Reflecting on the Congressional Budget Act
Philip Joyce looks back on the legacy of 1974... and ahead.
After having been away for several weeks, I’m still catching up. Happily, there has been some good work in the fiscal realm recently, as the 50th anniversary of the CBA approaches.
Philip Joyce is a Professor of Public Policy at the University of Maryland (among other titles), who is an expert on federal budgeting and Congressional support agencies. He recently authored a paper for Brookings, examining the various impacts of the Congressional Budget Act over the past 50 years, how they measure up to its original intent, and evaluates some possible reforms. Just up our alley!
I will highlight some key points below.
The Legacy of 1974…
Recall the original intent of the Act: to shift both de facto and de jure budgeting power away from the President into the hands of Congress. The main impetus was President Nixon’s liberal impoundments of allocated funds for uses he disagreed with - not the first President to do that, but his Watergate political troubles gave an opportunity for the legislative the wrestle some power back from the executive. The CBA set up rules and a timetable for our now-familiar dance between Congress and the Administration, the House and the Senate, and to some extent between the parties, in the process of formulating a budget. In practice, nobody has stuck to the original prescriptions, but the Budget Act at least established a center of gravity.
It also created the House and Senate Budget Committees, which, from the perspective of individual legislators, are not very prestigious. However, on the whole, they provide crucial institutions to set the annual fiscal agenda and hold other committees accountable.
Further, it created the Congressional Budget Office, which has probably done more to hold the legislature accountable in its fiscal policy than any other organization - at least normatively, since CBO is an exclusively advisory body.
Finally, it established reconciliation rules, which are now used to bypass the Senate filibuster and speed along fiscal legislation. Unsurprisingly, this has not worked as intended. Dr. Joyce expands on these elements in his paper.
Joyce evaluates the Budget Act’s performance over the last 50 years.
First: the law has effectively controlled impoundments.
The kinds of presidential overreaches that were common during the period just prior to the enactment of the law have been effectively eliminated because of the impoundment control provisions of the act. Presidents have periodically proposed cancellations of budget authority, but the Congress has often substituted its own spending reductions. The Congress has, therefore, not only been in the driver’s seat concerning whether reductions will occur, but also has been with respect to which reductions will occur. [emphasis added]
Success! It seems that considering the track record, absent the CBA, Presidents would have pursued less responsible fiscal policy than otherwise.
Second: the budget process has gotten less timely.
… in the 48 fiscal years since [the start of the fiscal year was extended] only three have seen all appropriation bills become law prior to October 1, and none of those occurred in the past 25 years. It is an open question whether the Budget Act itself has made the situation worse, although adding a layer to the process (the budget resolution) has made the process more time-consuming. At a minimum, however, it is clear that the process is in fact significantly less timely than it was 50 years ago.
Moreover, while late appropriations had been a problem even before the Budget Act, government shutdowns had not, as agencies routinely kept spending into the next fiscal year, even absent an appropriation. A 1981 opinion by Attorney General Benjamin Civiletti, however, held that to spend money in absence of an appropriation (for discretionary programs; that is, those that are funded through appropriations bills) was a violation of the Antideficiency Act of 1884, as amended in 1950 (Civiletti, 1981). This meant that, absent a regular or short-term appropriation (called a continuing resolution, or CR), agencies had no legal authority to spend money and needed to shut down. Thus, the impact of late appropriations was much more serious after 1981 than it had been before.
This chronic lateness has been getting worse and worse, and continuing resolutions have become more and more necessary to keep the lights on. Giving Congress an extension on its budgeting has seemingly incentivized them to delay even further (this year, it was by around 6 months).
Third: Congress can present comprehensive alternatives to the president’s budget, but usually does not.
It has unquestionably done that, often offering the public and the press an alternative fiscal path to that presented in the president’s budget. For example, during the Clinton administration, budget resolutions passed by Congress frequently were at odds with Presidential priorities, to such an extent that these differences in priorities led to a long government shutdown in 1995 and 1996. Later, and particularly when Paul Ryan (R-WI) was chair of the House Budget Committee, that committee routinely passed budget resolutions that argued for a substantially different fiscal policy path than the path envisioned by President Obama.
…
Further, especially because of the creation of CBO, the Congress had sources of information on the costs and (sometimes) effects of budget policy that just were not available before the Budget Act. The result of this was to diminish the influence of the Office of Management and Budget (OMB) because it was no longer the only game in town when it came to budget numbers.
Success again… kind of! However, Joyce adds:
It should be noted that the act has permitted the Congress to present such an alternative path, but only when it wants to. The frequent inability of the Congress to agree to budget resolutions has often compromised the ability of the Congress to stake out such an alternate vision. The efficacy of the budget resolution as the vehicle for presenting such an alternative has also been affected by the tendency in recent years for top-line appropriation agreements to be reached by the congressional leadership rather than by the Budget Committees.
