The topic of today’s episode is, “Can Congress budget?”
My guest is Dr. Allen Schick. He is professor emeritus at the School of Public Policy at the University of Maryland. He previously has held positions at the Congressional Research Service, the Urban Institute, the Brookings Institution, and the American Enterprise Institute. Dr. Schick published three volumes with AEI press, which you can download and read, and many other books with distinguished presses.
His books include, Congress and Money: Spending, Taxing, and Budgeting (1980), Making Economic Policy in Congress (1984), The Capacity to Budget (1990) and The Federal Budget: Politics, Policy, Process (1995).
Dr. Schick is the dean of budget policy, and we are very fortunate to have him on the program.
Kevin Kosar:
Welcome to the Understanding Congress Podcast.
Allen Schick:
Thank you. Good to be here.
Kevin Kosar:
Let me start with a really rudimentary question. What is a budget?
Allen Schick:
Well, a budget begins in the United States, not necessarily in all other countries, as a plan of revenue expenditure for a period ahead, typically one year. Congress does it, and the president does it, each has its own budget. But they differ in one important regard, the president’s budget is exceedingly detailed, it spills over thousands of pages, going through every account, many programs, activities, then it is submitted to Congress.
Allen Schick:
The Congressional Budget is really an outline that covers only a couple of pages, highly aggregated, total revenues, total expenditures. And the reason why it’s aggregated is it’s only a framework because implementation of the Congressional Budget requires some additional steps, appropriations, for example, revenue legislation, sometimes what we’ll get to reconciliation legislation. So, this is an outline that sets in motion across the sea within Congress.
Kevin Kosar:
Great. Yes. And I’m glad you highlighted the point that one should not confuse a budget for an appropriation. So, that sets me up very nicely to ask you about the basics of the current Congressional Budget process. It was more or less created by the 1974 Congressional Budget and Impoundment Control Act. You were on Capitol Hill working at the Congressional Research Service when the law was passed. What were the main features of the Act? And what process did it create for budgeting?
Allen Schick:
Well, the 1974 Act arose because of two confrontations, one between Congress and the president over impoundment of funds to president Nixon refused to spend seven of the money that Congress had appropriated and Congress felt that it can no longer rely on the present budget process to make legislative decisions. And the second conflict was in Congress itself between the appropriation committees, which control the portion of the budget and other congressional committees was controlled what we now call mandatory expenditure, particularly entitlements. There was a buildup of tension within Congress over why the country had deficits. The appropriators blamed other committees. Other committees blamed the appropriators. Both of them blame the revenue committees of Congress and all this led to Congress saying, “We need our own budget process.” The budget pressure they established includes the Congressional Budget Office, which has survived and flourished has a great deal of independence.
Allen Schick:
A scorekeeper process run by the Congressional Budget Office, which measures the budgetary impact of legislation passed by Congress or actually all legislation reported by house and Senate committees gets a price tag coordinated by the Congressional Budget Office. These features have survived quite well. In addition, Congress would pass, what’s called a budget resolution. Initially the idea would Congress would pass two resolutions a year, but that proved to be unworkable. So, boil down to one budget resolution typically in the spring, which will say, “These are total revenues. These are total spending. This is a total deficit. This is a total debt of the United States.” Now this the only point of the year, the Congress votes and the totals without a budget resolution, the totals are simply the sum of all the separate actions that Congress takes during the year. I mentioned this because it turns out that voting expressly on the deficit or the debt is not a pleasant activity for Congress.
Allen Schick:
Having a budget resolution means that your fingerprints have to be on it in contrast to the old situation where the deficit simply happened, Congress was not responsible for it. And I mentioned it because Congress actually does not adapt budget resolutions of most years. The law says it should, but it’s distasteful. So, Congress adopts budget resolutions only in those years like 2021, where it has an additional reason called reconciliation for adopting a budget resolution. And I think we may discuss reconciliation a bit later in the program, but that is really the only reason why Congress has an incentive to adopt a budget resolution these days.
Kevin Kosar:
All right. So, per the law, the way it’s supposed to work is, president early in the year, so in the calendar year, submits his budget. Congress then does a budget resolution by April, I believe. Subsequently the Appropriations Committee are supposed to move the 12 individual Appropriations Act. And then we can also have reconciliation and all that is supposed to be done by September 30th. Is that correct?
Allen Schick:
Well, you just scratch a bit of fiction because hardly any of this happens according to script, for example, here we are in early April and the president has not yet submitted a budget for the next year. He has an excuse that he’s an incoming president and therefore he needs more time. But in this case, the president has done something which is quite unusual. He hasn’t submitted a budget, but is submitted pieces of budget. His economic rescue program is infrastructure program. In other words, he’s avoided doing what a budget is supposed to do, which is to show you the whole picture. Instead, he showed you particular views of it. Now Congress passed a budget resolution, but it’s interesting. The budget resolution which Congress passed this year is last year’s budget resolution, not this year’s. This year’s budget resolution may come in the spring.
