In the latest iteration of the Senate extenders bill, specifically in an amendment by Senate Finance Committee Chairman Baucus, $58 billion of spending is designated as an emergency.  This is for two types of spending:  (1) unemployment benefits, and (2) aid to states, mostly through the federal government paying a higher share of Medicaid spending.

Emergency spending is advantaged in the Congressional budget process:

• The total amount of discretionary spending, implemented through annual appropriations bills, is capped by the annual budget resolution.  Discretionary spending designated as emergency spending does not count toward this cap.
• Mandatory spending, most of which is for entitlement programs, is on autopilot.  Congressional budget rules require you to offset any legislative increase you propose in mandatory spending.  An emergency designation waives this requirement.   The same is true for tax cuts designated as emergencies.

There are other technical aspects of the emergency designation, but these are the most important.  This year it’s a little hinky because there is not and apparently will not be a budget resolution.  The unemployment and Medicaid spending in the Baucus amendment are mandatory spending provisions.

OK, now that we know how emergency spending is advantaged, what exactly is it?  It turns out there is no formally binding definition in the legislative process, so as a formal matter, it’s whatever you can get away with labeling as an emergency.  A Member of Congress can argue that X is not an “emergency,” and if he or she can get the votes to strike that emergency designation from the bill, then that spending will count toward the caps (discretionary) or its deficit effect must be offset (mandatory).  If, however, a majority of lawmakers (separately in the House and Senate) agree that they’ll label X as an emergency, then there is no procedural challenge available.

This formal procedural ambiguity can be dangerous in the hands of a Congress that doesn’t want to make hard choices.  Sure it may be hard to argue that X is an emergency, but it’s probably easier than finding spending cuts to offset X, spending cuts which will involve real pain for some constituency that will complain loudly.

In the political debate, “emergency” has been distorted to mean “important and deserving of empathy.”  This is an abuse.  Emergency is not the same as important, and of course importance is in the eye of the beholder.

There is a definition first created in 1991 by the Bush (41) Office of Management and Budget.  It’s a five-part test for whether a particular spending provision should be designated as an emergency.  This is an AND test, meaning a provision must meet all five criteria to earn an emergency designation.

According to this 1991 definition, to qualify as emergency spending, the provision must be:

1. necessary; (essential or vital, not merely useful or beneficial)
2. sudden; (coming into being quickly, not building up over time)
3. urgent; (requiring immediate action)
4. unforeseen; and
5. not permanent.

This definition was included in Congressional budget resolutions during the Bush (43) Administration.  President Bush proposed codifying it in law.

Let’s compare a hypothetical request for more money for the Coast Guard to clean up the Gulf Spill with the proposed extension in the stimulus of unemployment insurance benefits and with the proposed extension in the stimulus of federal aid to states through higher Medicaid reimbursements.  I will be overly generous and grant a yes where I think a plausible case can be made, even if I might disagree with that case.

The clear failures for unemployment and Medicaid are the “sudden” and “unforeseen” tests.  Certainly now, 16 months after the initial enactment of these provisions, no one can plausibly argue that an extension is either sudden or unforeseen.

Both parties have violated this definition, which I emphasize is not now formally binding.  Emergency spending designations have become an enormous loophole subject to increasing abuse by those who want to spend money without making hard choices.  In the pending extenders bill, emergency designations are being used to exempt $57.8 billion of spending from budgetary offset requirements.

Recommendations

• Congress should remove the emergency designations from the unemployment insurance benefit extension and the Medicaid FMAP extension.
• If Congress thinks that extending unemployment benefits and Medicaid aid to states are essential policies, they should prioritize and either cut other spending (my preference) or raise taxes.
• Congress should formalize the 1991 definition of emergencies, ideally in statute but at least in the Congressional Budget Resolution, if they ever do a budget resolution.
• In formalizing that definition, Congress should change its rules so that an emergency designation applies only if the chairman of the relevant Budget Committee enters a statement into the Congressional Record explaining how the spending or tax provision meets all five elements of the definition.  This would place a slight check on Congressional spenders who abuse the designation.
• In the Senate, a senator should be allowed to raise a point of order against an emergency designation, requiring 3/5 of the Senate to waive.  Update:  This already exists.  I mistakenly thought it had expired.

(photo credit: Emergency Off by Gilbert R.)

Keith Hennessey served as the senior White House economic advisor to President George W. Bush and spent more than eight  years previous working on Capitol Hill as a policy adviser. KeithHennessey.com is his in-depth blog on American economic policy.