Three Ways to Think About Biennial Budgeting

The Federal budget process creates an opportunity for the president and Congress to examine and change policy priorities, measure the effectiveness of existing programs, and transparently communicate the goals of the government to the American people. 

The current budget process meets none of these objectives. 

One idea for reform, biennial budgeting, has become a fashionable thing to discuss in budget policy circles. However, not all members of Congress are thinking about the same concept when biennial budgeting comes up.  

There are at least three ways to think of biennial budgeting. And each version will worsen the outcomes of the budget process relative to the status quo. Furthermore, what is not discussed in any evaluation of biennial budgeting is the way in which its adoption would weaken the infrastructure involved in the production of the budgets.

Budget and appropriate every other year. 

This is traditionally what people think of when biennial budgeting comes up. Under this proposal Congress and the president would be required to produce budgets and appropriations bills every other year. Each appropriations bill would provide funding for a two-year period rather than for just one year. 

The idea behind this proposal is that it gives Congress more of an opportunity to provide oversight of programs, which they would presumably do in the year not used for budgeting. However, there are significant costs with moving to a two-year cycle. 

The annual process of producing a budget has important, positive externalities. For instance, the requirement to produce a budget gets the departments and agencies in the mindset of considering what can be changed and improved. This changes the way that the executive branch behaves regardless of whether the Congress actually takes the president’s budget seriously. 

Producing a budget each year also empowers the Office of Management and Budget (OMB) within regards to their relationship with the departments and agencies. OMB establishes the fiscal targets, works with the agencies to develop policy around those targets, and corrals the entire executive branch around the president’s policy vision. The status of this relationship in the production of the budget carries over to other activities throughout the year that involve near continuous interagency communication with the president’s budgeteers.

The requirement of the president to produce a budget each year puts Congress on the defensive. It highlights the differences between the Congress and the president on major policy initiatives. The president’s budget puts pressure on Congress to respond with its own reforms. These are good tensions to have within the process. 

Finally, the budget process is a good use of resources relative to other likely counterfactuals. From the perspective of the executive branch, preparation of the president’s budget takes up a lot of resources. Leadership within each department and agency (including the cabinet officials and their senior staff) spend many hours between May and December of each year thinking through new policies as well as what to change about existing policy. They then formulate these ideas in many, many documents that are eventually made public for the consideration of Congress.

This brings up the question, what would the departments and agencies do with all their newly found time if biennial budgeting was adopted? Well, one likely option would be writing more regulation. 

Budget every year, appropriate every other year. 

Under this proposal Congress and the president would still be required to produce budgets each year. However, Congress would only have to pass six, rather than the normal 12, appropriations bills in any given year providing two-year appropriations (rather than the annual appropriations, which is current law). 

Congress would then take-up the remaining six bills in the next fiscal year. The President’s budget would follow the same schedule with the two-year requests for each set of appropriations bills every other year. 

House Speaker Paul Ryan (R-WI) seems to buy into this approach and so does the current Senate Budget Committee Chairman Mike Enzi (R-WY). 

The idea behind this proposal is that Congress doesn’t pass appropriations bills because they run out of time each year to process all 12 bills required to fund general operations of the government. But the reality is that each bill includes tough choices that won’t become any easier with more time. In fact, this proposal will simply reduce the number of tough choices that each Congress will have to make. 

The cost of adoption will be the further removal of the legislature from the funding process. Under current law, each Congress gets at least two opportunities to express their grievances with the president by limiting funding for activities. This proposal would significantly limit those opportunities and further empower the executive. 

The obvious idea behind keeping the requirement to produce a budget every year is to allow for more frequent use of budget reconciliation, a special process used to change mandatory spending and revenue policies. Congress needs reconciliation because the real problem is with mandatory spending, right? 

But it’s not so simple. For instance, between 2017 and 2018, discretionary spending increased by 6.3 percent. One time spending increases are sustainable. But increasing discretionary spending year-after-year will make those programs as equally unsustainable as the major entitlements (e.g., Medicare or Medicaid). This is especially true for programs that distort markets, drive additional consumption over investment, or where the return to the investment is diminished. 

It’s also not true that reconciliation has been used to make the budget any more sustainable. For instance, reconciliation bills have increased the deficit over the relevant budget windows by $2.691 trillion since 1991. There are those who will shout “well, yes, this is because of those tax cuts!” Though very true, this point does not take away from the fact that reconciliation has been used to push non-budgetary policy objectives from tax and welfare reform to health reform.

Budget every other year, appropriate every year. 

This option seems to have the support of House Minority Leader Nancy Pelosi (D-CA) and has the same problems as the others. However, those who support this approach point out that this is basically what Congress has already done with the Bipartisan Budget Acts of 2013, 2015, and 2018. 

This is a dramatic oversimplification. The budget produced by the president and Congress covers all programs administered by the Federal government whereas the Bipartisan Budget Acts adjusted the statutory spending caps to increase the amount that could be appropriated on an annual basis. Plus, Congress’s historic inability to produce budgets isn’t a reason to change the process to reduce the requirement for a budget each year.