“In Budgeting Battled: Tax and Spending Myths and Realities” the New York Times editorial talks about the stalemate of federal budget debate.
The Republicans want to cut US$ 4.3 trillion of government spendings over the next ten years and US$ 4.2 trillion of tax revenues.
NYT agrees that government spendings have to be controlled but slashing vital social services just to support more tax cuts means bad policy and bad economics.
Reagan promised that tax cuts would spur economic growth and later pay for themselves. In the face of growing deficit, he was forced to raise taxes to close the gap.
Clinton disproved the notion that higher taxes would inevitably stifle economic growth or cost politicians their jobs. During his mandate, the economy was strong and stock market surged. In 1997, the administration decided on tax cuts but enacted higher tax rates on the wealthy.
Bush administration did not collect US$ 1.65 trillion through tax cuts. The economic recovery of Bush years was extraordinarily weak by historical standards.
Obama’s proposed budget for fiscal year 2012 is a mix of tax increases and tax cuts. The problems of this proposal are the clarification of the new sources of revenue, defense cuts, spendings on health care and on entitlements.
NYT editorial agrees that raising income taxes should start with rich Americans, who have been the biggest beneficiaries of Bush-era tax cuts. This measure will not dig the country out of its hole, though. Middle class has also to pay higher taxes as this is the only way for i) keeping needed services, ii) tackle deficit, iii) slow borrowing, and iv) rise interest payments. Other source of tax revenue will be i) energy ii) financial transaction and iii) value-added.
Obama also has to change political debate. He has to abolish the tax-cuts-above-all ideology. He has to make the case for tax increases based on reality.
http://www.nytimes.com/2011/04/13/opinion/13wed1.html?partner=rss&emc=rss
Mostrando postagens com marcador Budgeting. Mostrar todas as postagens
Mostrando postagens com marcador Budgeting. Mostrar todas as postagens
domingo, 17 de abril de 2011
sexta-feira, 8 de abril de 2011
Adressing Budget Deficits
In "Public Budgeting in 2020" Joyce and Pattison urge the need to address large budget deficits created by high demands for government services.
To address this deficit effectively, it is required reforms at both ends: revenue and spending. In the revenue side there are i) income ii) sales ii) property taxes. In the spending side i) health care ii) education iii) entitlement iv) infrastructure v) staff vi) transparency and accountability.
The defining characteristic of public budgeting is that it is a continual struggle between the demands placed on government to respond to societal problems and the desires of citizens and the capacity of governments to finance those responses.
In the revenue side, the four big problems of of income tax are i) vulnerability to economic downturns ii) large number of exclusions iii) complexity and obscurity iv) tax on all incomes disencouraging savings and investment. Solutions would be the creation of a structure i) less prone to cyclical variation ii) broader base iii) easier to comply with iv) encourage savings and investment.
The two main problems with sales tax are i) regressive - lower income people pay higher percentages of their income in tax than higher-income people. This problem is somewhat mitigated by the exclusion of some necessities from tax base like food and drug prescription ii) sales transaction over the Internet (use tax). An important solution ro address "use tax" is the Streamlined Sales Tax Project which makes state sales tax administration more uniform and thus easier for remore sellers to comply with.
The two main problems about property tax are i) doing accurate and equitable assessments and ii) tax limitation.
In the spendings side, the government address aging infrastructure with Private-Public Partnerships and other creative financial arrangements. All spending factors should be assessed by Performance Management (PM).
PM focuses on organization's resources and efforts toward achieving specific results that make the most difference to citizens, It also builds a culture of continuous improvement through which organizations are motivated to find and apply interventions that offer the best results for the least amount of money.
PM also relies on communication to be effective. Credible information produced and made available in a usable form help establish accountability throughout the organization and provide improved results to the public.
Budget-decision making requires data collection, organization, interpretation, and access to be improved. Also, it is necessary centralized financial control and staff with "big picture" perspective to determine where to cut services.
New staff need to be critical thinkers and analysts, have knowledge in financial & performance & accounting & auditing & contracts & negotiation as more privatization and outsourcing will occur and there will be more leaner budget offices.
