Can Congress curb its spending?

Congress recently approved legislation to suspend the federal debt ceiling and increase spending above levels currently allowed in law. In doing so, its members challenged our assumptions regarding the efficacy of multi-year budget agreements based on automatic enforcement mechanisms.

The Bipartisan Budget Act of 2019 (2019 BBA) is the most recent action taken by Congress to modify discretionary spending caps that were first established, in their current form, by the Budget Control Act (BCA; Public Law 112-25).

Congress passed the BCA in August 2011, on the eve of breaching the federal debt ceiling. At the time, proponents claimed that the legislation would change how Congress budgets by, in part, forcing its members to adhere to overall spending caps specified in law. Their expectation was that doing so would produce $2.1 trillion in deficit reduction over ten years (fiscal years 2012-2021). Any amount of expenditures above those caps would be reclaimed automatically via an across-the-board sequestration process. The BCA also created a Joint Select Committee on Deficit Reduction (the so-called Super Committee) and tasked it with identifying an additional $1.2 trillion in deficit reduction by December 2011. The legislation specified that the discretionary spending caps were to be reduced each year by an amount sufficient to achieve the $1.2 trillion target if the Super Committee did not produce a deficit-reduction package that could be signed into law.

It is important to note that the BCA did not actually reduce spending. It relied instead on the assumption that future congresses would pass appropriations bills that complied with the spending caps.

Of course, rules necessarily limit what members of Congress do. Yet not all rules are equally effective in restricting their behavior. This is because the Constitution gives the House and Senate plenary power to determine their internal rules of procedure according to which they will make decisions regarding budget policy and other issues. The only limitation on their ability to do so is that the rules they adopt cannot violate other constitutional provisions. Given this, statutory rules cannot cap future spending in any meaningful sense. It is therefore insufficient for Congress to merely set spending targets and adopt special rules to achieve them. Its members must also demonstrate a credible commitment to enforcing those rules in the future if voters are to have faith that the caps will be honored.

There are two ways that members of Congress can solve this problem of credible commitment. First, they may establish a precedent of responsible behavior. Notably, this eliminates the problem of credible commitment in the first place because such action on their part would, by definition, remove the need for spending caps. Second, legislators can promise to restrict their future behavior by making it marginally more difficult for their future selves to spend in excess of budget caps.

Congress has opted for the second approach on several occasions over the last four decades. It passed the Balanced Budget and Emergency Deficit Control Act of 1985 (Gramm-Rudman; Public Law 99-177) to serve as a catalyst for deficit reduction in the future. Gramm-Rudman established annual deficit targets. Deficits that exceeded the targets set forth in the statute would be automatically reduced by an across-the-board sequestration procedure to cut spending. However, such an approach was unworkable in that the deficit targets were not explicitly linked to a broader political agreement on the policies needed to achieve them. In addition, the size of the deficit was exacerbated by lower than expected economic growth in the late 1980’s. The deficit targets in Gramm-Rudman were revised and extended in 1987 in the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 (Public Law 100-119).

Congress opted for a different approach with the Budget Enforcement Act of 1990 (BEA; Public Law 101-508). Whereas Gramm-Rudman capped deficits, the BEA, in part, set annual limits on discretionary spending. It stipulated that any amount by which the spending caps were exceeded was to be reclaimed annually by across-the-board sequestration. The BEA was extended in 1993 and 1997, and expired in 2002.

Thus, recent history suggests that members of Congress prefer multi-year budget agreements that delay tough choices until the future over making those choices in the present. Their automatic enforcement mechanisms are designed to insulate lawmakers and their desired policy outcome (i.e., the tough choice) from immediate pushback. This is because they almost always defer spending reductions until the out-years in a ten-year budget window. At that time, lawmakers expect that they will have a compelling excuse for the tough choice is being made.

Bill Archer (R-Tx). captured this logic well during the House BEA debate in 1991.

“After four decades of unrelenting growth in Federal spending and taxes, most members of Congress came to realize that the desire to spend would always exceed the political ability to tax. From this realization, it was a short step to concluding that Congress, lacking this discipline and will, had to figure out some device by which it could automatically control its urge to spend.”

But Congress’s track-record when it comes to automatic enforcement mechanisms suggests that there is no way to automatically control the urge of its members to spend in the future. Gramm-Rudman’s deficit reductions and the BEA’s spending caps were repeatedly revised upward after the became law to allow for more spending.

Similarly, since 2011, Congress has passed legislation to increase the BCA’s spending caps on four occasions. The Bipartisan Budget Act of 2013 (2013 BBA; Public Law 113-67), first increased the BCA’s spending caps by approximately $63 billion for fiscal years 2015 and 2016. The Bipartisan Budget Act of 2015 (2015 BBA; P.L. 114-74) then increased raised the spending caps for fiscal years 2016 and 2017 by approximately $80 billion. The 2018 BBA likewise increased the spending caps by approximately $296 billion for fiscal years 2018 and 2019. Most recently, the 2019 BBA increased the caps by approximately $322 billion for fiscal years 2020 and 2021.

All of which suggests procedural solutions alone are insufficient when lawmakers do not want to abide by them. If Congress wants to spend more than the law permits, it will.