Whatever you want the government to do, or stop doing, or do differently, it all comes down to the budget. It's the key to how your government works.
Or doesn't. The modern budget process is now just as dysfunctional as the rest of our government. Who better to explore why than Yuval Levin? A former staffer for the House Budget Committee and the House leadership, he is now the editor of National Affairs and a fellow at the Ethics and Public Policy Center. I sat down with him to talk about what’s happened to the budget process, and what we can do about it.
This conversation has been lightly edited for length and readability.
Megan McArdle: You told me recently that many of our current problems in the legislative process stem from the budget process enacted in the early 1970s, which is now breaking down under a new political reality. What happened to the budget process in the 1970s?
Yuval Levin: I think that's the right place to start, because it will help us see what isn't working. I’m a believer in the Chesterton’s Fence approach to public problems. When something isn’t working, don’t just think about how it needs to change but think about why it is the way it is.
The 1974 budget process was developed in response to a specific set of problems, basically revolving around the frustration of a Democratic Congress at being constantly outmaneuvered by a Republican president in the budget process
The main problem was the practice of “impoundment” by which the Nixon administration just refused to spend money on things it disagreed with even after Congress appropriated money. The ’74 act ended that practice. But Congress decided to also rebalance the budget process in general to empower Congress. Their sense was that the president won budget battles because he had a disciplined, organized, professional budget bureaucracy serving him, while Congress was disorganized and undisciplined. They wanted a process that would make Congress function a little more like an executive when it came to budgeting.
So the 1974 Congressional Budget and Impoundment Act created a new budget process. It was a huge step forward for Congress, which had always been in a position of disadvantage against the president — who since the 1920s had had professional economists running a budget agency. When Congress needed budget projections, it had to ask the White House, and could never really trust the White House, especially with a president of the opposite party. The '74 Act changed that.
Megan McArdle: And it worked pretty well for a while, right? It gave us the Congressional Budget Office to score bills, and a number of real improvements in the process.
Yuval Levin: Absolutely. The core idea was for the budget committees to write a broad budget outline for Congress, to counter the president’s annual budget, so that Congress’s appropriations work wasn’t organized by, or measured against, a presidential product alone. The budget resolution allocates a certain amount of money to each Congressional committee to spend (or raise in the case of the tax-writing committees). The appropriators are bound by those amounts, and if they exceed them then opposing members can raise an objection that, especially in the Senate, might kill the bill.
This solved real problems for Congress.
Megan McArdle: And then [cue scary music] something went wrong. What was that?
Yuval Levin: The process began to decay in the mid-1990s, when something very important changed in Congress. After 40 years of Congress understanding itself as an institution run by Democrats, with Republicans exercising power by putting pressure on internal Democratic divisions (and making demands in return for giving votes to measures that couldn’t quite get enough Democrats), Republicans took control.
When Republicans took control, Congress didn’t settle into a new partisan pattern, but instead settled into a sense that control could switch with the next election — always.
So it's not that Republicans failed to run the budget process, but that both parties started thinking very differently about Congress. Now, the minority party tends to think the imperative is to keep the majority from getting anything it wants, instead of making trades in order to get something from its own to-do list, because that list would be much easier to achieve after the next election if control changes hands. And the 1974 process is a poor fit for that set of incentives.
Megan McArdle: I was recently told that Congressional volatility — how often it switches party control — is the highest it's been since the post-Civil War era.
Yuval Levin: Absolutely. And the effect on the budget process is especially dramatic because that process has become the way Congress does its core work. So I would argue that in some ways the 1997 budget deal was the last instance of the 1974 process really working. It was the last genuinely bipartisan budget compromise reached by the workings of the mechanisms of the budget process.
Since then, even when we’ve had bipartisan deals like sequestration in 2011 and some of the Bush-era budgets, they’ve worked around that system and not through it. And we’ve had very few even of those. After following the process for 25 years, passing a budget resolution every year, the Congress failed to pass budget resolutions in 1999, 2003, 2005, 2007, and then every year between 2011 and 2015. And today, the budget process is being distorted rather than used. We see that in the health-care process this year.
Megan McArdle: What do you mean by saying the budget process is "distorted" rather than "used" in the health-care process?
Yuval Levin: The health-care bill Republicans are advancing, whatever you think of its merits, is being advanced as a budget reconciliation measure. That is supposed to mean that it is part of the budget process for fiscal year 2017. But no one would really say that the health-care bill is a budget bill. It's not breaking the rules to do this, and it's something both parties have done when they have been in power lately, but it's showing that the rules aren't functioning the way they're supposed to.