Allen Schick:
Congress discovered that last year Congress didn’t adopt a budget resolution for fiscal 21 that’s occurring year in progress. So, let’s do it now that gives us another bite of the apple called reconciliation. So, Congress has flipped the schedule rather than having a budget resolution after the president submits a budget, he’s done it before the president submits a budget. This is not the only thing that falls apart. You mentioned 12 appropriation bills. In most years, Congress passes a 12 appropriation bills well after the September 30th deadline and it lumps them into a single measure. In just a few months ago, Congress passed the fattest, the lengthiest bill in American history weighing at more than 2000 statue pages over 6,000 bill pages that consolidated Appropriation Act of 2021 containing not only all 12 appropriation bills, but dozens and dozens of other measures as well. One more, many bills.
Kevin Kosar:
Remarkable. The way reality has so deeply deviated from the process that was set up in the ’74 Budget Act. I do have a follow-up about the ’74 Budget Act process. The way it’s supposed to work. Each house of Congress has a budget committee. What are their responsibilities? And do they have real authority or power over the budget process?
Allen Schick:
The budget committees control the budget resolution and therefore the power of the budget committees is only as powerful as a budget resolution itself. They have no other legislative jurisdiction. That is their one job to produce a budget resolution. And that means as follows, in some years, the budget committees are out of the script or they have no power. Congress fails to pass a budget resolution. The budget committees have no influence on what Congress does. In other years, the budget committees are the most important actors in Congress. In other words, there’s no in-between situation. Either the budget committees are powerful as powerless as sidelined. That’s the situation when there’s no budget resolution or alternatively the budget committees are formed center of the legislative process. That’s a year when there is a budget resolution, which is the budget committees attach reconciliation to it. And in those circumstances, they are perhaps the most important committees in Congress. It’s all or nothing. Either they’re all powerful or the powerless.
Kevin Kosar:
Amazing. To follow up on this habit of Congress, not adopting a resolution or kind of revenues and spending plan. If memory serves in the last decade, I believe under the Obama Administration, a deal was cut between Congress and Obama wherein there were statutory spending caps for some number of years, which from the first blush, it looks like it almost sort of replaced a budget resolution in terms of having accurate spending limitations, is that right?
Allen Schick:
You’re exactly right. If you have spending caps and spending caps were enacted in 2011, covering the next decade, fiscal year, 2012 to 2021. And that was another reason why many of those years, between 2012 and 2021, Congress failed to adopt the budget resolution because it really had spending caps in place. But there’s a footnote to this story. In almost every year, Congress changed the caps. It’s not the case that Congress enacted the caps, and then complied with them. Congress adopted additional legislation, which modified the spending caps and it also found other ways of running around the spending caps one of which had the very interesting acronym champs. And if you’re familiar with changes in mandatory programs, okay? For example, something around 2014, Congress changed Medicare for about 2025, okay? Knowing that the changes would never occur, but it can count the savings as offsets to the caps and every dollar of savings for those additional money to be spent within the caps. It was a lot of fun by the way.
Kevin Kosar:
Oh, astonishing, astonishing — the level of complexity. Well, so we laid out the present statutory budget process. We’ve also noted that the regular practices deviated far from that. For the sake of giving listeners a little historical perspective, could you characterize the process prior to 1974? And I should say, of course, since the founding, the budget process has evolved many times, but I got the impression from early 1920s to 1974, we had a budget process that was a bit more presidential or executive centric. Is that correct?
Allen Schick:
That’s exactly right. In 1921, Congress passed the Budget and Accounting Act, which empowered the president to send a budget to Congress each year. In effect Congress enlisted the president could be his instrument of spending control. Congress felt we can’t do it ourselves. We’re too fragmented. We have too many interests and therefore let us rely on the president budget to control spending. What happened of course, is that armed with a budget process, the president became what was referred to as the Imperial president. He used budget to buy power to budget, and other presidential powers simply during World War II, the cold war to greatly change the balance of power between the two branches. And so, it wasn’t simply the case that the president had a budget process. The president had a budget process, which dominated what Congress did every step of the way before Congress appropriated, for example, what does the president want?
Allen Schick:
How much more or less are we providing that the president asked for? That kind of budgetary arithmetic gave the advantage to the president. And the aftermath of Watergate and Vietnam, in the late ’60s and early ’70s Congress says, “We don’t want so much presidential domination.” So, as we discussed earlier, it created its own budget process in 1974. What it didn’t do, however, was to eliminate the president’s budget process. So, now we have in Washington for the first time in American history, two power centers of budgeting. Not surprisingly, sometimes they clash. In 2001, the Democrats are trying to fuse them together and if they succeed with the president and Congress on the same page, so to speak, this will be an awesome exercise of budgetary power.
