How The Budget Highlights Washington’s Dysfunction

Late Friday, the White House said it would run up an additional $1.1 trillion in new debt if all its plans were carried out over the next 10 years. That would be on top of the $16.3 trillion in debt it had already planned to incur and would bring government debt to $54.5 trillion.

Official Washington’s reaction to the news, unveiled in the administration’s mid-year budget update: crickets.

Fifty years after an embattled Richard Nixon, only weeks from resigning, signed into law the bill creating the federal budget process, it has become a bipartisan pariah, the fiscal crazy uncle no one wants to talk about.

And while Congress has effectively abdicated much of its responsibility, the picture could get worse if former President Donald Trump and Republicans take aim at the few parts of the law that are still working as intended.

“The days when the [Congressional] Budget Act had some impact on actually setting fiscal policy or actually setting priorities, that no longer exists,” said Bill Hoagland, senior vice president of the Bipartisan Policy Center and a veteran of many budget debates as a former GOP Capitol Hill budget staffer.

In 1974, the government’s debt totaled the then-mammoth sum of about $475 billion, and Nixon hoped the bill would set the nation on a path toward solvency.

Fast forward to July 12, when the law turned 50, and things haven’t exactly turned out that way.

Government debt, which is the accumulation of past annual budget shortfalls, stands just under $35 trillion, more than 10 times what the 1974 figure would be, even adjusted for inflation. The government routinely risks shutting down because lawmakers haggle over the total amount of the annual operating budget for most federal agencies and programs aside from Social Security and Medicare. That amount is supposed to be set in a budget resolution each year by Congress. And taxing and spending decisions are rarely made with any regard for each other, boosting the debt.

To top it off, the tool meant to put lawmakers on record for how much they want to spend and tax, that annual budget resolution, is now as rare as someone reading online terms and conditions. More than 25 years after Congress first dodged doing a budget resolution in 1998, the nonbinding blueprints are only passed now when one party wants to enact tax cuts or spending hikes without worrying they will be blocked by the Senate filibuster.

“Budget processes aren’t being followed at all, the outcomes are terrible, and I’m not sure anyone has any leverage if no one’s trying to succeed on the budgetary front. So that part is a clear failure,” said Doug Holtz-Eakin, a former director of the nonpartisan Congressional Budget Office and president of the conservative American Action Forum.

Why should anyone care? Because most economists, including Federal Reserve Chair Jerome Powell, say the debt and its trajectory raise the odds of a financial crisis or a steady decline in living standards as more resources are used to sustain the debt.

Another, less dire, possibility is the dollar’s status as the global reserve currency means the U.S. can avoid those outcomes for some time. But the United States may already be testing that idea with debt set to surpass the record World War II levels by 2034.

Hoagland said he thought of his grandkids when trying to explain the issue.

“It’s going to lower their living standards in the future below what I had. The whole purpose of the Budget Act was to provide fiscal sustainability in the future, not just for the current member sitting in Congress, but for the country’s future,” he said.

Democrats and Republicans disagree over what size of deficits and debt are sustainable and how they would close the gap, but few on either side argue that the process laid out in the 1974 law is working as intended.

Under the CBA, the White House is supposed to send its detailed budget plan to Congress by the first Monday in February. Congress is supposed to have voted on and passed its budget resolution, which lays out projected annual spending, revenues and deficits for several years, by April 15, with a “topline” number agreed to by the Senate and the House to guide the actual spenders in Congress, the Appropriations Committees. And then those spending bills are supposed to be finished by Sept. 30, the last day of the government’s budget year.

It does not happen that way.

The February budget submission deadline is rarely met now. In 1998, Congress ditched voting on a resolution for the first time, with the House and Senate agreeing on a total annual spending number but nothing else. That led to budget resolutions being done only in odd-numbered years, and even then, only when one party held both chambers. Now, they are done almost exclusively in odd-numbered years when one party controls both chambers and the White House and that party wants to use the process to sidestep the Senate filibuster to do things like tax cuts or Obamacare.

Moreover, the annual spending bills have not been finished on time since 1996, creating periodic threats of government shutdowns.

House Speaker Mike Johnson (R-La.) made restoring regular legislative order, including passing a budget resolution in the House at least, part of his promises when he took the gavel in October. He has since given up on the idea.

Even giving up helps Republicans, though: It would allow Republicans not one but two chances next year to bypass the Senate filibuster if they take control of Congress, using a process called reconciliation.

“Returning to regular order is a very difficult thing,” Johnson said June 26. Instead, he said, Republicans wanted to use reconciliation next year “expansively, as our Democratic colleagues did in the last couple of rounds, and we think there’s a lot of promise for that.”

House Budget Chairman Jodey Arrington (R-Texas) told HuffPost he would have liked to have taken the resolutions his committee approved for 2024 and 2025 to the House floor for a vote, but it was leadership’s call not to do that.

“I’ve been screaming and hollering to do it, but I think, at this point, six months out [from the general election], I don’t see that being a priority, unfortunately,” he said.

