10-05-2002

CONGRESS: The Lawless Congress

If the past is any precedent, Congress should be doing something dramatic
to fix the current budget mess. In 1974, confronting a president who
refused to spend money already appropriated, Congress created its first
formal budget process. In 1985, 1990, 1993, and 1997, amid a growing sea
of red ink, Congress imposed strict deficit controls. But in 2002, as the
budget process has failed, appropriations bills have remained deadlocked,
and budget-enforcement rules have expired, Congress has looked on, doing
next to nothing.


The bicameral, bipartisan gridlock that has stalled a variety of
legislation, including bills to create a Homeland Security Department and
to provide Medicare prescription drug benefits, is threatening to kill
budget rules that have been cobbled together since 1974. Congress has been
unable to re-enact a rule, which expired September 30, that requires
discretionary spending caps, as well as the pay-as-you-go
rule-"paygo" in congressional shorthand


-which requires that spending for new entitlement benefits or revenue
losses from new tax cuts be offset elsewhere in the budget.


In the past, a series of crises motivated Congress to create and change
budget law. But this year, despite warnings of dire consequences,
budgeteers have been unable to reach a consensus on anything.
"Without clear direction and constructive goals, the inbuilt
political bias in favor of budget deficits likely will again become
entrenched," Federal Reserve Chairman Alan Greenspan told the House
Budget Committee last month. "In any case, the bottom line is that if
we do not preserve the budget rules and reaffirm our commitment to fiscal
responsibility, years of hard effort could be squandered."


Congress's failure to follow a coherent budget process has had the
unintended consequence-at least temporarily-of shifting power to the other
end of Pennsylvania Avenue, where the only binding fiscal restraint may be
President Bush's wielding of his veto pen. Although Bush has been
reluctant to exercise that power during his 20 months in office (as of
October 2 he had yet to issue his first veto), earlier this summer he did
refuse to spend some $5.1 billion that Congress appropriated in the fiscal
2002 defense and homeland security supplemental spending bill. But even
that action-a clear demonstration of presidential power over congressional
desires-failed to energize the factions on Capitol Hill to put aside their
differences and restore order before major sections of budget law
expired.


Reform in the Wake of Crisis


Few people except the most grizzled budgeteers may remember, but before
1974, Congress had absolutely no order in its budget process. In 1870,
Congress passed the Anti-Deficiency Act, which prohibited federal agencies
from making obligations to spend more money than Congress had
appropriated. In 1921, Congress created the Bureau of the Budget, which
later became the Office of Management and Budget, and required the
president to submit an annual budget.


In the mid-to-late 1940s, Congress attempted to require passage of a
concurrent resolution establishing a budget plan, but the effort fizzled
out after the House and Senate were unable to agree on a plan in 1947 and
when a minority report attached to the budget in 1948 blasted the process.
Until 1974, Congress generally figured out how much money had been spent
over the course of a year by adding up legislation it had passed that
year.


In 1972, President Nixon began impounding money-refusing to spend domestic
funds Congress had appropriated. He lost virtually all legal challenges to
the impoundment efforts, but that did not stop him. The Senate Budget
Committee estimated that by 1973, Nixon had impounded as much as $15
billion-much of it for federal highways and pollution control projects-the
bread and butter of the federal funds that members of Congress deliver to
their districts.


Nixon argued that Congress had little rationale for objecting to his
actions because it lacked a coherent way to set spending and tax
priorities. And so Congress passed the Congressional Budget and
Impoundment Control Act of 1974. Until the impoundment issue arose,
congressional leaders had no particular interest in creating a budget
process, said Robert Reischauer, president of the Urban Institute and one
of the first two employees of the Congressional Budget Office, which was
created by the 1974 law. Congress's desire to reassert its spending
authority drove the budget law, Reischauer said, adding that the process
reform was "tacked onto" the must-pass impoundment reforms.
"The vast majority of members of Congress had no idea what they had
voted for," he said. "Even six month later, members were asking
what CBO was, what


the Budget committees were."


As envisioned in the initial budget law, CBO was supposed to provide
Congress with economic estimates, analyze the president's budget, and
provide cost estimates for legislation the House and Senate passed. It was
designed to provide Congress with the type of budget expertise the
president receives from the OMB.


But the House and Senate had different concepts of what CBO's duties
should be, said Alice Rivlin, who became the first CBO director. The House
wanted CBO to concentrate on numbers-crunching, while the Senate wanted a
policy analysis office. "I was the candidate of the Senate," she
said. "The House was quite suspicious." That suspicion helped
lead to the decision to locate the CBO's office on the House side of
Capitol Hill.


The law also created the congressional Budget committees, which initially
were charged with passing two budget resolutions-the first to establish
Capitol Hill's spending priorities for the year and the second to tally up
how much Congress had actually spent and figure out how to reconcile the
differences.


"The first budget resolution was designed to appeal to conservatives,
who wanted to control spending," Rivlin said. The second resolution
was supposed to force Congress to deal with the problem of having spent
more than it specified in the first resolution. "They had created a
very complex system," Rivlin said. "Not everybody understood
what they were supposed to do."


