Preventing Government Shutdowns: Designing Default Rules for Budgets

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In nearly every area of law and governance, default policies exist when lawmakers cannot pass new legislation — typically, the status quo simply remains in effect. To its detriment, U.S. budget making at both the state and federal levels lacks effective defaults. If a new budget isn’t passed by year end, there is no budget, and the government shuts down. This lack of defaults, coupled with a dysfunctional era of budgetary politics, has led to a number of recent high-profile and costly state and federal government shutdowns at the state and federal levels.

To date, legal scholarship has failed to address both the causes and costs of government shutdowns and near-shutdowns, and thus has also failed to consider possible solutions to prevent them. This Article takes up this cause, exploring the history and sources of recent government shutdowns. Government shutdowns are the result of a perfect storm of contemporary politics: acrimonious budget making characterized by partisan brinkmanship, game-of-chicken-style negotiation strategies, and strong anti-tax sentiment among many conservative legislators. Drawing on political science work on legislative negotiation theory, this Article explains how these new fiscal politics result in regular budget negotiation failures, greatly increasing the risk of costly government shutdowns or near-shutdowns.

From this diagnosis of budgetary dysfunction, this Article advocates for the adoption of default budget policies to maintain government operations in the event that legislators fail to pass a timely budget. This Article explains how default budget policies might be implemented to avert shutdowns and to stabilize the budget-making process. Drawing upon the experiences of several states with automatic continuing appropriations provisions, and the federal experience with sequestration, we explore how default budget policies might work in practice. Properly enacted, default budget policies have the potential to mitigate the harmful consequences of budget negotiation failures and to restore sanity to this era of new fiscal politics.