Week 5 deficits budget balancing reforms
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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 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

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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?

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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?

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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

From deborah stone s policy paradox critique of the market model of politics l.jpg
from Deborah Stone’s Policy Paradox:Critique of the Market Model of Politics

Critique of rational model of policy analysis based on lindblom the science of muddling through l.jpg

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

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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

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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

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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?

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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

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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

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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?

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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

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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

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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

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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