Establishing a congressional budget process helped level the playing field
between Congress and the White House. Nixon had been able to argue in
favor of impoundment because various committees on Capitol Hill had no
idea what decisions other committees were making, said G. William
Hoagland, Republican staff director of the Senate Budget Committee, who
was an aide at the Agriculture Department when the law was passed and who
later joined the CBO staff. "The right hand didn't know what the left
hand was doing," he said. "Congress was driven to putting this
process together as an embarrassment because the president was
right."


The process survived its initial years because "it was not biased
either in favor of big spending or opposed," Reischauer said.
"It was neutral. That's hard to believe. Many of the initial debates
were about spending more, not spending less."


A Bomb to Drop


As deficits soared, the budget process's neutrality about spending seemed
less and less useful. So in 1985, Congress passed a mouthful of a bill
called the Balanced Budget and Emergency Deficit Control Act. Few people
ever referred to the law that way, instead calling it
Gramm-Rudman-Hollings, after the three senators who wrote the bill. The
law set year-by-year maximum acceptable budget deficits; if the deficit
exceeded that figure in any one year, the president was required to issue
an order instituting an across-the-board cut in much of the government's
spending.


The 1985 law greatly increased the power of the Senate Budget Committee,
said a senior Senate Democratic aide. It instituted several points of
order that required 60 votes in the Senate in order to waive the
requirements of the act. "It changed the dynamic," the aide
said, adding that changing a budget resolution "became an
extraordinary thing." In the House, the Budget Committee had to rely
on the Rules Committee to ensure that the Budget Act's requirements were
not waived.


While many critics have called Gramm-Rudman a failure because it did not
control the deficit and did not take critical factors into account in
requiring cuts, one of its sponsors still believes it helped slow
spending. "There's a bend there," said Sen. Phil Gramm, R-Texas.
"Gramm-Rudman had an effect. It didn't take long for the White House
and Congress to find ways to cheat. And they did cheat. But it made a big
difference."


Congress had "designed a political system that put a gun to their
heads," Reischauer said. Gramm-Rudman was extreme and unfair, he
said, adding that the "bomb could be dropped for causes that Congress
had no control over," such as economic conditions. In addition, cuts
were imposed on an appropriations bill even if the bill met its spending
target, while others did not. "Sometimes the innocent could be
punished because of the actions of the guilty," he contended.


Hoagland said he recalled the day Gramm went into the office of
then-Senate Budget Committee Chairman Pete V. Domenici, R-N.M., to pitch
his idea. "It sounded crazy at the time," Hoagland said.
"It was a formulistic policy."


It was not until 1990 that Congress accepted that controlling spending had
only a partial effect on the deficit and that Gramm-Rudman might have been
cutting spending in unfair ways. In the spring of that year, Congress
learned that the deficit was going to exceed the allowable limit by some
$100 billion. OMB later estimated that $85 billion in spending would have
to be cut to meet deficit targets. And Congress was going to have to pay a
hefty price for having exempted certain programs from a sequester order.
The budget office projected a 32 percent cut in defense programs and a 35
percent cut in nondefense spending-clearly unacceptable
reductions.


The result was the convening of the much-lamented budget summit, which
lasted for months and eventually, with some setbacks, resulted in the
Omnibus Budget Reconciliation Act of 1990. The new law replaced the
impractical sequesters of Gramm-Rudman with two sets of limits. First, it
established a requirement for discretionary spending caps for programs
under the jurisdiction of the Appropriations committees. And second, it
implemented a requirement that any increases in the cost of entitlement
programs and tax cuts be paid for by offsetting cuts in other entitlements
or by tax increases.


Supporters of the law said the process worked because it held Congress
responsible for actions it had taken. "This was a process that
succeeded because it was not prospective," Reischauer said. "It
was designed to force decisions that already had been made." The law
protected Congress from being required to impose arbitrary cuts because of
changing economic conditions. "It didn't target a deficit number, so
the ups and downs of the economy would not trigger the need for further
action," he said.


Although Congress has tinkered with the process and extended the
budget-enforcement rules a few times since 1990, the House and Senate have
tried to live with this process until now. But over the past several
years, the budget process has been weakened significantly, until this
year, when it was rendered meaningless. "The Budget Act is like all
reforms," said the senior Senate Democratic aide. "It's meant to
impose discipline on an unruly system. Then people find ways around it and
there's a need for new reforms. You can see it in tax reform. You can see
it in campaign finance reform."


Advantage Through Confusion


Several factors helped weaken the budget process. As partisan margins in
both houses became tighter, appropriators had more difficulty producing
bills that could gain the necessary votes and be signed by the president.
To stay under statutory budget caps, everyone looked the other way and
agreed to an array of gimmicks that made it appear that caps were being
followed, when in reality they were not. The number of programs receiving
advance appropriations grew. Federal pay dates were changed. And Congress
started designating more and more spending as "emergency" and
therefore outside statutory spending caps. House appropriators even
designated the 2000 census-required under the Constitution-as an
emergency.


