The Clinton Budget for FY 1994: Taking Aim At The Deficit

President Clinton's budget for FY 1994 takes a high-risk approach to deficit reduction. By calling for the largest peace-time tax increase in American history as the centerpiece of his five-year economic plan, Clinton invited the possibility of either an outright defeat, unwelcome compromise in Congress, or a "victory" that might severely impair the prospects for economic growth. His willingness to accept such risks may be taken as strong evidence that reducing the deficit was the new administration's top priority.     

Congress, the Deficit, and Budget Reconciliation

President Clinton's veto of the 1995 reconciliation bill, the largest and most ambitious such legislation ever passed by Congress, was the first time a reconciliation bill was ever rejected by a president. It was also the first reconciliation bill in two decades to include a tax reduction rather than a tax increase. The fate of this bill, and its scope and contents, suggest the need to assess the evolution of reconciliation within the congressional budget process. In the early 1980s, Congress altered budget reconciliation procedures, putting in place a powerful new capability for deficit reduction. Reconciliation became the primary means within the budget process of restraining entitlement spending and increasing taxes as part of congressional efforts to reduce the deficit. Gramm-Rudman-Hollings magnified certain problems Congress encountered in using reconciliation to control entitlements, producing increased pressure to cut discretionary spending. While the Budget Enforcement Act of 1990 included new authority to use reconciliation to restrain entitlements, congressional spending priorities combined with the Peace Dividend to maintain the relative sanctuary entitlement programs have enjoyed. The limits of reconciliation as a deficit reduction tool, both in terms of increasing revenues and curtailing entitlements, are detailed. The inherent procedural advantages accorded to entitlements are contrasted with the treatment of discretionary programs, explaining in part the widening gulf between these two categories of spending. Congress has attempted, without success, to find alternatives to reconciliation. The failure of the seven-year, deficit-eliminating reconciliation bill of 1995 may indicate that certain Limits on the use of reconciliation may have been reached.     

The Budget Enforcement Act of 1990: The Path to No Fault Budgeting

The Budget Enforcement Act of 1990, included in the controversial and comprehensive budget legislation passed by Congress in October, makes a number of significant changes in federal budgeting. It shifts the focus of the budget process from deficit reduction to spending control, provides five-year spending totals and mini-sequesters for defense, international and domestic appropriations, and puts entitlements and revenue expenditures on a pay-as-you-go basis. The Gramm-Rudman-Hollings deficit targets have been raised substantially, Social Security surpluses taken out of the deficit calculation and allowance made for further adjustments for inflation, Operation Desert Shield, and other emergency spending, minimizing the prospect for general sequestration. OMB has been given important new estimating authority and the roles of the congressional committees involved in budgeting have been altered.     

Minimizing the threat of a positive majority deficit in two-tier voting systems with equipopulous units

The mean majority deficit in a two-tier voting system is a function of the partition of the population. We derive a new square-root rule: For odd-numbered population sizes and equipopulous units the mean majority deficit is maximal when the member size of the units in the partition is close to the square root of the population size. Furthermore, within the partitions into roughly equipopulous units, partitions with small even numbers of units or small even-sized units yield high mean majority deficits. We discuss the implications for the winner-takes-all system in the US Electoral College.     

The Great Entitlement Raid

To bail out the banks, and more generally Wall Street, and as a result of their profiteering, the nation faces a great deficit. It is premature to deal with it, but when the time comes, it should not be closed by scaling back social programs and entitlements. Such a way to deal with the deficit would in effect amount to a two-step major wealth transfer from the most vulnerable Americans to the most endowed. (First the funds were given to Wall Street; next they will be taken from the poor and working-class Americans, to cover the shortfalls). There are other sources for reducing government expenditures and for new revenues.     

Which among twin deficits hypothesis,twin divergence,and Ricardian's equivalence hold in a developing country?

South Africa witnesses the perpetual increase in budget deficit that hampers its ability for inclusive economic growth while on the other hand facing trade balance instability. To realise stability in the economy and sustainable yet inclusive economic growth, the two deficits, namely, budget and trade deficits, should be closely monitored. The study examined the empirical relationship between budget deficit and trade deficit in South Africa in the postapartheid era, employing time series data from 1994 to 2016. The autoregressive distribution lag approach was employed to examine the existence of a cointegration between the set of variables, both in the short‐ and the long‐run relationships and together with the error correction model. It was found that there is a significant and positive relationship between budget deficit and trade deficit in the short run. However, in the long run, the Ricardian's equivalence holds in South Africa. The study recommends that policies aimed at reducing budget and trade deficits should take into account inflation and aim to increase some macroeconomic variables such as fixed investment to ultimately achieve sustainable economic growth.     

