Congress Should Look To The States For Advice About Budgeting

Last Friday President Biden signed a bill to keep the federal government funded for another two months. This stopgap measure means there will not be a shutdown over the holidays, but it is not a long-term solution. The federal budgeting process is broken and needs real reform. Congress should take a lesson from states such as Indiana and Florida and adopt a unified budget that puts all spending and revenue in the same annual budget bill.

The federal budget is a mess. The annual deficit has been growing rapidly over the last several years and total federal debt is on track to hit nearly 120% of GDP by 2031 under proposals currently being discussed. As a result, interest payments on the debt would surpass $1 trillion by 2031, as shown below, or nearly 17% of all projected tax revenue collected by the federal government that year.

The reconciliation process the Democrats are trying to use to pass the budget-busting Build Back Better proposal was originally conceived to help Congress reduce budget deficits. Since it is clear this is not working, something new is needed to get the budget under control. A unified budget would be a significant step in the right direction.

As explained by Americans For Prosperity Senior Fellow Kurt Couchman in a new paper, a unified budget is a simple concept: The various authorizing committees in the House and Senate—energy and commerce, veterans’ affairs, education and labor, etc.—would report mandatory spending amounts on the programs under their jurisdictions to their respective Appropriations Committees, which are the committees responsible for actually allocating money to various programs.

The Appropriations Committees would package these submissions unchanged, along with the appropriations bills, into a single unified budget bill that would then move to the House floor for debate. Here, other members of the House could suggest amendments to the entire bill while having the complete proposed budget in front of them for context. The same process would then occur in the Senate until both bodies of Congress settled on a final bill to send to the President.

As Couchman explains, a unified budget has several advantages over the current process. First, it would help Congress identify duplicate and unauthorized programs since all the programs would be out in the open in one bill. As an example, there are currently 160 housing programs across 20 federal agencies that do similar things. Forcing Congress to confront this duplication via one bill would help it streamline programs and reduce waste.

Second, it would be easier for Congress to update lapsed authorizations. Right now, there are several authorizing committees with more than $30 billion each in expired authorizations. This means hundreds of billions of dollars are being spent despite no current authorization from the appropriate Congressional committee. This is an egregious violation of the rule of law and should be unacceptable in a country like America.

Third, a unified budget would create more opportunities for members of Congress to make an impact on policy. In the current process, Congressional leadership and the President largely negotiate the budget among themselves while other members are expected to fall in line and vote as directed.

Since the sidelined members of both parties cannot impact policy, they often find it easier to get voter and media attention by playing to their base. If instead they were brought into the budgeting process via their committees and the opportunity to add amendments on the floor, they may discover it is in their interest to be more cordial to one another to find allies for their amendments. As a result, Congress would be less dysfunctional and hostile.

A unified budget is the norm for many other institutions. As shown in the figure below, 14 states pass a single bill to finalize their budgeting process, while another 16 states only need two to five bills, far less than the 12 appropriations bills Congress uses to merely pass less than a third of overall spending.

The budgeting process in states like Florida, Colorado, and Indiana is more transparent, inclusive, and efficient compared to the convoluted Congressional process. As Couchman notes, Congress could make its process similar with a few adjustments and without any changes to its current committee structure.

States, local governments, and businesses use the budgeting process to make necessary tradeoffs and to ensure they are living within their means. They include all their expenditures and revenues in one place so every line item can be compared to all the others, which helps identify the most impactful way to allocate scarce resources.

The federal process, on the other hand, is a mess. Tradeoffs are all but ignored, duplication is widespread, and the whole process is incomprehensible to voters. Congress should switch to a unified budget to impose some discipline on itself, increase transparency, and save taxpayers’ money.