So, it has been very much a mixed bag thus far. We can’t know the (White House-dominated) counterfactual, but can certainly identify the process’ strengths and weaknesses going forward. Joyce drills down on what he considers to be the two most important and lasting impacts of 1974: reconciliation and the CBO.
Reconciliation
There used to be two budget resolutions: one in April, the other in September. Reconciliation instructions were there so that the appropriations committees could bring their proposed changes in line with the budgetary expectations established with the first resolution. Therefore, by the time the second resolution rolled around, the two would be “reconciled.” The latter could then be passed expeditiously before the new fiscal year.
But, Joyce explains, there have been some key changes that have increased the salience of reconciliation beyond its original intent.
During the early Reagan years, the second resolution was effectively scrapped, and reconciliation was moved up to April, although it is not required. Now, Congress is supposed to1 pass the resolution, followed by the actual budget in September.
This change in timing has enabled the Congress to have time to consider many more detailed changes to law through reconciliation than were ever anticipated when the process was initially established. Thus, the expanded scope of reconciliation—to cover mandatory spending and revenues, rather than appropriations—could arguably not have occurred without this timing change.
Legislators occasionally took advantage of the expedited reconciliation process to sneak in non-fiscal provisions to budget resolutions. In response, Senator Robert C. Byrd (D-WV) effectively established the “Byrd Rule” - enforced by the Senate Parliamentarian - which prohibits such “extraneous” amendments. The definition of “extraneous” is somewhat open to interpretation, but covers proposed changes to Social Security, those outside of committee jurisdiction, those causing Congress to miss reconciliation targets, “incidental” changes to fiscal targets2, and changes raising deficits beyond the time horizon covered in the bill. Joyce explains why Byrd is important:
A couple of the above changes have had significant impacts on the scope of, and the time period covered by, reconciliation. For example, an amendment to raise the federal minimum wage in 2021 could not be included in a reconciliation bill because of the Byrd rule, because its budgetary effects were considered “incidental,” even though CBO had estimated that it would increase deficits by $64 billion over ten years (Kogan and Reich, 2022). And many changes in tax law (most recently the Tax Cuts and Jobs Act of 2017) include “sunset” provisions so they do not run afoul of the Byrd rule’s prohibition against out-year deficit impacts. This has, in turn, sometimes meant that outyear baseline estimates were systematically understated, as these estimates assume current law (in this case, that taxes would be raised when the law sunset), even though few people believe that this would be allowed to occur.
In practice, the focus and scope of reconciliation has changed as well:
Initially, reconciliation was focused primarily on appropriated spending. Along with the changes in timing referenced above, reconciliation is now solely used to make changes to mandatory spending and revenues. During the debate on the American Rescue Plan Act, there were (ultimately successful) attempts to “reclassify” several hundred billion dollars in the bill as mandatory so that spending could be enacted through reconciliation (Krawzak, 2021). … The fact that it is now applied to years beyond the budget year (now typically 10 years) means that reconciliation can be used to make multi-year changes to tax and spending policy.
The Budget Act doesn’t actually mandate deficit reduction, and the Byrd Rule is based upon Congressional norms and procedural interpretation by the Parliamentarian. So, if norms change and precedents are set, things can snowball.3 The original intent was to bring budgets closer to balance, but in recent decades, the reconciliation process has been used to do the opposite:
A notable example of this was the 2001 tax cut proposed by President George W. Bush and enacted by the Congress. That legislation was enacted, to be fair, in the context of projections by CBO and OMB that showed 10-year surpluses in excess of $5.6 trillion (Joyce, 2011a); therefore at the time they were viewed as not deficit-increasing, but surplus-reducing. Supporters of using reconciliation to enact that legislation argued, correctly, that there was nothing in the Congressional Budget Act that prohibited using that process to cut taxes. This then paved the way for further deficit-increasing reconciliation bills…
Efforts have been made at various times to prohibit the use of reconciliation to enact changes that would increase deficits. In 2007, both the House and the Senate (under Democratic control) adopted rules to that effect. The House repealed that rule in part (permitting deficit-increasing revenue provisions, but not mandatory spending increases) when Republicans took over in 2011, but the Democratic-controlled House repealed that rule in 2021.
Politicking strikes again! Do the rules of the game guide the players, or the other way around?
At this point, reconciliation has morphed into a way of getting things done in Congress, so long as they are tangentially fiscal.
This is because the Congressional Budget Act limits debate on a reconciliation bill to 20 hours. The practical implication of this constraint is that a reconciliation bill cannot be filibustered. Therefore, particularly during times of unified Congressional control, reconciliation enables the passage of partisan legislation.
