He's ready to don the green eyeshades and dispel our fiscal illusions.
By Amity Shlaes & Matthew Denhart
Focus on result, and process will fall into place.
That's the American rule when it comes money management. It's also been the rule of politicians since the days of Ronald Reagan and John F. Kennedy: If you get the economic growth you desire, the process for obtaining the same result in the future will become obvious. Indeed, in recent decades, Republicans especially have proven themselves downright allergic to process, especially accounting and budgeting at the federal level. When uttered by a Republican, the term "green eyeshade" is a pejorative.
But what happens when the results flunk, not once but routinely? That has been the case with federal money management. Focusing on results has led only to poor results. Growth is not sufficiently strong. Within ten years, annual debt-service payments, the government's equivalent of a family's mortgage payment, will cost more than the defense budget. If interest rates move higher than predicted, those debt payments will become even heavier.
Yet Congress hasn't agreed on a budget since 2009. Instead, lawmakers pass continuing resolutions, the equivalent of saying, "We'll do what we did last year." They blow off the whole budget process. What's more, the Capitol Hill hierarchy reinforces the situation: Ways and Means, Finance committees, Armed Services, and heck, even "Environment and Public Works" rate as "A" committees, whereas budget committees are "B" committees, with less attention and authority. The full scale of the budget, a kind of master plan, is never evident to voters. "Fiscal illusion" is what an Italian economist, Amilcare Puviani, labeled this phenomenon: Because voters don't know, they can't care. And if voters don't care, they won't have the will to back entitlement reform or cuts.
For most sentient adults, fiscal illusion is not pleasant; it's more vertigo than nirvana. They know something's wrong, they are just not sure what. Politicians pick up on anxiety, which is why so many deem Senator Elizabeth Warren the perfect Democratic comer: A bankruptcy expert by trade, Warren has the credentials to present as a budgeteer. That she also focuses relentlessly on consumer rights renders her all the more beguiling.
There is a Republican counter to Warren, a volunteer budgeter: Senator Jeff Sessions of Alabama, who will probably become the chairman of the Senate Budget Committee. Senator Sessions wants to rein in federal spending and has embarked on a study tour of reforms and changes that might alter our budget process. In this emphasis on numbers, Sessions resembles a process president: Calvin Coolidge. Sessions also doesn't mind letting others know he takes the work of budget passage and reform seriously. "Failure is not an option," Sessions told a crowd at a Coolidge Foundation budget conference on the Hill, for which he served as honorary co-host.
The first action Sessions might consider is re-forging the link between budget cause and budget effect, forcing both lawmakers and the public to immediately confront the consequences of their overspending. Doing so would not necessarily be difficult. It would not be hard to publish federal budgets in two versions, as William White, a multi-term mayor of Houston and author of America's Fiscal Constitution, has proposed. Committees might put forward a preferred (read "lavish") budget for an appropriation item. But the same committees would also be required to publish a second version of that proposal, showing the amount of that item the government could afford without increasing federal debt. Such a comparative set-up would eliminate the current challenge: Congressmen must either back even the most generous plan for a project or risk being slammed as opponents of the project. For voters, comparative spotlighting would weaken that "fiscal illusion."
Another reform might be called the "automatic boot," by which chairmen of top committees such as Defense, Finance, or Ways and Means would be required to also sit on the heretofore-lowly budget committees of their respective chambers. If the lawmakers allowed legislation to come out of their committees that exceeded their budget-committee authorizations, then these spendthrifts would automatically be ejected from those powerful chairmanship positions.
Yet a third and more dramatic proposal, put forward by former comptroller general David Walker at our conference: Suspend pay for lawmakers until the two houses can agree on a budget, a version of what is known as "No Budget, No Pay." (Sessions actually winced when he heard this). A fourth: Let Congress put forward a budget every two years, rather than each year, so that lawmakers have time to do their work and can take it more seriously. That's what many states do. A constitutional amendment to balance the budget might also work. So might reclassification of budget committees to the "A" level.
Such changes may be led by a Republican but could also be Democratic or bipartisan. Senator Pete Domenici (R., N.M.) and Alice Rivlin (former director of the Office of Management and Budget), for example, put forward a plan called "save-go," which required Congress to alter legislation if necessary to ensure that cuts would be applied fairly. When lawmakers or officials failed to meet targets, across-the-board cuts would automatically kick in.
Partisan pundits like to convince voters that there's got to be tension between an occupational budgeteer such as Sessions and his fellow Republican Paul Ryan, who chairs the House Ways and Means Committee. (Another way the media exaggerate such tension is by running stories that build up the differences between old-time Republicans and tea-party "radicals," as does this one in the New York Times.) But that tension doesn't have to exist, for both committees actually work on process. If changes in rules or statute gave the budget committees more transparency and authority, citizens might trust our budgeting process more. That in turn would make voters more inclined to rationally consider reform proposals for tax and entitlement programs. And such changes might ultimately lead to the results everyone craves: strong revenues and economic growth.
One president who twinned the budget and the tax process – literally – was Coolidge. One day the president received a gift of twin lion cubs from the mayor of Johannesburg. The White House named the cubs Budget Bureau and Tax Reduction. The stunt had a point: There was not a giant lion called Tax Reduction and a runt called Budget Bureau. In Coolidge's view – and Treasury Secretary Andrew Mellon's, for that matter – the two had to be paired.
At our Coolidge event on the Hill, Sessions joined a spoof by donning a Coolidge-era gentleman's top hat. To the senator's credit, he also seems ready to pull on the green eyeshade. Sessions recognizes that the chances for a budget reform and budget deal are rising, in good part because Congress can no longer shift the blame of failure to the other party's lawmakers. The blame this time can be assigned to only two places, President Obama and the Hill Republicans. Completing a budget deal, and even budget reform, would be cheaper than when interest rates climb. These days voter trust is about as low as interest rates – astoundingly low. For many of us, restoring that trust is the priority that trumps all others.
Matthew Denhart serves as executive director of the Calvin Coolidge Foundation, where Amity Shlaes chairs the board.
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