Some years, the budget resolution has simply been ignored as the
appropriations process dragged on. During those years, Congress has passed
budget resolutions setting what are supposed to be discretionary spending
caps. But those caps have been routinely ignored, and in the House,
Republican appropriators occasionally branded them as unrealistic, even as
they were voting for them. "There are those in Congress who seek
advantage through confusion," said House Budget Committee Chairman
Jim Nussle, R-Iowa. "When the budget is murky, they have an
advantage. And they are the ones who stand in the way of
reform."


And of course the 1997 balanced budget agreement resulted in the federal
budget's actually becoming balanced. "We went into surplus and
people's guards went down," said the Senate Democratic aide. Former
CBO Director Rudolph Penner, a senior fellow at the Urban Institute,
agreed. "The combination of a disappearing deficit and politically
unrealistic caps proved lethal, and the caps have been ignored de facto
ever since," he said in a recent report.


"We had a budget process that was really designed to deal with
deficits," said Reischauer. "Surpluses replaced deficits and we
were faced with a very difficult challenge." Congress had to decide
how much of the surplus could be spent and how much should be set aside
for reducing the federal debt. "A consensus was developing that the
non-Social Security surplus was up for grabs," he said. Last year,
congressional Republicans pushed through a tax cut that tapped the
surplus, without paying for it through the paygo rules, arguing that the
rules did not apply. "In 1990, the possibility that surpluses might
emerge within the decade seemed remote indeed," Greenspan told the
House Budget Committee. "When they unexpectedly arrived, the
budget-control measures appeared to be addressing a problem that had been
solved. Fiscal discipline seemed a less-pressing priority and was
increasingly abandoned."


After the September 11 attacks, it again became politically acceptable to
run deficits. That acceptance created havoc in the budget process. The
House this spring passed a fiscal 2003 budget resolution setting spending
at $748.1 billion, roughly the same amount the Bush administration had
requested. But House Republican appropriations subcommittee chairmen have
said the cap established by the budget resolution does not provide them
with sufficient funds to pass the larger domestic appropriations bills.
That has resulted in gridlock in the House, as leaders struggle with how
to pass the funding measures.


The situation in the Senate is even worse. The Senate Budget Committee was
able to produce a budget resolution, but never brought it to the floor
because Democrats lacked the votes to pass it. Instead, Senate
appropriators set a spending cap at $757.95 billion, some $9 billion more
than the House. The breakdown of the budget process has left the funding
bills in chaos, even as the fiscal year expired. Without a conference
agreement on a budget resolution that established an overall cap on
spending, the House and Senate are working with vastly different targets.
So even if each house was able to pass its funding bills, it is highly
unlikely any conference agreements on the bills could be reached.


"We're at an impasse until we figure out the allocations,"
Senate Appropriations Committee ranking member Ted Stevens, R-Alaska, said
last month. "We have no way to work out the allocations. We really
need a budget resolution, which we don't have."


Budgeteers have vowed that they will not repeat the mistakes of this year.
But to avoid those mistakes, Congress must reinvigorate the budget process
and renew the budget rules. The Senate may soon debate a resolution
renewing the paygo rules for this year. While it would apply only to the
Senate, the move would be significant. It would mean that any change in
entitlement or tax legislation this year will have to be paid for through
offsets or the paygo rule will have to be waived by 60 votes. Some
supporters of extending prescription drug benefits to Medicare recipients
have been looking forward to the October 1 expiration of the paygo rule,
saying they would then be able to pass legislation without having to pay
for the benefits through offsets. The Senate resolution would make that
effort more difficult.


But the Senate rule applies only to fiscal 2003, and after the current
budget cycle ends, Congress has no requirements to set budget caps or use
paygo rules. A variety of budget reform proposals have surfaced in recent
years-including converting the budget process into a two-year cycle and
making the budget a resolution that would require the president's
signature.


But any reform effort will be complex, warned Stanley Collender, managing
director of the federal budget consulting group at Fleishman-Hillard.
"There's no consensus on what the problem is, so it would be very
difficult to come up with a solution," he said. Rivlin said the
process adopted in 1990 and extended since then has worked. "Those of
us who work with the budget process think they got it just about right in
1990," she said, adding that the expiring provisions should be
extended.


A failure to re-establish an orderly procedure will strengthen the
president's hand in dealing with Congress, Hoagland warned. The
president's decision not to spend $5.1 billion in the fiscal 2002
supplemental spending bill could be compared with Nixon's impoundment, he
said. And Bush will be able to justify vetoing spending bills, citing the
lack of a consensus on Capitol Hill. "If you worry about the power
shifting, you're going to see an imbalance between the Congress and the
White House," Hoagland said.


But any budget reform effort comes at a price. "If you're in
Congress, it complicates your life tremendously," Rivlin said.
"Discipline always does." Given that price, Congress is unlikely
to adopt anything drastic to reform the process, Collender predicted.
"Right now, there's not a whole lot of demand that someone does
something about the budget," he said. So what about next year?
"You just muddle through," he lamented. "It makes for an
extremely painful process."


David Baumann

National Journal