Government, interest groups and incrementalism

Abstract. This paper is concerned with the two underlying dimensions of the people's welfare – economic growth and social protection – and their realization in the diverse processes which determine the character of budgeting and of budgetary outcomes. These conflicting conceptions of welfare and the diverse agents involved in the budgetary process generate a government fiscal policy, which expresses the clash between ideology and political feasibility and between politicians' intentions and actual outcomes. This paper focuses primarily on the budgetary process in West Germany, but also makes some reference to fiscal policy in the UK and the USA.     

THE IDEOLOGICAL ROOTS OF DEFICIT REDUCTION POLICY

This article identifies those members of Congress who have most often supported deficit reduction on floor roll‐call votes since 1980. An examination of the reciprocal relationship between fiscal policy preference and the more holistic concept of ideology reveals that at an abstract level conservatives and Republicans continue to support fiscal restraint. When we examine specific issues, however, we find that more moderate legislators are generally the most supportive of deficit reduction in the contemporary policy process. This, in turn, suggests a bifurcation of fiscal policy as it relates to ideology. It seems that even though legislators do sometimes think of fiscal policy along the traditional lines of budgetary balance or deficits, the issue is now more often recognized as consisting of the two distinct and separate sub‐issues of government expenditures and revenue policy.     

Inside the Autonomous State: Programmatic Elites in the Reform of French Health Policy

This article combines the methods of institutionalist analysis and the sociology of elites to look inside the black box of the French state. We identify key groups of policymakers in the social policy sector and track both their policy preferences and the results of their efforts from the mid‐1980s through the late 1990s. Our conclusion is that budgetary and ideological challenges to existing policies led to the consolidation within the Ministry of Social Affairs of what we label a “programmatic elite,” whose influence derived less from the positions held by its members than from the coherence and applicability of its state‐centered policy model. The competition for legitimate authority between such programmatic elites, we conclude, is an important but often overlooked endogenous source of policy change in situations of institutional stability.     

How Government Reactions to Violence Worsen Social Welfare: Evidence from Peru

Dissident violence inflicts many costs on society, but some of the longest‐lasting consequences for civilians may be indirect, due to the government's response. We explore how government policy responses affect social welfare, specifically through budgetary shifts. Using subnational violence and budgeting data for Peru, we demonstrate that attacks on soldiers during the budget negotiation period drive a shift from local social services, especially health, to defense. One soldier fatality implies a 0.13 percentage point reduction in the local health budget share (2008–12). Health budget cuts due to a single soldier fatality result in 76 predicted additional infant deaths 2 years later. We show that the effect on health budgeting operates through decreases in women's use of health facilities and postnatal services. We offer evidence that Peru's coercive response indirectly harms civilians due to butter‐to‐guns budgetary shifts. Our results identify a budgetary mechanism that translates dissident violence into a deterioration in social welfare.     

Government survival the Italian way: The core and the advantages of policy immobilism during the First Republic

During its nearly fifty years of history, the First Italian Republic has been characterised by the highest rate of cabinet turnover in Western Europe. There are several convincing explanations for this exceptional feature; nevertheless, merely looking at the average figure risks overlooking the variety in the Italian government experience. Focusing on the spatial determinants of Italian cabinet duration shows that the presence of a core party has a positive, albeit conditional, impact on government duration, largely depending on the degree of intra‐cabinet conflict. Moreover, whenever the core is absent, the inability of cabinets to change the status quo appears to lengthen, rather than shorten, their duration. This outcome appears in line with works stressing the substantial policy immobilism of Italian governments throughout most of the postwar period. The analysis relies on a new dataset based on a coding of the investiture debates of all the Italian cabinets. This allows one to track the evolution of parties’ preferences in a policy space that can change between (rather than only across) elections. The results show the importance of in‐depth case studies to better analyse some puzzles within the cabinet duration literature that might otherwise be averaged out in large‐N comparative analysis.     

Representatives of the public? Public opinion and interest group activity

Although scholars have long speculated about how organised interests link the public to decision makers, there has actually been little empirical research on this important element of democratic theory. This important gap in the literature is addressed in this article by examining, in addition to other supply‐side and demand‐side factors, whether groups mobilise on issues in policy areas that are regarded as salient by the public. Based on an analysis of 4,501 contributions in 142 European Commission online consultations, it is found that organised interests potentially can act as a transmission belt between the public and decision makers. Although the results vary to some degree by issues, higher rates of mobilisation are found on those issues that fall within policy areas that are regarded as salient by the general public and those with consequences for budgetary spending.     

