A Broken Budget Process & the Latest GDP numbers
Weekly Lab Report – April 16, 2026
Fiscal Lab Notes is the official Substack page for the Fiscal Lab on Capitol Hill. You can check out all our work and analyses at fiscallab.org.
October 1 through November 12, 2025 saw the longest, full federal government shutdown in US history as Senate Democrats objected to extending Affordable Care Act subsidies. Since February 14, 2026, the Department of Homeland Security has been partially shut down with Congress failing to agree to fund Immigration and Customs Enforcement (ICE) and Border Patrol.
In a new Fiscal Lab essay, Joseph McCormack argues that the annual budget process, which has led to recurring, chaotic shutdowns, is outdated and that new solutions are needed to restore fiscal discipline.
Annual appropriations deal with discretionary spending, but discretionary spending has shrunk as a percentage of the federal budget over the past several decades and is projected to keep falling as our aging population means more mandatory spending, notably Social Security and Medicare. As McCormack points out, Congress spends a “disproportionate amount of time and political energy on annual appropriations brinksmanship,” but such political brawling is over an increasingly small amount of federal spending.
McCormack reviews other historical attempts to rein in deficit spending including commissions on entitlement reform, deficit targets, PAYGO, and sequestration. In each case, Congress failed to deliver long-lasting fiscal reform because they lacked adequate enforcement mechanisms.
McCormack suggests several avenues for budgetary reform. One option is to switch to a two-year appropriations cycle, which would likely reduce the drama of shutdowns and give Congress more time to focus on mandatory spending. Other options include a 3 percent deficit-to-GDP target; a Taxpayer’s Bill of Rights, which restricts real government spending per capita; and even a balanced budget amendment. Each of these options comes with serious tradeoffs, but with our debt burden on such an unsustainable path, something must be done.
Q4 GDP Numbers
Last week, the Bureau of Economic Analysis (BEA) released its final estimate of GDP for the fourth quarter of 2025. Although the BEA initially estimated real GDP rose 1.4 percent in the quarter, it revised that number down to a low 0.5 percent. I appeared on the Morning Wire podcast to discuss these numbers and explained how much of the low growth is explained by the government shutdown. I also observed that real final sales to private domestic purchasers, which measures consumption and investment minus inventories and could be viewed as “core GDP,” grew at a 1.8 percent rate and was revised down from an initial 2.4 percent.
While the real final sales to private domestic purchasers numbers are less worrisome than the overall GDP numbers, they both indicate a slowing economy. The BEA also showed last week that both the headline and core Personal Consumption Expenditures (PCE) price indexes rose 2.9 and 2.7 percent, respectively, in the fourth quarter. Unlike the GDP numbers, these numbers remained the same for each of the BEA’s estimates. In other words, economic growth is falling, while inflation remains elevated.