Needed: Budget Reforms to Save Money Into the Future

It has been more than two years since Congress passed a genuine federal budget. So why can President Obama go on spending so much more of our money? The answer is that Congress can continue spending without a budget. It passed seven “continuing resolutions” that allowed the government to continue operating before it finally agreed in April on a compromise appropriations bill for the current year. That deal runs out this month. Also running out is the American people’s patience with overspending.

Members of Congress are vacationing at our expense. As soon as they return to Washington, they need to start work on a real budget for America that will fix the problems government causes. That means a reduction in spending – and in bureaucracy.

The first thing a genuine reform budget needs to do is retool the federal accounting system so we know where our tax money – and the money borrowed against our future tax payments – is going. The federal government does not produce either profit or loss, so it doesn’t use the tried-and-trusted accounting tools that apply to private businesses. Instead, it uses a variety of accounting tricks and subterfuges that would land the Treasury secretary in jail if he were to try them in the private sector.

For example, the federal government uses “base-line” budgeting, which presumes spending increases every year. Reductions from the base-line increase are called “cuts,” which means government bureaucrats complain about cuts when their budgets actually go up. The compromise appropriations bill “cut” government spending by $38 billion but, in fact, increased many government agencies’ budgets by 10 percent or more. This is a straightforward con job of the American people that has to stop. We need to know whether our government is spending more or less than the previous year – without any trickery to muddy the picture.

Another example is the way the federal government issues loans to itself via the Federal Financing Bank. Those loans do not appear on the government books as spending increases, but they count as spending reductions when they are paid back. Then there are the budgetary activities of “off-budget” agencies such as the U.S. Postal Service and the Social Security Trust Fund, whose various borrowings do not count against the federal budget.

Transparency is key to bringing this kind of shadowy spending under control. Any future budget passed by Congress has to include significant reforms to the way the federal government reports its fiscal activities to taxpayers. Considering the extremely onerous accounting regulations it has imposed on private businesses, it is only right that the government’s own accounting should pass muster.

The budgetary reforms should not stop there. Congress should require a significant reduction in the burden government imposes on our economy beyond taxes – regulation. The cost of the regulatory bureaucracy in the United States amounts to a staggering $1.75 trillion a year.

Yet bureaucracy keeps on growing just like government spending. So far this year, Mr. Obama and his administration’s regulatory agencies have issued or proposed 389 new rules that would carry the force of law, at a cost of $65 billion, and repealed just one – the ludicrous rule whereby spilled milk was treated like an oil spill.

Consider federal contracting rules, which include Depression-era rules such as Davis-Bacon, which require federally funded construction projects to pay the so called “prevailing wage,” which really means union wage rates. This raises costs for taxpayers up to 20 percent, meaning communities can get just four schools instead of five if funding is coming from the federal coffers. Mr. Obama recently exacerbated that problem by issuing an executive order whereby all federal projects were “encouraged” to use project labor agreements (PLAs), which effectively shut out nonunion contractors, thus raising costs. PLAs also can raise costs by up to 18 percent.

This cannot continue. The next budget should significantly trim the federal bureaucracy, as was done in the 1990s budget deals. It should include the provisions of the Small Business Regulatory Freedom Act proposed by Sen. Olympia J. Snowe, Maine Republican, which allows small businesses more access to the courts to challenge damaging rules, and the REINS (Regulations From the Executive in Need of Scrutiny) Act, offered by Sen. Jim DeMint, South Carolina Republican, which requires congressional approval of regulations costing more than $100 million. Virginia Democratic Sen. Mark Warner’s proposal that each new regulation be accompanied by the scrapping of an old regulation also should be part of the mix.

The whole point of public spending is to secure value for the taxpayers’ money. The current U.S. federal budget system fails that test utterly. The American people deserve a budget, and they deserve one that respects them more than bureaucrats.