The appropriations committees perform in the legislature somewhat the same functions as the Bureau of the Budget performs in the executive branch. It is their function to impose limits on the tendencies of subjectmatter committees and of outside pressure groups to expand particular programs. It is also natural that the appropriations committees should have a somewhat more economical outlook on the budget than the President. After all, the Congress rather than the President has to finance the budget. It would be an indication that forces in the legislature were not properly balanced if the appropriations committees did not have a reputation for economy.
This brief description of the budgetary process indicates clearly that the requirements of good budgeting are by no means identical with the requirements for a positive fiscal policy. Of course the steps that have been taken to unify the budget are also indispensable for a coherent fiscal policy. But the process of program evaluation that is essential for good budgeting makes a flexible fiscal policy more difficult to achieve. It takes about six months to prepare the budget in the executive branch and about six months more for the Congress to consider it. Thus, budget plans must be begun about a year in advance of the time when they are to take effect. With our present limited foresight, fiscal policy may have to be adapted to changing economic conditions much more rapidly. How to do justice to both the program point of view and the fiscal policy point of view is one of the major problems yet to be faced.
I may have given the impression that the Budget Bureau is interested only in economy. Anyone who reads the President's budget messages will discover that in formulating the budget he is by no means forgetful of the requirements of fiscal policy. Yet it remains true that the main preoccupation of the Bureau is careful assessment and efficient execution of individual programs.
The Employment Act of 1946 should bring the fiscal policy point of view more to the foreground in the deliberations in both the legislative and executive branches of the government. Under this act, the President is required to report to the Congress on all policies of government that will contribute to the achievement of maximum production, employment, and purchasing power. The Congress is required to consider his report in a special joint committee. Fiscal policy certainly cannot escape consideration
if the purposes of the act are to be achieved. The Council of Economic Advisers and the Bureau of the Budget must jointly work out for the President recommendations that will satisfy budgetary needs and also meet the requirements of fiscal policy. In the Congress, the fiscal views of the Joint Committee on the Economic Report must be fully taken into account in the recommendations of the appropriations committees and the revenue committees.
We now have the legislative and executive machinery required for budgetary and fiscal policy purposes. But machinery alone cannot do the job. There must be a much fuller understanding throughout the government of the national objectives. I have indicated that the proponents of fiscal policy have not fully appreciated the need for the rather tedious budget process, and that the budget process itself has been evolved with little regard for the need for a positive fiscal policy. Fiscal policy can be neither responsible nor acceptable without good budgeting. As was seen in the depths of the last depression, budgetary procedures can break down in the face of the very depressions that a proper fiscal policy seeks to avoid.
One simple answer that has obvious appeal is that the entire policy should be adjusted. In the event of a depression the entire expediture side of the budget should be speeded up and taxes reduced. In short, the same principle that we have worked out for the long-run should also be applied to the short-run. Instead of making plans that will remain fairly stable from year to year, the budget should be made to fit the economic needs of each particular year.
Such a policy commends itself from the point of view of economic theory, but it could not be carried out without serious impairment of the budgetary process. As we have seen, that process is necessarily lengthy, and programs may have to be adjusted quickly to meet changing economic conditions. It is preferable therefore to consider short-run policy as a supplement to long-run policy, and it should be designed to interrupt as little as possible the application of budgetary principles to the long-run program.