Joyce also notes that, contrary to the CBA’s original intent, reconciliation has now weakened the power of committees, shifting it to that of the leadership:
Practically speaking, this has involved the leadership deciding on the scope of what will be included in a reconciliation bill, rather than actually deciding on the specific policy changes that will be made to meet reconciliation targets. But that “agenda-setting” role for reconciliation has tended to move authority away from the Budget Committees and toward the leadership.
The Congressional Budget Office
Although its role has somewhat evolved over the years, the CBO (in contrast to reconciliation) has stayed true to its mission. In fact, its influence has only grown. The opposite could have been true, with the Office fading into obscurity, or worse, becoming a partisan football.
Yet, under Alice Rivlin’s inaugural directorship, CBO developed a reputation for neutral and careful cost analysis. This has been carried on by subsequent directors.
In March 1975, Rivlin convened a key organizational meeting to discuss how the agency would be organized. A couple of key decisions that had their impetus in that meeting that remain to this day concerned the desire to separate the budget analysis and broader policy analysis (those staff engaged in longer-term studies, rather than short-term cost and baseline estimates) functions, the decision that CBO would not make policy recommendations, and the creation of an internal culture focused on true policy neutrality and analytical excellence. Some of the individuals present at that meeting also ended up being hired into the initial key CBO leadership positions.
The secret sauce of organizational culture was just right, and this time, incentives aligned productively:
There is a general recognition that it is not in the interest of the Congress, and particularly the Budget Committees, for CBO to be viewed as weak and for CBO credibility to wane. … Subsequently, CBO’s profile has tended to be raised when its analyses appear to throw cold water on the initiatives and assumptions of presidents.
And they have thrown that water consistently. Perhaps some parallels could be drawn to the bipartisan credibility of the Base Realignment and Closure (BRAC) commissions, and the proposed fiscal commission in its image.
Unfortunately, when deficits are out of the political spotlight, so is the CBO. Joyce notes:
[When public attention was focused on deficits], comparisons of CBO projections of the effects of current or proposed policy tend to get more attention. … At least over the past 15 years, the focus on Congress has not been on deficits and deficit reduction. … During this time, CBO’s influence, in a macro budgetary sense, has been more limited.
That said, the CBO doesn’t need to have a high public profile. Most of the time, committees and even members turn to it for invaluable advice on routine legislation. Even though the Office is not statutorily required to produce most of the estimates it does, those smaller tasks can have a large cumulative impact.
The CBO cost estimating process is highly influential, perhaps particularly behind the scenes. CBO does many informal cost estimates each year, resulting from congressional staff reaching out with proposals that have not yet gone through the committee process. In fact, the typical pattern for a given piece of major legislation involves a substantial amount of back-and-forth between CBO and the relevant committee or committees.
Again, norms are hugely important, and these linkages are a hugely productive one. Similarly, from a political messaging perspective, CBO has provided a legislative counter to the executive’s OMB, which used to be the only (official) game in town. Regardless of which agency’s estimates one prefers, this counterweight has been a crucial component of the CBA’s intended rebalancing of budgetary authority away from the White House.
Joyce also discusses why CBO has remained institutionally strong over the years, referencing a paper by Philip Rocco of Marquette University. In the interest of your time, I will expand on this topic in a separate post.
…and ahead.
The author concludes with some questions about the budget process going forward. The answers are not obvious, but in my estimation, these are the right questions.
Can the budget resolution be rescued as a meaningful way for the Congress to affect fiscal policy?
The budget resolution was intended to be the mechanism for Congress to set a path for overall fiscal policy. Rather than being a genuine means of doing so, however, it has degenerated into an opportunity for partisan political posturing. Further, in many years the Congress has failed to enact budget resolutions at all.
… Perhaps the best example of political posturing comes during the “vote-a-rama” in the Senate…
Also recall that Budget Committees, from the perspective of ambitious politicians, are not viewed as very prestigious. Much better to sit on an appropriations committee, for example. Joyce also points out that the Republicans have established term limits for their Budget Committee members, meaning high turnover and loss of crystallized knowledge.
One way, therefore, to make the Budget Committees more attractive, and therefore more powerful, is to change its membership. … [we could change] the membership of the Budget Committees to include the chairs and ranking members of the most important committees, with respect to their control of tax and spending policies…
He also mentions a common refrain of fiscal wonks: targeting.
Another reform that has been advanced is to have the budget resolution explicitly set a target for debt reduction, using a ratio such as debt-to-GDP. As the budget resolution covers multiple years, the resolution could (for example) set such a target and chart a path that achieved it over a ten-year period.
