Fun on a budget

Congress is incapable of restraining spending. It should let the president try

AT THE end of Barack Obama's budget, which was published on February 2nd, the administration thanks 614 people by name for putting the thing together. It adds that “hundreds, perhaps thousands” of nameless others also helped. There is something depressing about the effort that went into producing the document. The budget is an admirable piece of work which contains many good ideas, from cuts in farm subsidies to an increase in tax credits for childless workers. There is, however, a grammatical mistake repeated throughout it. “The budget will”, the president writes, when what he means is that his budget would, in the unlikely event that Congress were ever to pass it.

The president's budget would not change that. He has declared an end to “mindless austerity”, but does not seem to care much for the thoughtful sort either. In previous budgets he offered to trim entitlements a bit in return for tax increases. Republicans in Congress rejected this, and Democrats who supported the president's budget were rewarded with attack adverts in the mid-terms claiming that they wanted to raise the retirement age and slash Medicare. He now proposes higher taxes, more spending and continued deficits. Public debt would stay at its current level, around 75% of GDP, for the next decade. By 2025, according to the bipartisan Committee for a Responsible Federal Budget, annual interest payments would rise from 1.3% to 2.8% of GDP (nearly 800 billion, or enough to pay a year's tuition at Harvard, at current prices and with no financial aid, for 18m students).

Mr Obama's tax-and-spend priorities may be regrettable but they matter little in practice, because no president really controls how much his administration spends. The president's budget was an innovation of the 1920s. Before then, Congress set the budget as the Founders, ever suspicious of a strong central authority, intended. This worked well until the civil war, when the federal government's principal peacetime duties were to run customs houses and post offices and to give away land. By the beginning of the 20th century the federal government had become much more complicated. The first world war increased federal spending from 726m to 18.5 billion in five years (17.2 billion and 253 billion in today's money.) In 1921 an overwhelmed Congress asked the president to submit a budget for the first time.

Since then every president has done so, but the exercise has become drained of meaning since Congress took power over the budget back. This evil can be traced to Watergate. Richard Nixon, worried about inflation and the deficit, decided not to spend all the money Congress had appropriated. At one point he vetoed nine spending bills in one go. Congress took advantage of the scandal that was enveloping the president to reduce his control over federal spending in the 1974 Budget Act. Nixon duly signed the law in July and resigned the following month.

One of the new law's stated aims was to control the deficit, but it has had the opposite effect. From 1950 to 1974 the deficit averaged 0.7% of GDP; since Congress retook control it has averaged 3.2%. Part of the problem is that the budget Congress comes up with only covers a fraction of what the federal government actually spends. Over 1 trillion of tax expenditures—rebates on anything from mortgage-interest payments to health-insurance plans provided by companies for employees—are excluded. Another 2 trillion is off-limits because it is classified as mandatory spending. The staggering sums pumped into entitlement programmes (Social Security, Medicare and Medicaid) increase every year on the accounting equivalent of cruise control, with no need for a vote. Since the youngest of the baby-boomers are now in their early 50s, and since no politician would dare touch the benefits of those close to retirement, America's biggest generation has now protected itself from cuts to Social Security.

Bring back Dick

As entitlement spending has risen, it has squeezed the other bits of the budget. What remains is just over 1 trillion in discretionary spending: 6.5% of GDP, or less than a third of the total spent by the federal government. This is up for discussion every year. The resulting compromise is known as the budget, but that gives an inflated sense of what it really is.

According to textbooks the budget is a thing jointly agreed by both houses of Congress and then signed by the president by the end of September each year. This is how the budget has worked six times in the past 40 years. The rest of the time it has often consisted of last-minute negotiations to avoid a government shutdown or a breach of the debt ceiling. Agreement is reached only by putting off difficult decisions indefinitely. Attempts by well-intentioned super-committees and gangs of congressmen to get to something more thoughtful have come to nothing. This failure to steer the budget has been bipartisan. Since 1974 the federal government has run a deficit in all but four years, 1998-2001. Now that both the House and the Senate are controlled by Republicans the budget should be more orderly, but the process must be made to work when Congress is divided.

One solution would be to forgive Nixon and hand back some authority to the executive. Another would be to make the president's budget the default one unless Congress can agree, by a simple majority, on something else. That would stop the proliferation of no-compromise budgets, and would make a president content with a budget forever in deficit a figure from the past.