Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / Why the Federal Budget Process Is Broken
Transcript
- Lucas: So we are about six weeks away from the end of the fiscal year, and the government is, once again, staring down a funding deadline. But the thing that's always struck me is how weird the whole process is. We're not even talking about the policy fights. Just the mechanics of how the federal budget is supposed to get made. Luna: Right, the process that's supposed to have everything done by October first. And it hasn't actually worked on time in years, has it? Lucas: Exactly. The last time all twelve appropriations bills were passed on time was way back in 1997. Since then, it's been continuing resolutions, omnibus packages, and the occasional shutdown. So today I want to unpack why the system is so broken, and what it means for the country. Luna: And I'm guessing it's not just because politicians are lazy. Lucas: No, it's structural. But before we dig into the weeds, I've got to say something that's been on my mind. You know, if walking through the economy with us has made something click, you can support the show by buying us a coffee at buy me a coffee dot com slash fexingo. It's what keeps this podcast ad-free, and it genuinely helps us keep doing this. Luna: It really does. And we appreciate every bit of it. Okay, back to the budget. So what's the actual blueprint? Lucas: Well, the whole thing is anchored to the Congressional Budget Act of 1974. That's the law that created the modern budget process. It set the fiscal year from October first to September thirtieth, and it laid out a schedule. The president submits a budget request in February, Congress passes a budget resolution by April fifteenth, and then the appropriations committees are supposed to pass twelve separate spending bills by the end of September. Luna: And that's the part that's completely broken, right? The twelve individual bills. Lucas: Right. The intent was to have a deliberate process where each bill gets its own debate, its own amendments, its own vote. But what's happened is that they've become these massive packages. Last year's omnibus was over 1,500 pages, and it was dropped on members with just a few hours to read it. Luna: Yeah, I remember hearing that some members didn't even have time to read it. And that's how we get these surprise provisions tucked in. Lucas: Exactly. So the process has collapsed into this cycle where we lurch from one continuing resolution to the next. A continuing resolution, or CR, just extends current funding levels for a set period. And we've had dozens of them over the last decade. It's no way to run a government. Luna: So why is it so hard to pass the bills individually? I mean, in theory, they're just the nuts and bolts of what the government does. Lucas: Well, look, the appropriations process is supposed to be a negotiation. But negotiation requires trust and give and take. And right now, polarization has made it almost impossible to get enough votes for any single bill. So they end up bundling everything into one giant package because that's the only way to get enough votes. Luna: And the threat of a shutdown hangs over it all. That's the ultimate weapon. Lucas: And that weapon gets used more and more. We saw a 35-day shutdown in 2018 and 2019, the longest in history. And the cost of that was billions of dollars in lost productivity and delayed services. It's not just about the optics of a closed museum or a delayed passport. It has real economic consequences. Luna: But even setting aside the shutdown drama, the CR cycle itself is inefficient. Agencies can't start new programs or plan long-term because they don't know what their funding will be. Lucas: Exactly. A CR basically locks in last year's rates, even if needs have changed. So if there's a cybersecurity threat that requires new investment, agencies can't pivot. They're just running on autopilot. And that's not how you allocate resources efficiently. Luna: So what would a better process look like? Is there any appetite for reform? Lucas: There have been proposals. One idea is a two-year budget cycle. Instead of doing this every single year, you do a detailed budget every two years, with the off-year reserved for oversight and adjustments. That would reduce the frequency of the political battles and give agencies more stability. Luna: That sounds sensible. But I'm guessing the politics of that are tricky too, because you'd need to change the law. Lucas: Right, you'd need to amend the Congressional Budget Act. And any change to the process is a change in the balance of power. So those who benefit from the current dysfunction, and there are some, aren't eager to fix it. Luna: There's also the idea of an automatic continuing resolution, right? If Congress misses the deadline, funding just continues at current levels automatically. No shutdown drama. Lucas: Yeah, some countries do that. And it would take the threat of a shutdown off the table. But the downside is that it removes the incentive to actually pass the bills. You'd end up with permanent CRs, which might be even worse. Luna: And what about a fiscal commission? That's been floated to tackle the bigger debt issue. Lucas: A fiscal commission could be another way to force a grand bargain on deficits and entitlements. But here's the thing: any of these reforms require the very people who are part of the problem to agree to change. And that's the paradox. The system is broken, but it's broken in ways that benefit the people in power. So the incentives are all wrong. Luna: So we're stuck in this loop of last-minute deals and continuing resolutions. And the public just sees the dysfunction. That's part of why trust in government is so low. Lucas: That's the real cost, I think. It's not just the wasted time or the inefficient spending. It's the erosion of faith that the government can do anything right. When people see these giant bills dumped at the last minute, they think it's all a circus. And that's not entirely wrong. Luna: And yet, we still expect the government to handle big things, like the next pandemic or a financial crisis. The process is just not built for that kind of speed. Lucas: Exactly. Look at the early days of COVID, when Congress had to pass multiple relief packages quickly. They managed to do it, but it was through the same broken machinery. And some of those bills were so convoluted that we're still figuring out the consequences. The PPP loans had good intentions, but the implementation was messy. Luna: So it's not that the system can never work, it's just that it works only in the most extreme circumstances. Lucas: And even then, it's clunky. So what's the takeaway? I think the budget process is a perfect case study in how institutions designed for one era get strained when the political environment changes. The 1974 act was designed for a time when Congress was less polarized and had more of a culture of compromise. Luna: And now we have a system where the incentives are to do nothing until the last minute, and then do everything at once. Lucas: Right. So the real question is whether we can ever get back to a place where Congress can pass a budget on time, or whether we just accept that the process is broken and try to manage the chaos. I don't have a clean answer, but I think it's worth thinking about what the first step would be. Luna: Maybe the first step is just admitting that the current process is not working. And that's already a hard sell in Washington. Lucas: Yeah. But as citizens, we can at least understand the mechanics, so we know what to watch for when the next deadline hits. And it's going to hit in a few weeks. Luna: And hopefully, they'll get it done. Or not. We'll see.