An Integrated Theory of Budgetary Politics and Some Empirical Tests: The U.S. National Budget, 1791–2010

We develop a general theory of budgetary politics and examine its implications on a new data set on U.S. government expenditures from 1791 to 2010. We draw on three major approaches to budgeting: decision‐making theories, primarily incrementalism and serial processing; policy process models; and path dependency. We show that the incrementalist budget model is recursive and that its solution is exponential growth, and isolate three periods in which it operates in pure form. The equilibrium periods are separated by critical junctures, associated with wars or economic collapse. We assess policy process dynamics by examining the deviations within equilibrium periods. We offer three takeaways: (1) exponential incrementalism is fundamental to a theory of budgeting; (2) disjoint shifts in the level of exponential incrementalism are caused only by critical moments; (3) temporally localized dynamics cause bends in the exponential path, longer returns to the path within budgetary eras, and annual punctuations in budget changes.     

State Budgetary Processes and Reforms: The California Story

This paper analyzes state budgetary processes and reforms to inform California budgetary policy. We consider key institutional provisions, including budget periodicity, tax and expenditure limitations, balanced budget and reserve requirements, and supermajority vote requirements, and analyze the extent to which changes are likely to advance procedural norms. Our analysis suggests that empirically unproven assumptions and poorly articulated linkages between budgetary processes and outcomes have undermined the state's ability to understand the budgetary problem and identify effective reforms. We recommend a focus on procedural norms and related reforms that promote effective budgeting processes as a less partisan framework for reform.     

Public Finance Issues and Problems in Switzerland

Switzerland is regarded as a bastion of financial conservatism, yet the Swiss federal government presently faces annual budget deficits of the highest magnitude in recent history. This article provides an overview of measures instituted in Switzerland to control the growth of the public sector and public spending. Recent efforts to raise new tax revenues are also discussed. To place the fiscal dilemma in perspective, an introduction to the structure of Swiss national government and the budgetary process is included. In analysis of Swiss budgetary politics, particular emphasis is given to the influence of the public referendum process on the political dynamics of resource decision making. The authors also analyze the area of the Swiss budget that is growing most rapidly—mandated entitlements—especially payments for unemployment compensation. A prolonged economic recession in Europe has created high unemployment and, consequently, high demand for unemployment compensation and other social "safety net" programs and spending. The most prominent feature of the Swiss political system is that it is headed by a stable coalition government in which leadership does not alternate between different political parties. This system confronts social and policy problems in a slow and deliberate manner due to the necessity for consultation and compromise in a multi-party coalitional government. The advantage of this system is stability and prudence, the disadvantage is perhaps short-term unresponsiveness to budgetary and policy dilemmas of the type now faced in Switzerland. Parallels are drawn between the Swiss budgetary problem and that faced by the U.S. executive and Congress.     

Social Security: Reliance on Cash Flow Accounting and Projections Disguises an Inherent Upside Cash Flow Bias

The federal unified budget reports social security program results on a cash flow basis. Policy is established through projections of cash flows for 75 years into the future. This paper discusses how reliance on cash flow accounting and projections disguises an inherent upside cash flow bias that makes the program's finances appear better than they actually are and, when combined with the long‐standing pay‐as‐you‐go funding policy, leads to periodic solvency crises. The paper does not propose changing the budgetary accounting basis from cash to accrual but does explore the possible application of accrual accounting to the social security program for reporting purposes.     

A Comment on "The Great Unraveling: Federal Budgeting, 1998–2006"

To declare that the federal budgetary process is in utter shambles based principally on an analysis of a six-year interval during a single presidential administration, as Professor Irene Rubin does in the preceding article, is unfair to history and misleading. Drawing on significant budgetary experience as a U.S. Senate staff member, the author of this essay argues that (1) the contributions of emergency appropriations and earmarks to the federal budgetary imbalance are overstated, (2) the goal of perpetual budgetary balance is unsound policy, and (3) budgets—inevitably the result of a political process—are artifacts reflecting societal priorities at a given point in time.     

