Washington Update: The President's Budget Request - Dead on Arrival
The nonpartisan Congressional Research Service (CRS) paints a placid picture of the federal budget process. The president and White House staff, CRS explains, begin developing the president’s annual budget outline “approximately 18 months prior to the start of the fiscal year to which it applies.” Executive agencies like the Education, Agriculture, and Defense departments work with the White House and provide justification materials to the Office of Management and Budget (OMB), which writes the final document – a behemoth that, with supplemental materials, typically numbers in the thousands of pages. (The OMB is part of the Executive Office of the President, which houses the policymaking staff that works most closely with the president.)
The president is then supposed to submit his request to Congress by the first Monday in the month of February and, even though the president’s outline is not legally binding, legislators, CRS says, then take the “recommended spending levels for programs, projects, and activities” as the beginnings of the annual federal appropriations bills.
Based on this CRS description, one could be forgiven for picturing a rosy, collegial process in which two of the three American branches of government work together collaboratively. What has evolved over the last several years, however, defies this calm description.
The modern budget process was established in 1921 with passage of the Budget and Accounting Act of 1921. Up until that point, executive budgeting was “highly decentralized,” CRS explains, with federal agencies submitting their requests directly to the House and Senate. Those requests came “with varying levels of involvement or direction by the President.” In other words, the funding requests reflected the agencies’ actual needs rather than the political wishes of the president or his top officials.
Oh, how far we’ve come.
President Donald Trump submitted his fiscal year 2020 budget request to Congress this week, where it landed with a thud. It also was more than a month late. (Tardiness, too, is nothing new. According to the Capitol Hill newspaper Roll Call, President Bill Clinton’s first budget was 66 days late; President George W. Bush’s was 63 days tardy; and President Barack Obama’s first request was 94 days overdue.)
Perhaps it was the nearly $9 billion the White House requested for its border wall. Or maybe it was the requested five percent average cut to domestic spending programs. Either way, the reaction from Congress was overwhelmingly negative – even among Republicans. (Other agencies would suffer far more than the average. The budget for the Environmental Protection Agency, which is possibly the president’s least favorite federal agency, is reduced by 31 percent under his budget outline. The departments of State, Transportation, and Housing and Urban Development would endure 24 percent, 19 percent, and 16 percent cuts, respectively.)
Republican House appropriator Rep. Tom Cole (R-Okla.) said the president’s fiscal year 2020 outline “is frankly less realistic than most presidential budgets.” The congressman also called the request a “gimmick” and said Congress “isn’t going to accept” it.
That’s true, but that reaction isn’t all that unique. The submission of the president’s budget request to Congress largely has become a messaging exercise meant to outline the administration’s ideological perspective rather than its real legislative intentions, or what federal agencies actually need. The right-leaning Washington Examiner explained “Congress loves to ignore presidential budget requests …” Sen. Susan Collins (R-Maine) noted, “In all the years I’ve been here, there has never been a president’s budget that has passed as submitted, and I don’t think this will be any different.”
It appears some of President Trump’s top staff would agree.
Last year, then-Office of Management and Budget (OMB) Director and current Acting White House Chief of Staff Mick Mulvaney put an even finer point on Sen. Collins’ argument. In a briefing about the president’s fiscal year 2019 budget, which his office wrote, Mulvaney said, “The executive budget has always been a messaging document.”
The Washington Post put data to the Mulvaney/Collins assertion a few years ago when it compared the overall amount of spending requested by every president since 1945 and the amount of money actually appropriated by Congress. The newspaper’s research showed wide variations, and its findings also indicated Congress never is rubber stamp, even when one party controls all the levers of power.
In fiscal year 2010, for example, when Democrats controlled the White House, the Senate, and the House, President Barack Obama got six percent less in spending from Congress than he requested. President Harry Truman had an even harder time dealing with Congress when it came to appropriations. Even though his own party controlled both the House and Senate for most of his tenure in the White House, congressional appropriations ran from six to 39 percent lower than he requested throughout his presidency.
Cementing the notion of the presidential budget as a messaging document is one simple truth: Congress doesn’t have to vote on the president’s budget request and typically opts to vote on a budget resolution of its own.
Last year, though, neither chamber of Congress voted on budget resolution. The year before, only the House got to final passage. Budget resolutions generated by the House and Senate also don’t have the force of law. They are those chambers’ own messaging document. What typically really matters for government spending purposes, as we’ll see in the months to come, is the appropriations process that unfolds between now and the end of September each year.
There is one important caveat this year, though. When they retook the House of Representatives in January, Democrats tucked into their package of House rules a provision that would automatically suspend the debt limit when the chamber passes a budget resolution. With reports this week that House Democratic leadership is unlikely to force a budget vote on the House floor this year, the prospects of a straight up-or-down vote on the debt limit sometime before September, when the Treasury Department will exhaust its “extraordinary measures” to avert default, appear to have risen significantly.
Accordingly, as is often the case, the cable news networks and talking heads on television are this week focused on a less impactful story – the president’s budget – than the one that will almost certainly come to a head late this summer: will Congress find a way to pass an increase to or suspension of the debt limit to avert financial catastrophe, and, if so, will President Trump sign it into law?
Steve Boms is the founder and President of Allon Advocacy, LLC, a Washington, D.C.-based public policy consulting firm. Steve has spent his career focused on complex financial services public policy issues, having worked in the United States Congress on the committee with jurisdiction over banking. He has led advocacy efforts and public policy teams globally for equity options exchanges, large U.S.-based financial institutions, and leading fintech firms. In addition to working directly with Allon's clients, he is a frequent conference panelist and his perspective is solicited by reporters on the technology, financial services, and regulatory beats.
The content and opinions expressed herein are provided by a third party, Allon Advocacy, LLC. This commentary is provided for informational purposes only and does not necessarily reflect the views of Envestnet. The information, analysis and opinions expressed herein reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. It is not intended to constitute legal, tax, securities or investment advice.