highlight and penalize deviations from that agreement can be effective. The procedures succeed in part because the participants in the agreement have an incentive to stick to the original terms, but this success also reflects the fact that it is far easier to block legislation than to enact it. The parliamentary impediments (such as filibusters in the Senate, the need to muster majorities in numerous committees and at various stages of the legislative process, or the two-thirds majority in each house required to override a Presidential veto) that make enacting deficit reduction (or any controversial legislation) so difficult also work against reversing deficit reduction legislation once it is in place.

Further, Gramm-Rudman-Hollings lacked credibility because it promised results that were virtually impossible to achieve, and it invited evasion through phony estimates and budgetary gimmicks. Reaching the original deficit targets or the revised targets established in 1987 might have seemed possible, though ambitious, when the targets were established. As the performance of the economy fell below expectations and the costs of programs such as Medicaid and Medicare increased above projections, however, it became clear that there was virtually no way to reach the targets. This encouraged the reliance on rosy scenarios and other budget gimmicks that gave the appearance of compliance. The BEA is more credible than Gramm-Rudman-Hollings because it promises only to prevent legislative changes that would diminish the deficit reduction put in place as a result of the 1990 budget agreement. Unlike Gramm-Rudman-Hollings, these sequestrations apply only to deficit increases caused by legislative actions, and such actions are unlikely to increase the deficit in any year by the very large amounts that can result from changes in the economy or technical factors.

III. Budget Reform Proposals Focusing on Budget Targets

Many people continue to focus on enacting changes to the budget process that are intended to force actions to reduce spending and the deficit. These include updated versions of Gramm-Rudman procedures that would establish fixed deficit targets in statute. They also include other types of proposals that would set overall budget targets (such as a constitutional amendment to require a balanced budget), as well as statutory caps to limit the level or growth of mandatory or discretionary spending.

A. Balanced Budget Amendment and Other Overall Budget Targets

One of the most popular proposed reforms of the budget process would amend the Constitution to require a balanced budget. Proponents suggest that if the Constitution requires a balanced budget, policymakers will be provided political cover for the difficult actions necessary if the deficit is to be reduced. But a balanced budget amendment is just like Gramm-Rudman-Hollings in an important respect--that is, it sets an annual target (of zero) for the size of the deficit, but does

not specify either the policy actions that are necessary to reach the target or a process for enforcing those actions.

In fact, opponents maintain that a balanced budget amendment would lead to several problems. First, there is no consensus on what the budget to be balanced under such a strict rule should include, or on how to measure conformity with the balanced budget rule. Further, a balanced budget amendment lacks credibility because it interferes with the ability of the federal government to combat recessions through automatic stabilizers or discretionary fiscal policy. Most important, a balanced budget rule offers too many opportunities to evade its requirements. The President and the Congress could get around an apparently rigid balanced budget constraint by using timing mechanisms and other budgetary gimmicks to achieve short-run budget targets; basing the budget on overly optimistic economic assumptions; creating off-budget agencies that would have authority to borrow and to spend but whose transactions would not be directly recorded in the budget; and passing costly spending on to states and local governments (through mandates) or private businesses (through regulations).

A balanced budget amendment, if it were to work, would need to be accompanied by legislation that specified particular actions to reduce the deficit and how they would be enforced. The deficit cannot be brought down without making these decisions to cut specific programs and raise particular taxes. In short, a balanced budget amendment is not a substitute for a balanced budget plan, which would still be necessary even if the amendment were passed and ratified by the necessary three-fourths of the states.

Other proposals of this variety do not focus on prohibiting budget deficits, but on limiting the level or growth of revenue, spending, or debt. Some of these, for example, would limit them as a percentage of Gross Domestic Product. They share with the balanced budget amendment the characteristic of attempting to set some limitation in advance in order to force actions to meet that target.

B. Caps on Mandatory or Discretionary Spending

During the 102nd Congress, the Bush Administration and various Members supported the concept of placing an enforceable cap on mandatory spending. More than half of all federal spending consists of spending on entitlements and other mandatory spending. Mandatory spending has been growing much more rapidly than discretionary spending. A mandatory cap would tie the growth of spending for individual programs to the increase in the eligible population and inflation, plus a transitional percentage that would allow the change to be phased in. It would also establish a sequestration procedure to enforce a breach of that cap. Savings would be achieved if spending were held to the cap level, because the costs of some programs, notably Medicare and Medicaid, are estimated to grow much faster than their beneficiary populations and general inflation.

Many advocates of this approach do not accompany the call for a mandatory cap with policy proposals to achieve the reductions in individual programs that are needed to avoid sequestration. Because even most supporters of a mandatory cap agree that an across-the-board sequestration is not an acceptable way to achieve the desired reduction in mandatory spending, however, the cap is likely to be met only if such specific policy changes are enacted. The most important of these would be policies that would control the long-term growth in health care costs, which represent the fastest growing part of the budget.

If policy actions were not taken, a sequestration of mandatory programs could not be carried out easily. Government benefit checks and other mandatory spending cannot simply stop flowing after the cap is reached without disrupting, and possibly endangering, the lives of millions of citizens. Agencies in the executive branch could estimate the likely shortfall resulting from the cap and adjust all future payments to account for the effect of the limit, but that would involve an enormous amount of bureaucratic discretion and uncertainty about the benefits that will actually be provided. In any case, the courts may be asked to respond to the conflict between the legislation that authorized the mandatory spending and a sequestration of that spending.

