Toward a Better Understanding of Politics: Linking Costs, Cultures, and Institutional Rules to Budgets

Books reviewed:
Aman Khan, Cost and Optimization in Government
Ronald F. King, Budgeting Entitlements: The Politics of Food Stamps
Steven G. Koven, Public Budgeting in the United States: The Cultural and Ideological Setting     

On Studying Public Budgets

Editors' Note: The articles included in this section of the journal are revised versions of the papers presented at the conference on "Major Budgetary Problems in the Eighties" held in Siena, Italy, November 4–5, 1981, under the auspices of the Centro Studi Fondazione Adriano Olivetti, the German Marshall Fund of the United States, and the Gruppo Monte dei Paschi di Siena.     

The Case Against Balanced Budgets

A proposal by the Fahey government in late 1994 to amend the NSW state Constitution so as to require 'balanced' budgets is one of a number of signs which suggest that the simple notion that total government expenditure should not exceed total tax revenue has gained real influence in Australia, particularly at the state level. This article explains why fiscal responsibility does not require overall budget balance. A balanced budget requirement of this type is not appropriate even if one were to make allowances for recession-induced ('cyclical') deficits, and to seek to ban only 'structural' deficits. The reason for this is there are inherent irregularities in capital expenditure, and only through varying debt levels is it possible to reconcile reasonable stability of tax levels with stable levels of provision of public services (including services from public capital infrastructure).     

Rating the Chancellors and their Budgets

The annual budget presentation is one of the most important forms of public, partisan behaviour in a parliamentary democracy. As such, it should share many features with the addresses of US presidents, including their presumed efficacy. Yet public reactions to budget presentations have been studied only indirectly, and a link between these reactions and government standing has not been established. We use Gallup data over four decades to investigate how voters assess Chancellors of the Exchequer and their budgets. We find that voters' assessments are a product of the performance of the economy, the content of the budget, the media's reaction to the budget and political factors, and are not simply derivative of general feelings about the government in power or intended vote. While developed independently, evaluations of the Chancellor and the budget affect short-term voting intentions of the public. Thus, in unitary, parliamentary governments, as in federal and presidential systems, voters use more than one focal point (in a single party) to evaluate the government and its actions.     

Integrating Gender into Government Budgets: A New Perspective

A government's budget represents a statement of its priorities. During the past 25 years, the international community has recognized that gender equality is essential for sustainable economic growth and full social development, and it has called upon nations to use their budgets to promote genderequitable resource allocation and revenue generation. More than 60 countries have answered this call by implementing gender-responsive budgets at the national and subnational levels. However, gender-responsive budgeting is virtually unheard of among public finance scholars and U.S. public administration scholars and practitioners. Here we define gender-responsive budgeting, discuss the need for it, describe the lessons learned, and discuss its potential as a budget reform. We hope our commentary will bring gender-responsive budgeting into the mainstream of research in the U.S. public administration community and into the practice of government budgeting.     

The Variety of State Capital Budgets: A Survey

In 1986 the staff of the U.S. Office of Management and Budget reviewed issues concerning the possible development of a federal capital budget. As part of this study, a survey of all 50 states was conducted concerning state capital budgets. This paper summarizes the results of the survey. According to the survey responses, 42 states have capital budgets. Of these 42, 37 generally borrow to finance some public capital and 5 generally do not. Of the 8 states that said they do not have a capital budget, 4 generally borrow to finance some public capital and 4 generally do not. The survey also found that the form of a governor's capital budget, the way legislatures enact capital spending, the coverage of the capital budget, and the method of financing capital vary widely among states, making it virtually impossible to define a state capital budget in a precise way. Large amounts of state capital spending, especially for transportation, are generally not included in state capital budgets.     

Better Government

The decline in future trend economic growth coupled with the ever increasing demands of an ageing population mean the public sector will need to deliver better for less. This will require a smarter bureaucracy using the latest behavioural advances and using wellbeing as a measure of success. Spending will need to be directed more to prevention rather than cure. Radical tax and benefit reform is needed to make work pay and offset the rise in inequality. Decision making could be improved by attracting more diverse, experienced people into politics by, for example, more use of open primaries, a level playing field for independent candidates and better training. Ministers could be set proper objectives and have constructive appraisals. A proposed Office of Taxpayer Responsibility could screen policies to avoid the worst ones, backed by no evidence, from being introduced as it is very hard to abolish bad policies.     

