The federal budget no longer responds to changes in the economy, world affairs or the demands of voters because of the way Congress budgets, according to a new report.
The report, co-written by a former director of the Congressional Budget Office and published Thursday by two Washington think tanks, finds that the budget process fails because too much spending has been set into law before Congress even begins debating spending legislation each year.
The authors recommend a series of reforms to fix the way the government budgets, including setting up "triggers" to prod Congress to cut deficits, requiring re-authorization for major automatic spending programs such as Social Security and moving to a 25-year budgeting window.
Some of the ideas endorsed by the report are among the measures that members of Congress from both parties have weighed this summer.
The current budget process doesn't work because most laws governing the budget process were set in 1974, according to the report. Back then, government spending was not dominated by programs that pay out funds automatically, such as Social Security and Medicare.
Today, such entitlement programs, along with interest on the debt, account for roughly 60 percent of federal spending. Spending on Social Security, healthcare programs and interest payments will account for four-fifths of spending growth over the next decade, according to the Congressional Budget Office.
The report notes the "extraordinary extent to which future budgets, not just the current budget, have been set in law, putting in place a set of expectations that simply cannot be met.
"Imagine a household or business that keeps signing contracts about how it will spend all future expected revenues and then some and that then occasionally tries to renegotiate those contracts — this analogy gives some idea of the nature of modern government's fiscal problem," wrote Urban Institute scholars Rudolph Penner, a former CBO director, and Eugene Steuerle, a former Treasury official.
Because entitlement programs, interest payments and tax breaks occur automatically and are growing in relation to revenue, other budget priorities are being strained, they conclude.
Among the problems: Government investments in the future, such as research or education, are set to "decline severely." Spending isn't adapting to voter demands, even though it is growing and set to grow more.
The government won't be able to respond to a recession, because the debt is growing even in good times. Lastly, government and voters are led to believe that the U.S. is in a time of "austerity," when the reality is one of "foregone opportunity."
In addition to other reforms, the report says, Congress could require the president to deliver a "financial state of the union" detailing the budget problems. It also floats the idea of long-run targets for spending and debt.