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

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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

  • 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

  • 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

  • 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

  • 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?


Adaptability may be our most valuable asset the view from sacre couer

Adaptability may be our most valuable asset—the view from Sacre Couer


Some observations on current trends in public policy budgeting

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


Some observations on current trends in public policy budgeting

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: long-term budget projections(As a % of GDP)


Some observations on current trends in public policy budgeting

As to the budget caps: what’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.


Life expectancy at birth total expenditures on health person 2008

Life expectancy at birth & total expenditures on health/person, 2008


Health expenditures 2007 gdp

Health Expenditures, 2007(% GDP)

Source: OECD Factbook 2010


Us national health expenditures as a of gdp

US National Health Expenditures (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.


Some observations on current trends in public policy budgeting

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

17

Source: IMF Fiscal Monitor, Sept 2011


Some observations on current trends in public policy budgeting

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


Effective tax rates shares by quintiles 2007 source cbo

Effective Tax Rates & Shares by Quintiles, 2007(Source: CBO)


Some observations on current trends in public policy budgeting

Average Incomes & Shares by Quintiles, 2007

($ in thousands. Source: CBO)


Average social insurance tax rates by quintiles source cbo

Average Social Insurance Tax Rates By Quintiles(Source: CBO)


The laffer curve

The Laffer Curve


The neo laffer curve

The Neo-Laffer Curve

24


But isn t the budget process broken beyond repair

But Isn’t the Budget Process Broken Beyond Repair?

  • 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

  • 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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