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.     

The Balanced Budget Amendment: How Would It Be Enforced?

In this article we evaluate the likely effect of enforcement provisions to congressional proposals for a constitutional balanced budget amendment. We define four general areas of enforcement: legislative, executive, judicial, and public opinion. Each of these areas is in turn evaluated along three criteria: political feasibility (can it be enacted and consistently implemented?), effectiveness (is it likely to result in “balance”?), and implications for redistribution of power across branches. We conclude from this analysis that there are limits associated with all balanced budget enforcement provisions. A reliance on one or no explicit enforcement provision would limit the credibility of any constitutional amendment. Ultimately, the enforcement of the amendment would inevitably rest on the commitment of legislators to producing a balanced budget, and in the absence of such a commitment, any enforcement provision would not likely succeed.     

A theoretical analysis of the case for a balanced budget amendment

A balanced federal budget is not a best outcome for all situations, and a constitutional amendment to require annually balanced budgets is not well defended on grounds that it is. However, the case for a balanced budget amendment may have some merit on other, subtler grounds. This article outlines a set of such grounds.Specifically, if it can be shown that the political process systematically undervalues a desirable relationship between revenues and expenditures, a balanced budget requirement might be defensible. The grounds would be that annually balanced budgets are a second best solution, given an argument that the unconstrained political process produces even less desirable outcomes. However, existing knowledge does not make an adequate case that such a rule is needed.I would like to acknowledge the support of National Science Foundation Grant #SES-8218421, and the comments of the following persons on an earlier version: Arthur Benavie, J. Budziszewski, Henry Chappell, Richard Froyen, Paul (Kress, Peter Lange, Jeffrey Obler, Donald Searing, Kenneth Shepsle and the late Clement Vose. Of course, none of the above bears any responsibility for the content.     

Budgeting during the Clinton Presidency

This article assesses the Clinton administration record of budgeting. During President Clinton's two terms, the federal government moved from an era of large deficits to one of equally large surpluses. This turnaround was caused by both the strong economy and the deficit reduction deals of 1990, 1993, and 1997. Defense spending and interest declined as a percentage of the budget, whereas mandatory spending and nondefense discretionary spending increased. Acrimonious interbranch budgetary relationships dominated, with Clinton ultimately winning far more fights than he lost. Executive branch budgetary and financial management capacity improved during the Clinton administration.     

Demokratie als öffentliches Gut?

Political Science neglect classical insights on constitutional and economic conditions of the so called “tax state” as a fiscal institutional architecture sui generis. While studies in Political Economy focus on distribution quality of the welfare state or compare budgets from local to international level fiscal research should also consider the capitalist structure of tax paradigm again. Only after such a regeneration the discipline could better reflect old and new democratic challenges of fiscal problems. Recalling former theories of interdependencies between fiscal, constitutional and ideological orders, this article suggests to make sense of conceptualizing democratic regime itself as prime public good. Because if it is fiscal sovereignty that is foremost to produce with democracy’s budget it should be easier to analyze tax state driven regressive effects of democratic integrity.     

How to Succeed at Increasing Spending Without Really Trying: The Balanced Budget Amendment and the Item Veto

Congressional efforts at budgetary reform generally contain procedural impediments designed to limit profligate spending. In particular, the line-item veto and the balanced budget amendment are intended to limit the ability of legislators to pursue their constituents' interests through pork-barrel politics at the expense of the broader public interest. However, assuming that legislators remain motivated by local constituent interests, we argue that these reforms will promote unexpected results. The supermajorities requires by the line-item veto and the balanced budget amendment include incentives for log-rolling that promote – and may indeed increase – pork-barrel spending.     

The balanced budget amendment: Clarifying the arguments

From the perspective of a supporter, this paper responds to the several criticisms that have been raised to the proposed constitutional amendment to require budget balance. Economists have concentrated on the loss of fiscal flexibility. This objection is countered by reference to the political inefficacy of attempted budgetary manipulation. Lawyers have concentrated on problems of enforcement. This objection is countered by reference to observed respect to other constitutional rules.     

