the us budget process: an outsider’s view 3 myths about the us budget process 3 real anomalies in...
TRANSCRIPT
An Outsiders View of the US Budget Process
Richard Hughes
Division ChiefPublic Financial Management
21 October 2014
2
The US Budget Process:An Outsider’s View
3 Myths about the US Budget Process
3 Real Anomalies in the US Budget Process
3 Naïve Suggestions for Reform
3 Myths about the US Budget Process: #1: US Budget is Hopelessly Fragmented
State Budget421.2
Social Se-curity548.9
Local Admin242.5
Reviewed Dept12.4
Unreviewed Dept14.0
Standing Legislation
66.0
Unreviewed Programs6.5
Others1.0
Australian 2011-12 Budget (A$ 386bn)
France Public Expenditure in 2012(€1,212bn)
Discretionary1226
Social Security812
Medicare & Med-icaid774
Other596
Interest222
US Federal Budget in 2014($3,633bn)
Capital AME14.2
Current AME352
Current DEL315.9
Capital DEL33.3
UK Public Expenditure in 2014(£716bn)
4
3 Myths about the US Budget Process: #2: US Lacks Medium/Long-term Perspective
5
3 Myths about the US Budget Process: #3: US Has No Numerical Fiscal Rules
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10
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20
25
30
In how many years were numerical fiscal rules in place from 1985 to 2013?
(30 OECD Countries)
US Fiscal Rules
Law Rule Years
Graham-Rudman-
Hollings ActDeficit targets 1986-90
Budget Enforcement
Act
Expenditure caps &
PAYGO rules1990-2002
PAYGO Act PAYGO rules2011-
Present
6
Public Sector4
General Government
13
Central Government
6
None7
3 Real Anomalies in the US Budget Process#1. Coverage of Fiscal Rules
How much of government does the fiscal rule cover?
(30 OECD Countries)
USA, Canada, Japan, Mexico,
Norway, & Switzerland
7
3 Real Anomalies in the US Budget Process#2. Reversionary Budgets
Other3
Gov-ernment
falls3
Exec's budget enacted
3
Exec's budget enacted for lim-ited pe-
riod2
Last year's budget enacted for lim-ited pe-
riod19
What happens if the legislature doesn’t pass the Budget?
(30 OECD Countries)
USA, Mexico & Switzerland
8
3 Real Anomalies in the US Budget Process #3. Rescission of Expenditure
Can the Executive cut expenditure authorized by the legislature?
(30 OECD Countries)
Yes without restrictions
12
Yes with restrictions
12
No6
USA, Italy, Japan,
Norway, Switzerland,
& Turkey
9
3 Naïve Suggestions for Reform:
1. More personal sanctions for failing to pass a budget:– President’s Budget is enacted automatically– Senators and Congressmen don’t get paid– No further legislation can be passed– Senate and Congress face snap election
2. Make appropriations limits not floors for expenditure– Give executive (back) the power to manage the budget – Reduce the need for emergency appropriations– Use performance framework to ensure accountability for delivery
3. Elevate long-term fiscal targets above basic legislation– In many countries fiscal rules are in constitution or organic law– In most countries they cover central and sub-national governments– Sanctions for non-compliance are sometime enforced by courts
10
3 Naïve Suggestions for Reform (Bonus):Why Not Amend the Constitution?
Country Fiscal Rule AmendmentYear of
Ratification
Poland Debt rule 1999
Switzerland Balance and expenditure rule 2001
Austria Budget principles 2009
Germany Structural balance rule 2009
SpainStructural balance, debt,
expenditure limits2011
Italy Structural balance rule 2012
Countries with New Fiscal Rules in their Constitutions