To address this deficit effectively, it is required reforms at both ends: revenue and spending. In the revenue side there are i) income ii) sales ii) property taxes. In the spending side i) health care ii) education iii) entitlement iv) infrastructure v) staff vi) transparency and accountability.
The defining characteristic of public budgeting is that it is a continual struggle between the demands placed on government to respond to societal problems and the desires of citizens and the capacity of governments to finance those responses.
In the revenue side, the four big problems of of income tax are i) vulnerability to economic downturns ii) large number of exclusions iii) complexity and obscurity iv) tax on all incomes disencouraging savings and investment. Solutions would be the creation of a structure i) less prone to cyclical variation ii) broader base iii) easier to comply with iv) encourage savings and investment.
The two main problems with sales tax are i) regressive - lower income people pay higher percentages of their income in tax than higher-income people. This problem is somewhat mitigated by the exclusion of some necessities from tax base like food and drug prescription ii) sales transaction over the Internet (use tax). An important solution ro address "use tax" is the Streamlined Sales Tax Project which makes state sales tax administration more uniform and thus easier for remore sellers to comply with.
The two main problems about property tax are i) doing accurate and equitable assessments and ii) tax limitation.
In the spendings side, the government address aging infrastructure with Private-Public Partnerships and other creative financial arrangements. All spending factors should be assessed by Performance Management (PM).
PM focuses on organization's resources and efforts toward achieving specific results that make the most difference to citizens, It also builds a culture of continuous improvement through which organizations are motivated to find and apply interventions that offer the best results for the least amount of money.
PM also relies on communication to be effective. Credible information produced and made available in a usable form help establish accountability throughout the organization and provide improved results to the public.
Budget-decision making requires data collection, organization, interpretation, and access to be improved. Also, it is necessary centralized financial control and staff with "big picture" perspective to determine where to cut services.
New staff need to be critical thinkers and analysts, have knowledge in financial & performance & accounting & auditing & contracts & negotiation as more privatization and outsourcing will occur and there will be more leaner budget offices.
The Limits of Performance Budgeting
In "NOAA's Resurrection of Program Budgeting" West, Lindquist, and Mosher-Howe explain the limits of performance assessment as a means of reallocating resources and responsibilities across organization boundaries.
Before rationalizing performance, it is necessary to rationalize structure. The steps to do so are i) creating new norms and routines ii) ensuring adequate resources iii) carry out a comprehensive rational analysis to assess whether costs outweigh benefits in terms of better decisions.
Other problems with Planning, Programming, and Budgeting System (PPBS) are i) organizational commitmment ii) conflicting incentives iii) control of cross-cutting lines iv) accountability v) its complexity which end up reinforcing bureacratic inertia and vi) lack of political support.
Cross-cutting lines of accountability was a type of matrix management popular during 1970s and 1980s. Individuals who belonged to functional divisions were assigned to temporary teams in accordance with the needs of particular projects.
Although budgeting i) allows planning ii) hold officials accountable iii) identify redundancies iv) compare marginal utility of spending on different activities with similar goals, perfomance budgeting is not always the best solution to reinforce these positive aspects of budgeting.
Before rationalizing performance, it is necessary to rationalize structure. The steps to do so are i) creating new norms and routines ii) ensuring adequate resources iii) carry out a comprehensive rational analysis to assess whether costs outweigh benefits in terms of better decisions.
Other problems with Planning, Programming, and Budgeting System (PPBS) are i) organizational commitmment ii) conflicting incentives iii) control of cross-cutting lines iv) accountability v) its complexity which end up reinforcing bureacratic inertia and vi) lack of political support.
Cross-cutting lines of accountability was a type of matrix management popular during 1970s and 1980s. Individuals who belonged to functional divisions were assigned to temporary teams in accordance with the needs of particular projects.
Although budgeting i) allows planning ii) hold officials accountable iii) identify redundancies iv) compare marginal utility of spending on different activities with similar goals, perfomance budgeting is not always the best solution to reinforce these positive aspects of budgeting.