A probit analysis of the Senate vote on Gramm-Rudman

The Leviathan theory of government was seemingly contradicted when the U.S. Congress passed the Gramm-Rudman deficit reduction law. This study analyzes the Senate vote on Gramm-Rudman to try to determine whether legislators acted in their own self interest. A prisoner's dilemma argument explains how Senators made themselves better off by limiting their own spending abilities. A probit analysis shows how voting for deficit reduction was consistent with the personal incentives faced by individual legislators. The eventual failure of Gramm-Rudman to eliminate the deficit reveals a need to consider institutional as well as constitutional means of controlling government.     

The Politics of Federal Technology Policy: 1980–1988

This paper examines the politics of federal initiatives in technology during the period 1980–1988 that promote economic competitiveness. It finds that the ideological consistency of these new initiatives with the prevailing political climate, and the presence of business constituencies for technology are key to the adoption of new technology initiatives. In the absence of a strong business interest, agency politics and efforts dealing with the budget deficit dominate. Progress by new technology policy initiativesfbunders m is incremental at best. This paper also discusses the trend toward "industry-led" technology policy.     

Do Politicians Listen to Experts? The Budget Enforcement Act of 1990 and The Capacity to Budget

Last year offered a unique opportunity to compare the ideas of experts and politicians. The 1990 Budget Enforcement Act changed the federal budget process. Allen Schick's 1990 book, The Capacity to Budget, included ideas on how to improve budgeting at the federal level. A comparison is made between the new law and the new ideas in several areas of the budgetary process: deficit reduction; resource rationing; adjustment to changing expenditures; increasing budget honesty; decreasing conflict; rou-tinizing the process; integrating the parts of the budget; and balancing claims and resources.     

The Federal Line Item Veto Experiment: After the Supreme Court Ruling,What's Next?

The federal line item veto has ceased to exist, thanks to the Supreme Court's June 1998 ruling invalidating the expansion of the president's rescission authority that was contained in the Line Item Veto Act. This article reviews the application of the Act during 1997, its effect on spending and the deficit, the judicial reaction to its use, and the prospects for the restoration of some version of the power. President Clinton was quite restrained in the use of his new power, with the exception of his cancellations in the Military Construction appropriation bill; these were ultimately restored by the Congress. Because of the president's restraint, the Line Item Veto Act had a miniscule affect on spending and the deficit; total cancellations represented less than .04 percent of FY98 discretionary budget authority. Ultimately, the Supreme Court held that the Act violated Article I, Section 7 because it created a Constituionally impermissable way for the president to change laws. There is no clear fallback position for supporters of the Act; alternatives are either difficult to enact, hard to administer, or too weak to be considered an effective substitute. Given the problems in enacting any alternative, it may be that the federal line item veto will end up only as a historical anomaly.     

The 1990 Budget Package: Redefining the Debate

The debate of budgeting issues in the 1980s culminated in a dramatic change in 1990—the passage of the Omnibus Budget Reconciliation Act. The negotiations leading to this agreement considered the status of the deficit and the philosophical shift from "no new taxes" to "fair taxes." It led to changes in direct spending, enforcement of budget targets, timing of the budget, sequesters usage, tax increases, and entitlement reforms.     

Rebuilding Policy Capacity in the Era of the Fiscal Dividend: A Report from Canada

After two decades of focusing on deficit reduction and restructuring of operations, governments in many areas of the world are once again contemplating new policies and expenditures. In Canada, where budgetary surpluses have recently replaced deficits, the federal government has been asking whether it still has the capacity to make informed choices about new programs. This article examines Canada's recent efforts in rebuilding its policy capacity. It asks, first, to what extent and in what way was policy capacity originally lost. Second, it appraises the adequacy of new policy "networks," consisting of think tanks, consultants and government officials, as "virtual replacements" for former government-controlled advisory bodies, royal commissions, and in-house policy units. Finally, it notes the relative absence of parliamentarians, and even the political executive, from capacity-rebuilding activities, a deficiency that in the long run may undermine the legitimacy and effectiveness of such efforts.     

Wisconsin's Budget Deficit: Size, Causes, Remedies, and Consequences

Wisconsin's lawmakers increased spending and cut taxes during the 1990s. Then, in January of 2001, they faced an estimated $2.4 billion budget gap or deficit for the FY 2001–2003 biennium. They cut spending and generated additional revenue by borrowing against future tobacco settlement income. Still, by January of 2002, the estimated deficit had grown by an additional $1.3 billion, and more cutting and borrowing took place. Despite these actions, a $3.5 billion deficit was projected for FY 2003–2005. In this study, the causes of the deficit, the "remedies" selected, and their effects are examined. "Lessons" highlighted by Wisconsin's experience include the risks associated with nonincremental policy making, the high costs of excessive political partisanship, and the corrosive effects of "fiscal brinksmanship."     

