Like a long-dormant volcano, the federal budget and federal debt have triggered isolated rumbles of concern.
The House Budget Committee (HBC) recently advanced a fiscal commission proposal, which while flawed, provided some basis for hope. The obviously broken federal budget process also faces merited criticism.
Assuming these concerns are real, what core criteria should guide a robust fiscal commission or budget process reform? (RELATED: JD FOSTER: Congress Doesn’t Need A ‘Fiscal Commission.’ It Needs Some Guts)
The first criterion is establishing a proper goal involving a target fiscal outcome and the timeline. The Congressional Budget Office’s (CBO) latest projections indicate the ratio of publicly held federal debt to GDP (debt ratio) will approach 100% this year, rising to something closer to 120% in 2034. For context, a decade ago the debt ratio was below 75%.
Arguably the ideal fiscal target would be a balanced budget. Maybe someday balance can be debated again, but deficits are so massive that balancing the budget, while a great punchline, is not a credible goal. A credible, serious goal is to hold the debt ratio at 100% as per the HBC proposal.
Where HBC missed badly was allowing policymakers to wait 15 years to hit this goal. This is not serious.
Getting the budget under control requires tough decisions now, not in some distant, wistful future. If Congress is unwilling to make and implement these decisions today, why imagine some future Congress will be made of stiffer stuff?
A proper timeline is now and evermore. No 10-year timelines. No 3- or 5-year timelines. CBO says the debt ratio will be about 100% this year. Stay there. Anything longer is bold oratory masking fear and indecision.
Target. Timeline. Now the consequence for Congress of failure. For all its complexities, the current budget process fails in its modest goals only because members of Congress pay no price for failing to follow the process.
Historically, Americans favored a prudent fiscal policy. Historically, Congress and most financial commentators agreed that running massive budget deficits would eventually lead to disaster.
Voters’ preferences and fear of disaster sufficed to restrain Congress and the budget deficits. Obviously, neither works today, though eventually the financial market chickens will come home to roost and they’re going to be a bunch of angry birds.
If a debt-triggered financial crisis hits, then financial markets will signal whether Congress has reigned in budget deficits sufficiently. Hoping they act before the crisis, what mechanism could induce Congress to hit the target today? (RELATED: GOP-Backed Fiscal Commission To Reduce Debt Would Cost $12 Million, Budget Office Says)
Some suggest stopping Congress’ pay. Telling a millionaire they’re going to miss a paycheck isn’t much of a penalty. On the other hand, shooting a few members at random won’t fly, either.
What does every member of Congress hold dear? Staying in Congress. There’s the clue to a practical penalty — the boot.
Suppose CBO’s calculation of the debt ratio for the previous year was 102%, or two points above the target. Now consider the pool of all House and Senate members excluding any newly elected.
Every year come Feb. 1 the General Accountability Office would choose at random one member from this pool for each point the debt ratio exceeds the target. In the example, the two unlucky chosen members would be permanently expelled from Congress regardless of party or seniority.
This procedure would be followed any year Congress overshoots the target which, given the unwillingness of members to risk expulsion, would be never.
Other reforms involving transparency and simplification are warranted, but these are details. Congress would now have a profound interest ensuring budget restraint and compliance.
To paraphrase a common refrain in flyover country, “budget control is being able to hit your target.”
J.D. Foster is the former chief economist at the Office of Management and Budget and former chief economist and senior vice president at the U.S. Chamber of Commerce. He now resides in relative freedom in the hills of Idaho.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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