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At 40 years of age, the federal Budget Act bears the scars of fiscal battles dating from the Nixon administration, but its influence over legislation and spending has grown and deepened in ways that its authors couldn’t have imagined.
Hailed as good government innovation at its birth, in 1974, the law reshaped the gears that run spending and taxing in Washington. Its core tenet — that Congress needs to understand how much a law will cost — has become conventional wisdom in the years since its enactment.
But its reach stretches beyond just fiscal scorekeeping and budget resolutions. The creation of the reconciliation process, designed to help Congress balance its spending and taxing desires, paved the way for landmark legislation, from George W. Bush’s 2001 tax cuts to President Barack Obama’s Affordable Care Act. On the other hand, focusing attention on legislative price tags has forced lawmakers to rewrite bills and perhaps steer clear of some topics altogether, such as entitlements. Budget scoring helped torpedo proposals such as President Bill Clinton’s health care plan, for example.
For all its impact, the Budget Act’s 40th birthday went little noticed on Capitol Hill this July. But whether or not lawmakers realize it, the law is working its will on their bills and, perhaps more importantly, on the process for passing them. (See also, The Long Tug of War Over Purse Strings)
Signed by President Richard Nixon on July 12, 1974, the law was meant to help Washington get a grip on spending and wrest some budgeting decisions away from the White House. To that end, it freed lawmakers from having to rely on the administration for cost estimates of legislation and appropriations. Many of its core provisions, including the creation of congressional Budget committees and the Congressional Budget Office, now are integral pieces of the Washington landscape.
“I think it’s made the Congress and the executive branch very much more conscious of the cost of new legislation,” says Alice Rivlin, the founding director of CBO and currently a senior fellow at the Brookings Institution. “That was the whole idea of scoring — that you had to know what something would cost before you could sensibly decide whether it was worth it.”
The law also established a powerful new procedural tool called budget reconciliation, which has helped both political parties enact their priorities. Under reconciliation, lawmakers have an expedited procedure to raise or lower spending or taxes to reflect budget resolution levels, including the power to bypass the Senate’s usual 60-vote requirement to pass legislation.