Different Issues of the Budgeting Process

Nevertheless, acceptance of this rational approach was slow and not immediate. In 1949 and 1955, the Hoover Commissions were still recommending the "performance budget" (Wildavsky, 1988).

The time for serious rational budgeting in government arrived after the 1950s. President Johnson pressed for the Planning, Programming, Budgeting System (PPBS) for the entire federal government in the 1960s, and President Carter adopted the zerobase approach in the late 1970s. Conceptually, PPBS was exciting, but few government officials had a clear understanding of how to approach such comprehensive rational budgeting. It was Secretary Robert McNamara who was the first to implement PPBS for the Department of Defense in 1961. Although few studies were conducted to measure the effectiveness of PPBS in the Department of Defense, rational budgeting remained the dominant approach well into the 1990s (Axelrod, 1995, pp. 292-294).

Planning, Programming, Budgeting System reflected the very model of rational budgeting. All of the key concepts of rational budgeting were including in the overall model: resources were allocated based on programmatic analysis; objectives of government programs were identified for the medium-term and long-term; costs of alternative programs were compared; performance indicators were developed; results were emphasized; and choices by decisionmakers were expanded.

Instead of imposing such a comprehensive rational budgeting process on all agencies within the government, the traditional incremental model and rational model could be integrated into a less radical budgeting process. Multi-year objectives should be established which guide present and future budget decisions. But at the same time, budget performance should be regularly measured in more concrete, incremental units, and thereby encouraging minor adjustments in budget plans. Long-term goals should be readily modified, or even discarded, if short-term performance standards indicate that the long-term objectives are unrealistic.

Almost all 50 state governments have a special capital budget separate from the operating budget. Only 20 of the 50 states eventually combine their capital and operating budgets to arrive at unified budget totals. Nearly all local governments also have special capital budgets, especially in large cities and counties. Unlike state and local governments, however, the federal government does not have a special capital budget separate from the overall operating budget. It relies on a unified budget that treats the acquisition of capital assets just like any current operating expenditures. The United States government is the largest government in the world without a special capital budget.

Wildavsky and others argued that PPBS was doomed from the start. Wildavsky argued that such comprehensive rational budget was as political as economic, riddled with political values that ran counter to the traditional principles of negotiation and compromise. By looking at all programs in a universal sense instead of manageable incremental slices, it rekindle political turf wars between agencies. The multi-year objectives and financial plans added an impossible "burden of calculation" to the entire budgeting process, further confounding a prudent and reasonable allocation of resources (Axelrod, 1995, p. 301).

 

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