MattAndrews

Is the US federal budget process ungovernable?

I usually write exclusively on development and developing countries. I recently authored an article on the US federal budget process, however. The Association of Schools of Public Administration referenced it in discussing the debt ceiling debate/debacle.

I think there are some lessons about fitting reform to context in this piece. The lessons speak to the importance of theorizing both the reform and reform context to ensure you have the proper fit for a governance problem. When one theorizes the American context, focused on the logics driving political decisions, I come to wonder if any solution does fit. 

Let me get to the blog piece. Apart from some fun figures (see here) I also liked the blog title:  "The Budget Deal: A Repeat Phenomenon?" (http://aspanational.wordpress.com/2011/08/04/the-budget-deal-a-repeat-phenomena/).

 

It could also have been titled, "Governance Gaps in US Federal Budgeting: Gaping and Growing despite Reform." Or it could have kept the original article title, "The illogics of Federal Budgeting and Why Crisis Must Come." (http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2011.02352.x/abstract).  All of these titles show how well the story line of US federal budgeting reform relates to the problems of governance gaps in developing countries. Consider some of the observations I think are relevant:

• US budget reforms have been numerous in the past decades, just like they have in developing countries: Federal budgeting reforms since 1912 have included steps to introduce executive budgeting and fiscal rules, PPBS, ZBB and PBB and PART, the formalization of internal audit in agencies, process computerization, adoption of long term planning, and more. One could call the last century 'The period of great budgetary reform in the federal government' (Let's call it 'The Period'). 
• The US federal budget performance seems to have gotten worse in spite of these reforms, as it has in many developing countries: Interestingly, the country's fiscal sustainability problem has worsened in this 'Period'. Deficits have been more prevalent since these interventions than before. Federal spending has exceeded revenues in 75 percent of the years following the 1921 Act that introduced executive budgeting as a solution to spending problems, for instance, compared with 38 percent of the years between 1792 and 1920. Spending exceeded revenues in 16 of the 20 years after the 1990 Budget Enforcement Act (BEA) introduced measures to control deficits in the late 1990.  Deficits exceeded 3 percent of GDP in eight of the twenty years since 1990’s BEA, reaching such levels only 26 times in the prior 198 years (13 of which related to wars).
• Reforms that seem poorly fitted to the US context are constantly proposed, as they are in developing countries: Executive budgeting is an example. How can one have an executive driven budget as the 'solution' in a country where the Constitution gives Congress responsibility for budgeting? How can one think that fiscal rules will work in a country where politics is competitive, flexible and dynamic? 
• The country ends up being dependent on short-lived 'deals' as fixes to immediate problems, even though these offer no longer term solution--as one sees in many developing countries:  Short term fixes like the recent agreement between President Obama and the Congress are like band aids on a corpse. The agreement between President Clinton and the Republicans was not much better--a bandage, perhaps--and did not ensure the sustainability of budget surplus (a major short run achievement though that was). 
• In many ways reforms and agreements  are really just signals intended to suggest that those in authority are  trying to provide governance solutions--as they are in many developing countries: Beyond the signals, the interventions have limited effect--either holding for short periods only or penetrating the budgeting system superficially. Writing over twenty years ago, Aaron Wildavsky noted that we cannot even imagine what a budget reform would look like that penetrated further, disrupted politics, and forced real change where it is really needed.

These observations could be made about reform in many developing countries. It is often nothing more than a repeated game of signaling an intent to govern better while preserving the status quo. In the United States that status quo is a complex one that I think may prove ungovernable. I say this simply because it is informed by a set of principles or logics that interact in ambiguous ways.

