Interview with Richard Kogan, Center on Budget Policy and Priorities

March 29, 2005
Richard Kogan is a Senior Fellow at the Center on Budget Policy and Priorities, specializing in federal budget issues, including aggregate spending, revenues, surpluses and deficits, and debt. He is also an expert in the congressional and executive budget processes and budget accounting concepts. He served for twenty years on the staff of the Committee on the Budget of the U.S. House of Representatives, most recently as the Director of Budget Policy. In 1990 he designed and drafted the Budget Enforcement Act, which established caps on discretionary appropriations and the "pay-as-you-go" rule for tax and entitlement legislation. Thank you for agreeing to speak to us, Richard. Is it technically possible for the U.S. Government to make a legally binding commitment to buy vaccines in the future? Yes, of course. The U.S. Government enters into legally binding contracts every day. In fact, I don't know what the word "contract" means if it is not legally binding. But to enter into any contract, the Administration must have approval from Congress. So there is no problem for the government to bind its successors?In the 19th Century, Congress passed an act which explicitly allowed the government to be sued for breach of contract, precisely to enable this to happen. Of course, courts should enforce contracts even in the absence of an explicit federal law saying that federal contracts are binding. If the government could not enter into a commercial contract, it would be very difficult for it to do any business. What would happen if the government borrowed money under an agreement that it might, rather than absolutely would, repay principal and interest on schedule?If the government does sign a contract to buy a vaccine when it is available, how would this score in the government deficit? It would only count in the deficit when the vaccines are actually purchased. Although we would sign a contract now, expenditures and deficits are recorded on a cash or cash-equivalent basis, and we would not pay the provider of vaccines until they had been delivered.How would the commitment score in projections of government outlays?The Congressional Budget Office would estimate how likely it was that a vaccine was going to be developed, and predict when the government might have to start making payments. These estimates would be included in projections of future government outlays. But normally the outlay projections are only for five or ten years. Especially if Congress is trying to fit legislation into a five-year budget window, the expenditures might be projected to occur entirely outside that budget window and so be of little or no procedural concern to Congress.If Congress has to give the government authority to sign a contract, does that count as an appropriation?Yes:- when Congress gives the government authority to sign the contract, the whole amount of the commitment would score against the Congressional appropriations ceiling. That could be quite a lot of money: if the U.S. was picking up a quarter of the tab for $3 billion for a disease like malaria, this might be $750 million. The key point to recognize here is that Congress and the Executive keep track of the dollar amount of authority provided up front (the "appropriation") and also keep track of the estimated expenditures.So that would mean squeezing out other appropriations when Congress first decided to make the commitment?Unless there was a change in the appropriations ceiling to accommodate the commitment, then some other program or programs would have to receive smaller appropriations, to make room for the vaccine commitment. In practice, though, that is not very likely to happen: Congress would not want to cut budgets that are delivering goods and services today, to make room for commitments that would only deliver benefits at some uncertain time in the future.So how could Congress avoid squeezing other programs?Congress would need to increase the appropriations ceiling for that one year, to accommodate the vaccine commitment. (Equivalently, Congress might agree to ignore its own rules and breach the appropriations ceiling in order to provide the vaccine appropriation.) Congress might in fact agree to take one or the other of the approaches, because the commitment would not have any impact on the deficit or projected outlays within the five-year budget window. But the easiest way to provide room for the vaccine appropriation would be to assume the commitment in the budget plan ("congressional budget resolution") approved by Congress in the Spring. That way it could be built in to the appropriations ceiling from the start; Congress wouldn't have to ignore its own rules. Who in Congress would approve the legislation providing the appropriation?It could either be the Appropriations Committee or another committee, such as the Energy and Commerce Committee. (I know it sounds strange to talk about appropriations made by a committee other than the Appropriations Committee...) It would be easier if it was the Energy and Commerce Committee, because expenditure projections rather than appropriations ceilings tend to be the constraint that is considered politically binding on committees other than Appropriations. What if the Appropriations Committee wants to approve this? This is possible, too, though Congress would really need to make provision for the commitment within the appropriations ceiling in the budget, to prevent this from crowding out other funding considered by the Appropriations Committee. As I said before, because the appropriation would have no short-term impact on the deficit or projected expenditures, this might be something to which Congress would agree.So there is no technical obstacle to making this commitment?Correct. If the administration and Congress want to do this, there is no law or procedure that necessarily would stop them. If the political will is there, it can be done. The commitment could be implemented in a way which did not compete with other spending priorities in the short run. Richard Kogan: Thank you very much.


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