Has the reconciliation process been, on balance, a positive development, and how might it be changed to make it more effective?
Although it bypasses the filibuster and therefore gridlock, reconciliation just incentivizes partisan policymaking which may be undone by the next Congress. This is not the fault of reconciliation per se, but its use in the context of increased polarization.
He offers a few options:
i) Eliminate reconciliation.
Particularly because many of the changes that have occurred through reconciliation in the past 25 years have added substantially to deficits, the argument is that reconciliation has made it too easy to make these budget-busting changes.
Of course, that goes both ways. It has been used in the past to reduce deficits. Further, how would we even get budgets passed? It’s not impossible, but:
It is also reasonable to ask whether, in the absence of reconciliation, there is any reason to pass a budget resolution.
ii) Leave it alone.
If reconciliation is necessary to get anything of fiscal importance done, what is the alternative? It’s a reasonable argument, for the time being.
iii) Permit reconciliation to be used only for deficit reduction.
This is a bit more nuanced. Reconciliation has, as mentioned, been recently used for deficit-expanding legislation. Perhaps, as the Committee for a Responsible Federal Budget has recommended:
… reconciliation be returned to what was arguably its original purpose—deficit reduction by “restoring and codifying the ‘Conrad rule.’” This reform would establish a 60-vote point of order against reconciliation bills that increase deficits over the period covered by the budget resolution.
iv) Reduce the constraints caused by the Byrd rule.
In particular, it prohibits using reconciliation to make any changes in Social Security. Given the uncertainty regarding the health of Social Security, with the OAS Trust Fund slated to become insolvent in less than 10 years (Congressional Budget Office, 2024), it seems short-sighted to tie the hands of the Congress by prohibiting the use of reconciliation for changes in this program.
How can CBO best be sustained as a source of nonpartisan information for the Congress?
A few ideas:
i) Congress as a whole must continue to defend CBO.
Periodically, and particularly when the White House has been under the control of the same political party as one or more of the houses of Congress, some members of Congress, and even some Budget Committee members and individuals in Congressional leadership, have questioned the need for CBO. … Such criticisms are short-sighted, as a weakened CBO invariably weakens the Congress and strengthens the presidency.
ii) Codify and solidify the procedure for selecting directors.
In practice, an informal process has been developed where the House and the Senate alternate taking the lead in identifying candidates. There is also no limit in the law concerning the number of terms that a given director can serve, and also no specific provision suggesting what happens if a given director’s term expires and no successor has been named. … It would be useful to codify a more specific set of selection procedures (Rivlin and Domenici, p. 19).
iii) Prohibit expensive and even urgent bills from consideration without a CBO score.
This could, from a practical perspective, mean establishing points of order, with supermajority requirements, which cannot be waived except in documented emergency situations. The Congressional leadership would need reassurance that CBO would produce estimates quickly enough for Congress to be able to do its work if such a rule was put in place. … it compromises the very purpose of CBO cost estimates if the most expensive bills can be passed without the Congress having information on their cost.
iv) Ensure that the budget process follows its own timetable (which they haven’t done in many years).
The failure to adhere to [the October] deadline likely explains much of the lateness of Presidential budgets, which then creates a domino effect with respect to CBO products and the budget resolution. It also results in the CBO baseline being out of date because it is based on numbers in a continuing resolution, rather than a regular appropriation. It should also be noted that the budget process has more, and better, information than ever before, but the demand for this information has been in decline for many years.
This paper is valuable not only in its scope, but also its attention to detail. Joyce establishes context, distills the most relevant factors, and meticulously analyzes them in a straightforward manner. Again, read the full thing when you have time.
He ends with this:
It is reasonable to question whether the Budget Act is asking the Congress to do something—set overall budget priorities rather than focus on narrow political or parochial interests—that it is just not well suited to do. This argument was advanced almost 35 years ago by Louis Fisher (Fisher, 1990)… Fisher’s argument was that it was presidential leadership that promoted fiscal responsibility, and that expecting fiscal responsibility from the Congress was unreasonable. It should be noted, however, that presidential responsibility itself can be elusive, and one can come up with more examples of presidents who did NOT embrace fiscal responsibility than those who did …
If the Congress is to play a credible role in setting fiscal policy, particularly given the current and projected future trajectory for the debt, it needs to take that role seriously. This means making use of the resources it has not to simply score political points, but to make decisions that are in the long-term public interest. Otherwise, we may have to acknowledge the 1974 Act, as Fisher predicted, as largely a failed experiment.
Emphasis on “supposed to.”
This is more fuzzy and complicated. See Kogan and Reich (2022) for more on the Byrd Rule and reconciliation generally.
Regular readers may note that political norms have repeatedly shown to be the most powerful influences on budgetary practice.