Kevin Kosar:
Yeah. So, let’s talk about today in the strange place we find ourselves in. I should say, as a footnote, I recall reading perhaps something, it was something that you had written when the ’74 Budget Act was adopted, making elected officials vote on aggregates was viewed as a way of creating a disincentive to run deficits and to pile up debt. But it doesn’t seem to work quite that way, because we are now staring down annual deficits of $2 trillion, national debt’s at 28 trillion. And we’ve seen the budget process as we’ve alluded to already devolve into something that looks nothing like the ’74 process and feels like annual adhocracy. But with bills being rolled into omnibuses and reconciliation being used the calendar year after the budget year, how did we get here? Why does Congress drifted so far from the process set forth in the ’74 Congressional Budget Act?
Allen Schick:
It’s very easy to blame Congress for the reasons you just mentioned. Congress follows the procedural advantages of the Congressional Budget Act, but really doesn’t really control the aggregates, which is the purpose of the Act. And there’s a good reason for it to understand the behavior of Congress. The first place you’ve got to look is outside Congress. And the message American voters give to Congress is a kind of conflicting message. We want a smaller government and want bigger programs. Public opinion polls have consistently showed this. Americans think that government is too large. It spends too much, it taxes too much and it borrows too much.
Allen Schick:
However, when you zero in on particular programs, whether it’s defense or social programs or education or infrastructure, Americans overwhelmingly say, spend at least the same amount and often spend a lot more. So, the mixed messages that Congress has received have paralyzed its capacity to do what budgeting does, it’s supposed to do rather to reconcile the parts with the whole. The individual pieces of the budget with the totals in as ineffective pointed out, the parts of the budget determined the totals,. what Congress contemplated in 1974 was the opposite, that the totals would govern the parts. It hasn’t worked out that way.
Kevin Kosar:
Yeah. I mean, you’ve watched Congress a long time and you’ve certainly known many members of the legislature. Does it feel to you as if the incentives to lower taxes and spend more have kind of always been there because the American people are happy to have it be that way, but that members of Congress themselves are just more inclined these days to give into the incentives? They’re less moralistic about running deficits, less willing to kind of throw themselves in front of a spending bill it’s making its way out of the door if the numbers don’t line up?
Allen Schick:
That’s correct, but I would add the point footnote to it, the president. The role of the president, not the legal role, but the central role of the president is just sending Congress totals, which then can govern and discipline what Congress does. We went through a period of four years, the Trump presidency, where we had president submitted budgets with trillion dollar deficits at a time that the economy was very strong. And what happened is we didn’t pay a penalty for it. Interest rates remain very low. Inflation was low. The new incoming president has read that message, the members of Congress have read that message. We can get away, it seems with large deficits and not pay up an economic price for it. That means we don’t have, interest rates are rock bottom low, inflation is negligible. Now whether this will be the case in the future remains to be seen. But for the president, Congress taking these signals, the president is to budgets with high deficits and those high deficits don’t exact an economic penalty.
Kevin Kosar:
Oh, I thank you for reminding us of the interesting macro economic reality that we find ourselves in. I was pointing to the kind of moral fiber of the politicians, but let’s remember inflation and interest rates, which are a significant force and effecting behavior. I recall during the Clinton administration, president had some big ideas about spending initiatives that he wanted to do. And then I believe the bond market got rattled. He remarked something to the fact of like, it was nice to be powerful as a president, but when he dies, he wants to come back as something even more powerful, which is the bond market. And the absence of these outside forces also makes it just easier for legislators to kind of go along with deficit spending.
Kevin Kosar:
I guess I’d want to ask you, you’ve emphasized that the president has a role to play here. Do you think the president can still play a role in curbing deficits or would it be just like when he submits his budget, the document is kind of dead on arrival and Congress would just wave him off and they would ultimately dump an omnibus package on him and he’d have to choose one of the shut the government down in the name of doing the right thing or to just sign it and let it go?
Allen Schick:
Let me make two points. One is the dead on arrival label that you gave to budget, presidential budgets is really important because what it represents is a transformation of the president’s budget from an authoritative statement to policy, into an opening bid at a bargaining process. And this has happened with democratic presidents, with Republican presidents. In both cases, they’re saying, “How do I position myself for the negotiations that will ensue with Congress and we’ll create a real budget?” That has taken a big bite out of the capacity of presidential budgeting. The second point is that we will know about how budgeting unfolds in the future, if and when inflation and high interest rates return. As long as they do not return this president, that is President Biden, is not going to lead the charge for fiscal discipline. He has no incentive to do so. If however, we go into an inflationary period, we’ll notice the president pivoting very swiftly to a different kind of budgetary policy.
