August 23, 2014

Washington Budget Report: Oct. 11, 2011

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Senate Committee Considers Budget Process Reforms

Senate Budget Committee Chairman Kent Conrad (D-N.D.) and Ranking Member Jeff Sessions (R-Al.) both have expressed support for biennial budgeting -- a proposal to convert the budget process to a two-year cycle. The comments were made at a hearing last week on budget process reform.

At the hearing, Maya MacGuineas of the Committee for a Responsible Federal Budget, Don Kettle of the University of Maryland School of Public Policy, and David Kendall of Third Way generally agreed that biennial budgeting could have positive effects such as providing Congress with time for more effective oversight. They cautioned that it is not a solution in itself and should be accompanied by additional reforms.

With potential benefits such as increased oversight, a more orderly budget process, and fewer opportunities for fiscal irresponsibility, biennial budgeting should be considered by Congress. In an op-ed published in The Hill last year, Cliff Isenberg, The Concord Coalition’s chief budget counsel, argued that biennial budgeting would be most effective if it is included as part of a broader proposal involving other budget process, spending and revenue reforms.

In a second panel, former Senate staff testified on improvements that could be made to Senate procedures for considering amendments to the budget resolution. The current process -- often referred to as the “vote-a-rama” -- has been criticized for requiring votes on hundreds of amendments with little time for substantive debate.  Reforms discussed would limit the number and scope of amendments while allowing more time for debate.

The committee has scheduled a second budget process hearing for this week. Also this week, congressional committees have until Friday to submit recommendations to the Joint Select Committee on Deficit Reduction.

Bernanke Urges a Two-Front Attack

Federal Reserve Chairman Ben Bernanke is urging Congress to focus on achieving long-run fiscal sustainability in the federal budget while avoiding action that could “impede the ongoing recovery.”

These two objectives are compatible, Bernanke assured the Joint Economic Committee in his testimony last Tuesday. He also advised fiscal policymakers to set two other objectives: promoting long-term growth and economic opportunity, and improving the process for making long-term budget decisions.

“In sum,” Bernanke told the committee, “the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed.”

Diane Lim Rogers, chief economist for The Concord Coalition, points to Bernanke’s testimony  as further bolstering the argument that Washington can and should tackle both short- and long-term budget challenges. She notes in a recent blog post that Doug Elmendorf, director of the Congressional Budget Office, made a similar point in his testimony last month to the congressional “super committee” on deficit reduction.

The key, Rogers writes, is to “optimize our policies to get the best and most cost-effective results in terms of both short-term stimulus and longer-term growth.” The basic strategy, she says, would be to reduce deficit spending that has failed to effectively stimulate demand and to “either increase the ‘bang’ for the same amount of ‘buck,’ or achieve the same ‘bang’ for a lot less ‘buck’ — or anything in between.”

CBO Estimate Shows Economic Growth Is No Panacea

The Congressional Budget Office has provided an estimate of what the deficit would be if the economy were operating at total capacity. With full utilization of capital and labor resources in the economy, CBO says, the deficit for fiscal year 2012, which began Oct. 1, would be about a third lower than currently projected -- or $630 billion rather than $973 billion.

The estimate came in a letter last week to Rep. Chris Van Hollen (D-Md.), ranking member of the House Budget Committee. It underscores an important point for elected officials and the public to keep in mind: That even robust economic growth would not solve all of the nation’s fiscal problems.

But a stronger economy would mean more people working and paying taxes, and less government spending on programs such as unemployment insurance, COBRA and Medicaid.

The White House contends that its American Jobs Act of 2011 will significantly bolster the economy but concedes that hard choices must still be made to deal with our long-term fiscal problems.

The legislation includes $447 billion in an assortment of tax cuts, unemployment benefits, funding to prevent teacher layoffs, and money for transportation and infrastructure projects.

Senate Democrats, who have scheduled a vote on the legislation this week, included a tax on individuals earning over $1 million that would offset the cost of the bill. The Joint Committee on Taxation estimated that provision would raise $453 billion over 10 years, producing a total of $5.7 billion in deficit reduction for the legislation.

Sessions, Snowe Propose “Honest Budget Act”

Last week Senators Jeff Sessions (R-Al.) and Olympia Snowe (R-Me.)  introduced the “Honest Budget Act,” which proposes a number of fiscally responsible reforms to the budget process.

The bill would strengthen the budget point of order preventing consideration of appropriations bills before a budget resolution has been adopted. The legislation would also make it more difficult to use emergency spending as a loophole, limit changes to mandatory programs that are included in appropriations bills, prevent timing shifts from being used as budget gimmicks, and require more honest budgeting for transportation spending.

Concord Coalition Executive Director Robert L. Bixby said the proposal should “be seriously considered by Congress” but should also be accompanied by “detailed proposals that make the difficult choices among competing revenue and spending priorities.” Bixby said

“Improving the integrity of the budget process would help to facilitate these choices and restore public trust.”