Federalist No. 30: What Is to Be Done About the Federal Budget?

Published date01 December 2011
Date01 December 2011
Paul L. Posner is the director of the
public administration program at George
Mason University and formerly was
president of the American Society for Public
Administration. He led the Government
Accountability Off‌i ce’s federal budget work
for 14 years and consults with federal
budget commissions, the Organisation for
Economic Co-operation and Development,
and other organizations on budget issues.
E-mail: pposner@gmu.edu
What Is to Be Done about the Federal Budget? S53
Paul L. Posner
George Mason University
Federalist Nos. 12 and 30–36 describe the benef‌i ts of a
national f‌i scal system with independent revenues, arguing
that a strong national government cannot exist for long
without the means to raise revenues on its own.  is
essay examines the national f‌i scal policy process during
this period of economic crisis and rising national debt.
It provides a detailed assessment of needed reforms in the
budget system that would meet the tests imposed by an
increasingly uncertain global economy.
Budget processes frame the most important
decisions made by a political system in a given
year. How much of the economy to devote to
government through taxes and how to allocate the
spending of limited resources are the most important
decisions that political leaders at all levels of govern-
ment must make each year. It is no wonder that
Wildavsky (1961) called budgeting the lifeblood of
government, the f‌i nancial ref‌l ection of what govern-
ment does and intends to do.
Over the more than 200-year life of the nation, the fed-
eral budget process has evolved through several distinct
f‌i scal policy regimes. For much of our history, f‌i scal
policy was an island of stability for a government that
perennially was challenged by economic volatility, de-
mographic and territorial change, and war. Challenged
at the outset to overcome the f‌i scal impotence that
hamstrung the national government during the Revolu-
tionary War and after, the balanced budget and public
f‌i nancing regime instituted by the founders became the
foundation for f‌i scal policy for the next 150 years.
e second regime had its origins in the New Deal,
but it came to full f‌l ower in the late 1960s through
the present time.  e federal role in balancing the
economy supplanted older balanced budget rules as
the watchword for f‌i scal policy makers. Failing to
adhere to norms of balance or surplus during periods
of economic expansion and inf‌l ation, def‌i cits became
deeply embedded and were transformed from cyclical
to more permanent structural imbalances between
spending and revenues. Traditional policy-making
institutions and rules that anchored federal budgets
to incremental norms were unseated by increasingly
novel open-ended entitlements and tax expenditures
that grew according to their own gyroscopes.
We stand on the precipice of a potential third shift
in f‌i scal regime brought about by the unprecedented
f‌i scal challenges arising from an aging population and
higher health care costs. Already facing the highest
def‌i cits in peacetime arising from the f‌i nancial crisis,
the budget will remain in structural imbalance even
when the economy returns to full employment. Un-
like previous recoveries, the budget faces escalating
and economically unsustainable def‌i cits for decades to
come, absent dramatic policy reforms in spending and
revenues. Burgeoning def‌i cits and debt will consume
nearly all of the savings that private markets rely on
for their own capital investment and growth. In sharp
contrast to the f‌i rst f‌i scal regime, the federal budget
will become a destabilizing force for the nation’s po-
litical and social order.
e founders’ system, which was designed to curb
the exercise of power, now must be mustered to foster
broad support for the unwinding of tax and spending
policies that have undergirded our political coalitions
for the past 80 years. Other nations have succeeded in
achieving reforms in pensions and f‌i scal reforms, but
they may have the advantage of doing so within more
cohesive parliamentary settings and more insistent
bond market pressures.
Solving these vexing problems requires seemingly he-
roic acts of collaboration across the institutional sepa-
rations and conf‌l icting interests of our system. It calls
for policy makers to do what many think is a politi-
cally unnatural act—administering f‌i scal sacrif‌i ce today
for the benef‌i t of future generations. And they must
do this in a system featuring greater electoral anxiety
by public of‌f‌i cials, party polarization, and 24/7 media
coverage, which conspire to undermine the governance
by insulated elites that may very well be necessary to
make the hard choices facing the nation.
Federalist No. 30: What Is to Be Done About the Federal

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