House Democrats propose overhaul of federal budget process

WASHINGTON–Imagine that after you filed your taxes this month, the IRS sent you back a receipt, showing how much of your income tax went to pay for everything from foreign aid to education, transportation, and entitlement programs like Medicare and Social Security.

That’s one provision of a bill, introduced by Rep. Jim Himes and several other Democrats, that seeks to significantly revamp the federal budget process.

The legislation aims to make the federal budget a more true and transparent picture of government spending by barring the use of accounting gimmicks that hide certain expenditures and forcing lawmakers to immediately pay for any new tax cuts.

Perhaps most controversially, the bill also calls for Congress to “promptly consider” the debt-reduction recommendations issued last year by President Barack Obama’s national fiscal commission. Those recommendations include, among other things, increasing the Social Security retirement age, eliminating popular tax breaks, hiking the gas tax, and cutting $100 billion each from domestic and defense spending.

Lawmakers have been free to ignore the debt-reduction plan because in December, the commission fell three votes short of the 14 needed to force an up-or-down vote in Congress. Himes, a Democrat from the 4th District, and others have been looking for ways to revive that proposal.

But the main goal of new legislation, called the “Transparent and Sustainable Budget Act” and drafted by Rep. Mike Quigley, D-Ill., is to force a more honest accounting of government spending and make it harder to ignore the costs of certain programs.

“It gets us back to a much stronger process that tips the Congress in favor of fiscal responsibility,” Himes said.

In addition to the tax receipt and debt reduction provisions, the bill would:

  • Make the cost of tax subsidies–for everything from home-mortgage deductions to business tax credits–a more transparent and identifiable part of the budget. Right now, the government loses out on more than $1 trillion of revenue each year because of various tax breaks on the books, but those are not clearly accounted for.
  • Make it harder for Congress to pass legislation with a price tag that skyrockets after 10 years–and therefore falls outside the timeframe Congress generally uses to calculate a bill’s cost. It would also require the Congressional Budget Office to analyze the second-decade fiscal impact of bills.
  • Tighten so-called “pay-as-you-go” rules by requiring lawmakers to find new revenues to off-set any tax cuts. Right now, House Republicans only apply that rule to new spending, not to tax cuts.
  • Require the president’s budget and the annual Congressional budget resolution to include specific long-term deficit and debt sustainability targets.

Himes said there are so many budgetary gimmicks and loopholes at Congress’ disposal right now, that it’s hard to have a genuine and informed debate about the nation’s fiscal problems. On the pay-as-you-go rule, for example, he noted that Congress could go so far as to eliminate the income tax entirely and still “not address how you deal with the fiscal impact of that.”

Similarly, he noted that because Congress uses a 10-year budget window to tally the costs of legislation, lawmakers often hide the price tag of a program in the out-years.

“One of the many games around here is to structure a proposal that looks good in the budget window, but has a time bomb outside the budget window,” he said. The transparent budget bill would force lawmakers to muster a super-majority for any legislation that would create large deficits after 10 years.

On the idea of the tax receipt, Himes said he was initially skeptical. The proposal is being promoted by the Third Way, a centrist Democratic think tank, which has put a tax receipt calculator on its website.

David Kendall, a senior fellow at the Third Way, noted that Americans are often ill-informed about federal spending. For example, in a November 2010 poll by the University of Maryland, most respondents estimated that 25 percent of the federal budget was dedicated to foreign aid-when in fact it’s less than 1 percent. Other surveys suggest that most Americans believe policymakers can tackle the debt without tinkering with Social Security or Medicare.

“People think most of the waste in the federal government is due just to the annual appropriations that Congress approves,” he said. “But in fact, mandatory spending [on Medicare, Medicaid and Social Security] and the interest on the debt constitutes most of the spending. So it’s really important in this current budget fight to understand that money for NPR and Planned Parenthood and even certain weapons systems are really only a small and shrinking portion of the federal budget.”

Sending people a tax receipt would show them in concrete terms of how much of their money is being spent on foreign aid versus Social Security and other programs.

“But by bringing it down to numbers their familiar with, people can get a sense of the proportion of what we’re spending in government better,” he said. “Equally important, people feel disconnected to the government. They send this money off and all they hear is fights about shutting down the government or spending more on this program or that program.”

Sending them a tax receipt, he argued, would give them a more direct link to the debate in Washington.

Himes said the need to engage the public is vital if Congress is going to deal with the nation’s long-term fiscal problems. Last week, he held four town hall meetings on the budget around his district, delivering a power point presentation on the problems and soliciting opinions about possible solutions. Cutting foreign aid was a popular suggestion.

“Some tiny percentage of Americans knows where the money is going,” he said. “But if they talk about what they or what their neighbors are paying [in taxes], they would be more informed participants in this very tough debate.”

The prospects for the Quigley-Himes budget proposal is unclear. Himes said it’s is a pretty “nonpartisan” bill. But Ben Strauss, a spokesman for Quigley, said his boss’ initial efforts to get Republican co-sponsors have yet to bear fruit.

Kendall said the bill may not be put on a fast-track. But some of its provisions could generate further debate about federal spending and may eventually be rolled into a broader package that addresses long-term fiscal stability