July 20, 2014
The Congressional Budget Office last week issued one of its periodic long-term budget outlooks. Its themes are distressingly familiar. There is no balanced budget in sight. Under favorable assumptions, the CBO projects deficits of $7.6 trillion from 2015 to 2024. Under less favorable (maybe more realistic) assumptions, the added debt would total $9.6 trillion. The big drivers are an aging population and rising health spending. The deficits materialize despite slightly higher taxes and squeezed spending on defense and most programs — for transportation, law enforcement, education and much more — that don’t support the elderly or supply health care.
The CBO pronounces present policies “unsustainable,” but it does not know — no one does — when and how a breakdown might occur or what the consequences might be. It warns that large deficits will crowd out private investment, reducing future living standards. It speculates that excessive debt might someday so frighten investors that they would retreat from Treasury bonds and cause a financial crisis. Finally, it notes that the huge debt could handcuff government’s ability to respond to emergencies: wars, financial crises, recessions.
It’s worth asking how we got into this hole and why we can’t dig out. Some answers are obvious. Politicians of both parties dislike cutting spending and raising taxes; so they don’t. It’s also true that until the 1960s there was a consensus to balance the budget in good times. Presidents Kennedy and Johnson shattered this consensus on the advice of Keynesian economists, who argued that strategic deficits could spur economic growth. The moral stigma of deficits diminished. Republicans soon embraced the new consensus. It made passing their tax cuts easier.
But unending deficits have another cause: what might be called the “process illusion.” This is the notion that Congress could write budget rules forcing it to make unpopular choices.
We are marking the 40th anniversary of theCongressional Budget and Impoundment Control Act of 1974, the granddaddy of process rules. Until the 1970s, Congress lacked a coherent budget process. Appropriations committees controlled spending; the Senate Finance Committee and House Ways and Means Committee oversaw taxes. Budgets simply resulted from their haphazard decisions. Reacting to this and to deficits, President Nixon resorted to “impoundments” by refusing to spend money Congress had appropriated. Congress was infuriated.
To restore its power, Congress passed a budget law that was a model of rationality. It created House and Senate budget committees to set overall spending and tax priorities in annual budget resolutions that Congress would debate and approve. If goals clashed with existing law, the committees with jurisdiction over programs and taxes would make changes, a procedure called “reconciliation.” A rigid calendar governed when each step would be met.
“No longer would Congress enjoy the luxury of voting for a popular new spending program, or for a tax cut, without being aware of the impact on the overall budget,” wrote journalist Joel Havemann in his 1978 book “Congress and the Budget.” “Congress would have to face up to the federal deficit.” That was the idea.
It hasn’t turned out that way. Congress repeatedly ignored the law. There are no effective penalties. Congress is supposed to finish the budget resolution by April 15. In the past 30 years, the deadline has been met four times, reportsthe Committee for a Responsible Federal Budget, a research and advocacy group. Congress hasn’t even passed a budget resolution in eight of the past 16 years.
Congress has adopted other budget rules to subdue deficits:Gramm-Rudman-Hollings ; “paygo”; discretionary spending caps; sequestration. At best, the effects have been marginal. All these rules suffer from the same defect: They try to accomplish big political and social changes through technical, mechanical means that, by design, mystify the public. But once the consequences become clear, politicians retreat. They circumvent, modify, ignore or weaken the rules.
Except in crises, which create their own logic, our political system requires the support or (at least) the acquiescence of public opinion to make major changes. The only way to cure chronic deficits is to cut someone’s benefits or raise someone’s taxes. But this requires an open debate to reshape public opinion. What is government’s proper role? Who deserves benefits? What taxes are effective and needed?
These are precisely the basic questions that political leaders of both parties evade, because the answers would offend much of the public. They would jeopardize the protected status of all of today’s benefits for the elderly. They would reveal that, even after plausible spending cuts, only higher taxes can balance the budget. Presidents and congressional leaders have judged this sort of candor to be a pointless exercise in political suicide.
Instead, they take refuge in “budget process” fixes. What we’ve learned after four decades is that, as policy, this is little better than prayer.
Read more from Robert Samuelson’s archive.
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