Transcript The “Missing Middle” of the Federal Budget Process: Priority-Setting Roy T. Meyers UMBC [email protected].

The “Missing Middle” of the Federal
Budget Process: Priority-Setting
Roy T. Meyers
UMBC
[email protected]
What I don’t mean by the “missing
middle”: bipartisan compromisers
• Moderate legislators who are willing to
compromise across partisan lines have largely
vanished
• I agree that it would be desirable to have more
legislators who seek pragmatic solutions to
problems
• But that is not my focus; rather, it is whether
current budgeting intelligently identifies priorities
and allocates resources to address these
priorities
“Allocating resources” is often said to
be one of three goals for budgeting
• The three major goals for budgeting (modifed
from World Bank/Schick) are:
– ensuring fiscal discipline at the macro level (with
additional macroeconomic management responsibility
for national governments)
– encouraging program effectiveness and efficiency at
the micro level
– enabling priority-setting and resource allocation at the
meso (or middle) level
• This framework subsumes other presumably
major goals, such as democratic responsiveness,
within these three goals
Of course, there is no consensus on
how to define each goal in practice
• Selected issues re fiscal discipline include:
– What is the proper size of short-run deficits to stabilize the
economy?
– What is the maximum sustainable debt over the long-run?
– Should discretion be replaced with constitutional rules,
statutory rules, or strong centralization?
• Selected issues re program efficiency and effectiveness
include:
– What is the realistic promise of performance budgeting?
– Can delegation and other NPM concepts survive political
challenges (e.g., earmarks)?
Selected issues re priority-setting and
allocation include
• Well, actually, is anyone even talking about this topic?
– Only tangentially—when traditional budget hawks fixate
on the the Big Three (SS and MM) entitlement programs as
the sole cause of unsustainable long-run budgets and the
Pac-Man of other priorities;
– Or the Big Two (MM), plus private health spending, for
health reformers
• But the idea that budgeting should allocate resources
appears to be an article of dogmatic faith, according to
government budget documents
From the President’s Commission on
Budget Concepts, 1967, p. 2
• “What is the budget of the United States?
Fundamentally, it presents the essential
ingredients of the financial plan of the Federal
Government for the coming year. This plan has
many aspects and must serve many purposes:
– It sets forth the President’s request to Congress for
new programs, appropriation of funds, and changes in
revenue legislation;
– It proposes an allocation of resources to serve national
objectives, between the private and the public sectors,
and within the public sector;” [emphasis supplied]
• And so on
From the President’s FY10 budget
• “The budget system of the United States Government
provides the means for the President and Congress to
decide how much money to spend, what to spend it
on, and how to raise the money they have decided to
spend. Through the budget system, they determine the
allocation of resources among the agencies of the
Federal Government and between the Federal
Government and the private sector. [emphasis
supplied] The budget system focuses primarily on
dollars, but it also allocates other resources, such as
Federal employment.” Analytical Perspectives, “The
Budget System and Concepts,” p. 395
With apologies to Saturday Night Live,
“Really?!”
• If you’ve watched the sausage made, you may be
a bit skeptical that the federal budget process
allocates resources with any semblance of reason
• Note that above definitions do not claim anything
about the quality of allocations
• So here’s a question: How would you tell whether
the budget process allocates resources well?
• Proposed answer: Confirm that budgetary
practice is consistent with a normative theory of
allocating resources through the budget process
• Are there any such theories?
Of course, but they aren’t very useful
• Key’s lament—how to choose between X and Y?
• Standard incrementalism---e.g., Wildavsky’s
various versions
– But if incrementalism suffers at the macro level for
risking unsustainable totals and the micro level for
embracing an anti-managerial ethos, why not reject it
at the meso level as well?
