The Magazine

To Be Continued

The Democratic Congress's inadvertent budget reform.

Feb 26, 2007, Vol. 12, No. 23 • By JAMES C. CAPRETTA and YUVAL LEVIN
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Amidst the clang and symbolism of the new Democratic Congress's first month, between the hundred-hour marathon and the posturing about Iraq, a peculiar thing has happened. In a matter of a few weeks, with only minor controversy and little fanfare, a 2007 federal budget has taken shape that includes only modest increases over last year's spending, some minor substantive adjustments to programs, and essentially no earmarks. The House passed it on January 31. The Senate followed suit last Wednesday. It happened for political convenience but, inadvertently, may point the way to a better appropriations process. If congressional conservatives are paying attention, they may just find in this ad hoc experiment an exceptional opportunity for budget reform.

The budget in question is technically not a budget at all, but a "continuing resolution" or CR. CRs are typically used to bridge the gap between the start of a new fiscal year and enactment of a regular, full-year appropriation. Continuing resolutions do not enumerate resources for every agency and program. Instead, they use formulas to "continue" funding at a previously established level, usually the amount provided in the prior year, plus or minus some percentage. The last CR was enacted in December by the previous Congress and expired February 15.

The CR just passed to replace it is not typical, however. For starters, it is not a temporary measure. It continues funding for all federal agencies and programs that have not yet gotten a full annual appropriation--that's everything except Defense and Homeland Security--through September 30, the end of the fiscal year. In other words, for most federal agencies, this CR is the last word for 2007, and will stand as their budget for the year.

Further, CRs are usually brief documents, as it takes just a few pages to specify a funding formula and provide rules for special circumstances requiring exceptions. The House-passed CR is not brief, however; it runs 137 pages with some exceptions provided in just about every department and agency of government. Many of the exceptions are understandable and necessary, as there are some critical agencies that simply cannot function well at last year's funding level. Of course, some exceptions also reflect the Democratic majority's spending priorities.

The Bush administration has stated that the total funding provided in the bill is acceptable, but complained that the formulaic approach shortchanges certain new priorities and fails to seize "opportunities for savings." Fair enough. But these criticisms have more to do with substantive disagreements with congressional leaders over spending priorities than the process used to get there.

And the process Congress has followed this winter has much to commend it, particularly when compared with what usually happens. Congress's "regular order," as it is called, involves 11 separate appropriations bills every year, each crafted through a lengthy and often incomprehensible process of committee and subcommittee action. The House and Senate appropriations committees draft, consider, and amend each of the 11 different bills and bring them separately to the floors of the respective chambers for debate and amendment. Each chamber passes its bills, and the two then work out their differences in conference before sending a final version to the president.

Under the best of circumstances, the process takes many months--starting in the spring and ending in September, before the start of the new fiscal year on October 1. But the best of circumstances almost never occur. Fundamental disagreements between the parties over budget priorities mean that, in a normal year, the minority party has little to gain from cooperation. The Senate often poses a particular challenge in this regard; without unanimous agreement on the terms of debate, any senator can bring the chamber to a halt for days on end, making progress on contentious spending measures nearly impossible.

In a typical year, Congress bravely embarks on the appropriations journey in late spring, with ritual expressions of determination to finish on time. Sometime in early fall, however, after one of the bills has gotten hopelessly bogged down in the Senate, the leaders are forced to admit defeat and pull the plug on the regular process. Whatever bill has managed to make its way through both chambers becomes the vehicle for an "omnibus" measure encompassing the entire rest of the budget. Weeks then pass as the appropriations committee chairmen work in secret to assemble a bill that stands a foot high on members' desks. The 2005 omnibus appropriations bill ran more than 3,000 pages. Late in the year, the omnibus emerges from a closed-door conference committee and is presented as a "take it or leave it" proposition to rank and file House and Senate members, most of whom could never have the time to read it even if they wanted to.

This way of doing things is not only convoluted and inefficient, it also creates a natural breeding ground for earmarks and micromanagement. Members with a gift for manipulating the numerous (and often hidden) contortions of the process can tuck away a great number of spending requirements in the folds of the gargantuan bills. In the 2006 process, Congress passed more than 12,800 earmarks. Depending on who you ask, this year's continuing resolution has either completely eliminated earmarks or buried a modest number in the fine print.

In the coming months, as the government lives under this new CR without the sky falling, perhaps the time will come to ask what is wrong with making something like this--a trimmed-down process by which Congress each year formally amends the previous year's budget rather than starting from scratch--the new budgeting routine?

One potential disadvantage of a continuing resolution approach is a diminution of Congress's much-vaunted "power of the purse." But for too long, Congress has confused its power of the purse with the executive's authority to manage the daily operations of the government. The federal budget has become a tool of micromanagement, which neither improves the functioning of government nor serves the interests of its constituents. Earmarks and comically specific mandates to the executive are not the power of the purse. Congress, through its power to appropriate, can set priorities for the federal government and require the executive to serve those causes, but a process that hides key priorities beneath mountains of minutiae does not serve that purpose. A budget process that involves necessary changes, rather than a set of massive and indecipherable ex nihilo bills each year, would not reduce the power of the Congress to legislate changes in the way public money is spent. It would merely rein in the capacity of Congress to do so in the dark, and beyond its proper bounds.

Executive branch supremacists, meanwhile, could argue that such an approach might actually limit the president's sway, since his ability to use the veto would be constrained. Rather than confronting 11 separate bills, each of which he could threaten to veto for causes unique to that bill, he would now be confronted with a short list of amendments to the previous year's budget, which he would have to take whole or reject entirely. But in fact, the current broken budget process often produces the same result--only with a massive omnibus budget bill rather than a brief and manageable continuing resolution.

A further objection may be that CR-type budgeting would limit the ability of government to respond to changing circumstances. But by enacting exceptions and revisions, Congress could direct its attention to key national needs, and, by giving the executive more leeway in execution (combined, ideally, with more stringent oversight), such a process could actually improve the responsiveness of the federal budget to changing priorities--recognizing that such changes are in fact few and rare, but important.

Finally, fiscal conservatives might argue that building each year's budget on top of the previous year's would set in stone programs that ought to be reconsidered each year. But the current budget process already works that way. As Ronald Reagan once remarked, "a government bureau is the closest thing to eternal life we'll ever see on this earth." The key difference in a refined CR approach would be to lessen the room in the process for fraud and abuse, and for earmarks and hidden new spending. If Congress wished to eliminate a program, it could do so through an exception or rescission.

True, if Congress were in the habit of routinely cutting spending, a refined CR approach would not make sense. But since novelty in the budget almost always means new and greater spending, an approach that highlights and constrains the new should be welcome to fiscal conservatives. It would act as a natural restraint on the appropriations process, and would trim fat from a system that has grown morbidly obese.

An annual continuing resolution may not be ideal, but it would be significantly better than the process we have now. It could evolve into the most significant budget reform in decades and an enormous, if unintended, gift from the new Democratic Congress to the cause of budget discipline.

Yuval Levin and James C. Capretta are fellows at the Ethics and Public Policy Center.