Budgetary Reform and Formal Modeling: A Comment on Gabel and Hager

In a recent article, Gabel and Hager argue that the line-itemveto and the balanced budget amendment promote (BBA) and mayincrease pork-barrel spending. In their discussion of thebalanced budget amendment, Gabel and Hager present one exampleto support their claim. I demonstrate that the effect of a BBAin their model is highly contingent on parameter values, andthat their results hold only for a specific set of parametervalues. Further, in a generalized model where the balancedbudget amendment is crafted endogenously, the BBA that isenacted has the effect of either decreasing spending orkeeping it constant.     

The Impact of State Policies to Limit Debt Financing

State policies intended to limit debt financing, either by requiringa balanced budget or by establishing constitutional limitationson debt, have been adopted in many states. A nalysis revealsthat stricter constitutional debt limitations are associatedwith lower levels of full faith and credit debt but show littlerelationship to overall state debt.     

Incremental Thinking: "Congressional Debate on the Budget and Accounting Act of 1921 (Excerpts)"

Editors' Note : The Congressional Budget Act of 1974 was designed to improve the budget-making process of the national legislature. Although this new process has been in use for less than a decade, proposals for a constitutional amendment to limit the budget powers of the federal government are advancing through Congress. In assessing the potential and problems of budget reform, it would be wise to recall the expectations that animated the introduction of presidential budgeting more than 60 years ago. The following excerpts from the October 1919 debate in the House of Representatives on the legislation that ultimately became the Budget and Accounting Act of 1921 have a contemporary ring. The problems are not new, and one wonders whether the solutions are as easy as some claim.     

The Monster that Ate the United States Senate

Under this allegorical title the article addresses the lawmaking process that has led to the acceptance of three major laws: the 1996 welfare law, the 1997 tax law, and the 1997 balanced budget law. The article presents the author's critical views regarding the budget reconciliation process that underlies the acceptance of these laws.     

Check bouncing and fiscal irresponsibility: Evidence of nonideological shirking by legislators

Kalt and Zupan have measured ideological shirking by legislators. Here we present evidence concerning nonideological shirking. We demonstrate that representatives with more overdrawn checks tend to be more fiscally irresponsible, with fiscal irresponsibility measured by National Taxpayer Union ratings and by representatives' voting behavior on the recent House balanced budget amendment vote.     

Budgeting Rules and Program Outcomes

It is not efficient for a budget system either to enable excessively frequent changes in programs and tax policies or to be rigid and unresponsive. Program durability is one measure of how a budget system weighs the competing goals of resoluteness and responsiveness. The federal budget has different processes—mandatory and discretionary spending and tax expenditures—each based in separate congressional committees and relying on separate procedures. This article examines the budget systems' durability. One finding is that mandatory spending programs and tax expenditures are more durable than programs backed by discretionary spending. However, while programs targeted to vulnerable populations and supporting long‐term planning, such as in income support and health, might benefit from durability, these programs display shorter durability, not longer. While displaying greater durability, tax expenditures do respond to changes in different economic sectors, based on the changes in spending of other budget systems.     

Instrument choice,political reform and economic welfare

The purpose of this paper is to formally examine the effect of placing constraints, such as the line-item veto or a balanced budget amendment, on legislative behavior. There are two basic findings that emerge from the analysis. First, constraints on one type of instrument, such as spending, will in general result in more widespread use of other kinds of instruments, such as regulation. Second, it is naive to conclude that constraints on legislative behavior will promote economic efficiency and/or reduce the growth of government. The primary contribution of the paper is to suggest how changes in the political environment can affect instrument choice, economic welfare, and the size of government.This research was supported in part by a grant from the National Science Foundation Decision, Risk and Management Science Program. The author gratefully acknowledges the helpful comments of Ed Campos and Allan Meltzer. The views in this paper are solely those of the author and do not necessarily reflect the views of the Council.     

