Budgeting: Politics and Power, by Carol W. Lewis and W. Bartley Hildreth. New York, Oxford: Oxford University Press, 2011.
Article first published online: 17 MAR 2013
© 2013 Public Financial Publications, Inc.
Public Budgeting & Finance
Volume 33, Issue 1, pages 135–139, Spring 2013
How to Cite
BROWN, C. A. (2013), Book Review. Public Budgeting & Finance, 33: 135–139. doi: 10.1111/j.1540-5850.2013.12006.x
- Issue published online: 17 MAR 2013
- Article first published online: 17 MAR 2013
“Money chases problems and priorities, not profits” (xix) according to Carol W. Lewis and W. Bartley Hildreth in Budgeting: Politics and Power. Public budgeting—along with discussions on efficiency, accountability, ethics, transparency, and responsiveness—drives this introductory textbook through ten well-balanced chapters. Each chapter begins with a set of questions the authors pose and then proceed to answer. There are margin symbols that direct learners to more in-depth on-line resources, along with term definitions embedded in the chapter. The chapter summary is presented in the “thumbnail” near the end of each chapter, followed by a case study that relates to some point, theory, or application just covered. There are moments of humor with the inclusion of several cartoons/comic strips all while maintaining a politically neutral “voice.”
Chapter 1 lays the ground work for understanding the interplay between democracy and budgeting and examines the importance of sound budgeting. Budgets force choices, often among many positive alternatives. The authors discuss accountability, transparency, responsiveness, stewardship, and efficiency as hallmarks of a democracy that the budget should meet. The chapter concludes with the tasks a good budget should perform. A good budget: (1) shows balance between spending and revenue; (2) provides information for policy making, public scrutiny, and accountability; (3) meets legal and political purposes; (4) preserves credibility and public confidence; and (5) is persuasive (22).
Chapter 2 focuses on the citizens' role in the budget process, either as individuals operating in a self-interested way or as aggregate groups. Citizens' participation is varied and their input into budget decisions may lead to increasing polarization because “deep social divides translate into different interests” (25). The authors have created a set of decision rules that citizens use to cast their votes. Calculus describes voters comparing candidates' views to their own. Trump describes a single issue voter who may be more likely to vote if that issue is on the chopping block. Trade off describes voters who are willing to trade their budget preferences for particular policy concerns. No show describes the apathetic or frustrated citizen—creating an advantage for more passionate voters. Finally, voting party affiliation and core beliefs describes partisan voting and values voting (27–28). Harkening back to basic American government concepts, the authors discuss “attitudes” of elected officials about how they see their jobs. Delegates (elected officials who vote consistent with the opinion of the majority of their constituents), trustees (elected officials that vote consistent with what they believe is best regardless of the opinions of their constituents), and statesmen (elected officials who take a much broader, global view) attitudes (or some combination of these) contribute to a politician's openness to engaging with the public on budget issues. Unfortunately, “the public offers little consistent direction about the type of leadership it wants.” There are options for citizens to directly vote on budget matters in several states through such direct democracy provisions as referendum and initiative. These tools present a two-edged sword which may do more to jeopardize democracy rather than enhance it because the “tyranny of the majority” can overwhelm the concerns of the minority (38). The chapter concludes with an examination of public opinion and the ability of those opinions to influence budgets. Opinion polls are one avenue for the public to influence public leaders. Of course, opinions change, new information becomes available or a new crisis emerges. Public leaders may still struggle to “hear” the publics' opinion.
Chapter 3 takes up the issues of fairness and trust in budgetary politics, bringing to mind the recent presidential campaigns and debates calling for some citizens to “pay their fair share.” The chapter acknowledges that fairness and trust are “big political questions” (53) and much depends on how issues are framed.
The problem starts with even trying to define what is fair. Lewis and Hildreth present different interpretations of what is considered fair. Whether or not taxes are fair takes up the bulk of the chapter. The authors list four ways that citizens might consider taxes fair:
- Everyone pays something.
- Taxes paid in line with services and benefits received.
- Willingness to pay or political acceptability.
- Ability to pay (tax burden or effective tax rate) (56).
The authors then transition to a discussion of spending and whether or not that is done fairly. Redistributional policy, intergenerational politics, and entitlement programs all receive attention as influences on spending preferences and fairness as well as overall costs and sustainability of those costs.
