Eakinomics: Pandemic Budgeting

The first sentence in reporting by The Hill reads: “Key lawmakers on Wednesday expressed interest in creating off-budget accounts to pay for pandemic defense programs.” At this point you should be very alarmed. No two phrases less belong in the same sentence than “off-budget accounts” and “pay for” – except, possibly, “Washington Redskins” and “Super Bowl.”

There is a brand of magical thinking that certain designated categories of spending don’t count toward budgetary totals. Wrong. All of the money flows into the Treasury and all of the money flows out of the agencies. The budget identity that every dollar of federal spending must be paid for by taxes, fees, or borrowing has to add up every year.

Designating money as “off-budget” simply removes it from the budget planning process. For example, at the peak of war activities in Afghanistan and Iraq the key budgetary item was the Overseas Contingency Operations (OCO) accounts, which created the budgetary fiction that those operations were not part of the Department of Defense budget.

It is hard to understand why this is desirable. Budgeting forces Congress (or anyone for that matter) to identify its goals in different areas. Are we somehow expected to have no goals with respect to future pandemics? I certainly have a list of them. Budgeting also forces Congress to compare the relative importance of those goals in setting budget allocations. Is Congress incapable of weighing the importance of pandemic surveillance, national stockpiles, and vaccine development against the sugar subsidy program? I can.

Now, it isn’t possible to anticipate all of the spending that proves necessary in the pandemic. Certainly, it does not make sense to budget $1.8 trillion for a Coronavirus Aid, Relief, and Economic Security (CARES) Act every year. In the unfortunate event of another pandemic, that type of a response would be designated emergency spending – because it is. It does make sense to budget for the money necessary to prepare for the possibility of a pandemic because that should be a regular, annual activity of the federal government. Having an off-budget account, unfortunately, tempts Congress to shift ever-more of those regular activities that belong in the budget to the off-budget account. (This was the experience of the OCO accounts.) Such shifting simultaneously allows regular activities to escape budgetary scrutiny and crowds out the necessary pandemic preparation. (It is probably not a surprise, then, that the two largest off-budget programs – Social Security and the United States Postal Service – are both financial disasters.)

In short, there is no good budgeting with off-budget accounts. This is a bad idea whose time should never come.