Op-Ed by Concord Coalition Board Member Dr. Carolyn Bourdeaux: Federal Budget Lessons from the States

Author: Dr. Carolyn Bourdeaux
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How to Radically Change Expectations about the Federal Budget Process

by Dr. Carolyn Bourdeaux, Senior Visiting Scholar, University of Georgia; Board Member of the Concord Coalition; Former Member of Congress from Georgia’s 7th District

Now that we’ve come through the debt ceiling drama, most of us who want to see more fiscal responsibility at the federal level can agree that we got to a reasonable result, but the process was – to put it mildly – a problem.

We cannot use the full faith and credit of the nation and the economic health of the global economy as a bargaining chip to restore fiscal responsibility. There has to be a better way.  In fact, many of us who study state budgeting annually observe budget processes that lead to (largely) fiscally responsible decision-making and do not require high stakes hostage taking to get there.

As someone who has worked at both the state and federal level, the differences are striking and suggest that some serious thought should be given to translating some valuable lessons of state budget processes and policies to the federal level.

The most obvious place to begin is that almost all states have some sort of statutory or constitutional balanced budget requirement. The objection to this at the national level is that the federal government may need to run deficits to reboot the economy or respond to emergencies – but we are now running nearly $2 trillion-dollar annual deficits when times are good. And without any procedural restraint to invoke, it is very hard for policymakers to temper expectations and build a culture of fiscal discipline consistently over time.

While balanced budget requirements at the state level are often perceived as strictly binding, state budgeters can deploy any number of tricks to circumvent these requirements. States can short their pension obligations, issue debt to cover operating expenses, create off-the-books entities to issue debt, pass the buck to local governments, and game the revenue estimate – just to name a few gimmicks.

Yet, by and large, year after year, most states pass fiscally constrained budgets.  Balanced budget requirements are as much about perception than about a hard and fast rule.

Original Source: Barrett and Greene, Inc.

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