Can the Federal Budget Process Promote Fiscal Sustainability? Evidence from the Budget Enforcement Act of 1990

Abstract

The Budgetary Enforcement Act of 1990 (BEA90), in effect from 1992 to 2002, is frequently held up as an example of a congressional control that constrained U.S. federal spending. This paper provides a formal test of this conventional wisdom using synthetic control on federal non-defense discretionary expenditures, which is the category of spending BEA90 was considered the most binding. A BEA90-retaining Synthetic United States generated from a lasso regression on a large panel of donors high-income national economic and government finance indicators ultimately reach 2006 at about the same level as the actual United States despite temporarily showing some more restraint immediately upon expiration. We conclude that BEA90 effect on federal non-defense discretionary spending was small, short-lived, statistically likely to have emerged from chance, and more generally did not bend the curve of federal expenditure growth.