Chapter 4 is the beginning of the authors' coverage of the “how to” of budgeting. The authors use the terminology of the “Budget Game” in reference to the budget process, although clearly the stakes remain high. Differences between federal budgeting and state/local budgeting are outlined, with discussion of each occurring as the next chapters unfold (84). Chapter 4 focuses on major differences in terms of executive/legislative powers and procedures and practices.
A quick history of the development of government budgeting in the United States is provided in the chapter, along with the appropriate legislation and agencies created to deal with United States budgeting issues. The budget cycle is presented (absent the standard circular chart) and then the details of each stage are fleshed out. Entitlement spending—perhaps one side of the recent political fiscal cliff—is presented from the perspective of process, avoiding any partisan charged language. The case study that concludes this chapter illustrates the dilemma facing elected officials when confronted with tough budgeting decisions complicated by political logrolling.
Chapter 5 covers how to put all the pieces of the budget back together achieving a balanced budget and the problems that arise when there is no budget. There are hard and soft fiscal rules on taxation, debt, and budgeting at different levels of government that constrain government budgeting authority and the authors introduce and discuss several of them—from Colorado's TABOR to federal debt limits. The chapter also discusses the fundamental difficulty in achieving a balanced budget which is summed up nicely by the authors: “Citizens have an almost insatiable appetite for more government-provided services. At the same time citizens express a preference for low taxes. The government budget has to simultaneously balance citizen needs against fiscal responsibilities—a difficult balancing act” (125). In the event budgets are not balanced, budget reduction strategies are listed and discussed, including the ambiguously worded “right sizing” (140). This is followed by a discussion of budget sustainability through measures that keep the budget balanced over time.
Chapter 6 takes on the tough task of discussing how all the revenue generated by government is spent. The main purposes of public spending are addressed, and two of these, implementing fiscal policy and redistributing resources, are discussed in greater depth as measures such as tax rebates, stimulus packages, and pork barrel projects are further scrutinized. How much should be spent, on what activities, and whether it is well spent are central questions addressed by the chapter. The chapter also confronts issues related to spending for the “War on Terror” and the costs of counter terrorism.
The chapter examines how much government currently spends and the impact of different factors on the budget. Whether we are looking at percent change or rate of growth, every level of government is dealing with more money in a more complex system of budgeting. Prices change, cost of living is adjusted, opportunity costs are recalculated (choosing to fund a military airplane rather than repair a bridge has a cost). Employee benefits add additional burdens to stretched budgets, along with different payments into retirement benefits that become unfunded liabilities. The reasons for growing budgets are listed near the end of the chapter (176–177) and include electoral politics (politicians promise not to raise taxes but budgets continue to grow), automatic pilot entitlements (increasing number of eligible recipients drives up costs), and emergency and military spending (often unexpected and expensive responses to hurricanes, wars, and post-hostilities costs).
Chapter 7 is a substantive chapter on raising public resources. Whether the “cost” is very visible, like a sales tax, or hidden in a phone bill to pay for 911 services, citizens contribute to the services provided by government through taxation. In this chapter, the authors cover the functions of revenue systems, the rationales for grudging public support for taxation, and the types of taxes and other revenues used at all levels of government (182) and how they work.
The authors cover many of the traditionally cited function public revenue systems serve—everything from financing services and affecting economic and social behavior to redistributing resources and implementing fiscal policies to affect the economy. They also place some emphasis on the potential of taxation to encourage civic engagement. In this respect, the authors equate paying taxes as an exercise of civic engagement comparable to voting. The data presented clearly demonstrate that the percent of people paying taxes is far greater than the percentage voting. I find the authors' comparison problematic, as voting is a completely free choice, not subject to fines or imprisonment for failing to vote, whereas not paying taxes is the opposite. I feel confident that if the United States adopted a compulsory voting policy, we would see closer to 100% voter participation, instead of an average of 50% participation.
Strategies for cultivating public support for taxation include taxing everyone a little bit, dedicating the revenue, using politically acceptable taxes, and keeping the tax burden light (188–189). The balance of the chapter is spent discussing the five principles of taxation and their application:
- Foster strong economic growth, job creation, and a rising standard of living for everyone.
- Minimize distortions of private economic behavior by households and businesses (an efficient tax).
