A Budget Conference - Now What?
The House and Senate will soon appoint a formal conference committee to iron out differences between their two budgets, even though press reports indicate the Chairmen of the House and Senate Budget Committees have already started negotiating. In addition to agreeing to the total spending levels (by function) within the budget, a number of important issues must be agreed upon. Specifically, the conferees will have to decide how broadly to write reconciliation instructions, whether to limit use of the OCO designation to spend in excess of statutory caps, how to address potential sequester relief, and whether to include other budget enforcement provisions cracking down on budget gimmicks. This blog summarizes these issues and our views on them.
Provide reconciliation instructions broadly
The House budget included instructions for all committees with mandatory spending to produce legislation achieving at least nominal savings in mandatory programs within their jurisdiction. The Senate only had reconciliation instructions for the Finance and Health, Education, Labor, and Pensions (HELP) committees.
Given the very real need to slow the growth of entitlement spending, the budget conference should adopt the House’s approach, providing instructions for every committee with jurisdiction over mandatory programs. Doing so will offer opportunities to enact the mandatory savings assumed in the budget resolution, or at least a smaller set of savings with the potential for broader support.
The House budget also included provision allowing the Chairman of the Budget Committee to publish guidelines to supplement the nominal savings instructions currently included, which could be used to provide guidance for reconciliation legislation with a significant amount of mandatory savings. Our hope is that the budget committee and the relevant committees will work together to produce a reconciliation bill with, at minimum, enough savings to offset the spending increases Congress is likely to approve, including costs associated with the Medicare Access and CHIP Reauthorization Act of 2015 and sequester relief. For further reading on reconciliation in the two budgets, see our blog "Reconcila-What?"
Restrict the use of Overseas Contingency Operations (OCO) as a slush fund
Both the House and the Senate increased the allocation for Overseas Contingency Operations (OCO) well above the levels requested by the President, effectively using OCO as a slush fund to provide defense spending above the limits set by the Budget Control Act. However, the Senate budget included a provision creating a point of order against designating more than $58 billion in funding as OCO in Fiscal Year 2016 and $59.5 billion in 2017 for purposes of the statutory spending limits in the Budget Control Act. The President's budget requested $58 billion for OCO, so this point of order, unless waived, would limit the ability to use the OCO designation for spending not related to the war, except to the extent Congress reduced spending for OCO items below the President's request. We wrote about the point of order here and the abuse of the OCO funding here.
Allow for sequester relief, responsibly
Given the apparently strong bipartisan support for spending above the sequestration limits, the budget should accommodate legislation providing for responsible sequester relief instead of relying on gimmicks to circumvent spending limits. The House-passed budget resolution included a deficit neutral reserve fund for defense sequester replacement. The Senate-passed budget included several deficit neutral reserve funds allowing for increased discretionary spending offset by savings elsewhere in the budget, and one specifically accommodating sequester relief for defense and non-defense spending in Fiscal Years 2016 and 2017, offset by savings from mandatory and discretionary spending as well as tax expenditures.
The conference should include a version of the Senate’s deficit neutral reserve funds for increases in discretionary spending, offset with other deficit reduction to allow Congress the choice of keeping discretionary spending within the spending limits set by sequestration or enacting a fiscally responsible sequester replacement deal similar to the one negotiated by Chairmen Ryan and Murray. We described each budgets handling of the sequester here.
Maintain provisions strengthening budget enforcement
Both budgets include important provisions constraining the use of budget gimmicks and focusing attention on the long-term budget outlook. The concurrent budget resolution should strengthen, not weaken, current budget enforcement.
The limit in the Senate budget on the use of phony savings from changes in mandatory programs (CHIMPs) (our detailed take here) to offset domestic discretionary spending above the caps provides an important complement to the limits on the use of the OCO designation discussed earlier. Both provisions strengthen the integrity of spending limits.
The House budget includes a special rule providing that general revenue transfers to the Highway Trust Fund be counted as a cost, which addresses a loophole in budget scoring rules. You can read about scoring related to the Highway Trust Fund here. The Senate budget also contains useful provisions prohibiting consideration of legislation increasing long-term deficits, restricting the use of timing shifts, and requiring CBO scores before voting on legislation and apply those rules to both chambers. The Senate’s call for various types of supplemental analysis could also be helpful to policymakers.
While the budgets include many provisions strengthening budget enforcement, they include some provisions which would weaken enforcement. Specifically the Senate budget includes a provision repealing a rule requiring reconciliation legislation to reduce the deficit. Reconciliation should not be used to increase the debt, and we hope this change is dropped in conference. The Senate budget also includes exemptions for certain legislation from the long-term deficit point of order. Read about these and other budget process provisions in the budgets in our new paper.
Follow through on the budget
While passage of a budget resolution conference report would be an important step toward providing discipline in the budget process, the success of a budget resolution in achieving the goals it sets out depends on the willingness of Congress to enforce the budget. We hope Congress follows through and enforces the spending and revenue levels set in the budget by opposing legislation that would move current law further away from these levels. Absent a true emergency, passing legislation that violates the levels in the budget undermines the credibility of the budget resolution and the budget process in general.
For additional budget process resources including specific options for reform, visit our Better Budget Process Initiative home page.