Budget Reform

Budget Reform


Peter T. Calcagno, Edward López | Nov 12, 2015
A new study published by the Mercatus Center at George Mason University argues that, beginning late in the 19th century, the informal rules that govern fiscal policy began to reward policymakers for increasing spending—even for increasing it beyond the capacity of federal revenues, and therefore at the cost of chronic deficits. Despite numerous legislative attempts to constrain spending over the past 40 years, these informal rules have trumped formal constraints, and the deficit problem has marched steadily on.
James C. Capretta, Joseph Antos | Oct 27, 2015
Proponents of the Affordable Care Act (ACA) have frequently pointed to official cost estimates projecting that the law will reduce federal budget deficits. Much less attention has been paid to the primary reason for this favorable outlook: the law’s heavy reliance on indexing important provisions to restrain spending and increase revenue. These components of the ACA will automatically impose perpetual, across-the-board cuts on payments to certain institutional medical providers; increase premiums for lower-income households; and raise taxes on an ever-expanding segment of taxpayers.
David R. Henderson | Jun 30, 2015
Many observers think that it is impossible to cut federal government spend- ing as a percentage of Gross Domestic Product (GDP). But it can be done. And the evidence is hidden in plain sight: it’s called the 1990s. Between 1990 and 2000, federal spending fell from 21.85 percent of GDP to 18.22 percent, a drop of 3.6 percentage points. Most of the reduction was in defense spending after the Cold War ended. Domestic spending also fell slightly as a percentage of GDP. This drop cannot be attributed to higher economic growth in the 1990s because average growth in the 1990s was the same as growth in the previous two decades.
Laurence Kotlikoff, Adam Michel | Jun 03, 2015
The true US debt is 16 times larger than what the government reports. Closing this fiscal gap with taxes alone would require a massive, immediate, and permanent tax increase on every American family. The burden grows with each year of congressional and presidential inaction, threatening future standards of living. How would such a tax hike affect individual American households? A new study published by the Mercatus Center at George Mason University details how much Americans would have to pay to actually close the true fiscal gap with tax increases.
Jason J. Fichtner, Patrick McLaughlin | Jun 02, 2015
The current legislative and regulatory processes may not adequately inform Congress about the scope and economic consequences of legislation. Even if Congress had such information, no mechanism exists to allow Congress to easily act upon it. The budget process permits Congress to monitor and fund programs based on fiscal impact information. These processes could be improved to provide more, better, and actionable information about legislative and regulatory actions, especially through a reform that we term “legislative impact accounting.”…
James C. Capretta | Mar 25, 2015
Reforming the congressional budget process is no substitute for actual policy changes that can correct the government’s fiscal problems. Yet according to a new study published by the Mercatus Center at George Mason University, the right kinds of process reforms can open up new potential for agreement between Congress and the president and can focus attention on long-term spending commitments.

Testimony & Comments

Jason J. Fichtner | Sep 30, 2015
Academic research and some anecdotal evidence suggests that the current budget rule of use it or lose it is not optimal and may be encouraging wasteful spending of taxpayer dollars. The question remains: If such spending is indeed wasteful, what can be done to reduce it?
David M. Primo | Jul 28, 2015
My three-part message today is this. First, Congress should treat the budget process as a means, not an end, and enact reforms accordingly. Second, given the fiscal challenges facing the country, now is not the time for minor tweaking. Instead, now is the time to think big and craft a process that drives legislators to produce credible and sustainable fiscal policy by constraining federal spending both today and tomorrow. Third, any reform should include effective enforcement mechanisms, preferably constitutional in nature, to prevent the new process from suffering the same fate as the current one.
David M. Primo | Jul 24, 2014
Constitutional rules, unlike statutory or internal rules, are difficult to change. If written to cover the entire budget, avoid loopholes, and make waivers difficult to obtain, Constitutional rules can provide the enforcement mechanism that will help ensure that specific reforms to entitlements, defense, and other spending areas will not be undone by future Congresses.
| Dec 15, 2011
Anthony Sanders testified before the U.S. House Committee on Oversight and Government Reform Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs on the role of the U.S. in addressing the European debt crisis.
Veronique de Rugy | Oct 05, 2011
Veronique de Rugy testified before the House Committee on Energy and Commerce, Subcommittee on Oversight and Investigations about a line-by-line budget review process.
Matthew Mitchell | Oct 04, 2011
Matthew Mitchell testified before the House Committee on the Judiciary about state governments' experiences with Balanced Budget Amendments.