Constitutional Reform and Continental Free Trade: A Review of Issues in Canadian Federalism in 1987

Two issues dominated the Canadian federal provincial agendain 1987: constitutional reform and trade negotiations with theUnited States. On the constitutional side, a unanimous agreement—knownas the Meech Lake Accord—was reached among First Ministers(Prime Minister and provincial premiers). On the economic side,Prime Minister Brian Mulroney and President Ronald Reagan signeda comprehensive, bilateral, free trade agreement. However, neitheragreement will take effect until endorsed or implemented bythe relevant legislatures, and one cannot take for granted thatlegislative approval will be forthcoming in either case. Whateverthe outcome, the attempt to grapple with these matters willhave a lasting impact on Canadian federalism. Both agreementsare controversial in certain regions, and while implementationwould initiate a string of systemic changes, rejection wouldengender new regional animosities. Thus, each of the two issues,taken separately, will affect institutional arrangements andterritorial (regional) relationships within Canada. The interplaybetween the two initiatives will also be significant.     

The Electoral College and the Idea of Federal Democracy

On July 22, 1977, Martin Diamond spent the last morning of hislife moving to Washington, D.C., and testifying before the ConstitutionalSubcommittee of the Senate Judiciary Committee on the need tomaintain the Electoral College. That testimony, reprinted infull below, lasted approximately 35 minutes; and it representsa lively exchange between Professor Diamond and Senator BirchBayh, the sponsor of a proposed constitutional amendment forthe direct election of the President. Professor Diamond's priorpublication (see below), is a more systematic defense of theElectoral College against six American Bar Association chargesthat the College is "archaic, undemocratic, complex, ambiguous,indirect, and dangerous."     

Revenue Diversification in Arkansas Cities: The Budgetary and Tax Effort Impacts

The consequences of revenue shortfalls for cities are particularly dramatic due to the balanced‐budget requirement. Revenue diversification is one method of stabilizing revenue streams because diversified revenue structures can mitigate the revenue fluctuations often associated with single source revenue. Using audited financial reports, this study examines the impact of revenue diversification in Arkansas cities over 10 years. To address the issue of revenue adequacy, this study examines diversification's impact on current year budget changes in revenue and expenditures as well as its impact on tax effort.     

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).     

Completing the Constitution: The Fourteenth Amendment and Constitutional Rights

Although the Fourteenth Amendment has been the vehicle for anumber of transformations in the protection of rights, therehas been no consensus on what it means. The amendment is sometimesheld to have revolutionized the Constitution, in effect replacingthe traditional federal system with a more national system.It is also argued that the amendment essentially reaffirmedthe prewar Constitution. The truth appears to lie with neitherside: the drafters of the amendment attempted to "complete theConstitution," neither to reform it radically, nor to reaffirmit simply. In doing so, they unwittingly followed in the tracksof the original "father of the Constitution," James Madison,who believed the original Constitution to be defective in importantways. Proper attention to the context and the structure of thetext of the amendment reveals just how the amendment was to"complete the Constitution." So examined, the amendment revealsitself to be a precisely stated, clearly drafted text, containinga number of new constitutional principles. Properly understood,the amendment affords constitutional protection for rights alreadypossessed in some sense, but therefore unprotected in the oldConstitution.     

Fiscal Federalism, European Stability Pact, and Municipal Investment Finance: A Microdata Analysis of Spanish Municipalities

In countries where subnational governments control a large partof the public finances, the central government's ability tokeep its commitment to the European Union's Stability and GrowthPact can be a difficult matter. European rules demand that theoverall budget be balanced over the medium term; applying thisrule at subcentral level may unduly reduce capital outlays andlocal budgetary autonomy. This article examines the possibleimpact of budgetary stability legislation on the capital expenditureof Spanish municipalities. The empirical findings suggest thatthe new budgetary stability framework will oblige municipalitiesto (i) limit their investments, (ii) raise the tax burden, or(iii) reduce the funds allocated to other budget items. We believethe Spanish municipal experience is generalizable to other federalcountries in Europe that are facing hard budget constraintsand high earmarked grants.