15 February 2011

Simplicity budgeting

With the latest White House budget put out by President Obama, there is little in the way of actual spending cuts or regulatory reform going on, and much in the way of increasing spending and taxation. This as the government nears its debt limit ceiling.


The lack of 'Hope & Change' in this budget for FY 2012 has been noted by many on the Left and Right, and that the Administration lacks the ability to actually show that anyone in the Administration understands the ramifications of the 2010 elections are plain: Stop The Spending. Yes, Stop The Spending is meeting Stuck On Stupid.

Interestingly enough the budget process for FY 2012 (not the FY 2011 work that is due soon) will be different than what has been going on since the 1960's, as outlined in this Politico article by Jake Sherman & Jonathan Allen on 01 DEC 2010:

House Republicans are devising a plan to simplify spending decisions by considering government funding bills on a department-by-department basis in the new Congress, according to Republican insiders.

The move would facilitate cutbacks in government programs and, GOP aides say, enhance oversight and accountability for individual agencies, fulfilling promises made by Republicans on the campaign trail and in their Pledge to America. But it would also threaten to complicate an already tattered appropriations process on the House floor and in negotiations with the Senate, which is why the mechanics of the transition are still under discussion.

In a speech to the American Enterprise Institute earlier this year, Speaker-designate John Boehner (R-Ohio) outlined the idea that he, Republican transition chief Greg Walden (R-Ore.) and rank-and-file Republicans are now working to implement.

"Let's do away with the concept of 'comprehensive' spending bills. Let's break them up, to encourage scrutiny, and make spending cuts easier. Rather than pairing agencies and departments together, let them come to the House floor individually, to be judged on their own merit," he said at AEI more than a month before the midterm election. "Members shouldn't have to vote for big spending increases at the Labor Department in order to fund Health and Human Services. Members shouldn't have to vote for big increases at the Commerce Department just because they support NASA. Each department and agency should justify itself each year to the full House and Senate, and be judged on its own."

This is the way budgeting used to be done before the Cold War got into full swing: Congress decided the budget for each part of government separately. The unitary budget process creates a huge ball of wax and the 'take it or leave it' form of governing, in which much bad can be packed into a bill that covers the entire federal government. It is a way to hide spending and force 'compromise' not only amongst parties in Congress but with the President. It is also highly irresponsible as each part of government should receive a separate review and be divided from other agencies to see if it is carrying out its duties in an effective manner consistent with its enabling legislation and the Constitution.

Doing it this way, piece by piece, affords opportunities for savings, reductions or changes in the way an agency works, and a review of an agency each and every year in a way that unitary budget process requirements do not meet. By allowing pork to be packed into a unitary budget, good oversight and control of the fiscal side of government, by Congress, is over-ridden by political needs to 'get things funded'. Congressionally Directed Actions put in by individual Congresscritters means that those items are not properly budget for in the Operations & Management portions of those agencies getting such funds. All accounting for those funds must be done on the set operational budget that does NOT include the earmarks. This stretches staff and reduces proper Congressionally mandated oversight on spending and puts a direct line by individual Congresscritters into government departments. By removing the opportunity for political abuse of the unitary budget process, the actual abuse is expected to diminish.

Beyond that salutary effect, however, there is something even better with this process: cutting budgets of individual departments or agencies, or even requiring that they schedule to reduce their overall size or disband completely. This form of budgeting to remove an agency is rarer, still, as Congress so rarely does this as to make such times noticeable, as I pointed out in another piece. That is the formal 'tell the agency it is time to tidy up and go home' form of Congressional budgeting. There is the other form when no spending is coming forth via the budgetary process to fund a department or agency: shutdown.

With the unitary budget process that is an all or nothing affair: either the entire government is funded or it isn't. That is a game of 'chicken' with the government held hostage to it. Thus an 'across the board' cut to all departments becomes an all or nothing affair if you use this process. When you go to piecemeal budgeting, then you get individual parts of the government segregated out for funding. This is a powerful legislative tool as it can serve very well in the hands of those seeking to remove power from government via the expedient means of not funding those parts with the power. Congress is obligated to fund very little of the federal government: servicing the debt, DoD, salaries in the three branches, the Mint, USPTO, parts of Commerce and the IRS, a piece or two of Interior, government archives, duties related to the border on immigration and naturalization as well as the orderly processing of goods individuals at the border, a postal system, plus any necessary buildings for those activities. Those are the mandatory parts of the budget, per year. Everything else is discretionary, and I do mean EVERYTHING including 'entitlements' as individuals have no contractual right (via Megan McArdle) to expect anything from SSA, Medicare or Medicaid:

Well, sort of. The first thing to point out is that legally, changing social security benefits would not be default, because (as the Supreme Court has already ruled), beneficiaries have no legal, contractual right to their benefits. They enjoy them at the sufferance of Congress, and Congress has the perfect right to change them. Doing so will not affect our status as a borrower adversely in the eyes of people we actually borrow money from. Indeed, it might enhance it. The first thing a lender wants to know is not whether you are a good person, but whether you are likely to repay the money they lend you; they are interested in the former only insofar as it implicates the latter.

During the Johnson Administration the system lost its 'lock box' with 'account' concept as all funds were available from SSA to the general fund by putting Treasury Bills in their place for future promise of payment. So servicing the debt includes those bills held by SSA. More importantly is that all the 'entitlements' are at the sufferance of Congress and are, thusly, discretionary spending.

Putting 'entitlements' to the end of the line after the mandatory funding parts, and then dealing with the rest of the discretionary budget, first, allows for a few things to be done.

First, austerity packages to federal departments and agencies can be created and passed by the House to demonstrate that it 'gets the message' of 2010.

Secondly the Senate is put into a position of a House unwilling to bump spending up for anything and it is the Senate then faced with the 'pass it or lose it' deal. This is so because a House can clearly say that in not passing a spending bill for something like, say, the EPA or Dept. of Agriculture, that the Senate clearly is in the 'clean sweep' mode and just wishes to do away with them. Then the House thanks the Senate for its fiscal responsibility and does NOTHING further on that department or agency. It passed what it had to pass and the Senate is free to pass that. Really, who is going to 'lobby' for the Dept. of Education beyond the Teacher's Union? Who will actually be HURT if the Dept. of Agriculture goes under? Monsanto?

Third the Senate, faced with either austerity or nothing, passes austerity and puts THAT on the President's desk. He has the exact, same choice as the Senate: if he wants a part of government to go away, he can simply not sign the bill. And get THANKED by the House for his fiscal rectitude.

Yes, games will be played on the 'if you agree to pass this bitsy program then I will pass/sign that bitsy program' but that would only be with the Senate. The House can say that austerity is the rule from here on out, and get used to it.

The group of Republicans following the Tea Party elections of 2010 offer enough of a block to be able to block parts of the budget as they have already demonstrated on things like the Patriot Act. This puts Democrats in the nasty position of having the 'chance' to show up the fiscally responsible House members by joining with the few remaining fiscally irresponsible Republicans to try and pass a 'bi-partisan' budget that is not responsible.

Mind you that is a career ender for 2012, which would see a return of those following their constituents and an angry populace voting out the irresponsible House (and Senate) members.

By doing it this way the line gets clearly drawn about who is serious about fiscal responsibility and who isn't.

And because 2012 will be looming, angering the voting public really isn't such a hot idea and that may even sway the irresponsible ones just a smidgen.

Then you tackle 'entitlement' reform... because everyone, up and down the line, will see that you are serious about cutting spending EVERYWHERE which will include 'entitlements'. Be a shame if the Senate or President didn't want to fund those, no?

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