Memo to the President: Reforming the Federal Budget Process

The new president and Congress need a working budget process to help them put resources behind their policies and govern the nation effectively. Budgeting, one of the core processes of government, is badly broken. But a return to “regular order” is not enough. We need a new order that will help leaders make tough fiscal choices in a complex and turbulent world—the kind of budget process that would help leaders translate promises into resource allocations aimed at achieving a desired future, anticipating a broad array of complex challenges amidst almost paralyzing uncertainty.

The goal of such reforms should be to give the federal government a budget process that:

• Is more disciplined, predictable and institutionalized.
• Facilitates negotiation and compromise.
• Regularly reviews all elements of the budget, including revenue and spending policies.
• Is more forward-looking, giving greater attention to both growth-producing investments and long-term commitments.
• Supports stabilizing public debt at a safe level over the far horizon.
• Is neutral with regard to specific policies, including the balance between revenues and spending.
• Supports more use of evidence showing how alternative resource uses would improve the government’s performance in achieving national goals.

Drawing on fresh ideas developed by the National Budgeting Roundtable, we propose the new president and congressional leaders take the following steps toward a new budget process.

Budget for major national goals by reviewing the relevant portfolio of spending, tax expenditures, regulations and other policies

The current process for developing the budget is biased toward marginal, short-term changes and familiar policies. It is piecemeal, fragmented and stovepiped, and often blind to major shifts in the nation’s economy and social structure. It misses bigger, strategic options that could produce breakthrough gains in how resources could be used to achieve national goals.

A portfolio budgeting approach to selected major policy goals should be added to the current process. Each year, for a few major national policy objectives, the full portfolio of spending, tax provisions and other policies addressed to each goal would be compared with alternative strategies that use resources very differently. The aim would be to find a new strategy to achieve a better result at lower cost. This approach could identify breakthrough gains in the productive use of resources. Budget savings could be reinvested in the same or other policy priorities that promise higher long-term returns.

Strengthen the congressional budget committees, making them leadership committees that take a bigger role in shaping budget priorities and directing the work of other panels

The legislation enacted in 1974 that created today’s congressional budget process was a compromise that limited the ability of the new budget committees to shape a coherent budget resolution and enforce its targets and priorities. As a result, the process has been used only erratically and to limited effect.

To make Congress an effective partner with the president in shaping budget priorities, the House and Senate budget committees must have a stronger role in shaping budgets and directing the work of other committees. If they are reconstituted as leadership committees—including the chairs of the appropriations and tax-writing committees—they can become a forum for negotiating the outlines of the budget at the beginning of the process, giving specific policy instruction to other committees.

Establish a multi-year budget framework and process with annual targets for budget savings and investment consistent with fiscal sustainability

One great weakness of the current budget process is its myopia. The nation cannot meet its long-term commitments and invest in future economic growth if its focus is only short-term and fails to align spending with expected revenues.

To stabilize its fiscal future and promote long-term economic growth, the federal government should budget within a multi-year framework with enforceable targets for savings consistent with long-term fiscal sustainability. The multi-year framework would include annual targets for budget savings and investment that put the budget on a trajectory toward sustainability.

Budget for tax expenditures and mandatory programs by regularly reviewing them and including tax expenditures in revenue and spending totals

The largest programs (including the major entitlements) and tax expenditures (provisions of the tax code that function much like spending programs) are not subject to the same scrutiny, regular review or degree of control as are discretionary (annually appropriated) programs.

The process should be revised to put all parts of the budget on the table and to ensure regular reviews of tax expenditures and mandatory spending. Tax expenditures should be added to both revenue and spending totals to more accurately represent the true size of the budget. Consideration should be given to the best way of controlling or capping the growth of so-called mandatory spending programs, as is done in many other countries, while providing flexibility to meet growth caps without harm to vulnerable recipients.

Revisit the use of budget concepts using a bipartisan process established by the president and Congress

Basic concepts used in constructing the federal budget are in disarray. The last comprehensive revision of basic concepts and their use was the 1967 President’s Commission on Budget Concepts. Seemingly dry and technical, decisions about the way the budget is organized and presented shape decisions and public understanding of how much money government raises and spends.

It is time to establish a new bipartisan process—including Congress—to review and recommend changes in the use of budget concepts. The agenda should include questions about the scope of the budget—why some programs are “on budget” and others are not, and why some federally sponsored entities are included and others are not. It also should include questions about how to define spending and revenue and ways of recording the economic impacts of government actions.

Because negotiation and compromise are the essentials of a healthy budget process, efforts to reach agreement on budget process reforms may contribute directly to the conditions for better budgeting. And, a stronger budget process is one precondition for realizing the promises of a new administration and Congress.

This article is part of a series of Memos to the President, highlighting advice from leading academics and practitioners in public administration for the incoming president and his team. The series was developed by the National Academy of Public Administration, the American Society of Public Administration and George Mason University’s Schar School of Policy and Government. Click here for more information and links to the full set of memos.