Some observations on current trends in public policy budgeting
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Some Observations on Current Trends in Public Policy & Budgeting. Barry Anderson Deputy Director National Governors Association [email protected] March 13, 2012. 1. My Goal Today. Discuss a series of observations on current trends in public policy and budgeting

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Some observations on current trends in public policy budgeting
Some Observations on Current Trends in Public Policy & Budgeting

Barry Anderson

Deputy Director

National Governors Association

[email protected]

March 13, 2012

1


My goal today
My Goal Today Budgeting

  • Discuss a series of observations on current trends in public policy and budgeting

  • These observations are not intended to be definitive or all inclusive, but I hope they will be thought-provoking, or at least entertaining

2


Some observations
Some Observations Budgeting

  • The period of American economic dominance may be ending—but so what?

  • And it is not at all clear that State Capitalism will dominate in the long run.

  • Adaptability may be our most valuable asset.

  • Our inherent ability to think strategically, which may be a product of our political system(!), is also an asset.

  • Speaking of our political system, some good news: more competitive House races.

  • A positive budget trend: long-term budget projections.

  • As to the budget caps: what’s wrong with what works?

  • In fact, the Europeans should learn from us: shuck their GRH & adopt a BEA.

  • With respect to tax reform, could there be agreement on “broaden the base & lower the rates”?

  • But isn’t the budget process broken beyond repair?

  • A final word on What We Will See in the Year Ahead.


About me experience
About Me—Experience Budgeting

  • 30+ Years in Federal Budgeting

    • GAO

    • OMB: Senior Career Civil Servant

    • CBO: Acting & Deputy Director

      • FASAB

  • IMF in Washington

  • OECD in Paris

  • Independent Consultant

  • National Governors Ass’n

4


About me personal
About Me—Personal Budgeting

  • Not an ‘R’ or a ‘D’, but an SOB!

  • An “Card-Carrying Middle of the Roader”

5


The period of american economic dominance may be ending but so what shares of world gdp 1600 2006
The period of American economic dominance may be ending—but so what?:Shares of World GDP, 1600-2006

Source: Angus Maddison, The World Economy: Historical Statistics (2003) Table B-20; www.ggdc.net/maddison


And it is not at all clear that state capitalism will dominate in the long run
And it is not at all clear that State Capitalism will dominate in the long run

  • State Owned Enterprises (SOEs, including sovereign funds, Chinese banks, State-controlled energy companies) have advantages

    • Mimic the market

    • Import Western ideas

    • Impose some discipline

  • But their disadvantages—especially in the areas of liberty & scrutiny—outweigh their pros

    • Can states regulate the companies that they run?

    • Can SOEs stop throwing good money after bad—no market discipline?

    • Can SOEs innovate when innovation requires freedom to experiment?

    • Can effective oversight be provided by politicians?

    • Can SOEs operate efficiently with both commercial & social missions?

    • Can SOEs institute effective cost controls to inform stakeholders and discourage corruption?



Our inherent ability to think strategically, which may be a product of our political system(!), is also an asset


Speaking of our political system, some good news: more competitive House racesSource: The Cook Political Report, 3/6/12


A positive budget trend long term budget projections as a of gdp
A positive (?) budget trend: competitive House raceslong-term budget projections(As a % of GDP)


As to the budget caps: competitive House raceswhat’s wrong with what works?The most important recent trend in government budgeting internationally has been the shift to performance budgeting; why not us too?

  • Away from “Budgeting for Inputs”

    • “How much money can I get?”

  • Towards “Budgeting for Measurable Results”

    • “What can I achieve with this money?

      See: Performance Budgeting in OECD Countries, OECD, September, 2007.



Health expenditures 2007 gdp
Health Expenditures, 2007 health/person, 2008(% GDP)

Source: OECD Factbook 2010


Us national health expenditures as a of gdp
US National Health Expenditures health/person, 2008(as a % of GDP)

Source: Sean Keehan (CMS), et al., “National Health Spending Through 2020: Economic Recovery & Reform Drive Faster Spending Growth”, Health Affairs, August 2011.


In fact, the Europeans should learn from us: health/person, 2008shuck their GRH & adopt a BEA(General Government Gross Debt as a %/GDP)

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Source: IMF Fiscal Monitor, Sept 2011


With respect to tax reform, could there be agreement on “broaden the base & lower the rates”?(Percentage of households whose payroll taxes exceed income taxes; Source: CBO)


Marginal federal income tax rates
Marginal Federal Income Tax Rates “broaden the base & lower the rates”?


Effective tax rates shares by quintiles 2007 source cbo
Effective Tax Rates & Shares “broaden the base & lower the rates”?by Quintiles, 2007(Source: CBO)


Average Incomes & Shares by Quintiles, 2007 “broaden the base & lower the rates”?

($ in thousands. Source: CBO)


Average social insurance tax rates by quintiles source cbo
Average Social Insurance Tax Rates By Quintiles “broaden the base & lower the rates”?(Source: CBO)


The laffer curve
The Laffer Curve “broaden the base & lower the rates”?


The neo laffer curve
The Neo-Laffer Curve “broaden the base & lower the rates”?

24


But isn t the budget process broken beyond repair
But Isn’t the Budget Process Broken Beyond Repair? “broaden the base & lower the rates”?

  • Long-term sustainability is the major issue, not short-term borrowing ability—see payroll holiday pay-fors

  • Improvements can be made

    • BRAC

    • More and better credit reform

      • Insurance programs

      • Administrative costs

      • Market rates

  • But not:

    • Line Item veto [Enhanced recession better]

    • Biennial budgeting

  • But in sum, the process is not the problem; the problem is the problem


A final word on what we will see in the year ahead
A Final Word on What We Will See in the Year Ahead “broaden the base & lower the rates”?

  • A BudgetaryPerfect Storm at the end of the year:

    • Expiration of tax cuts & payroll tax holiday

    • Expiration of additional unemployment benefits; TANF; R&E & other tax expenditures

    • Then there is the sequester, debt limit, & CR

  • The states will be in a Big Squeeze

  • And finally there’s China


In conclusion in the future even more than in the past it is good to remember
In conclusion, in the future—even more than in the past—it is good to remember:

“Sunshine

is the best

disinfectant.”

Supreme Court Justice Louis Brandeis (1856-1941)

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