• Extreme rationalism (PPBS, etc.); the IFIs’
excessively detailed prescriptions
– Been there, done that
Modern texts give scant coverage to
this claimed function of budgeting
• Those with an economics slant tend towards a mix of
abstract marginalism with extensive instructions on
benefit-cost analysis, despite rare use in practice
• Those with a management slant emphasize variants of
performance budgeting at the program level, assuming
that learning about program efficiency is sufficient to
allocate resources across major categories
• Few incorporate politically realistic theories (path
dependency, punctuated equilibrium, structural
strategy); more on this below
Suggested principles for a theory for
budgetary resource allocation
1. The process must clarify whose and which
resources are to be allocated
2. Budget allocations should be preceded by a
process of identifying major priorities (outcomes/
impact targets) at units of aggregation above the
program level
3. Categorizations of priorities and of resource
allocations should be aligned
4. The effects of allocations should be incorporated
through feedback loops into the following years’
processes
Reforms linked to the theory
• A real Budget Concepts Commission (not a “commission” to
advocate a funder’s viewpoint)
• National indicators reporting on social, economic, and
environmental conditions (selectively aggregating from
available data)
• State of the nation deliberation that identifies targets
(more than a prime-time, lengthy, and unrealistic speech)
• Committee (and agency) restructuring by sector (instead of
so-called “regular order”)
• Periodic sector reviews and crosscuts, following a sunset
schedule (not the current silo approach to performance
management)
Remaining slides
• Selected examples of how the current process
doesn’t work along these lines
• Summary specifics of proposed reforms
• A conclusion that attempts to convince you
that I’m not that crazy
P1: Process must clarify whose and
which resources are to be allocated
• Cash budgeting is obviously flawed, but incorporation of
accrual has been uneven and slow due to technical and
political challenges
• The scope of the budget is just as important
• Many policies that allocate private resources are not included
in the budget (e.g., most regulatory and trade policies),
following “cash flowing through Treasury” principle
• In recent years, scope has expanded to include some
equivalents to traditional spending, especially when
apparently designed to avoid budget scrutiny—e.g., Universal
Service Fund
• “Principles” for on-budget status are made up on a case-bycase basis; in aggregate, do they make sense?
Current dilemmas: health reform
and climate change
• “Hillarycare” featured a debate over on-budget treatment of alliances;
•
•
•
•
now resolved in favor of on-budget for Exchange
Could health reform could be killed if scored as increasing the short-run
deficit even though it enables massive expansions in access and makes a
plausible start to reducing public and private sector costs over the longrun?
Herb Stein was right that we should seek to “budget the economy”—but
how to do that deserve much thought and discussion
Climate change presents even tougher issues: do you agree with CBO’s
estimate of Waxman-Markey that allowances should be on-budget and
offsets off-budget?
These and related dilemmas could be addresses by a real budget
commission—one that is transparent and that draws on a wide range of
experts
P2: Allocations should be preceded by
a process that identifies priorities
• The budget resolution debate on priorities is no longer
meaningful
– It was at the start—debates were closely observed
– We have spent eight years at war without a meaningful “guns vs. butter”
debate (or a “guns and butter vs. future opportunities” debate)
• Committee “views and estimates” now have very limited
impact
• Functional allocations in the resolution do not mandate 302bs
• “Mandatory” vs. “discretionary” is not a sensible basis for
priority-setting
– Much “discretionary” spending is politically mandatory, and some
mandatory spending is reviewed annually
• Despite claims, Senate amendments are for show, as are
“reserve funds”
How conditions could be
translated to priorities and targets
• Scanning conditions that the budget could address would
provide the informational foundation for priority-setting
• Especially important would be trends in conditions and
benchmark levels from other countries
• The “big picture” is more comprehensible when the level
of aggregation is above the program level, such as by
(revised) budget functions
• While conditions are incommensurable (math: having no
common factor), they are still comparable through
rhetoric
• E.g., is the current balance between having the world’s most
powerful military and ranking in the mid-twenties on infant
mortality one that we want to maintain or change?