Performance Budgeting
In "Performance Budgeting" Yi Lu examines the perspective and the role of state agencies on perfomance budgeting. This concept is defined as the integration of performance with budgeting.
Tha main findings of Lu's research were i) agencies play an important role in this process ii) the need of elevating managerial capability iii) the use of performance information iii) improvement of measurement quality and iv) this is a collaborative process.
Tha main findings of Lu's research were i) agencies play an important role in this process ii) the need of elevating managerial capability iii) the use of performance information iii) improvement of measurement quality and iv) this is a collaborative process.
segunda-feira, 28 de fevereiro de 2011
Tax & Expenditure Limitations and Public Policy Efficiency
In "Fiscal Management Implications" Christine Martell and Paul Teske explain the downsides of limiting the size and scope of government.
Colorado state has amended its constitution in 1992 with a Taxpayer Bill of Rights (TABOR), the strictest Tax & Expenditure Limitations (TELs) to date. By limiting the scope and size of government, TABOR has also limited the governmental capabilities of weathering economic recessions and employing sound fiscal management practices.
The reasons for this loss of fiscal control is the increasingly part of budget already earmarked, privatization, and the shift of responsibilities. In the financial and educational field, binding TELs reduced Colorado ability to invest in a rainy-day fund and the access to quality public education.
Authors conclude affirming that public administrators have to determine whether the trade-offs of increasingly restrictive budgets - through earmarks, mandatory expenditure and direct democracy - are worth the adoption of a TEL.
http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2007.00752.x/abstract
Colorado state has amended its constitution in 1992 with a Taxpayer Bill of Rights (TABOR), the strictest Tax & Expenditure Limitations (TELs) to date. By limiting the scope and size of government, TABOR has also limited the governmental capabilities of weathering economic recessions and employing sound fiscal management practices.
The reasons for this loss of fiscal control is the increasingly part of budget already earmarked, privatization, and the shift of responsibilities. In the financial and educational field, binding TELs reduced Colorado ability to invest in a rainy-day fund and the access to quality public education.
Authors conclude affirming that public administrators have to determine whether the trade-offs of increasingly restrictive budgets - through earmarks, mandatory expenditure and direct democracy - are worth the adoption of a TEL.
http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2007.00752.x/abstract
The roles of Budget Stabilization Fund
In "Substitution and Supplementation Between Co-Functional Policy Instruments" Yilin Hou and Gene Brewer talk about the two roles that Budget Stabilization Fund (BSF) have on General Fund Balances (GFB).
The first role is substitution. BSF is created by policy-makers in order to ward off spending pressure and limitations from balanced budget requirements of GFB. States take savings from GFB and place them into BSF.
The second role of BSF is supplemental. By increasing state's total savings substantially, BSF helps public administrators mitigate revenue shortfalls during economic downturns.
Although BSF roles help GFB, these multiple policy instruments are only effective at initial stages. During policy implementation process, both BSF and GFB encounter internal and external resistance resulting in increased budget displacement by supplemental policy overtime.
http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2010.02223.x/full
The first role is substitution. BSF is created by policy-makers in order to ward off spending pressure and limitations from balanced budget requirements of GFB. States take savings from GFB and place them into BSF.
The second role of BSF is supplemental. By increasing state's total savings substantially, BSF helps public administrators mitigate revenue shortfalls during economic downturns.
Although BSF roles help GFB, these multiple policy instruments are only effective at initial stages. During policy implementation process, both BSF and GFB encounter internal and external resistance resulting in increased budget displacement by supplemental policy overtime.
http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2010.02223.x/full
Multiyear Countercyclical Budget
In “Budgeting for Fiscal Stability” Yilin Hou defends a Multiyear Countercyclical Budget (MCB) to deal with uncertainty.
Rather than annual budgets aiming balanced budget requirements, MCB ensures stability during fluctuating economic conditions by creating stabilization funds (General Fund Surplus and Budget Stabilization Fund).
MCB encourages cutbacks during surplus years and overspending during lean years. Fiscal revenues accumulated during boom years create surplus funds to be available in lean years to maintain fiscal stability.
