Collapse, Reform, Repeat

Looking back at a broken budget process

We are in the middle of a budget pileup: a reconciliation fight, spiking debt and debt payments, the beginnings of a debt ceiling standoff, rescissions, and even impoundment. It’s becoming increasingly clear that the budget process isn’t up to the task right now. 

But here’s the twist: it never really was. The budget process used to be much worse. And at moments of major national transformation the budget process itself was transformed. After the Civil War we created the Appropriations Committees to centralize spending decisions. During World War I and the Progressive movement, we centralized power in the executive branch because it had more information. During and after World War II and the New Deal, the budget process was revamped.  And after Vietnam and the Great Society, the budget process was transformed in response to those challenges. 

What we’re experiencing now isn’t unprecedented. It’s cyclical. And that means we’re not just at a moment of breakdown — we’re at a moment of potential redesign. If we understand how we got here, we might glimpse what has to come next.

The Founding through World War I and the Progressive Era

At the founding, the budgetary processes were more ad hoc. Congress often passed a single spending and revenue bill. If the Treasury needed to borrow, Congress authorized each bond issuance individually. The system functioned because the federal government was small. But as it grew, Congress found itself overwhelmed.

The Civil War made that clear. Afterward, the House split the tax-writing and spending functions by creating the Appropriations Committee in 1865. But even that structure fragmented. Committees proliferated. Spending authority spread. Coordination broke down.

By the early 20th century, Congress was losing its grip on fiscal coherence. You started to see a shift to the executive branch. It happened in several steps.

During World War I, Congress created a debt ceiling. Today, the debt ceiling sounds a bit like a crazy idea. But then, it was a way to simplify debt issuance. Congress would spend money and then Congress would micromanage the details of debt auctions. That was slow and dumb. Congress gave the power to the executive branch and the Treasury Department to run the process in a smarter way. 

Progressives in the states were experimenting with executive budgeting: giving governors the power to propose unified state budgets. This logic migrated to the federal level with the Budget and Accounting Act of 1921, which required the President to submit an annual budget and created the Bureau of the Budget (now OMB) and the GAO.

Congress reluctantly ceded agenda-setting power in exchange for fiscal clarity. It was an attempt to restore order through coordination — with the President proposing and Congress disposing.

For a few decades, that model held. But it didn’t last.

Rebuilding After the New Deal and World War II

The Great Depression and World War II didn’t just expand the federal government — they transformed it. What had been a lean republic with modest fiscal machinery became a sprawling administrative state. Agencies multiplied. Spending soared. A national social insurance system emerged. After World War II, we created our first standing army. The federal budget was not only massive — it was central to the American economy. My colleague Kevin Hawickhorst has discussed how the accounting systems in the executive branch were transformed during this expansion. 

But Congress did not keep up. Its processes were still shaped by a 19th-century logic: fragmented committee structures, weak oversight, minimal staff, and little analytic capacity. If the legislative branch was going to reassert itself in the postwar order, it needed to retool itself for scale.

Two major reforms followed — not widely remembered today, but foundational to what came next.

The Legislative Reorganization Act of 1946

This was the most sweeping internal overhaul of Congress since the Founding. It rationalized committee jurisdictions, cut down on duplication, and formally charged committees with continuous oversight of federal agencies, including how appropriated funds were being spent. For the first time, Congress committed — on paper at least — to supervising the execution of its own laws.

Crucially, the Act also created professional committee staffs, including dedicated budget and policy experts. It was a step toward institutionalizing knowledge inside Congress — toward building a legislature that could keep pace with the executive. Congress recognized that it had given too much power to the President. And now it was trying to claw it back.

The Budget and Accounting Procedures Act of 1950

While the 1946 Act was inward-facing, the 1950 law aimed at tightening the machinery of budget execution within the executive branch.

• It codified the practice of apportionment, requiring agencies to spend funds in quarterly installments rather than all at once — a safeguard against overspending.

• It allowed temporary deferrals of funds for efficiency, laying the legal groundwork for later fights over presidential impoundment.

• It expanded the authority of the GAO, deepening Congress’s capacity to audit and track executive spending with standardized reporting.

Together, these reforms stitched a patchwork of fiscal procedures into something resembling a coherent system — not perfect, but navigable.

And for a time, it held. But it rested on a key assumption: that most federal spending would continue to flow through the annual appropriations process, where Congress retained control.

That assumption wouldn’t survive the next 20 years. With the arrival of large-scale mandatory spending programs like Medicare, and the unraveling of global monetary anchors like Bretton Woods, the postwar architecture would prove too fragile for what came next.

Entitlements, Inflation, and the 1974 Budget Act

By the 1960s and early ’70s, the postwar budget architecture started to crack under pressure. Several major forces hit the system at once.

First came mandatory spending. Social Security already existed, but in 1965 Congress added Medicare and Medicaid. These weren’t discretionary programs. Congress didn’t vote on them each year. They were automatic. If you qualified, you got the benefit. That meant spending grew according to demographic and economic trends — not political decisions.