Kevin Kosar:
That sounds right to me. Now earlier we touched upon the reconciliation process. And I remember the first time that I looked at the ’74 statute and looked at reconciliation and I thought, oh, this sounds like sound accountancy. You adopt a budget, but reality can change. Incoming revenues might go up or down. And so, you should reconcile the budget to it, reality’s developments. What we have now is very different from that. Can you describe what’s happened?
Allen Schick:
Yeah. What happened is a rule of politics and that is you create a procedure for one purpose. It’s almost certain that at sometime in the future will be transformed the hijacked for different purpose. The original purpose of reconciliation in 1974 had nothing to do with the way reconciliation is used today. It had to do with the fact that there would be two resolutions, in between the two resolutions, Congress would pass revenue and spending measures, which may be inconsistent with the second resolution. And therefore we want just a very limited debate, 20 hours to the Senate to reconcile what Congress just did with the final budget resolution. It turns out Congress did not adopt a second budget resolution. As I mentioned earlier, it even had difficulty adopting the first budget resolutions. Why do it twice in a year when it’s so hard to do it even once in a year.
Allen Schick:
So, all that survived that the ink on the page was something called reconciliation and Congress sensibly actually wasn’t Congress. It was the president who sees reconciliation for its own purpose. Ronald Reagan in 1981, used reconciliation to get his agenda through Congress. The Congress is now simply taking the bare words of reconciliation, which as we note has a limited period of debate in the Senate, not filibuster, only 20 hours, oh, that enabled you to accomplish what you and otherwise will not be able to do. So, this is to go back what I said earlier. Another instance in American political history, where a reform adopted for one purpose ultimately gets used for totally different purposes.
Kevin Kosar:
So, this leads me to ask the question, which is the title of this episode, can Congress budget? And perhaps I should have phrased it as can Congress budget well?
Allen Schick:
The answer is, yes, but only with the assistance of the president. In other words, the president has to provide a safe Harbor, so to speak for Congress in order for Congress to make tough decisions. And I mentioned it because Congress is much more exposed than the president. Members of the house have two-year terms, Congress — there are 535 different voices in Congress pulling in many different directions. So, Congress does need the leadership of the president if it’s going to have budgetary discipline. Without that leadership, Congress is not going to be front center saying, “Let’s make all these very tough decisions, which would actually do my reelection chances.”
Kevin Kosar:
Yeah. I mean, it looks to me that the kind of natural pluralistic forces in the country, all of which are most of which these days are organized or represented in Washington at one way or another are all pushing for the thing that they want, whether it’s keep lower this tax or increase this spending, et cetera. And you put that all together and you have all those forces hitting upon Congress. It would seem fairly natural for the legislative body, which has to be representative to respond and to give in. And that would kind of naturally lead to deficits. There’s just not a whole lot of groups in society who are regularly advocating to raise taxes and doing so with Gusto. And you rightly point out that president is a unique actor.
Kevin Kosar:
He can create to a degree, public opinion through leadership, by emphasizing certain things like, let’s get our fiscal and order. That noted, I’ll just ask a follow up to help us close out the program. Listeners might be to some degree despairing of the state of the budget process right now. Yes, we can hope for a president who will be strong in this area. What else can we do if we can’t have that great man come in, or great woman come in and lead from the executive office and improve our budgeting, is there any way we can fix the ’74 CBA to make it less likely to fail?
Allen Schick:
Yeah. There are things you can do to be more transparent, to have more activity, more independence. I don’t think they’ll add up to a fundamental change in legislative behavior. Unfortunately, my own view is that things have to be bad for budgeting to get better. In other words, you’re looking at the situation. When would the president go to Congress and say, “We have to exercise budgetary discipline.” That’s only whether it’s the bond market or the economy as a whole seem to be providing signals that overspending, over borrowing maybe under overtaxing by Congress is creating economic problems. We’re not in that situation right now. Right now, we’re worried about the pandemic getting over it.
Allen Schick:
If it turns out that in the period after the pandemic, that the economy is stable, the president will continue to propose significant deficits. If it turns out that as we mentioned earlier, interest rates and inflation move in an adverse direction, you will see the president coming before Congress as saying, “We have to be disciplined.” What the president will not do is say, “I’ve changed my mind.” The president will make it appear as any president would as a natural evolution in policy. This is appropriate in 2021. Now we’re in 2022, 2023, and we need to sing at a different choir.
Kevin Kosar:
Dr. Allen Schick, thank you for being on the program and answering the question, Can Congress budget?
Allen Schick:
Thank you very much, and let’s wait and see whether it can.
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