The other benefits of MCB is that it addresses cyclical deficit budget by requiring governments i) to prioritize and express policy goals explicitly and consistently, ii) to force current policies to fit the multiyear strategy, and iii) to help mitigate cyclical fiscal deficits (structural deficits has to do with mismatch between revenue and expenditure and managerial deficit is a result of poor management).
The challenges to adopt MCB are mainly political and technical. MCB supporters have to convince legislators that they can also benefit from this budgetary politics. The technical difficult of MCB is to estimate accurate future revenues and expenditures. “Fiscal Conservatism” tends to underestimate revenue and overestimate expenditure, hence putting at risk the maintenance of public services during recessions.
http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2006.00638.x/abstract
Rather than annual budgets aiming balanced budget requirements, MCB ensures stability during fluctuating economic conditions by creating stabilization funds (General Fund Surplus and Budget Stabilization Fund).
MCB encourages cutbacks during surplus years and overspending during lean years. Fiscal revenues accumulated during boom years create surplus funds to be available in lean years to maintain fiscal stability.
The other benefits of MCB is that it addresses cyclical deficit budget by requiring governments i) to prioritize and express policy goals explicitly and consistently, ii) to force current policies to fit the multiyear strategy, and iii) to help mitigate cyclical fiscal deficits (structural deficits has to do with mismatch between revenue and expenditure and managerial deficit is a result of poor management).
The challenges to adopt MCB are mainly political and technical. MCB supporters have to convince legislators that they can also benefit from this budgetary politics. The technical difficult of MCB is to estimate accurate future revenues and expenditures. “Fiscal Conservatism” tends to underestimate revenue and overestimate expenditure, hence putting at risk the maintenance of public services during recessions.
http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2006.00638.x/abstract
sexta-feira, 18 de fevereiro de 2011
Budget and Fiscal Discipline
How to create a budget process predictable and accountable when governments have increasingly contracted out and a large part of budget has been removed from public review?
This is the question that Irene Rubin poses in "The Great Unraveling: Federal Budgeting, 1998 - 2006".
In the United States the failure to fund Medicare and Social Security depicts the urgency to review federal budgetary processes. Chronic deficits have to be addressed by the return of fiscal discipline.
This is the question that Irene Rubin poses in "The Great Unraveling: Federal Budgeting, 1998 - 2006".
In the United States the failure to fund Medicare and Social Security depicts the urgency to review federal budgetary processes. Chronic deficits have to be addressed by the return of fiscal discipline.
Budgeting and Accountability
"Budgeting for Accountability" is a paper written by Jun Ma and Hou Yilin comparing US and China's budgetary systems and their importance for accountability.
Ma and Yilin argue in favor of "societal accountability" which means i) exposing governmental wrongdoings ii) bringing new issues onto the public agenda and iii) activating the operation of horizontal agencies.
They define accountability as answerability and enforcement. Public officials must provide information on their decisions and justify their actions. The government must also be able to impose sanctions on public servants who have failed to comply with financial responsibilties.
Political accountability, therefore, is better understood as financial accountability. Budgetary control serves taxpayers to monitor the milestones and wrongdoings of state agencies.
Citizen Participatory Budgeting is a mechanism that not only allows constituents to decide on how best to allocate resources but also to hold representatives accountable for their financial decisions.
http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2009.02089.x/abstract
Ma and Yilin argue in favor of "societal accountability" which means i) exposing governmental wrongdoings ii) bringing new issues onto the public agenda and iii) activating the operation of horizontal agencies.
They define accountability as answerability and enforcement. Public officials must provide information on their decisions and justify their actions. The government must also be able to impose sanctions on public servants who have failed to comply with financial responsibilties.
Political accountability, therefore, is better understood as financial accountability. Budgetary control serves taxpayers to monitor the milestones and wrongdoings of state agencies.
Citizen Participatory Budgeting is a mechanism that not only allows constituents to decide on how best to allocate resources but also to hold representatives accountable for their financial decisions.
http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2009.02089.x/abstract
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