Off the Charts Blog | Center on Budget and Policy Priorities

Tomorrow’s release of President Obama’s budget will bring new attention to the debate over how to reduce deficits.  A key sticking point in that debate has been Republican leaders’ opposition to any new revenues on top of those in January’s American Taxpayer Relief Act.

With that in mind, here’s a fact worth remembering:  some 70 percent of the $2.3 trillion in policy savings that the President and Congress have enacted over the past few years — which will produce $2.75 trillion in total deficit reduction when interest savings are included — have come through program cuts rather than revenue increases (see graph).

The Senate recently expressed support for “biennial budgeting,” under which policymakers would consider budgets and appropriations bills that stretch over two years rather than one.  We urge those who voted for this concept, in the form of an amendment to the Senate budget resolution, to reconsider.

While proponents of biennial budgeting say it will improve budgeting and congressional oversight, it’s unlikely to work in the real world as they suggest and, as many budget experts have concluded, its disadvantages outweigh the advantages.

Here are four reasons why:

Biennial budgeting is done too far in advance. Agencies would begin to craft their budgets for the second year of a two-year cycle at least 28 months before that year starts and 40 months before it ends.  They cannot possibly know that far in advance what the particular needs of individual programs will be or the special factors that might influence those needs.  Both the economy and social conditions can change substantially from year to year.  Consequently, between budget cycles, agencies would inevitably want to make changes to programs.  But, under biennial budgeting, it may be a year before policymakers can fully reflect those needed changes in their budget decisions.

Budgets would have to be revised frequently. Pressures to revise the budget during the two-year period would be very strong, likely generating frequent budget revisions and large supplemental appropriation bills.  Such revisions often involve less rigorous congressional analysis than the regular budget process. The possible result:  nearly as much budgeting activity as under the current annual budget process, but with much of it pursued on an ad hoc basis.

Biennial budgeting may protect the status quo. Reordering budget priorities often involves challenging the status quo and confronting strong constituencies that protect various discretionary programs.  Due to resistance to such shifts, changes tend to occur incrementally; each year, policymakers can nudge down appropriation levels for lower-priority programs somewhat and boost funds for important new initiatives somewhat.  If, however, policymakers make appropriations decisions only once every two years, the process of reordering budget priorities may proceed more slowly.  Lower-priority programs will likely be reduced at slower rates because Congress tends not to take big bites out of existing programs all at once.  Thus, while biennial budgeting would represent a change in the budget process, it could impede changes in budget priorities.

States have seen the downsides of biennial budgeting and are moving away from it. Most states, including nearly all of the largest states, use annual rather than biennial budgeting, according to the National Conference of State Legislatures.  Since 1968, some 18 states have changed their budget cycles; 15 from biennial to annual and only 3 from annual to biennial.

At least 66 percent of the cuts in House Budget Committee Chairman Paul Ryan’s new budget would come from programs that serve people of limited means, our new analysis finds.  That violates a core principle of the Simpson-Bowles fiscal commission, which the commission co-chairs reiterated in the revised plan they issued a few weeks ago:  that deficit reduction should not increase poverty or widen inequality.

Cuts in low-income programs appear likely to account for at least $3.3 trillion of the budget’s $5 trillion in non-defense program cuts over ten years (relative to a continuation of current policies).

Our report has the specifics, but the $3.3 trillion in cuts fall into the following four categories:

• $2.6 trillion in reductions from Medicaid, subsidies to help people with low or moderate incomes purchase health insurance, and much smaller related expenditures under the Affordable Care Act.

• $135 billion in cuts to the Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program.

• At least $325 billion in cuts in mandatory programs serving low-income Americans other than Medicaid and SNAP.

• At least $235 billion in cuts in low-income discretionary programs.

As our report explains, our estimates are conservative.  In cases where the Ryan proposal cuts funding in a budget category but doesn’t distribute that cut among specific programs, we assume that all programs in that category — including low-income ones — will merely bear a proportionate share of the cut.  But when policymakers are faced with the choice of which specific programs to cut, they likely won’t cut much from a number of the non-low-income programs in these budget categories that are popular, such as the FBI, cancer research, and protecting the borders.  That means that other programs — including low-income programs — would have to be cut by more than their proportionate share.

The Office of Management and Budget has calculated how deeply the automatic budget cuts — known as sequestration — which began on Friday, will cut programs.  These figures differ slightly from our earlier estimates and are reflected in the table below.

Senator Marco Rubio (R-FL) and several other congressional Republicans have proposed canceling $45 billion in unused funding that Congress provided for discretionary programs in prior years, using the savings to shrink deficits.  The idea that these “unobligated balances” are a painless source of budget savings isn’t new.  But it isn’t true, either, for three reasons in particular.

• Nearly all of these funds will be needed in this or future years to finish the project for which Congress provided them. Congress often provides full funding up front for multi-year construction, research, or other projects; funding that isn’t used in the first year is carried over to later years, when it will be needed — and spent.  In some cases, canceling this funding would be tantamount to canceling the project altogether, which can be extremely wasteful.  It makes little sense, for example, to build two-thirds of a bridge, or to halt a research project after collecting the data but before analyzing the results.

  Even in cases where the loss of these funds wouldn’t undermine the project as a whole, it would weaken it, exactly as a similar cut in new funding would.  And it is generally better to cut new money than unobligated balances if doing the latter would waste money already invested.

• Congressional Appropriations Committees regularly rescind unobligated balances that turn out to be unneeded. Some small proportion of multi-year funding will often turn out to be unusable, such as if the project was completed under budget or had to be scrapped.  But the Appropriations Committees regularly “rescind” (take back) those unobligated balances and use the savings to help fund other programs.  For this reason, it’s extremely unlikely that there are large pots of unusable money:  the Appropriations Committees have already found and rescinded them.
• Eliminating unobligated funds that aren’t needed (but haven’t yet been rescinded) wouldn’t shrink deficits, since they weren’t going to be used in any case. In budget-speak, canceling these funds scores as a reduction in “budget authority” but doesn’t reduce outlays (the actual flow of dollars in any particular year), deficits, or debt.  If some funding proves to be unneeded and so won’t be spent, cancelling it may be good practice but won’t reduce the deficit.