It also meant Congress was losing its grip. These programs were hugely popular. No one wanted to touch them. But they consumed more and more of the budget every year. By the 1970s, most of what the federal government spent wasn’t actually decided in the annual appropriations process. Congress was debating less and less of the total budget, even as the total kept getting bigger.

Second, the macroeconomic ground shifted. In 1971, Nixon ended the convertibility of the dollar into gold, pulling the U.S. out of the Bretton Woods system. For decades (centuries?), the gold standard had acted as a kind of fiscal anchor. Now, with the shift to fiat money and floating exchange rates, there was no external constraint. Fiscal discipline had to come from inside the system. 

But it didn’t. The U.S. was running large deficits to pay for Vietnam and the Great Society. Inflation soared. Confidence in the federal government’s economic management collapsed.

Nixon’s response was dramatic. He started impounding funds — refusing to spend money that Congress had appropriated. He said it was necessary to fight inflation. But for Congress, it looked like a constitutional crisis. The President wasn’t just managing the budget. He was vetoing it after the fact.

And Congress had no real tools to respond. There was no formal budget process. No budget resolution. No way to coordinate across committees. No institutional memory or fiscal strategy. If Congress wanted to reassert control, it needed to build something new.

So it did. In 1974, it passed the Congressional Budget and Impoundment Control Act. Nixon didn’t veto it, but only because he was too weak, just weeks from resigning. 

The Act had a few major parts:

• It banned presidential impoundment unless Congress explicitly agreed to cancel the funds.

• It created the congressional budget resolution — a way for Congress to set its own total spending, revenue, and deficit targets.

• It created the Congressional Budget Office (CBO) — Congress’s own economic and fiscal scoring shop to counter the executive branch’s numbers.

• And it introduced reconciliation — a new tool for bringing existing spending and tax laws into line with the budget resolution.

This was Congress saying: We’re going to govern ourselves again. We’re going to set our own numbers. We’re going to track the growing parts of the budget — especially the entitlements. And we’re going to build the machinery to do it.

It was the most ambitious budget reform since the Founding. And it was a classic case of American institutional politics: the system completely broke, and only then did anyone bother to fix it.

For a little while, the new process worked. But like every previous reform, it contained the seeds of future breakdown. The reconciliation process would eventually be used not just to align spending with a budget — but to pass sweeping legislation that couldn’t get through the Senate otherwise. The budget resolution would become symbolic. The hard constraints would shift to the debt ceiling instead. And Congress would start bypassing its own process with omnibus bills.

But that came later.

In 1974, Congress rebuilt its capacity. The budget process was reborn. And for the first time in decades, it looked like the legislature might take back control of the purse.

The New Breakdown: Appropriations, Reconciliation, and the Debt Ceiling

The 1974 Act was a bold reset. But like every past reform, it worked until it didn’t.

Over the following decades, each part of the new process came under strain. And each broke in its own way.

Appropriations Are Dead

Congress no longer reliably passes individual appropriations bills. The regular order — committee markups, floor debate, amendments — has collapsed. In its place: omnibus bills and continuing resolutions.

Instead of twelve appropriations bills debated in public, we get one massive bill assembled in private, passed under deadline pressure. These bills are often thousands of pages long. No one reads them. Few members shape them. They’re designed to avoid conflict, not structure it.

Peter Hanson’s Too Weak to Govern explains part of how we got here: the Senate majority, especially when small or ideologically fractured, often can’t manage open debate. So it packages bills together to avoid amendment fights, floor votes, and delays. The result is efficiency — at the cost of transparency, participation, and democratic legitimacy.

What was once a tool of last resort has become the norm. Congress hasn’t passed all twelve appropriations bills on time since 1996.

Reconciliation Is Overloaded

Reconciliation started as a technical fix — a way to bring revenue and mandatory spending laws into alignment with the budget resolution. But it came with a huge procedural benefit: it’s filibuster-proof in the Senate.

That one feature turned reconciliation into the only reliable vehicle for major legislation. It was used for Reagan’s 1981 tax and spending cuts, Clinton’s deficit reduction, the Bush tax cuts, ACA repeal attempts, the Trump tax cuts, and the Inflation Reduction Act.

But this also warped policy. The Byrd Rule was created to prevent reconciliation from becoming the exception that swallowed the rule of the legislative process. It restricts what can be included in reconciliation. So lawmakers distort legislation to fit the process: slicing up policies, trimming provisions, rewriting them to look more “budgetary.”

What was once a side tool became the main path for certain kinds of major projects. And that means the budget process now shapes not just how we legislate — but what we legislate.

The Debt Ceiling Has Become a Crisis Engine

The debt ceiling was created in 1917 to give the Treasury more flexibility. Before that, Congress approved every bond issuance. The ceiling was supposed to make things easier.

Today, it’s a weapon. Raising the debt ceiling doesn’t authorize new spending — it just lets the Treasury pay for commitments Congress has already made. But it’s become a recurring standoff: a chance to demand concessions, signal fiscal virtue, or simply stage a showdown.

