Fix US budget process, or expect more debt, less confidence: TCB CED

It calls for comprehensive solutions that improve the timeliness of the process, mitigate challenges to regular order, permit greater debate on important topics and incorporate longer-term planning into budget development.

“The federal budget process is broken. Since 1977, only on four occasions has Congress passed all appropriations bills on time. Delayed action sets the stage for fiscal irresponsibility, undermining the ability to address the national debt and breeding economic alarm with looming government shutdowns,” a release from The Conference Board noted.

CED cautions that without reforms, the national debt and net interest spending will continue to increase, crowding out other national priorities and reducing confidence in the US government’s ability to repay the debt.

This will damage the government’s credit rating, result in higher interest rates that the US treasury must pay investors to compensate for the greater risk of default and devalue the US dollar as investors seek safer investments, the think tank observed.

“We are facing $36 trillion in outstanding national debt and an annual budget deficit of $1.9 trillion. As our fiscal trajectory worsens, the broken budget process will only stand in the way of the bipartisan solutions needed to address these long-term fiscal challenges. Congress should act now to end the dysfunction before current government funding runs out in March or we default on the debt,” said CED president David K Young.

The report calls for improving timeliness. This requires lawmakers to pass a budget on time by prohibiting legislation with any fiscal effect from being considered until a budget is passed. Congressional leadership may prevent members of Congress from leaving for scheduled recesses to enforce this requirement, with exceptions for genuine emergencies, the report suggested.

The Congress may also consider moving from an annual budget process to a biennial one—respecting the rule that one Congress cannot bind a future Congress—which can include a two-year budget resolution, two-year appropriations, and multi-year authorisations of federal programmes.

Budget enforcement mechanisms need to be strengthened, including enforcing pay-as-you-go statutes, capping increases in discretionary spending and utilising sequestration as a last resort.

The debt limit needs reforms, according to the think tank. Options include automatic increases if fiscal targets in the budget resolution are met or requiring a debt limit increase or suspension vote with any legislation with a significant fiscal effect.

Automatic continuing resolutions may be implemented at the start of a fiscal if Congress has failed to pass the Federal budget on time, recommended the report.

An emergency reserve fund may be set up to respond to natural disasters, geopolitical events and other unanticipated crises, perhaps financed by issuing long-term bonds coupled with plans to mitigate these risks, it added.

ALCHEMPro News Desk (DS)