Caps on discretionary spending, of course, have been used to set targets for discretionary budget authority and outlays under the Budget Enforcement Act (BEA). Setting caps that are supposed to ensure future discretionary savings may seem to run counter to the argument that the budget process is not good at forcing future agreements on specific cuts. But the very fact that discretionary spending is annually appropriated is what makes the caps work. Because mandatory spending and taxes are based on permanent law, the President and the Congress can avoid making promised future cuts simply by failing to take action. But appropriators must act every year in order to provide funding for discretionary programs. They cannot evade the caps by simply failing to act. Instead of the caps being a device to force future actions, they are mechanisms that limit future actions.

III. Conclusion

A review of past experience indicates that efforts to reduce the federal budget deficit are most likely to be successful if the President and the Congress first agree on policy actions and then set up processes to enforce them: deficit reduction does not work as well if the process changes precede the policy actions. For example, both Gramm-Rudman-Hollings and the proposed balanced budget amendment and mandatory cap try to force agreement on specific deficit-reducing actions. Since processes are not as good at forcing agreements as they are at enforcing them, however, it is questionable whether reforms of this type would have any real effect on the federal deficit.

Timing of Budgetary Actions

The annual review of the budget poses a dilemma for Congress. On the one hand, annual review of authorizations and appropriations affords Congress the opportunity to maximize its influence concerning various programs and policies. On the other hand, annual action on these measures, as well as the budget resolution and other budgetary matters such as reconciliation and supplemental appropriations, has consumed an increasing amount of Congress's time in committees and on the floor, and some Members have expressed the concern that this has a negative impact on their ability to perform other functions. Establishing a timetable which allocates sufficient time for all of these actions has been a serious and growing issue for more than a decade.

Proposals for Change

The requirement that so much budgetary legislation be enacted on an annual basis has led to the complaint that much of it is redundant or even unnecessary, and that it distorts the already heavy workload of Congress. Significant support for some form of biennial budgeting has been the primary expression of this concern, but there are other approaches to addressing this problem. In addition to these questions of timing, broad questions concerning other structural and procedural aspects of Federal budgeting are addressed in separate memos.

An annual budget cycle depends on the timely enactment of each of its component parts. Delays in enacting authorizations or adopting the budget resolution affect timely action on appropriations bills and reconciliation. By making budgetary decisions for two years at a time, even if only for selected aspects of it, Congress could potentially streamline the process by removing some of its redundancy and reducing the overall budgetary workload.

B.

Reestablish a deadline for reporting authorizations

Reintroduction of a deadline for reporting authorizing legislation has also been considered as a part of some reform agendas. A similar deadline (May 15) was provided for in the Congressional Budget Act of 1974, but was eliminated in the revision of the Act by the Balanced Budget and Emergency Deficit Control Act of 1985. It is proposed as a means to help streamline the congressional workload by providing for the consideration of authorizing legislation and appropriations in two distinct periods.

Another perceived problem derived from annual consideration of budgetary legislation is that it doesn't provide adequate time for the various components of budgeting and is often conducted in a pro forma manner. By mandating that programs terminate unless Congress takes positive action to reauthorize them within a specified period, sunset legislation could provide the incentive necessary for a thorough review of authorizations.

Issues Raised by Biennial Budgeting

An annual budget cycle depends on the timely enactment of each of its component parts. Delays in enacting authorizations or adopting the budget resolution affect timely action on appropriations bills or reconciliation. A biennial budget cycle often has been discussed as a possible way to reduce workload and delays, and as a method to streamline the budget process by removing some of its redundancy.

Biennial budgeting can refer to either the budget resolution or to appropriations, or to both. Although most biennial budget calendars provide a separate period for the consideration of authorizations, individual authorizations would not necessary be required for two year periods. Indeed, authorizations are currently of varying durations from annual to permanent. Instead, by providing a specified period in each biennium for the consideration of authorizations, biennial budget calendars would facilitate their review and enactment.

The more familiar 2-year budget option includes both biennial budget resolutions and biennial appropriations. The biennial budget measures previously reported from the Senate Governmental Affairs Committee (S. 2478 in the 100th Congress (S.Rpt. 100-499) and S. 29 in the 101st Congress (S.Rpt. 101-254)) were of this variety as was S. 1667 in the 102d Congress. The other type, which has become more common in recent years, includes a two-year cycle for the budget resolution only, with appropriations remaining on an annual cycle. H.R. 1676, H.R. 1889, and S. 391, all from the 102d Congress and H.R. 565 for the 103d Congress are all of this variety. Sometimes called a "summit" model, this type is intended to institutionalize the multi-year budget agreements that have been a mainstay of Federal budgeting in recent years.

In terms of timing, biennial budgeting proposals fall into two general categories: those which would simply stretch out the current process to two years, and, more commonly, those which would divide each biennium into a budgetary year (for budget resolutions and appropriations) and a non-budgetary year (for authorizations and oversight). Under either calendar, proponents contend that biennial budgeting would streamline congressional workload, and promote timely