Trajectories and Consequences
Edited by John Wanna, Lotte Jensen and Jouke de Vries
Chapter 2: Budget Reforms in the United States: A ‘Perfect Storm’ for a New Wave of Deficit-Reduction Reforms
Alfred Tat-Kei Ho* Public budgeting is composed of at least two types of decision-making: how much a government should extract from the private economy through taxation, user charges and fees, and borrowing; and how it should spend the resources to advance the social and economic good and the policy objectives desired by the decision-makers and those they represent. The first set of decisions is about the fiscal policies of a country and the second is about appropriation and management once the resources are in the hands of the government. The two sets of decisions are obviously related, because how much a government can spend depends largely on how much revenue it can raise or how much debt it is willing to incur. However, they are separate issues which often force decision-makers to ask very different questions. Fiscal decisions are about ideologies, values, politics and economics. Different constituency groups with different ideologies and values want different things and there is often unlimited demand for public spending, but only finite resources. Policy-makers also have to balance the interests of the current and future generations and exercise self-discipline to avoid overborrowing and shifting too much tax burden to the future. Finally, fiscal decisions are influenced and bounded by the institutional rules and the distribution of power among the executive and the legislative branch, as well as the macroeconomic forces that set constraints on the latitude of fiscal choices because the government can only tax and borrow to the extent the economy can bear....
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