Bipartisan Enzi-Whitehouse budget bill a very bad fix for deficits

Last week’s report that last year’s federal deficit approached $1 trillion produced one entirely predictable response: Much of official Washington yawned. This is for two equally predictable reasons: Democratic economists do not see deficits in the current range as problematic, while Democrats generally have repeatedly seen deficit panic manipulated to extract cuts form social programs that would otherwise have been politically unacceptable — and most Republicans, in turn, do not want to call attention to the deficit because their 2017 tax legislation played such a large role in expanding it.

On the other hand, some have wildly overreacted to the news. Chief among these are Senators Mike Enzi (R-Wyo.) and Sheldon Whitehouse (D-R.I.), the chairman and ranking member of the Senate Budget Committee. This week, they plan to mark-up legislation that would radically change the congressional budget process in ways likely to have severe unintended consequences.

Their bill, S. 2765, would make a number of modest but worthwhile changes to the way Congress writes and implements budgets. The centerpiece of the legislation, however, is an aggressive new procedure forcing Congress to vote on deficit reduction whenever the Congressional Budget Office’s estimate of the deficit ten years out is worse than that assumed in the prior year’s budget resolution. This automatic reconciliation legislation is likely to become a vehicle for making deep cuts in Medicare, Medicaid, tax credits for low-wage workers, farm programs, and other direct spending or “entitlement” programs — often at times when the economy is in precarious condition.

Under S. 2765, Congress would enact budget resolutions — general blueprints for revenues to be collected and spending to occur — in odd-numbered years. These resolutions would be required to include projections for the amount of debt held by the public a decade later. The following year, the Congressional Budget Office would estimate the publicly-held debt in that same year, now nine years in the future. If CBO’s estimate of the future deficit was higher than that assumed in the prior year’s budget resolution, the new law’s automatic reconciliation procedures would kick in.

The bill’s automatic reconciliation process would allow the Budget Committee to determine unilaterally the aggregate level of deficit reduction to be achieved, how those savings would be divided among the various authorizing committees of jurisdiction, and how savings would be split between revenue increases and spending cuts. Under current reconciliation procedures, the Budget Committee prepares recommendations but the entire Senate votes on whether to initiate the reconciliation process and — if it does — can amend the amount and allocation of revenue increases and spending cuts.

Both the bill’s trigger for action and its rules for auto-reconciliation are deeply flawed. The result is likely to be both unnecessary economic harm to the country and a further corruption of a budget process that the bill’s sponsors admit is already “broken.”

The new bill would trigger auto-reconciliation any time CBO’s estimates of publicly held debt in a distant year increased from one year to the next. Although this increase could result from fiscally irresponsible legislative action in the intervening year, many other factors — such as changes in technical estimating methodologies — could also drive such a change.

In particular, economic downturns increase future public debt by reducing revenues and increasing spending on need-based programs such as unemployment insurance and food assistance. Thus, S. 2765 likely would trigger auto-reconciliation at the very time the economy was slipping into a recession: the very time when it needs more, not less, stimulation. The result of budget cuts at this point would be to deepen and lengthen the recession — and to trigger auto-reconciliation again in subsequent years.

If the bill did trigger auto-reconciliation, it would endow the Budget Committee with staggering powers.  The Budget Committee could dictate which other committees must cut and how much. If an authorizing committee’s package did not meet the Budget Committee’s approval, it could rewrite the cuts in that committee’s jurisdiction and move them directly to the Senate floor under rules making amendments extremely difficult. The generalist Budget Committee’s attempts to legislate in other committees’ jurisdictions would have a high risk of negative unintended consequences.

Making the passage of a congressional budget resolution trigger this deeply problematic process would give Members yet another reason not to pass such a resolution. As it stands, Congress rarely passes a budget resolution when control of its two houses is divided — and often fails to do so even when control is unified. Budget resolutions encourage thoughtful long-term planning; we should be seeking ways to encourage Congress to undertake this process, not creating another set of unappealing political consequences for doing so.

In the current environment, Republicans will uniformly oppose any tax increases, meaning that reconciliation legislation is likely to depend almost entirely on spending cuts. Medicare and Medicaid are by far the largest programs subject to cuts in reconciliation. (Social Security is statutorily exempt from reconciliation cuts, and the Pentagon is funded with annual appropriations and so does not receive the “direct spending” that reconciliation bills can cut.) Reaching a large deficit reduction target without substantial Medicare and Medicaid cuts will typically be implausible. Therefore, Members wanting to protect those programs from potential auto-reconciliation cuts may vote against budget resolutions to avoid triggering that process.

If Senators Enzi and Whitehouse are serious about restraining the deficit, they should go to the root of the problem, which is the use of fast-track reconciliation procedures to pass budget-busting legislation.

Congress created reconciliation to reduce the deficit; it was only much later that enterprising Members got the idea of turning it on its head to rush through measures that increase the deficit. The 2001 and 2003 Bush tax cuts that replaced the late 1990s budget surplus with massive deficits both relied on reconciliation procedures to overcome their lack of broad support. So did the 2017 tax cuts, which are adding hundreds of millions of dollars to the deficit each year.

Over considerable resistance from the left wing of their caucus, Democrats imposed strict “pay-as-you-go” rules last winter when they regained control of the House. These rules, however, can be changed by a future House majority and do not affect the Senate.

Real budget process reform would re-impose the “pay as you go” rules enacted in the bipartisan Budget Enforcement Act of 1990. This would prevent budget-busting in the first place. At a minimum, these rules should apply to fast-track reconciliation bills. S. 2765 is, at best, just an awkward and dangerous attempt to chase down the horse after it has already escaped the barn. We can do much better.

David A. Super is a professor of law at Georgetown Law. He also served for several years as the general counsel for the Center on Budget and Policy Priorities. Follow him on Twitter @DavidASuper1