The Budget, Deficits and Default: America’s Self-Inflicted Crises

By

Home / The Budget, Deficits and Default: America’s Self-Inflicted Crises

Intransigence notwithstanding, President Obama and Speaker of the House John Boehner will have to figure out a way to work together. Credit: By Pete Souza (Executive Office of the President of the United States) , via Wikimedia Commons

Conflicts of fiscal philosophy notwithstanding, President Obama and Speaker of the House John Boehner will have to figure out a way to work together. Image by Pete Souza.

Imagine for a moment the concept of running your personal finances the way the U.S. government does.

First off, you just don’t worry about managing a budget: After all, Congress hasn’t passed one in over four years. Secondly, with no budget in hand, you spend more than you take in. In fact (with or without a budget) you have exceeded your means every year but nine since Harry Truman was president.

Finally, you purposely place yourself on the brink of defaulting on your obligations because you cannot agree with your family members upon what debts you should have, and how you should pay them.

If it sounds beyond ludicrous, it is. And yet, that’s a pretty good summary of the situation in Washington D.C. as it stands today. Why has it come to this, and how could our government avert a budgetary disaster?

Setting a Budget: a Surprisingly Rare Event

Passed in 1974, the Congressional Budget Act set a framework for how the budgetary process is to work every year. Per PolitiFact:

“Since the passage of the Congressional Budget Act of 1974, the Senate and the House are supposed to pass budget resolutions in the spring. These budget resolutions set a framework for spending, taxation and other fiscal items in the coming fiscal year. They also lay out general plans for the next four years. If these budget resolutions differ, the chambers are supposed to hammer out a compromise.”

Despite the legislated blueprint, the passage of a full budget on time is actually very rare; it has happened a mere four times over the past 30 years. The last time we had a government shutdown was 1996, when Bill Clinton was in office and Newt Gingrich was Speaker of the House. Coincidentally or otherwise, it was also the year the U.S. recorded the smallest budget deficit ($21.9 billion) in a generation, followed by four straight surpluses. The country has not enjoyed a budget surplus since then.

A solution to the brinksmanship with respect to government shutdowns and bitter political battles over programs is a surprisingly simple one: Amend the Congressional Budget Act of 1974 to require by law the passage of a budget, lest it automatically renew every year with triggers established. This format would mirror the mechanism of the much-publicized sequester, which came into effect on March 1, 2013. Although a politically unpopular legislative act, the sequester has been credited by economists with helping reduce the budget deficit this year.

Leave a Comment