Budget Gimmicks

Washington U. School of Law Working Paper No. 07-02-01

FISCAL CHALLENGES: AN INTERDISCIPLINARY APPROACH TO BUDGET POLICY, Elizabeth Garrett, Elizabeth Graddy, Howell Jackson, eds., Cambridge University Press, 2007

34 Pages Posted: 8 Feb 2007

See all articles by Cheryl D. Block

Cheryl D. Block

Washington University in St. Louis - School of Law

Abstract

At least rhetorically, most members of Congress care about fiscal discipline. Consistent with this concern, Congress has included numerous fiscal discipline rules in its federal budget process legislation. Faced with constituent pressures to cut taxes while maintaining or even increasing federal spending, however, politicians have succumb to certain budget pathologies. These pathologies can lead to gimmicks used to disguise the size of the budget deficit and to by-pass or merely comply superficially with formal budget process requirements. Since both parties often benefit, there is little political incentive to check the use of such strategies.

This chapter seeks to explain and highlight the most prevalent budget games. It classifies budget gimmicks as falling into three general categories: 1) games with numbers; 2) games with timing; and 3) procedural gimmicks. The first category involves manipulation of economic data or methodology used to estimate the cost or "score" for proposed legislation as well as the economic "baseline" used to project increases or decreases in revenue that would result from enacting such legislation. Although there can be reasonable differences of opinion regarding such economic assumptions and methodologies, the budget process offers temptations to pick and choose the economic data or methodology that portrays legislative proposals in the best budgetary light or to suggest inconsistent use of such data or methodologies in pursuit of a particular political agenda. Timing gimmicks, on the other hand, involve manipulation of the budget year in which projected revenue increases or savings are reported. One such potential game is manipulation of the "budget window." Revenue estimates over a five-year period will look very different from those reported over ten-years. Timing gimmicks also include the use of delayed payments, accelerated receipts, and phased-in or expiring statutory provisions designed largely or solely for purposes of "budget appearances." Finally, the chapter looks at the increasing use of "reconciliation bills" for tax and other budget-related legislation. The optional budget reconciliation procedure, originally designed for deficit control, offers opportunities to include controversial provisions, often including major tax cuts, in legislation subject to debate under streamlined, limited-debate procedural rules accompanied by rigid numeric requirements regarding revenue to be raised or saved. The chapter incorporates some modest suggestions for changes to reconciliation and budget scoring rules to limit some of the gimmicks described and increase the potential for greater fiscal discipline.

Keywords: budget gimmicks, federal budget, federal budget process, federal deficit

JEL Classification: H10-11, H20, H27, H30, H50, H57, H60-69, KOO, K34

Suggested Citation

Block, Cheryl D., Budget Gimmicks. Washington U. School of Law Working Paper No. 07-02-01, FISCAL CHALLENGES: AN INTERDISCIPLINARY APPROACH TO BUDGET POLICY, Elizabeth Garrett, Elizabeth Graddy, Howell Jackson, eds., Cambridge University Press, 2007, Available at SSRN: https://ssrn.com/abstract=961887

Cheryl D. Block (Contact Author)

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States

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