Partisan schemas and economic voting: The federal budget deficit and the 1988 presidential election

This paper considers the issue of the budget deficit and its influence on the 1988 presidential election. Specifically, we are concerned with the role of partisan economic schemas, and the possibility that many voters might have supported the incumbent Republicansbecause of the deficit problem (reasoning that the GOP, regardless of the failures of the previous 8 years, was the best party to reduce government spending). We find that the deficit issue, despite its high salience, did not have an overwhelming impact on the 1988 race, but what effect it did have apparently favored the Republicans. We demonstrate that schematic voters concerned about the deficit were, indeed, more likely to support George Bush over Michael Dukakis. We conclude by discussing the importance and limits of partisan schemas in explaining economic voting.     

Deficit by Design

This paper focuses on the distinguishing concern of the discourse of democratic deficit: namely, that there appear to be some striking discrepancies between democratic norms and institutional practice. I argue in this paper that the problem of democratic deficit is in fact the normal condition of the institutions of representative government. Indeed, early arguments in favour of representative government insist that it departs from and is superior to democracy itself. If representative government provides the predominant modern understanding of democracy, then democratic deficit is an integral part of its design.     

The change in aggregate budget behavior in the 1990s: a cointegration-error correction model analysis

Using data from 1955 to 2005, the estimates presented imply a long-run equilibrium relation between U.S. federal government revenues and expenditures, but one that is consistent with a continuous expansion in the deficit. There is evidence of a structural break that led to deficit reduction and surpluses from 1996 to 2001, which coincides with several noteworthy economic and political outcomes including the only time when a Democratic administration and Republican Congress were in power simultaneously. The results support the view of a long-run deficit bias in federal budget decision-making. Absent behavior similar to that of the late 1990s, a change in budget rules may be needed to avoid the large deficits forecasted under current law.     

Making Austerity Popular: The Media and Mass Attitudes toward Fiscal Policy

What explains variation in individual attitudes toward government deficits? Although macroeconomic stance is of paramount importance for contemporary governments, our understanding of its popular politics is limited. We argue that popular attitudes regarding austerity are influenced by media (and wider elite) framing. Information necessary to form preferences on the deficit is not provided neutrally, and its provision shapes how voters understand their interests. A wide range of evidence from Britain between 2010 and 2015 supports this claim. In the British Election Study, deficit attitudes vary systematically with the source of news consumption, even controlling for party identification. A structural topic model of two major newspapers' reporting shows that content varies systematically with respect to coverage of public borrowing—in ways that intuitively accord with the attitudes of their readership. Finally, a survey experiment suggests causation from media to attitudes: deficit preferences change based on the presentation of deficit information.     

The Politics of Fiscal Austerity: Implications for the United States

As austerity becomes the new normal for advanced nations, questions are raised about whether nations can make the hard choices necessary to bring about a sustainable fiscal future. The political defeat experienced by so many European governments undertaking fiscal consolidations points to the vulnerabilities that leaders will face. This article shows that how some Organization of Economic Cooperation and Development (OECD) nations have survived the daunting politics of fiscal consolidation by timing actions for periods of economic recovery and political honeymoons following elections and by pursuing deficit reduction strategies that emphasize broad sweeping changes yielding high potential for dramatic economic gains over the longer term. Unlike many European nations today, the seemingly endless appetite for US treasuries by worldwide markets give the United States the luxury of choosing to begin deficit reduction only when the economy strengthens. However, the absence of market pressure also reduces the sense of urgency, consigning national leaders to create internal crises such as the 2012 “fiscal cliff” to force their own hand. While the polarized politics characterizing our party system does not bode well for concerted fiscal action, divided government carries the potential for spreading political risks and promoting more sustainable fiscal outcomes, as it has in our recent history and in other nations as well.     

Islam’s democracy paradox: Muslims claim to like democracy, so why do they have so little?

In this brush-clearing paper, we demonstrate that there is a deficit both of democracy and of freedom in Muslim-majority countries by comparison with the rest of the world. We further demonstrate that these deficits are not fully explained by poverty or by oil but seem to have something to do with Islam itself. We further demonstrate that the democracy and freedom deficits are larger in the Islamic heartland than elsewhere in Muslim-majority countries. We show that the democracy deficit is not driven by demands for autocracy in Muslim-majority countries, and indeed, that individual Muslims value democracy more than non-Muslims. We suggest that the lack of religious freedom in Muslim-majority countries (the supreme power concept) may be a significant variable in explaining the democracy deficit.