. Congress has been unable to produce a budget resolution for seven of the past 15 years, while most federal agencies have learned to live with short term continuing resolutions. Large parts of the budget -- including the tax code and mandatory entitlements -- are on autopilot and receive no regular review. Any semblance of orderly, considered, annual review of spending and taxes has given way to ad hoc closed-door negotiations and brinksmanship. The results are disappointing, to put it mildly.

A series of new fiscal cliffs and crises in the coming months will test the seemingly infinite patience of federal managers as never before. The failure of the budget process is not the main cause of the fix the nation is in, but a well-designed set of reforms is essential to helping budget leaders and their successors sustain whatever agreements are reached in the coming weeks. There is precedent for enacting process improvements as part of a negotiated bipartisan budget agreement, and with good results.

It happened in 1990 with the Budget Enforcement Act. Many observers believe budget process improvements in the legislation were critical to sustainable savings, which later led to surpluses. The provisions included a “pay as you go” requirement for covering the cost of new spending mandates and tax cuts, as well as enforceable caps on annual appropriations. At a recent event reuniting participants in the 1990 budget summit, John Sununu, President George H. W. Bush’s chief of staff, attributed much of the decade’s fiscal success to the agreement. “With all due respect to my friend President Clinton and Newt Gingrich, who have been running around in recent years [taking credit] for having generated surpluses, I truly believe that the surpluses of the 1990s were generated by the agreement [on] the BEA, which required those budgets to make sure they did not spend more than they took in,” Sununu said.

Today, there is a fundamental mismatch between spending commitments and projected revenues, and a need to develop a strategic, disciplined and far-sighted approach to budget decisions. Much work has been done in recent years to identify the kinds of reform needed. The Peterson-Pew Commission on Budget Reform produced an integrated set of proposals in 2010. The National Academy of Public Administration and the American Society of Public Administration recently published a set of recommendations, which we co-authored with others as members of the Memos to National Leaders project. The group also has endorsed best practices in other nations, including a multiyear budgeting cycle, recognition of costs as they accrue rather than when they must be paid, and legislated fiscal rules and targets.

What reforms are needed? Perhaps most important is to legislate targets for the federal debt as a proportion of the economy during the next few years that can be used to guide spending and tax decisions. This approach should replace the current debt ceiling, which imposes fiscal goals retrospectively by threatening to renounce payment for spending obligations already made. Long-term targets for entitlements also should be enacted to curb sources of fiscal instability for the nation.

The size of looming fiscal gaps will require the president and Congress to strengthen their budget institutions. A stronger process can expedite federal initiatives to reduce deficits or to bolster the economy during recession and to deal with other emergencies. Ideally, budget resolutions would become joint agreements that require the president’s buy-in up front. Public administration experts also recommend a budget formulation process that focuses on national missions and policy goals -- such as improving ground transportation, promoting good health and making higher education more affordable -- and that includes reviews of programs based on their contributions to the broad outcomes.

Whatever fiscal goals are developed, Congress needs to strengthen control of its committees to ensure fiscal progress. Budget committees should be given a broader leadership role with clout over other committees. Annual budget resolutions should include savings, investment and tax revenue mandates for related committees, and the reconciliation process should be used to move these changes through Congress.

These changes would not remove political obstacles to reaching agreement on difficult revenue and spending actions. There is no substitute for leadership and political courage. But well-designed reforms can help sustain hard-fought bipartisan agreements that will come under inevitable pressure in the future. It would be tragic if budget negotiators took big political risks to address the nation’s long-term fiscal challenges, only to see their work undone in the years ahead. It is critical for Congress and the Obama administration to incorporate a better budget process into whatever legislation emerges from the coming negotiations.

Steve Redburn, adjunct faculty member at Carnegie Mellon University-Australia and George Washington University, is former project director for the Peterson-Pew Commission on Budget Reform. Paul Posner is director of the Public Administration program at George Mason University and a consultant on national budgeting with the Organization for Economic Cooperation and Development and other institutions.

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