Three proposals to improve priority
setting
• Adopt national indicators reporting on social,
economic, and environmental conditions
– Almost all of the necessary data is already available
– Through the World Bank, we require the same of poor countries
– US ranks quite poorly in many HDI and other league tables
– HELP bill includes a watered-down proposal along these lines
• Devote time to a formal state of the nation debate
– Spain does it; do other nations?
• Select a relatively small number of medium-term
targets to which the government would commit
– Was Britian foolish or wise to commit to cutting child poverty in half
by a year certain?
P3: Categorizations of priorities and
resource allocations should be aligned
• The current committee structure is neither wellordered nor orderly
• Jurisdictions and related procedures are largely
the result of compromises made during the Civil
War, the 1880s, and 1921
• Since then, numerous small changes have been
made, sometimes to mirror executive
reorganizations
• But the “regular order” is still unnecessary
duplication, which plagues the legislative process
Distinctions between committee types
is honored in the breach
• Authorizations and appropriations committees
address the same topics in separate bills, and
sometimes each year (DoD)
• Other authorizations struggle to make it to the
floor, causing many expired authorizations
• Appropriators regularly provide funds for
unauthorized programs and legislate in
appropriations bills
• Authorizers create and protect mandatory
spending
Auth. vs. apps. illogically bifurcates the
two sides of performance
• Appropriators are supposed to defer to the
authorizers regarding program design, instead
concentrating on what is affordable this year. This
reinforces the appropriators’ tradition of
controlling budgetary inputs rather than taking a
broader view of performance
• Authorizers, in turn, when considering
discretionary programs, have a political incentive
to authorize appropriations that exceed what is
likely affordable
Tax expenditures; health
• Tax committees have a jurisdictional license to spend
through the tax code in all areas of government activity
• Tax preferences are rarely compared to regular
spending programs that address similar purposes, even
in the executive branch
• No wonder the tax code is a mess
– Check out the “strippable credits” in the stimulus bill
– Why would Baucus spend for health using tax credits?
• And does it make sense to have split committee
jurisdictions over health?
– Medicare and Medicaid not integrated in the House
– Program integrity rule in budget resolution
Basics of a reformed committee
structure
• Budget and Taxation committee as the control
committee
– Significant representation from party leadership
and chairs or their representatives
– Rules that require sequential referral for tax
preferences, reducing tendency to overuse tax
tool
• Other committees organized by sector, with
dual appropriations and authorizations
functions
P4: Effects of allocations should be
incorporated through feedback loops
• GPRA and PART are too focused on individual programs,
and largely ignored by legislature
• Obama/OMB have pledged to develop more cross-cuts, but
should go farther
• Require sector reviews, as in Westminster countries
– Compare priority targets to achievements; set out strategic
options across range of policy tools and within multiyear budget
constraint
• IF QDR (defense), and new QDDR (diplomacy and
development), have effect, why not broaden to domestic?
• Rotating reauthorization schedule would be a mechanism
for sunsets and tradeoffs
The radical conclusion
• Regarding the claim that the budget process
allocates resources in an intelligent way: if it is
inaccurate to claim that the budget has no
clothes, it is accurate to claim that its clothes
are skimpy and shredded
• Politically realistic theories (path dependency,
punctuated equilibrium,, structural strategy)
explain why adopting the proposed normative
model is difficult, but not impossible
E.g., barriers to committee
restructuring
• CQ Weekly reports that the average tenure of a
Member of Congress is the longest in history
• Informally-vested seniority rights are strong,
especially for the many legislators who aspire to
become committee chairs
• Many affected interests benefit from the status
quo
• Inside-the Beltway budget experts, suffused with
political realism, refuse to consider the issue
How budgeting academics can help
• Many Inside-the-Beltway budget experts are also so
cynical about the process that they recommend
adopting extraordinary institutions to “force” or
“trigger” the policy actions they desire
• This position is at least as unrealistic as my proposed
reforms
• Plus it retreats from the obligation to propose lasting
improvements to core institutions
• Academics should not join this backward march; we
should develop robust normative models of how
budgets should allocate resources