We’ve had serious debt limit crises in 1995, 2011, 2013, and 2023. Each time, the U.S. flirted with default. Each time, Congress raised the limit at the last minute. And each time, trust in the system eroded a little more.

The debt ceiling doesn’t control debt. It doesn’t shape spending. It exists only because Congress hasn’t replaced it — and because both parties sometimes find it useful to keep it around.

What the History of Budget Reform Tells Us

Across more than a century of reform, a consistent pattern has played out: Congress delegates power to make budgeting more manageable — then scrambles to claw it back when things go off the rails.

When the system gets too big to handle, Congress hands the executive branch new tools. These are almost always framed as sensible: more efficient, less duplicative, better aligned with the scale of modern governance.

But over time, those tools get stretched and abused — sometimes by Presidents, sometimes by Congress itself. And the system breaks again.

Here’s the cycle:

• 1865: Post–Civil War chaos. Congress creates the Appropriations Committees, centralizing spending decisions for the first time.
  

• World War I and its aftermath — 1917 and 1921. Congress empowers the executive to manage complexity. It creates the debt ceiling to simplify fiscal management and passes the Budget and Accounting Act of 1921, establishing a formal executive budget process and creating the GAO to audit federal spending.
  

• World War II and its aftermath — 1946 and 1950.  Responding to the New Deal, global war, and a sprawling administrative state, Congress reorganizes itself. The Legislative Reorganization Act of 1946 strengthens committees, creates professional staff, and establishes permanent oversight responsibilities. The Budget and Accounting Procedures Act of 1950 gives the executive new tools — apportionment and deferrals — while expanding GAO’s tracking powers to try to keep up.
  

• 1974: Post-Vietnam, post–gold standard, and Watergate.  Congress reasserts control with the Congressional Budget and Impoundment Control Act. It bans unauthorized impoundments. It formalizes rescissions and deferrals as executive tools subject to congressional review. It creates the budget resolution to focus political energy on the macro-fiscal picture. It launches the CBO to give Congress its own numbers. And it introduces the reconciliation process to adjust policy quickly when fiscal conditions change.

Each of these moments responded to failure — and each sought to strike a new balance between control and flexibility.

And some deeper lessons come into focus:

• Reform is reactive. Congress doesn’t redesign the budget process in anticipation of new challenges. It responds when old systems collapse — often after real damage has already been done.

• Delegation is necessary — until it isn’t.  Each reform gave the executive tools to manage scale and uncertainty. But those tools only worked as long as Congress had the will — and the institutional structure — to oversee them.

• Every tool gets repurposed.  The debt ceiling, reconciliation, deferrals — none stayed within their original guardrails. Congress writes rules; politics turns them into leverage.

So we’re back where we’ve been before: old tools misfiring, new threats mounting, and a process stretched to its breaking point.

What Comes Next

The system is failing. You can see it everywhere:

• The debt ceiling has become a weapon.

• Rescissions no longer work as a tool to renegotiate spending.

• Reconciliation is now the only reliable path to major legislation.

• Appropriations have collapsed into omnibuses and continuing resolutions.And our fiscal trajectory is unsustainable.

That’s not a functioning budget process. 

There are some ideas and even action out there. In 2019, a bipartisan proposal from Senators Mike Enzi and Sheldon Whitehouse was reported out of the Senate Budget Committee. It would have made the budget resolution a legally binding joint resolution, combined it with reconciliation instructions, adopted portfolio budgeting in some areas, and simplified the vote structure across the budget cycle — a serious attempt to align procedure with actual political incentives. There were also some small fixes to address impoundments and apportionment. 

Some more radical ideas are out there:

Kurt Couchman at Americans for Prosperity has proposed a single budget bill that combines the budget resolution and appropriations — a model already used by many states. It would force Congress to confront tradeoffs in one coherent vehicle, not scatter them across disconnected procedures. This is an echo of some of the budget debates 100 years ago. 

Biennial budgeting is another option, giving Congress one year to set policy and the next to do oversight — buying time for reflection and course correction.

Rohan Grey, a law professor and theorist of fiscal architecture, has gone further — calling for a radical digital redesign of federal budget execution and accounting, one that would make the system more legible from the outside and shift the power balance between branches.

My colleague Kevin Hawickhorst has called attention to the underlying accounting systems and the debates to reform them. The executive branch used to know what was going on with its money and share that information with Congress. It doesn’t any more. 

These aren’t just technocratic fixes. They’re bids to reimagine the budget process itself — to rebuild the link between congressional budgeting and actual governance.

Because this isn’t the first time we’ve been here.

• It happened in 1917 and 1921, when Congress empowered the executive to streamline and audit the fiscal system.

• It happened in 1946 and 1950, when Congress restructured itself to match the scale of the administrative state.

• It happened in 1974, when the system cracked under inflation, impoundment, and constitutional crisis.

Each time, a new process emerged — built to meet the challenges of the moment.

It’s time to do it again.