BUDGET ENFORCEMENT ACT OF 1990

Budget Enforcement Act of 1990

Abstract

The Budget Enforcement Act of 1990 (BEA) established a new budget process highlighted by categorical spending limitations and a pay-as-you-go discipline covering revenue reductions and mandatory spending increases. The environment in Congress has been less than welcoming, however, during the first year of the agreement. Support for the new process, never strong, has waned in light of the recession, recent international events, and continuing record budget deficits. This has led many members of the Congress to introduce legislation that would change the BEA, and several congressional committees convened hearings to consider the future of the BEA during the first session of the 102nd Congress. This report analyses the various impacts of the Budget Enforcement Act of 1990.

Table of Contents

Abstract2

Introduction4

Budget Enforcement Act Procedures4

Implications For A Balanced Budget5

Deficit Reduction9

Rationing Resources11

The Spirit Of The Laws13

A More Honest Budget13

A Less Conflictual Budget15

Conclusion and Summary16

References18

Introduction

The Budget Enforcement Act was enacted in 1990 in an effort to control future budgetary actions. It did this through two separate, but related, mechanisms: limits on discretionary spending, and the pay-as-you-go process to require that any legislative action on direct spending or revenues which would increase the deficit be offset. These procedures currently would apply through FY2002 (for legislation enacted before October 1, 2002, for measures affecting direct spending or revenues), regardless of whether the budget is in deficit or surplus. (Fisher 2008 )

Budget Enforcement Act Procedures

When Congress and President Bush reached agreement on a five-year deficit reduction plan in 1990, they also agreed to supplant the Balanced Budget and Emergency Deficit Control Act of 1985 (Title II of P.L. 99-177, and also known as the Gramm-Rudman-Hollings Act) with the Budget Enforcement Act (BEA)(Title XIII of P.L. 101-508). The BEA effectively eliminated its predecessor's emphasis on the deficit as the focus of budgetary control.

The new law established a pair of mechanisms that were intended to make it difficult for Congress or the President to undo the budget agreement. First, it established a limit on the level of discretionary spending (divided into defense, international, and domestic discretionary spending for FY1991-93), to be enforced by a presidential sequester order affecting only discretionary spending (only the specific sub-category for FY1991-93). Second, the act established the pay-as-you-go procedure, which requires that increases in direct spending or reductions in revenues due to legislative action be offset by other such legislative actions so that there is no net increase in the deficit. This process is also enforced by a presidential sequester order, one that would affect only non-exempt direct spending programs. The result was that these new mechanisms shifted the focus away from actions Congress and the President exercised no direct control over (the effect of the economy on the deficit) to those they could control (spending and revenue legislation).

Implications For A Balanced Budget

The budget submitted by President Clinton on February 2, 1998, projected a surplus for FY1999 of $9.5 billion for the consolidated budget (i.e., including all federal on-budget and off-budget expenditures and ...