Organizational design and its consequences for administrative reform: Historical lessons from the U.S. Budget and Accounting Act of 1921

The landmark U.S. Budget and Accounting Act of 1921 (BAA) instituted a series of administrative reforms that proponents claimed would improve budgetary control, stability, and coherence. We maintain that the compatibility of governance structures between agency and system levels is critical for understanding why these administrative centralization efforts were successful in achieving these aims for some federal agencies but not others. The BAA reforms impact on budgetary outcomes is evaluated using panel data on major U.S. federal agencies between 1894 and 1940. Applying semiparametric heterogeneous treatment estimation techniques, we find compelling support that administrative centralization of the federal budgetary process enhanced budget stability and coherence for executive departments while resulting in a lower caliber of budgetary performance for independent agencies. These findings imply that system‐level administrative centralization efforts may be effective only when public agencies are structurally amenable to such reforms.     

The Rise of the Far Right in Debtor and Creditor European Countries: The Case of European Parliament Elections

While the 2014 European Parliament elections were marked by the rise of parties on the far right‐wing, the different patterns of support that we observe across Europe and across time are not directly related to the economic crisis. Indeed, economic hardship seems neither sufficient nor necessary for the rise of such parties to occur. Using the cross‐national results for the 2004, 2009 and 2014 EP elections in order to capture time and country variations, we posit that the economy affects the rise of far right‐wing parties in more complex ways. Specifically, we compare the experience of high‐debt countries (the ‘debtors’) and the others (the ‘creditors’) and explore the relationship between far right‐wing party success on the one hand, and unemployment, inequality, immigration, globalisation and the welfare state on the other. Our discussion suggests there might be a trade‐off between budgetary stability and far right‐wing party support, but the choice between Charybdis and Scylla may be avoided if policy‐makers carefully choose which policies should bear the brunt of the fiscal adjustment.     

Newspapers and Budgeting: The Effects of Media Coverage on Local Expenditure Decisions

The media play an important role for the political agenda. It is less clear, however, how strong the media impact is on political decisions. This article pursues a different approach from the one commonly used in the media–policy research tradition. Instead of focusing on the relationship between the content of the media agenda and the political agenda, it is argued here that from a broader policy perspective, media pressure on the incumbents is a more relevant variable. Media pressure is measured as media competition and media coverage. Furthermore, the article investigates the effect of media variables on budgetary decisions in different spending areas, and compares the relationships between media pressure and policy under various economic, political and institutional conditions. This allows the authors to investigate which factors hinder and promote media influence on policy. The units of analysis are the Danish municipalities, which are similar political units with different newspaper coverage. Coverage by local newspapers is intense in some municipalities, but absent in others. As expected, the authors find that in municipalities with intensive coverage from local newspapers, local politicians do feel a stronger media pressure. However, when it comes to budgetary decisions, almost no observable effects of media pressure are found, either generally or in favourable political, economic or institutional settings.     

Ideas, Inheritances, and the Dynamics of Budgetary Change

Long the lifeblood of public administration, budgeting in the United States acquired a new importance during the 1980s and 1990s because of the fiscalization of the policy debate. But how much has American national budgeting really changed? This article examines the evolution of federal budgeting over the past half-century, exploring such developments as the massive growth of entitlements, congressional budget reform, and the protracted battle over the budget deficit. It finds that year-to-year changes in budget results have been relatively small even while budgetary rules and procedures have experienced sweeping change. At the same time, the composition of federal spending has undergone a quiet revolution. The traditional concept of budgetary incrementalism offers an incomplete explanation for these dynamics. To make sense of them, the article focuses on two key factors: the impact of policy inheritances, and the role of actors' causal and normative beliefs. These factors shape the ideational and material context within which boundedly rational actors negotiate decisions. The tension between changes in ideas and entrenched budgetary commitments has often served to stimulate institutional reform.     

Does fiscal pressure constrain policy responsiveness? Evidence from Germany

Political responsiveness is highly unequal along class lines, which has triggered a lively debate about potential causes of this political inequality. What has remained largely unexplored in this debate are the structural economic conditions under which policymakers operate. In this contribution, we hypothesize that budgetary pressures affect both the level and the equality of political responsiveness. Using a dataset containing public opinion data on around 450 fiscal policy proposals in Germany between 1980 and 2016, we investigate whether policymakers are more responsive on issues with budgetary consequences under conditions of low fiscal pressure than under conditions of high fiscal pressure. We find that responsiveness indeed varies systematically with the degree of fiscal pressure and that policymakers are less responsive on fiscal issues when fiscal pressure is high. This holds for both left-wing and right-wing governments. In contrast, we do not find strong effects of fiscal pressure on political inequality: responsiveness is not more equal in fiscally more permissive times. However, since different types of policy proposals are adopted in times of high fiscal stress, unequal responsiveness has different policy implications in times of high and low fiscal pressure.     

