The federal budget process has many problems. Different people see different problems and propose different solutions. Let us look at some of these.
One problem is that real decisions on the budget are often pushed into the future. The Congress often fails to pass actual budgets. Instead, it simply passes continuing resolutions that allow agencies to keep spending the way they always have. This means that no decisions are made about which programs should continue and which should be cut.
A second problem is that the budget process takes a very long time. This makes it very hard to use the budget to respond to things that happen in the economy. Let us say that a recession sets in and Congress wants to act to try to help the economy. By the time that Congress actually acts, the recession might well be over.
A third problem is that the great majority of the budget is not really under Congress’s control. This is the so-called “entitlement spending” that makes up about 75% of our government’s spending. This spending is spending that has already been written into law and will happen automatically without Congress doing anything. The major programs that work this way are Medicare and Social Security. Because Congress cannot easily touch these programs, much of the federal budget is essentially out of control.
A fourth problem is the lack of a separate capital budget. The federal budget does not distinguish between spending on capital goods that are useful in the long-term and operating expenses which occur on a day to day basis.
A final problem is that the federal budget is tremendously detailed. Congress specifies very carefully how much of the money in the budget is to be spent. This often happens in the form of “pork” spending on projects that are important to particular lawmakers’ home districts. This makes it harder to rein in spending and introduces a sense of corruption into the process.
Two proposed changes that would help to alleviate some of these problems are having a biennial budget and having a more general budget that does not go into so much detail. These changes would allow more time to get things done and would allow for a greater focus on the big picture. It would also be possible to split the budget into capital and operating budgets.