Research Summaries & Toolkits

Veronique de Rugy, Jason J. Fichtner | Oct 10, 2013
As federal government borrowing is set to exceed yet another debt limit, most are quick to recall—and wish to avoid a repeat of—the 2011 debt-limit showdown. If current rhetoric is any indication, it appears many of the last debate’s lessons have been forgotten. Regrettably, it seems many of the debate’s facts have been forgotten as well.
| Sep 24, 2013
The Mercatus State Policy Guide is intended to summarize and condense the best research available on the most relevant topics. It’s a starting point for discussion, not a comprehensive overview of economic policy. Each statement is supported by academic research, with links provided in the endnotes. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your economic policy research.
| Jul 23, 2013
The Mercatus Policy Guide is intended to summarize and condense the best research available on the most pressing topics. It serves as a starting point for discussion, not a comprehensive overview of economic policy. Anyone who wants to go deeper into these studies should consult the references listed at the back. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your evaluation of economic policy.
Veronique de Rugy, Jason J. Fichtner, Charles Blahous, Matthew Mitchell | Mar 15, 2013
Despite years without a federal budget, trillion-dollar deficits, and ad hoc, crisis-driven fiscal and economic policies that failed to deal with the looming entitlement crisis, leaders on both sides in Washington are now touting seemingly miraculous progress toward a “fix” to our budgetary woes.
| Feb 13, 2012
This policy brief takes a look at the president's FY2013 budget proposal and emphasizes the need for fundamental reform in the areas of spending, taxes, and the budget process.
Veronique de Rugy, Jason J. Fichtner, Matthew Mitchell | Sep 12, 2011
This toolkit provides members and their staffs with tools to help them evaluate spending bills and start the process of reducing government spending.

Expert Commentary

Nov 11, 2015

One need not be intricately familiar with the tale of "Alice's Adventures in Wonderland" to appreciate that the federal budget process has similarly become an alternate reality replete with sketchy characters, peril and the absurd. In the latest trip down the Beltway rabbit hole, a Republican-led Congress relied on Democratic votes to produce a two-year budget agreement that removed the limit on Uncle Sam's credit card and increased spending now in exchange for offsetting spending cuts and revenue increases that will mostly occur 10 years from now. Well, that's if future Congresses stick to the offsets.
Nov 04, 2015

ACA proponents, often pointing to Congressional Budget Office (CBO) estimates, argued that the law would reduce the number of uninsured people by about 30 million while producing federal budget savings. Five years later, low exchange enrollment suggests that far more people than projected will remain uninsured. New Mercatus research by James Capretta and Joe Antos shows that the projected federal budgetary savings result from provisions that are unlikely to be economically or politically sustainable.
Oct 28, 2015

The claim of deficit reduction rests on a shaky foundation. It depends entirely on the uninterrupted implementation of four carefully constructed "indexing" provisions. These provisions, which make annual adjustments to key spending and tax parameters of the law (or specify that such adjustments will not be made), were written with the clear intention of making the ACA look better financially as time passed. Our new study, published by the Mercatus Center at George Mason University, shows that these budgetary manipulations are no more likely to survive mounting political pressure than did income-tax "bracket creep" in the 1970s or across-the-board cuts in Medicare physician fees over the past 15 years.
Sep 20, 2015

