The 50-year-old budget process must evolve to confront the serious fiscal challenges of today and tomorrow. Improved scorekeeping to understand the fiscal and economic effects of legislation more accurately is an essential component of this reform.
Proposals for Improved Scorekeeping
Congress – in particular the House and Senate Budget Committees – can take several steps to improve scorekeeping.
1. Improve Macroeconomic Estimates
Congress must ensure that scorekeeping agencies use best practices when conducting so-called dynamic scoring that provides analysis of the macroeconomic effects prompted by changes in fiscal policy. The Budget Committees should require the Congressional Budget Office (CBO) to modernize its outdated models and incorporate additional factors into its scoring methodology such as the budgetary effects of changes in economic output, employment, capital stock, tax revenues, sources of financing new outlays, total debt of the federal government, international trade, and international capital flows resulting from the legislation. The Pro-Growth Budgeting Act, introduced by Rep. Kevin Hern (R-OK-01) in the 117th Congress, would implement these requirements.
2. Incorporate Debt Servicing Costs for Legislative Proposals
Congress should understand how proposed legislation would add to or decrease net interest costs, which are one of the largest and fastest growing components of the federal budget. The Budget Committees should require all cost estimates to include the projected debt servicing costs that would be attributable to the legislation. H.R. 311, the Cost Estimates Improvement Act, introduced by Rep. Michael Cloud (R-TX – 27) would implement this reform.
3. Use Fair Value Methodology for Credit Programs
The Federal Credit Reform Act of 1990 (FCRA) method discounts the cost of loans using the interest rates of Treasury securities; this understates the actual cost to taxpayers because it fails to account for market risks. In contrast, fair-value accounting would take into account the market risk of the cost of credit assistance. The CBO has said that “Fair-value budgeting represents a more comprehensive measure of cost for government activities than the measure required under current law.” H.R. 5571, the Fair-Value Accounting and Budget Act, was introduced by Rep. Ralph Norman (R-SC-05) to implement this reform.
4. Long-Term Scoring
Congress should require the CBO to provide information about the long-term impacts of all legislation being considered. Such cost estimates should assess whether the legislation would increase outlays or deficits in any fiscal year or 10-year period following the normal budget window. Congress should be prohibited by House and Senate rules from considering any legislation that increases outlays in any 10-year period beyond the original 10-year budget window; this could be enforced through a new point of order.
5. Account for the Costs of Transfers from the General Fund to Trust Funds
For purposes of scoring and budget enforcement, transfers from the General Fund to any trust fund should be counted as new budget authority and outlays. A similar rule related to transfers to the Highway Trust Fund was included in the fiscal year 2016 budget resolution.
6. Understand How Government Spending and Taxes Fit into the Economy
The terms by which components of the federal budget are generally described can be confusing and often fail to convey information about how government spending and taxes will fit into the national economy. In its cost estimates for legislation, the CBO should describe how the legislation would affect national income and product accounts (NIPAs), such as consumption, transfer payments, and subsidies. This information should not replace the normal cost estimate, but it would help lawmakers better understand the economic impact of bills under consideration.
7. Provide Cost Estimates for Appropriations Bills
The CBO does not provide formal cost estimates on the regular appropriations bills, even though they are the most important federal spending legislation considered by Congress on a regular basis. This is due to a loophole in Section 402 of the Budget Act that carves out bills reported by the House or Senate Appropriations Committees from the requirement that the CBO prepare cost estimates for legislation reported by other committees. Rep. Glenn Grothman (R-WI-06) introduced H.R. 7584, the Appropriations Transparency Act, to close the loophole and finally require the CBO to provide cost estimates for appropriations bills. Requiring cost estimates for appropriations bills from Congress’s non-partisan official scorekeeper is an important step towards transparency and uniformity in understanding the fiscal implications of spending legislation. The Appropriations Transparency Act would also require the CBO’s cost estimates for appropriations bills to information on how spending in within the bills is categorized.
8. End Gimmicks in Appropriations Bills
Under the current scorekeeping guidelines, certain provisions that make changes in mandatory programs (CHIMPs) included in appropriations bills can be used to increase discretionary spending. These CHIMPS are often just gimmicks that shift the timing of mandatory spending or otherwise fail to reduce mandatory outlays and allow increases in discretionary spending year after year using the same “offset” repeatedly. President Biden’s fiscal year 2025 budget request proposed $41.5 billion in CHIMP gimmicks. These gimmicks should be eliminated.
9. Provide Preliminary Cost Estimates Prior to Committee Markups
Under current law, the CBO is only required to provide a cost estimate for legislation after it is reported out of a committee. In order to provide transparency, the CBO should publicly provide a preliminary cost estimate prior to a committee’s consideration of fiscally significant legislation. This would enable Members sitting on the committee to make more informed decisions during a legislative markup.
10. Provide Regular Updates on Congressional Legislative Action
Section 308(b) of the Congressional Budget Act requires the CBO to issue monthly reports on the progress of Congressional action on legislation and their fiscal impacts, including a comparison to the levels set forth in the budget resolution. In recent years, these reports have been infrequently (or rarely) made widely available. The CBO should make its monthly reports available publicly. Additionally, committee websites should be required to display updated trackers of their fiscal impacts and progress. This overview table should be duplicated on the Congress.gov website for public consumption.
11. Provide Updated Assumptions Regarding Major Enacted Legislation
Understanding the past is essential for preparing for the future. When the CBO’s understanding of the costs of previously enacted legislation are updated based on new information, it should alert Congress to these facts. Disclosure should also be triggered if a provision in a previously enacted law that was meant to offset the costs of other spending is later repealed or proves to save less than originally estimated.
12. Create an Offset Accountability Tracker
Using the updated data about enacted legislation, the CBO should establish an “offset accountability tracker” cataloguing if Congress is keeping its promises to pay for various legislative proposals.
More from EPIC on Reforming the Budget Process
Reforming the federal budget process must be driven by clear fiscal goals and enable Members of Congress and the public to be better informed about the true impact of legislation.
A modernized and improved budget process would:
1. Set and achieve fiscal goals.
2. Increase transparency.
3. End the baseline bias.
4. Improve scorekeeping.
5. Reauthorize and provide oversight of the CBO and the JCT.
6. Provide a common language of budget concepts and terminology.
7. Promote constitutionalism and support federalism.
8. Invest in Congress.
9. Encourage fiscal responsibility by the Executive Branch.
Read EPIC’s full report:The Budget Process Must Confront the Challenges of Today and Tomorrow.
