Biennial Budgeting Is a Bad Idea

Those who pay just casual attention to the annual federal budget process can see that it’s a mess. It’s rarely completed on time, and it always seems to get bogged down by partisan bickering and political scheming. When the dust finally does settle, the result is usually a bloated conglomeration of goodies for countless special interests, who most likely had a better grasp of the contents than our elected representatives who voted on it.

Veronique De Rugy1

This sorry state of affairs inevitably leads policymakers and observers to propose “fixes” to the budget process. One idea that’s been gaining support in Washington is to move from an annual budget to a biennial budget (one that would cover two fiscal years). Supporters argue that it would give legislators more time to conduct oversight of federal programs and thus more time to weigh competing spending desires.

According to this fairy tale, the last-minute budget deals that people from all corners of the ideological spectrum end up criticizing could be avoided. Federal funds could be better targeted to those programs that “work,” while those that “don’t work” could be “fixed” or see funding cut. After that, the lamb would lie down with the lion while members of Congress hold hands and sing “Kumbaya.”

Forgive the sarcasm, but when you’ve been following public policy for as long as I have, pie-in-the-sky ideas such as biennial budgeting are hard to take seriously. Start with the fact that biennial budgeting lost favor long ago at the state level. According to the National Conference of State Legislatures, 44 states practiced biennial budgeting in 1940. The figure today is 19 mostly small states. If the states moved toward an annual budget process as their budgets became bigger and more complicated over the decades, why would the federal government do the opposite?

And forget about reducing spending. The Mercatus Center’s Matt Mitchell writes, “After controlling for other factors, (Paula Kearns of Michigan State University) found that states with a biennial budget process actually spend more per-capita than states with an annual budget process.” Another study finds that “other factors being equal, states with a biennial budget process spend about $120 more (per capita) than states with an annual budget process.”

As for the benefit of giving Congress an extra year to focus on oversight, it’s worth remembering that a lack of oversight isn’t the reason for our budget mess. First, committees that authorize government programs can already perform oversight whenever they want. In 2015, authorizing committees performed more than 750 oversight hearings, according to the House Budget Committee. Do we really need more? And if more oversight is the goal, biennial budgeting isn’t the solution. The appropriations committees are already supposed to conduct oversight annually in making funding decisions, so switching to a biennial budget would result in less oversight for those programs.

Besides, congressional oversight is highly overrated. Speaking from experience, oversight hearings are often just political dog and pony shows of little or no consequence. Anyone possessing a layman’s knowledge of public choice theory should know that politicians are fundamentally motivated by self-interest rather than the public’s interest, which is the ostensible purpose of congressional oversight. Think about this: Hundreds of oversight hearings about waste, fraud and abuse haven’t resulted in any less waste, fraud or abuse.

Perhaps the largest and most obvious flaw with biennial budgeting is that it would invariably lead to more supplemental spending, which is already a problem with annual budgeting. Whether it’s a new war, a natural disaster or even a down economy, policymakers are never shy about finding an excuse to pass a supplemental spending bill. Unfortunately, supplemental spending bills end up becoming vehicles for extraneous spending and are generally rammed through without sufficient deliberation or oversight. Biennial budgeting would only exacerbate the problem.

There are other known problems with biennial budgeting, and unforeseen problems would almost certainly arise. The only question is: Why would anyone support it? From my vantage point, support for it largely consists of politicians (mainly Republicans) and some Beltway policy wonks. The former group isn’t surprising, given politicians’ penchant for addressing a problem by creating new ones. The latter group is befuddling. Regardless, biennial budgeting is a bad idea that needs to go away.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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