Terrible, No Good, Very Bad Ways of Funding Government
Maya MacGuineas testifies before Congress about the cost of budget dysfunction
I am finishing up Part II of my series on the full cost of the current budget process, this time looking at the broader economic consequences, rather than just the fiscal drawbacks.
In February 2018, just after the January 2018 shutdown, CRFB President Maya MacGuineas testified before the Senate Subcommittee on Federal Spending Oversight and Emergency Management. Her testimony covered several areas in which our broken budget process is causing serious harm to the United States. I am optimistic in believing that her writing on this issue has moved the needle in our current era, but it’s also rather sad to see how little has changed since 2018.
All of her recommendations in the testimony are relevant today, considering we have the second budget deadline (i.e. the most contentious of appropriations fights) looming this Friday the 22nd. Not only does our current budget process have significant fiscal costs, but CRs, omnibuses, debt limit fights and more impasses harm us in ways seen and unseen.
I will again link the full testimony below, but here is a summary of her main points:
Continuing resolutions and the threat of shutdowns.
These are a major impediment to agency functioning, draining resources and creating unnecessary waste. Even if a CR averts a shutdown, agencies are often prevented from beginning new projects or trimming old ones. Also, agencies have to prepare for the possibility of shutdown within a week of a deadline.
According to Navy Secretary Richard Spencer, inefficiencies arising from continuing resolutions have caused the Navy to waste $4 billion since 2011.
Remember, that quote is from 2018.
Further, when appropriations bills are set in omnibus packages at the last minute, it increases the probability that there will be wasteful spending included to “grease the wheels,” reflecting the fact that Congress does usually not have enough time to fully evaluate the bills in such instances. It’s do or die, and members usually select “do,” even if there are changes they would propose if there were more time available.
Actual government shutdowns are even worse.
I’ll just leave a quote:
For one, putting contingency plans in place has a real cost. The uncertainty of whether or not the government will be funded can also cause federal contractors to include risk premiums in their bids to account for the possibility of not being paid. User fees and other charges often go uncollected during a shutdown, and while many federal employees are forced to be idle, they have historically received back pay.
Mandatory spending (i.e. unfunded entitlements) is our single biggest threat.
There is no political incentive or appetite for reforming mandatory spending. The longer we ignore this, the smaller the breathing room becomes for discretionary spending.
Political will is the lynchpin of any potential comprehensive reform.
MacGuineas recognizes that large overhauls expend a lot of political capital. She therefore recommends several incremental reforms that are likelier to have bipartisan support and a smoother passage through the legislative system. In short:
Automatic Continuing Resolutions
Biennial budgeting
Make the budget resolution into a law
Punishments [on Congress] for failure to meet deadline
Real overhaul requires some big procedural changes: fiscal goals and longer-term budgets.
Separate the fiscal aspirations from the actual budgetary reality, instead of bundling the two together - a marriage which creates our current woes. Divide the budget resolution into two parts, recognizing this incongruity.
Separating the governing documents from the incredibly important work of setting a fiscal goal could reduce partisanship in the appropriations process.1
The above has just been a summary. I would suggest that you read Maya’s full testimony - it’s worth your time. She concludes with:
Lurching from shutdown to shutdown is a terrible way to govern. While it is good to avoid shutdowns, it is not much better to rely on continuing resolutions to fund the government for months, then finally set spending levels months into the fiscal year.
The testimony lists relevant recommendations from the Peterson-Pew Commission on Budget Reform.