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Week 5: Deficits, Budget Balancing, Reforms Week 4 follow up: BCPs – look at sample Deficit politics – federal questions raised by Kettl book rationality in theory reforms in practice Kettl’s answers Deficit politics – state Proposed reforms: ZBB; new commission Role of analysis

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week 5 deficits budget balancing reforms
Week 5: Deficits, Budget Balancing, Reforms
  • Week 4 follow up: BCPs – look at sample
  • Deficit politics – federal
    • questions raised by Kettl book
    • rationality in theory
    • reforms in practice
    • Kettl’s answers
  • Deficit politics – state
    • Proposed reforms: ZBB; new commission
  • Role of analysis
  • Budget balancing strategies
    • class exercise
  • Preview of week 6
federal deficit politics
Federal Deficit Politics
  • Questions raised by Kettl
    • How important is it to reduce the deficit?
    • Why can’t we reduce the deficit if most people agree it should be done?
    • Is the deficit a sign of faulty budget process?
    • Is it possible to make budget process more rational?
is should can the budget process be rational
Is/Should/Can the Budget Process be Rational?
  • What is rationality?
  • The economics/politics debate
    • do concepts of economic efficiency and rationality apply to politics?
    • do they apply to budgeting?
rationality in economics and political science
Rationality in Economics and Political Science
  • Economics
    • individuals
    • fixed preferences
    • maximize expected utility
    • market mechanism
  • Economic Rationality Applied to Politics
    • explains political outcomes as result of self-interested behavior of individuals
    • citizens/voters as individual consumers
    • politics is a marketplace
    • no collective goals or interests
    • no learning from others or situations
    • public interest is sum of individual interests
critique of rational model of policy analysis based on lindblom the science of muddling through
Rational-Comprehensive Method:

1. Clarify objective apart from policy choices

2. Ends-means analysis

3. Good policy is the best means to the ends

4. Analysis is comprehensive --accounts for all relevant impact

Information is conclusive and authoritative

Outcomes projected with certainty

Successive Limited Comparisons:

Objectives and choices are linked

2. Ends and means not distinct

3. Good policy is one on which agreement can be reached

Analysis is always limited

5. Information is ambiguous; subject to interpretation/framing

6. Outcomes rationalized afterward

Critique of Rational Model of Policy AnalysisBased on Lindblom: The “Science” of Muddling Through
rationality in budgeting assumptions of rational process
Rationality in Budgeting: Assumptions of Rational Process
  • economic, not political
  • based on analysis
  • comprehensive review of options
  • orderly decision rules
  • allocated funds where they are most needed by objective measures
  • promote reallocation from lower to higher priorities
critiques of rational budgeting
Critiques of rational budgeting
  • Practical critiques:
    • comprehensive analysis is impossible
    • asks analysts to do what they cannot
  • Normative critiques
    • budgeting is about choosing among values
    • political process does a better job of solving value problems
    • political strength of program = deserving of $$ support
    • incrementalism/bargaining is the most fair
    • process reflects political system – change system not process
    • analysis must serve, not replace, politics
rational budget reforms
Rational Budget Reforms

Proposed to replace line-item budgeting – why?

  • Performance budgeting
    • links inputs with outputs
  • Planned Programming Budgeting Systems
    • link program goals/strategic plans with program costs
  • Management by Objectives
    • links manager-driven objectives with budgets
  • Zero-Based Budgeting
    • justify all costs above specified level


  • Do the outcomes justify the efforts?
reforms to budget process
Reforms to Budget Process

The search for an alternative to political struggle:

  • Gramm Rudman I, II, III
  • Line item veto
  • Balanced budget amendment
  • Biennial budget
summarizing kettl
Summarizing Kettl
  • rationality fixes have failed
    • technique cannot substitute for political judgment
    • role of Congress must be honored
    • implementation problems
  • process fixes have failed
    • procedures cannot substitute for political judgment
    • always a circumvention strategy
    • procedures cannot force unwanted decisions
    • creativity and game playing
  • Other foils:
    • top-down, centralized process open to interest groups/closed to citizens
    • anti-tax sentiment
    • divided party government
summarizing kettl continued
Summarizing Kettl -- continued
  • Solution: political leadership
    • confront controversy
    • promote vision and values
    • promote citizenship and sense of fairness
    • define the public interest
    • other characteristics of effective political leadership?
  • Would a greater sense of fairness of tax and spending policies help?
    • disconnection between who pays and who benefits
    • should there be a closer connection?
deficit politics state level
Deficit Politics—State level
  • Does the state face the same pressures toward deficits?
  • Do process or rationality “fixes” have a better chance of success at the state level?
  • Current deficit
    • what’s the constituency for budget balance?
    • what strategies (gimmicks) are being used?
    • real alternatives – who is proposing them?
  • Proposed reforms
    • ZBB
    • Commission on Government Waste and Inefficiency
role of budget analysis
Role of Budget Analysis
  • Are politics and analysis antithetical?
    • How can analysis serve, rather than replace politics?
    • What should analysis try to accomplish?
    • If analysis is rejected by decision makers, is it useless?
    • What should budget analysts try to accomplish?
    • Would unlimited analysis achieve rationality?
  • LAO type of analysis v PPBS, MBO, PB, etc.
  • More in Week 10
balancing budgets state and local
Balancing Budgets -- State and Local
  • Balanced budget requirement
  • More intense efforts to hide deficits
  • Fewer macroeconomic issues to consider
  • Greater influence of environment on balance/deficit
  • Deficits don’t (usually) accumulate--problems more tractable
  • Temporary, not structural deficits -- more fixes available


Class exercise on balancing bugets

preview of week 6
Preview of Week 6

Begin Part II: Context of Public Finance

  • Readings
    • Rubin Chapter 2 on revenue politics
    • Primer on state taxes
    • LAO section on “perspectives on state revenues”
  • Guest speaker, Brad Williams, from LAO
    • process (and politics) for projecting revenues
    • current issues in state finance