The tyranny of averages, “deltas” and the need for some version of zero-based budgeting

February 9th, 2015 at 9:40 am

I’m trying to finish my book so this post will be briefer than it should be as it’s a weighty topic, but let me scratch out the idea as a marker to return to it.

Reading much budget analysis of late, especially regarding spending levels and those unfortunate caps against which appropriators from both side are chafing, I’ve been struck by the paucity of substantive information. We generally all argue—and I include myself—about percentage cuts off of some baseline (e.g., spending levels down compared to 2010, or as a share of GDP) and there’s definitely a lot to be said for that approach, especially relative to GDP. After all, as the economy and population grow, there’s every reason to think gov’t services will need to expand as well.

But to make informed choices about our budget priorities, we need much more granular knowledge about the programs and weapons systems and research and so on that we’re actually funding. This perception struck me acutely when the generals recently went up to Capitol Hill to excoriate Congress about how the military couldn’t possibly live within the discretionary caps imposed by sequestration and prior budget acts. The claim “we can’t possibly defend the nation for $600 bn; we need $638 bn!” (I’m paraphrasing, but that’s the gist) may be right or it may be wrong, but to assume it’s right, as is the DC norm, makes no sense unless your mindset is simply “more!”

And I do not spare the non-defense discretionary side of the budget from this critique. A colleague, upset about the impact of the caps on programs to help low-income families, sent me a four-page table of all the programs that would either be cut outright or whose growth rates would be diminished. I pay a fair bit of attention to this sort of thing and my instinct is that she is correct to be worried. But I also believe we need to know more about how the people who depend on these programs would be hurt by the proposed cuts.

Right here at OTE we tried to engage in this sort of thing during sequestration, showing, for example, the impact of Head Start cuts on the ability of families to make ends meet (click on “sequestration watch”—we did 32 of ‘em!—h/t: GL). I recall one documenting lotteries to see which kids would be kicked out of Head Start. How could that possibly be good for America?

I sometimes fantasize, as only a DC wonk can, on the need for “zero-based budgeting” for the federal budget (that’s where instead of starting with last year’s levels and adding or subtracting, you build up the budget from the bottom up). That’s probably not realistic or possible, but I was recently speaking with a wise friend who’d been an appropriator for many years who basically said, “yes, that would be near impossible; and yes, we have to do it.”

Here’s my other, related big issue to this. Besides being stuck, in the absence of something like the zero-based approach, with hard-if-not-impossible-to-evaluate arguments about what constitutes the right levels of spending for various parts of the budget, we risk becoming a slave to historical averages. Hawkish politicians often argue for keeping expenditures and outlays at historical averages (which are, 1979-2014: 17.4% for receipts, 20.5% for outlays).

But we now face a spate of challenges that defy those averages: an aging population, climate change, new geopolitical conflicts (and the responsibility to care for veterans of those conflicts), infrastructure, inequality, poverty challenges.

We mustn’t be ruled by the tyranny of the average, nor by some arbitrary delta off of last year’s levels. To avoid that fate calls for much more granular work by budget wonks and the media. So, let’s break out the eyeshades and get to it!

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3 comments in reply to "The tyranny of averages, “deltas” and the need for some version of zero-based budgeting"

  1. John Buckstead says:

    As a federal employee (Office of Economic Opportunity and DHHS from 1962-94) I worked with many administrations and several different budget development systems. Program Planning Budgeting System (PPBS) used during the 1960’s-70″s and Zero Based Budgeting (ZBB) used during the Carter Administration were certainly the most rigorous and useful. It can be done, but it requires an administration that understands the benefit and has the administrative capability (OMB) to require competent performance from the Departments.

  2. Smith says:

    No one in their right minds could argue that their isn’t a lot of waste in government spending, defense department included, or especially. Just as there is a lot of waste at General Motors, Bank of America, Google and Apple. Now is probably not the time to cut. There is no shortage of useful programs that could be funded if the actual fat started to get trimmed.