There is no shortage of ideas on how to improve the federal budget process; it is difficult to get bipartisan agreement on most of them. Some believe budget rules should be easier to execute, to increase the chances lawmakers will abide by them. Others believe rules should be toughened, to force lawmakers to make difficult choices they currently avoid. Inevitably, advocates tend to favor budget rules they believe are more likely to lead to their preferred fiscal policy outcomes, and of course such views are all over the map.
Jun 24, 2015

Does it seem as if some lawmakers have the attention span of a toddler? Several years ago, concerns about the debt and overspending were all the rage. These worries have dissipated almost entirely as deficit levels have gone down from their sky-high summit in 2009. And just like that, lawmakers have gone back to overlooking our long-term fiscal situation and the unsustainable path the nation is on.
May 11, 2015

As gas prices have fallen dramatically across the country, congressmen from both sides of the aisle have proposed raising the gas tax to increase funding for America's aging highways and bridges. Maintaining or increasing spending on highways is urgent, given that one-third of the nation's roads may be in poor or mediocre condition while a quarter of its bridges are in need of repair, according to the Federal Highway Administration.


The Bipartisan Budget Act of 2015, freshly signed into law by President Obama, suspends the $18.1 trillion federal debt ceiling until March 2017. It also busts the 2011 Budget Control Act—which I previously discussed—for the second time. It does so by raising the caps on discretionary funding by $50 billion for fiscal year (FY) 2016 and $30 billion for FY 2017.


Charles Blahous is the director of the Spending and Budget Initiative, a senior research fellow at the Mercatus Center at George Mason University and has served as a public trustee for Social Security and Medicare. He specializes in domestic economic policy and retirement security (with an emphasis on Social Security), as well as federal fiscal policy, entitlements, demographic change, and health-care reform.
Antony Davies is a Mercatus Center–affiliated senior scholar at George Mason University and associate professor of economics at Duquesne University. He also is a member of the Research Program on Forecasting at George Washington University. He specializes in econometrics, public policy, and economic psychology.
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, tax competition, and financial privacy. Her popular weekly charts, published by the Mercatus Center, address economic issues ranging from lessons on creating sustainable economic growth to the implications of government tax and fiscal policies. She has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the economy.
Jason J. Fichtner is a senior research fellow at the Mercatus Center at George Mason University. His research focuses on Social Security, federal tax policy, federal budget policy, retirement security, and policy proposals to increase saving and investment.
Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University, where he is the director of the Project for the Study of American Capitalism. He is also an adjunct professor of economics at Mason. In his writing and research, he specializes in economic freedom and economic growth, public-choice economics, and the economics of government favoritism toward particular businesses.


Veronique de Rugy | February 04, 2015
On Ed Dean’s morning show Veronique de Rugy talks about the newly released budget and what to watch for.

Recent Events

The Mercatus Center at George Mason University invites you to join Dr. Jerry Ellig, Dr. Jason Fichtner, and Dr. Patrick McLaughlin for a Regulation University to discuss how the budget and regulatory process operate in isolation to each other, and reform options that could improve both systems.

Media Clippings

Sarah Arnett | Jan 17, 2014
The Mercatus Center cited at Philly.com.
Veronique de Rugy | Oct 08, 2013
Veronique de Rugy cited at USA Today.
Eileen Norcross, Matthew Mitchell, | Jul 23, 2013
Detroit reports an unfunded pension liability of $634 million, but using more accurate accounting methods it's closer to $3.5 billion.
Vincent H. Smith | Jul 17, 2013
Farming, it turns out, is not so risky after all. Smith reports that the annual failure rate for farms is only 0.5 percent, compared to 7 percent for other businesses.
Veronique de Rugy | Jul 16, 2013
Mercatus Center Economist Veronique de Rugy found, “Between fiscal years 2007 and 2010, annual wind subsidies grew from $476 million to nearly $5 billion.”…
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