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35 IRET Op Ed 1 (1987)

handle is hein.taxfoundation/iretbyln0123 and id is 1 raw text is: June 29, 1987
No. 35
OpEd
The Budget Process Is Broke,
So Fix lt
President Reagan is quite right -- the Congressional
budget process needs to be fixed. It's a pity that it has
taken him so long to tell the public that Congressional
budget making doesn't work; it never has. If one test of
its working properly is that it achieves budget balance or
at least persistently and significantly reduces deficits,
then the process has been a failure ever since it was
first implemented in producing the budget for the 1976
fiscal year. Show a man from Mars the federal budget
results from the beginning of the republic to today and
ask him when federal budgets were under control; he
would surely conclude that we did a fair job during
peace time until 1976. Ever since, it would look to him
as if the objective of budget policy were to run the
largest deficits the federal government could get away
with.
It really is about time to try to devise a budget-
making   process that works -- that restricts government
outlays to the resources the public is willing to commit
to the government.
What we have now is a process that operates in
exactly the opposite -- and wrong -- way. The Congress
first sets spending levels, or more realistically, deter-
mines increases in the coming fiscal year's spending over
the current year's level. Having made this determination,
the Congress then holds a gun to the public's head,
telling us, in effect, to pay up. The message is pony up
the taxes or we'll deficit you to death. To make the
threat more effective, we are repeatedly assured that
federal budget deficits will do the economy great harm,
never mind the fact that it is government spending, not
the deficit, that burdens the economy. To avoid all the
dire economic consequences that deficits allegedly entail,
we are told, we simply have to raise taxes.
We   ought to subject this fiscal prescription to the
most searching scrutiny. What we'll find is that most
Congressmen and Senators, irrespective of party, have
fretted under the constraint of the budgetary stringency
the President has insisted upon for the last six fiscal
years. They've  been  unable to  resist the  supposed

political advantage of declaiming against budget deficits
for which someone else, of course, is responsible, but at
the same time, those deficits have laid a tighter and
tighter lid on the new spending they believe they need
in order to show the folks back home that their man or
woman in Washington is looking after their interests.
The way out of this dilemma is to get more taxes to
finance the spending initiatives without being exposed
to the charge that these additional outlays are budget
busters that increase those naughty deficits.
This is the scenario that's been played out ever
since 1981. Unless and until the budget-making process
is drastically revised, until the whole approach to
federal budget policy is basically altered, we'll see the
same dreary budget drama year after fiscal year.
A   small but useful start toward     constructive
revision of the budget process would be to reverse the
present sequence of Congressional decision-making on
the budget.  The Congress should take a lesson from
the way in which households and businesses -- or at
least those that manifest even a small degree of
financial prudence -- go about the job of figuring out
how much they can spend and on what.
The first thing the folks in the private sector have
to do is to estimate what their resources will be in
their budget period, i.e., how much income they'll be
able to obtain. That's the budget constraint they must
deal with, that tells them how much they can spend.
Inside that limit, they must then determine the best way
to allocate their resources -- their income -- among all
the competing demands they recognize. Of course, there
may well be times when it pays to go into debt in order
to expand the household's or the business's resources,
but the prudent household or business decision-maker
will do this only when he's satisfied that the benefits
from the additional spending are at least equal to the
cost of servicing the debt and that he       will have
adequate resources to do so.
Applying this lesson to the government would
require the Congress in its budget making first to
decide on the amount of taxes it is prepared to ask the
puibHe to pay. Only after the tax-writing committees in
both chambers have reached an accord on this matter
should the budget committees turn to the next step of
determining how the expected tax revenues should be
allocated to funding the federal government's numerous
and varied spending programs. This process would not
preclude incurring a deficit, but the decision to spend
more than expected revenues should call for the same
kind of validation that a prudent business or household
must provide. Among other things, this validation should
include identification of the revenues that will be
needed to service the deficit and how these revenues
are to be obtained.
Of course, this approach would not resolve all the
budget policy problems the Congress faces. The budget

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