But I think it’s worse than that. The ‘74 budget process now tends to worsen the two key problems Congress faces in budgeting.
There are two kinds of challenges the budget process would have to help with today: One is the medium-term fiscal challenge facing the federal government, as a result of its entitlement commitments. The other is the partisan paralysis in the more mundane and near-term legislative process, where Congress just isn’t doing much legislating — whether to reform, change, or eliminate existing policies, or to create new ones.
Today’s budget process makes both problems worse. First, it keeps us from addressing entitlement programs, because it keeps them largely off the budget, and out of the process. Because we draw a distinction between annually appropriated discretionary programs and “permanent” entitlement programs, the budget process tends to focus on the former, and so in effect it tries to mitigate the fiscal problems of entitlement spending by restricting the much less fiscally problematic domestic discretionary spending. As budgeting, that’s bad policy.
Second, it exacerbates Congress’s debilitating partisanship because it creates an annual confrontation over an essentially abstract set of numbers (the budget resolution), which can be tied to a broad vision of government, but isn’t necessarily tied to any concrete set of policy reforms. This allows the parties to fight each other in principle over their ideal plans, without confronting each other in practice over specific legislative tradeoffs. It’s the opposite of what Congress needs now.
Megan McArdle: And meanwhile we get all this crazy legislation done through the reconciliation process, which was designed to kind of refine budgets, not to pass durable laws.
Yuval Levin: Right. Reconciliation is valuable as a way around Senate procedural rules for reforms that have broad support, and are enacted through the budget process. Now it’s used as a way around everything — a way for the majority party to just squeeze as much as it can through this narrow passage because it seems like no other mode of legislating can work.
Megan McArdle: And the laws themselves often end up badly flawed because you have to cram them into the requirements of a reconciliation bill. You can't increase the deficit outside of the 10-year window, and you can only do things that affect the budget. With the new Republican health-care bill, lawmakers can't touch the Obamacare regulations about things like community rating and guaranteed issue, so they have to design a sort of Frankenstein's monster bill that tries to work around them.
Yuval Levin: Certainly the Republican bill shows the limits of legislating through reconciliation.
That process is not supposed to substitute for the entire legislative process.
Megan McArdle: Okay, so that brings us to that perennial of "problem" pieces: The "What is to be done?" section. What should we do to fix the budget process?
Yuval Levin: Right, so when you move from diagnosis to prescription things obviously get a lot harder and we all start mumbling.
Megan McArdle: Presumably a lot of the problems that make it not work also make it hard to reform: everyone in the minority thinks they'll be in power soon, so better to wait until they can get a budget process more friendly to their priorities.
Yuval Levin: Absolutely. So the question is how to work within this political reality. I'd say there are two broad schools of thought on budget reform at this level.
One way to think about reforming the process would strengthen or double down on the '74 process, by more closely tying the congressional and executive budget processes to one another so they have to work together from the start, rather than both being irrelevant to each other. That's one way to force the budget process to be concrete.
Jim Capretta at AEI has proposed reforms in this direction. He would have the budget resolution be a law, so the president would have to sign it, and therefore Congress and the president would have to negotiate over it. It would direct both the legislative and executive budget process from the start. And if Congress and the president agreed on a budget framework, the procedural rules would be relaxed a lot to allow it to be put into effect. That basically says, "this process is broken, so let's fix this process."
A more dramatic set of reforms, which I think might be a better fit for the scale of the problem, would really rethink the 1974 structure. It would try to address the peculiar problem at the heart of congressional dysfunction (which is analogous to the problem at the heart of our politics): that we are living in a time of intense partisanship but weak parties.
For the budget process, I think that means a less consolidated process.
Megan McArdle: Can you unpack that a little?
Yuval Levin: Basically, the idea is that where the '74 process consolidated things, we might now want to break them into pieces. A two-year budget, for instance, would set a broad framework and then let Congress do a lot of distinct, smaller-scale legislating most of the time.
Right now, what Congress ends up doing in the budget process is actually what the executive is supposed to do: Members take one up or down vote on one huge bill. It's like they are exercising a veto power rather than legislating. Rather than 13 huge appropriations bills (let alone one huge one to be passed at midnight before the government shuts down) you'd have smaller more programmatic efforts, so that most of what the budget process involves is legislating, which is what Congress does well.
But all of this would mean huge institutional reform. That happened in the 1940s, it happened in the 1970s, and now it needs to happen. But everybody's mindset is unfortunately very far from that at the moment.
Megan McArdle: Maybe we need to bottom out before we can fix it.
Yuval Levin: That's what passes for optimism now.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of “The Up Side of Down: Why Failing Well Is the Key to Success.”