The Impact of Capital Spending on Municipal Operating Budgets

What is the impact of capital spending for buildings, equipment, and other facilities on future operating expenditures of municipal governments? Because capital spending decisions are made independent of operating decisions in many larger municipalities, managers make long-term capital commitments without fully understanding the repercussions for operations. This implies the need for research that examines more closely the linkages between these budget cycles. This article develops a theory of the relationship between capital and operating expenditures, then uses data from the fortyeight largest U.S. cities to estimate both the magnitude of capital's impact and the time it takes for operating budgets to adjust. The study finds that five of six commonly provided municipal services were affected to varying degrees by past years' capital expenditures. Especially notable is the finding that the operating budgets of labor-intensive services, such as police and fire protection, are most sensitive to capital spending. For public managers, the findings point to the need for closer coordination between the capital and operating budget cycles, especially in those cases where capital outlays have clear, unambiguous positive implications for future operations.     

Human Rights,Public Budgets,and Epistemic Challenges

Ideally, governing institutions would be designed so that they would produce and implement with certainty ‘human rights-compatible budgets’, i.e. budgets that adequately reflect the obligations enshrined in human rights. However, there are various reasons why a government may ultimately fail to produce such budgets. This article focuses on under-examined challenges for budgeting for human rights: epistemically oriented challenges. More specifically, the article engages in ‘horizon scanning’, and it maps key underlying factors that can be conducive to epistemically oriented challenges to produce and implement human rights-compatible budgets. In addition, the article considers the road ahead from the perspective of institutional design.     

A General Empirical Law of Public Budgets: A Comparative Analysis

We examine regularities and differences in public budgeting in comparative perspective. Budgets quantify collective political decisions made in response to incoming information, the preferences of decision makers, and the institutions that structure how decisions are made. We first establish that the distribution of budget changes in many Western democracies follows a non-Gaussian distribution, the power function. This implies that budgets are highly incremental, yet occasionally are punctuated by large changes. This pattern holds regardless of the type of political system—parliamentary or presidential—and for level of government. By studying the power function's exponents we find systematic differences for budgetary increases versus decreases (the former are more punctuated) in most systems, and for levels of government (local governments are less punctuated). Finally, we show that differences among countries in the coefficients of the general budget law correspond to differences in formal institutional structures. While the general form of the law is probably dictated by the fundamental operations of human and organizational information processing, differences in the magnitudes of the law's basic parameters are country- and institution-specific .     

Sovereign Currency and Non-Sovereign Budgets: The Modern Money Theory Approach

This paper will present the Modern Money Theory approach to government finance. In short, a national government that chooses its own money of account, imposes a tax in that money of account, and issues currency in that money of account cannot face a financial constraint. It can make all payments as they come due. It cannot be forced into insolvency. While this was well-understood in the early post-war period, it was gradually “forgotten” as the neoclassical theory of the household budget constraint was applied to government finance. Matters were made worse by the development of “generational accounting” that calculated hundreds of trillions of dollars of government red ink through eternity due to what neoconservatives label “entitlements” (largely, Medicare and Social Security). As austerity measures were increasingly adopted at the national level, fiscal responsibility was shifted to state and local governments through “devolution.” A “stakeholder” approach to government finance helped fuel white flight to suburbs and produced “doughnut holes” in the cities. To reverse these trends, we need to redevelop our understanding of the fiscal space open to the currency issuer—expanding its responsibility not only for national social spending but also for helping to fund state and local government spending. This is no longer just an academic debate, given the challenges posed by climate change, growing inequality, secular stagnation, and the rise of Trumpism.     

'Building a Better World'

Garran Oration Royal Institute of Public Administration Australia National Conference, 29 November -1 December 2003     

Federal Grants and Local Capital Improvements: The Impact of Reagan Budgets

Changes in intergovernmental grants for local capital improvements during the Reagan Administration are explored from a national perspective and from the experiences of two mid-sized communities, Tulsa, Oklahoma and Toledo, Ohio. Nationally, a roller coaster pattern was identified with a strong down-turn in the most recent data and a notable shift from redevelopment to expansion/development grants such as highway and airport construction. Locally, the first dilemma is that the change in the mix of grants available is having a greater impact on the older Toledo than the newer Tulsa because their capital needs vary. Yet as federal grants declined, both cities responded affirmatively by raising new local revenues for capital improvements. The second dilemma is that the differences in their wealth and needs make revenue enhancement more difficult for Toledo than Tulsa.