What is a budget resolution?

What is a budget resolution?

A budget resolution is an internal management tool used by Congress to structure its spending and tax decisions. It consists of legislative language and looks like a bill, but it’s not a bill. It is instead a concurrent resolution, which means that the House and Senate have to pass identical language, but it does not go to the President for his signature or veto.

The budget resolution is like a blueprint for a house. It’s not a house, it’s a plan for building one. A blueprint establishes the size of the house, the size of each room, and how the rooms are put together. A budget resolution does the same for federal spending and taxes. A budget resolution by itself does not spend any money or raise any taxes. It is instead the quantitative blueprint and rules for other legislation that does both of those things.

Each year on the first Monday in February the President proposes a budget. The main set of documents released from OMB are more than a thousand pages long. When you include the supplemental details provided by agencies, the full proposal is a multiple of that. But in the end it’s just a proposal and it has no legal binding authority. The Constitution gives the “power of the purse” to Congress, not to the President.

Congress can take the skeleton of the President’s proposal and use it to build their budget resolution or they can ignore it completely. They can write their own budget, as often happens when one or more houses of Congress are controlled by a different political party than the White House.

I think of a budget resolution as a top-down structure that basically consists of four parts:

  1. Totals – We intend the federal government to spend $X billion and collect $Y billion in taxes, resulting in a deficit of $(X-Y) billion.
  2. Committee allocations – We divide the $X billion of spending up among the various committees in Congress. This is done separately for the House and Senate committees, but they’re designed to match up.
  3. Processes – We can set up reconciliation processes to produce reconciliation bills, create points of order, and create reserve funds.
  4. Fluff – Non-binding “Sense of the Congress” statements.

As an example, last year’s budget resolution (I’m oversimplifying here):

  • Said that for Fiscal Year 2010 the federal government should spend $3.36 trillion, collect $1.53 trillion in taxes, and therefore run a deficit of $1.83 trillion. It then sets similar parameters for each of the next four years, up through FY 2014. Budget resolutions typically cover either the next five or the next ten years at the discretion of Congressional leaders.
  • Allocated that $3.36 trillion of spending to various committees in the House and Senate. In the Senate, the Finance Committee could spend no more than $1.23 trillion. The Appropriations Committee could spend no more than $1.81 trillion. The Armed Services Committee could spend no more than $136 B, and so on.
  • Created a reconciliation process in the House and Senate. This process was later used to pass health care law #2 and was created for that purpose.
  • Set up the pay-as-you-go rules that require entitlement spending increases and tax cuts to be offset so they are deficit neutral.
  • Created 14 “reserve funds” in the House and 20 in the Senate. In theory, a deficit-neutral reserve fund smooths the procedural path for legislation that shuffles spending and taxes around for a particular purpose (like student loan reform or more veterans benefits) while not increasing the deficit. Other reserve funds are designed not to be deficit neutral, and allow Congress to increase spending or cut taxes, but subject to restraints: only by certain amounts that fit within the totals defined above, and only for particular purposes.
  • Included Sense of the Congress provisions on homeland security, promoting innovation, pay parity, and Great Lakes restoration.

Once the House and Senate have agreed to the same budget resolution language, the numbers and rules within it bind Congress until a new budget resolution is adopted the following year. The power of the budget resolution comes from the Congressional Budget and Impoundment Act of 1974, which sets up procedural rules that allow Members to enforce the budget resolution. I’m a bit more familiar with the Senate, so I’ll give an example there.

Suppose an agriculture bill is on the Senate floor and you want to amend that bill to increase mohair subsidies by $10 B per year. Such a spending increase would cause the spending in farm programs to exceed the amount allocated to the Agriculture Committee, so any of the other 99 Senators could raise a budget point of order that your amendment violates the Agriculture committee allocation in the budget resolution. You would need 60 votes to waive that point of order. If you couldn’t get 60 votes, then the point of order would be sustained and your amendment would die.

There’s a huge practical difference between getting 51 votes to pass an amendment, and getting 60 votes to “break the budget” and waive the point of order. Points of order like this are powerful tools to force legislation to conform to the numbers in the budget resolution. They force quantitative discipline on the legislative process. The discipline is imperfect and the budget is sometimes waived, but there is discipline nonetheless.

Without an annual budget resolution, that discipline does not exist. Committee chairman spend and tax as they see fit, because there is no overarching structure to reign them in. It can become budgetary chaos.

Because of this power, the budget resolution is one of the most important and most hotly contested legislative efforts of each year. While it looks like just lists of numbers and procedural rules, the budget resolution reflects enormous policy choices that shape the entire legislative landscape for the year. Budgeting is about choices and tradeoffs, and the budget resolution is where those choices are made. These hard choices often involve politically painful tradeoffs among important issues and powerful interests.

As an example, the budget resolution can establish whether cap-and-trade legislation must reduce the deficit (presumably by auctioning off permits) or can be deficit neutral, in which case carbon credits can be allocated to particular interests to help Members vote for the legislation. The budget resolution’s requirements on cap-and-trade can set a budgetary bar that could doom the legislation.

The enormous substantive impact also means that budget resolutions are typically partisan legislative efforts. The two parties are fairly far apart on major fiscal policy questions and the budget rules make compromise on a budget resolution less necessary than on traditional legislation, and so most budget resolutions pass the House and Senate on nearly party line votes.

Even within a political party it can be hard to bridge fiscal policy differences and a challenge for leaders to corral their members into a fiscal policy agreement.

In recent weeks House and Senate Democratic leaders have said they do not intend to try to pass a budget resolution this year. The statutory deadline for a budget resolution conference report is April 15th and is routinely missed, but it’s almost always complete by mid-May. Without a budget resolution there will be no discipline on tax or spending legislation other than the limited enforcement that can be derived from last year’s resolution. We can see one symptom of this as the Senate debates on an “extenders” bill that violates the majority’s own much-touted pay-as-you-go rules. Update: While the extenders bill appears to violate the Senate’s paygo rules, the majority works around this by designating as emergencies the provisions that are not offset. The bill therefore technically complies with the PAYGO rule. I think of it as violating the spirit of both the Senate’s PAYGO rule and the definition of an emergency.

Press reports suggest that in this heavily contested election year the Democratic Leaders don’t want to put their members through the tough votes that always happen during floor votes on the budget resolution, and they don’t want to force different parts of their Democratic caucus to fight with each other to reach agreement.

Since my policy experience began in 1995, there have been several instances where the House and Senate have failed to reach agreement on a conference report. This is, however, the first time Congress didn’t even try.

That’s an abdication of responsibility. Based on past experience, I expect I would oppose a hypothetical budget resolution compromise by the Democratic House and Senate majorities. Still, it would be better to have a budget resolution that I oppose than to have no structure and no formal budgetary discipline.

Voters elect Members of Congress to make hard choices.

3 responses

  1. Pingback: Tweets that mention What is a budget resolution? | KeithHennessey.com -- Topsy.com

  2. Keith,

    Is there no requirement to pass a resolution? If so, is this setting a precedent to stop the annual budget process for Congress?

  3. The government applies the best of cartoon physics. Falling isn't a problem if you don't look down.

    Wife: I've been looking at our savings.
    Husband: We have $80,000.

    Wife: But, what is this note at the bottom "Aces Casino gambling debt: $105,000"? Do we owe that in addition?
    Husband: Yes, but don't worry, that is off budget.

    Political Dictionary: Off Budget

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