Budget resolutions used to be the big thing that Budget Committees, also created under the 1974 law, did each year. Without them, the panels have become less relevant almost to the point of being seen as vestigial afterthoughts.

The resolutions have little inherent power themselves. But their political value had resided in forcing lawmakers to put on record how much in taxes, spending and deficits they wanted. Dodging them means getting to avoid those tough votes.

In the Senate, Arrington’s counterpart, Sen. Sheldon Whitehouse (D-R.I.) has not considered a budget since he took the gavel in 2023 and has been criticized for turning the focus of the committee away from fiscal issues to climate change, a favorite topic for him.

“Just having hearings about the environment and climate and not actually putting together a budget resolution, at least trying, I think is unfortunate,” Hoagland said.

“More than a third of the national debt stems from economic shocks that caused widespread financial pain — the 2008 financial crisis and the COVID pandemic — so the Budget Committee, in this period under a bicameral budget agreement through September 2025, has focused on how climate change poses systemic risks of economic shock to our economy,” Whitehouse said in a statement to HuffPost.

Two parts of the 1974 law have fared well, though: the CBO and the law’s anti-impoundment provisions. But they, too, could face a rough ride if Republicans gain control of the White House and Congress.

The nonpartisan CBO is widely acknowledged as the scorekeeper for Congress, giving estimates of how much a particular piece of legislation or proposal would add or subtract from the budget deficit. It also gives Congress insight into budget and economic issues, though not policy recommendations.

The CBO was created so Congress wouldn’t have to rely on the White House’s Office of Management and Budget for those kinds of estimates, and has carved out a niche in Washington as the closest thing to a neutral fiscal umpire the city has.

But in 2017, as Republicans were mulling how to keep down the costs of former president Donald Trump’s tax cuts, some House GOP members wondered why the CBO should be the sole arbiter and suggested that other entities, like conservative or libertarian think tanks, also score bills. The Trump administration attacked the CBO’s credibility as well, leading to a rare public letter signed by former directors of both parties defending it.

Marc Goldwein, senior vice president and senior policy director with the anti-deficit Committee for a Responsible Federal Budget, said it was possible a second Trump administration would again try to weaken the CBO.

“Nobody wants to know how much their stuff costs because they want to be able to make up their own numbers,” he said.

But he said the CBO has been attacked by Democrats as well and survived.

“I don’t take it lightly. I’m not dismissive of it. I think we need to work to protect our need for scorekeepers. But I also have faith in the resilience of CBO as an institution,” he said.

A Trump win could also revive the issue of presidential impoundment, which happens when the president basically refuses to spend money Congress has approved for specific uses. It was Nixon doing this that gave impetus to writing the 1974 law in the first place.

Currently, a president can put off spending funds for specific uses for up to 45 days without getting Congress’ approval. Longer than that, though, requires lawmakers to sign off. Trump has said he would control spending in part by challenging the current impoundment system to give him more control.

“Clearly where the Trump allies are headed is to say the Impoundment Control Act was unconstitutional,” Hoagland said. “I’m not sure that’s going to fly.”

The fight could end up in the federal courts, which may be Trump-friendly at the level of the U.S. Supreme Court.

2025 will see the budget be a major focus of Washington, even if large portions of the Budget Act are seemingly on their last procedural legs. Decisions on whether to extend parts of Trump’s 2017 tax cuts, worth several trillion dollars, or Obamacare’s premium subsidies, worth hundreds of billions, will need to be made.

Hoagland said the process may, ironically, be a victim of its own success. In 1997, with Cold War military spending needs gone, a booming economy and rising Dot Com-era capital gains tax receipts, a bipartisan budget agreement was reached aiming for a surplus in 2002. It was even passed using the reconciliation process now wielded as a partisan cudgel.

But the lawmakers were wrong. The economy was doing so well the surplus was hit in 1998 and it continued through 2001. The Treasury Department, flush with cash, paid down debt and conducted regular auctions to buy back its most high-interest debt.

But a litany of policy decisions — the post-Sept. 11 wars, repeated tax cuts from Presidents Bush and Trump, the Part D Medicare drug benefit, Obamacare and the response to COVID — now mean an annual surplus is politically out of reach. Deficit hawks’ ambitions have dwindled to simply trying to stabilize the debt as a proportion of the U.S. economy.

Goldwein said it would take about $8 trillion in deficit reduction over 10 years to stabilize the debt. (For a sense of scale, that’s more than the $6.9 trillion that is projected to be all of federal spending this year.)

“In theory,” Goldwein said of finding that much in deficit savings, “the budget process would be a very reasonable place to accomplish most of that.”

But without political buy-in from Congress and the White House, the process won’t matter, he said, a point echoed by Holtz-Eakin.

Asked who’s to blame for the current state of affairs, Holtz-Eakin said, “everyone.”

“The voters, the people in office who don’t care about the budget. Republicans, Democrats alike, they don’t pass them. They don’t adhere to them when they do. They don’t make any sense from a long-term fiscal objective,” he said.

“There’s nobody here who’s done well.”