The Congress and fiscal policy

Although the common belief is that the Congress has paid little attention to fiscal policy, the same kinds of political-economic models which have been used to explain presidential budgetary policy may be used equally well to explain congressional budgetary behavior. The Congress' fiscal policy appears to be systematically sensitive to both economic and political factors. Changes in the unemployment rate have a major impact on congressional budgetary policy. As for political factors, the President's lead is followed most closely on revenue proposals and not at all on the expenditure side. The electoral cycle, in particular the off-year congressional election year, is also important; inducing larger deficits and smaller increases in revenues. When the influences on congressional fiscal behavior are compared with those on presidential behavior, the sources of the generally more expansionary congressional fiscal policy are identified. Congressional budget deficits increase in response to increased rates of unemployment but are insensitive to increases in inflation. In contrast, presidential budgets are heavily influenced by inflation and the growth in personal income — increases in each resulting in smaller proposed deficits — as well as by unemployment rates. In years in which both unemployment and inflation are increasing, the combination of the two (assuming a one percentage point change in each) implies an increase in the congressional deficit of $6.7 billion but a decrease in the president's proposed deficit of $2.5 billion. The implications of this study are a challenge to the literature which makes the President the central actor in macro-economic policy.     

Incrementalism in Appropriations: Small Aggregation,Big Changes

U.S. federal budget dynamics, as a major attribute of the legislative and bureaucratic decision‐making processes, increasingly calls into question the scholarly focus on incrementalism. What constitutes a “small” change is largely unspecified in previous research that has also been unable to assess incrementalism across multiple levels of aggregation. Using a unique budgetary database, this article analyzes whether budgetary changes are in fact “small” at different levels of aggregation. Surprisingly, a low proportion of changes are small by any logical standard. During most years, more than one‐fifth of budgetary changes are greater than 50 percent, and nearly half are more than 10 percent. The level of aggregation is also important for assessing whether political variables influence incrementalism. A salient finding: change in party control reflects greater influence within micro‐level budget decisions, while divided government manifests more impact on aggregate‐level budget decisions.     

The influence of the gramm-rudman-hollings act on federal budgetary outcomes, 1986—1989

This article analyzes the impact of the Gramm-Rudman-Hollings (GRH) Act on federal budgetary and fiscal outcomes. Rather than portraying it as a two-on federal budgetary and fiscal outcomes. Rather than portraying it as a two-party game between Congress and the president, each with monolithic policy preferences, we view GRH as a multiparty negotiation game among advocates of different programs and agencies. In this game, agencies subject to sequestration and their congressional advocates have an incentive to reach a budget accord, while those exempt from sequestration do not. Consistent with this argument, we find that GRH has restrained outlays for nonexempt programs and that exempt programs have, if anything, experienced more rapid growth. Overall, GRH is estimated to have restrained outlays by $59 billion by fiscal 1989, and to have restrained outlays more effectively after the 1987 modifications in the Act. The Gramm-Rudman-Hollings Act signals another phase in the decade-long struggle between the White House and Congress over public spending priorities. Our final counterfactual analysis suggests that GRH partially returned federal fiscal and budgetary relationships and priorities to those that prevailed before Reagan.     

Accounting for coalition‐building in the European Union: Budget negotiations and the south

Which parameters affect coalition building in budgetary negotiations? In this article, three distinct levels of analysis are identified to account for coalition building patterns, associated with domestic politics, domestic socioeconomic structures and EU politics. At the level of domestic politics, ideology points to cross‐governmental affinity of a partisan nature; at the level of socioeconomic structures, similarity of policy interests, generated by cross‐national socioeconomic convergence with EU policy standards, informs coalition formation patterns; at the EU politics level, the intergovernmental power balance influences the political aspirations of each Member State in the integration process and coalition‐building decisions. Two sets of parameters affect the evolution of EU coalition patterns, corresponding to the integration impact on the EU (new cleavages) and on the Member States (the impact of Europeanisation). This analytical framework is used to examine the southern coalition (Spain, Greece, Portugal) in the four multi‐annual financial frameworks (1988, 1992, 1999 and 2005).