- Yield revenues as low as possible to finance justified levels of expenditures over time.
- Be structured to be simple understandable, predictable, and efficient.
- Have a tax burden that is equitable in impact (204).
Chapter 8 is concerned with capital budgeting: what a capital budget is and why it is important. The authors define capital assets (costly and long-term, physical things, like roads sewage systems schools bridges and government buildings, generally paid for over many years, and providing usefulness for many years). As the authors note, a comprehensive plan is necessary, not only for the capital assets but for financing those assets. They cover the capital improvement planning process from identification of projects to the development of the capital improvement program, the first year of which becomes the capital budget. Often, to pay for a capital asset, money must be borrowed and paid back over multiple years. The authors cover the basic mechanics of debt financing, including bond ratings and their effects on borrowing costs. The chapter ends by exposing the myth of “free money” (“there is always a catch:” while state and local governments may be enticed by supposedly “free” money for capital projects from other levels of government, matching requirements can compel unwanted monetary commitments or even skew goals, and the costs of capital facilities once built increase the operating budget) and the role the federal government plays by investing in the capital assets of state and local governments.
Chapter 9 focuses on elements of a local budget. Documents from Boston, Oklahoma City, the Town of Mansfield, CT, and Alexandria, VA are used to illustrate key parts of a local budget. These include the Budget message, Summary, Detailed Schedules, and Supporting Documentation. The chapter covers the eight focal points or basic things you need to know when reading a budget: organization and scope; fiscal year covered; operating or capital; actual or budget (adopted); budget balance; applicable funds(s); budget drivers; and spotlighted concerns. The authors caution that it may be necessary to seek out more detailed background information that explains the numbers or to go beyond the budget to examine the government's financial condition. The chapter also includes a detailed application exercise for students to work their way through a local budget of their own choosing. Because of the inclusion of the exercise, there is no case study associated with this chapter.
The authors conclude, or more accurately, sum up how well or poorly the politics of budgeting is addressing democratic concerns and policy needs in Chapter 10. Every budget is temporary until the next budget is passed. Budgets represent change (formats, priorities), yet so much stays the same (the difficulty in balancing competing demands on finite sources of revenue). The authors discuss the six broad sources of change (structural, political, environmental, socio-economic, technological and organizational capacity, and professional standards) in budgeting along with the six broad sources of stability (intellectual limits and customary practices, traditional public functions, formal process and procedure, structural, political, and professional budget staffs) that produce continuing tension between stability and change (274–275).
Transparency, complexity, accountability, stewardship, efficiency, effectiveness, and performance are used to measure how far we have come with the budget process. Regarding transparency and complexity, the authors cite factors that demonstrate the availability of governmental budget information, from e-government initiatives to investigative reporting. Regrettably, the authors also voice frustration at the intricacies of government budgeting. As the authors note, “The fact that each piece is more transparent does not make the whole puzzle something we can understand easily” (282). Accountability and stewardship also show mixed results. Advances in technologies to monitor and track monies, along with professional financial management and reforms to earmarks, lobbying, and campaign finance are offset by political gimmicks and trickery. Whether it is burying the costs of the war on terror in emergency spending bills or passing the costs of today's programs spending onto the next generation, is a game elected officials have been far too willing to play. Efficiency, effectiveness and performance also remain elusive. Efficiency can be lost as controls for effectiveness take center stage. Add in the oftentimes difficult to quantify measurements of performance, and few people can figure out if the delicate balance between these three factors has been achieved. Many challenges remain. According to the authors, reforms to the appropriations process, entitlement reform, and earmarks may be the next targets for reformers. In their view, United States citizens can be parties to those reforms through active, educated participation.
The worldwide economic pressures confronted in the last few years highlight the importance of learning about the budget process. The authors have done an outstanding job of walking even a beginning student through the maze of this process with clear goals, useful definitions, an accessible writing style, engaging case studies, and a strictly non-partisan approach.
I write this review as we stand on the edge of the “fiscal cliff.” A line from Chapter 2 keeps coming back to me. “When compromise is rejected—by either party or by both—as an acceptable route to at least some policy goals, victory outweighs governing” (33). Hopefully, our elected officials will embrace governing and pull our fragile economy back from the fiscal cliff. Perhaps time spent with this textbook, Budgeting: Politics and Power, would help.