The United States fiscal constitution since the congressional budget impoundment and control act

Abstract

Despite both chambers of the United States Congress passing budgetary rules to limit deficits and public debts, the deficit and, as a result, public debt, have increased dramatically. Most political economy literature has attributed these phenomena to the tragedy of the fiscal commons or political budget cycles. In contrast, this paper attributes these phenomena to a change in the fiscal constitution—specifically, the Congressional Budget and Impoundment Control Act (CBICA) of 1974. Prior to the passage of the CBIA, the fiscal constitution was such that the Executive Branch led the federal budgeting process. The Executive Branch leading the budgetary process effectively established a constraint on Congress’ propensity to use deficit and public debt finance. The passage of CBICA, however, established a new fiscal constitution that removed this constraint. The CBICA provided Congress with the lead over the budgeting process. This new fiscal constitution established by the CBICA caused an increase in deficits and public debt—despite budgetary rules aiming to stop such increases. Budgetary historical narratives are provided to support the theory.