Budget Reform Proposals in the President's FY 2013 Budget

This installment of the FY 2013 Budget Series focuses on some of the budget process reform proposals buried deep in the Analytical Perspectives section (chapter 14, to be exact) of the President’s budget. We have long argued that reforms to the budget process are not the solution to the mounting debt the country continues to accumulate. But such reforms can be a piece of the solution, and in these tough political times they can be the first steps taken that pave the way for broader action. The 2013 budget contains a number of reform proposals. This analysis covers just a few of the more well known, and less arcane ones.

The current version was enacted in 2010, and we have long favored a strong statutory PAYGO rule. Responsible budgeting dictates that new spending or tax cuts be paid for by cuts or revenue increases elsewhere in the budget. And the Administration again calls for adjusting their baseline to include more realistic assumptions about the Alternative Minimum Tax patch and Medicare physician reimbursement freeze (the “doc fix”). However, we also continue to argue that even this version of PAYGO contains too many exemptions to successfully enforce a sustainable debt level. A stronger version, such as that recommended in the Peterson-Pew Commission’s 2010 report, Getting Back in the Black, would include essentially no exemptions, and would be accompanied by hard spending caps.

The Administration proposes to transform the existing Highway Trust Fund (HTF) into a broader umbrella entity called the Transportation Trust Fund (TTF). There are two problems with the current HTF system: it has not collected enough revenue from fuel taxes to fund all the projects undertaken, and it is a strange hybrid of mandatory and discretionary budget treatment. (See page 172 of this pdf for the arcane details.) 

The Administration follows a recommendation made by the Fiscal Commission in creating the TTF, where everything is treated as mandatory spending and subject to PAYGO. Unfortunately, the needed supplemental funding for the expanded TTF would come in part form “ramping down overseas operations” – something we have described as a gimmick.

Drawing down spending on wars that were already set to wind down and that were deficit financed in the first place should not be considered savings. When you finish college, you don’t suddenly have thousands of dollars a year to spend elsewhere – in fact, you have to find a way to pay back your loans.

Something we have also supported in the past, and that is included again this year, is the extension to the President of expedited Rescission Authority. As the budget states:

In order to make it easier to eliminate unnecessary spending, the Administration requests that Congress enact the President’s proposal for expedited rescission, transmitted May 24, 2010. That legislation would create an important tool for reducing unneeded funding. In short, the bill would provide the President with additional authority to propose a package of rescissions that would then receive expedited consideration in Congress and a guaranteed up-or-down vote.

In addition, as with the President's September submission, the budget has a trigger ensuring a certain path, which we go into detail on later in the blog series.

As with the overall budget, we see good and bad ideas in the handful of reforms reviewed here. In general, we prefer a package of stronger and more extensive budget process reforms that would get the budget on a more sustainable path to strengthen public finances. 

Stay tuned throughout the week for more in our FY 2013 Budget Series.