• The first logic is reflected in the doctrine of Separation of Powers. A system of checks and balances allows each branch to restrain abuse by the others. Federal budget preparation and oversight is the responsibility of Congress, for example, but execution rests with the executive. The system purposefully fragments power, which inevitably fragments accountability as well. This makes developing a budget--or a budget reform--problematic. Who is accountable for the overspending? Who is accountable for developing the solution?
• Consider also the principle of limited government. Formalized in the Constitution, it reflects a deep seated American view that government should not encroach significantly in the lives of individuals. Applications in the Articles of Confederation relate directly to budgetary policies, limiting federal government powers of taxation. Many still believe these limits should hold, including civil society groups like the Club for Growth. Such groups see low taxes as appropriate fare, but this is a perspective that clashes with other ideals. 
• America is also a nation of people who value assertiveness and competition, for instance, and exhibit what Geert Hofstede calls a 'low uncertainty avoidance'. Put together, these values support aggressive, unfettered budgetary deal-making that are reinforced by regular competitive elections, expectations that representatives will bring home the pork, and the appropriateness of a vast structure of lobbyists set up to press for interests. These elements contribute to a logic of competitive competition that encourages politicians to act as snake-oil salesmen playing high-stakes games of chicken in the budgetary process. Winning is important, reflected in one's ability to get money for one's constituents. This clashes with the idea that government should be limited and constrained.
• Short-termism and a defining belief in the ‘American Dream’ and versions of American Exceptionalism further promote such behavior. These scripts generate expectations of America being ‘better’ than others, which arguably manifests in demands on government and on government expenditure. The demands come from multiple competitive representatives and their constituencies who all wish to be heard and expect to be satisfied with appropriations. Some expect and demand federal assistance in the aftermath of Hurricane Katrina and are willing to sponsor lobbyists to ensure this is forthcoming. Others demand military responses to provocation from Iran, Iraq and Afghanistan. Some work hard to ensure federal efforts are robust in stabilizing unstable financial markets. Additional interests call for support to small business, help for first-time home buyers, and much much more. The scripts suggest that an exceptional country needs exceptional government that can do all these things.  And still be limited. Budgets should accommodate it all, but taxes must still be low.

I am not sure how one crafts a governance solution in the face of these different values and logics. I am sure that the task is more complex that introducing a technical fix--like a fiscal rule (the balanced budget amendment, for instance), or mechanisms that strengthen the executive, or performance metrics, or program based budgeting.

Whatever the solution, reformers must have a theory about American government that takes such values into consideration--identifying the hole in which the reform peg must fit.

To be real and accommodate a fit, the debate about reform must involve open political contestation and discussion about the logics driving budgeting--the social and cultural ideas of what American government is, how it gets its money, the social trade-offs of providing or not providing services, and such. I think real crisis may be the only thing that fosters such debate. Until this happens, I fear that the US federal budget process will continue to be ungovernable--and get worse over time. Regardless of who holds the Presidency or what band aid deals they can facilitate.

In many senses, the situation in US federal budgeting may be more complex than that in developing countries! In both, however, we need to ensure that future reforms are better fitted to context--and to do this we need to theorize the reforms and context better. 

Theorizing case studies: check out ISS at Princeton

Princeton's new Innovations for Successful Societies is an interesting initiative. Jennifer Widner, Laura Bacon (a former student) and others are developing materials one can use to learn about innovative solutions to developmental problems. These include case studies, interviews and more. What I like about the materials is that they don't just present a 'best practice' idea or heroic story of success. They provide enough information to enable readers in theorizing about these practices and innovations: you can listen to the protagonists describing why the innovation emerged, what process it emerged from, how people came on board to make it happen, what kinds of political and operational demands it posed, and so forth. If only all development organizations were required to provide background stories like these for the innovations they so easily reproduce everywhere. One wonders if ministers of finance in French speaking African countries would so willingly agree to Medium Term Expenditure Framework reforms if they knew where these ideas came from (select advanced Anglophone countries like Australia), what kind of process MTEFs emerged from in these settings, what kind of political context they demand, what capacities they require etc. Ditto for just about every good, better or best practice one can think of. We need more of what ISS is providing: materials to help theorize what makes a best or innovative practice best or innovative and to assist us in thinking about whether these practices fit into new contexts...or what will be required to facilitate the fit. Visit their web site at http://www.princeton.edu/successfulsocieties/

Fitting best practice governance solutions to reform contexts: vital questions

Yesterday I blogged about a study of insolvency regimes. The study noted that many countries have adopted insolvency laws that are not now implemented. The problem is often a poor fit between norms implicit in the new laws and norms in place in the reforming country. This problem of fit is something I see a lot. It plagues development, in my opinion, and is a particular problem for those working on governance. Good governance solutions often come in the form of formal best practice processes that appear to make the difference between governments that work in the developed world and governments that do not work in developing countries. The solutions frequently don't work in the same way in developing countries, however. I was discussing this in class today and one of the great students said that when we talk about best practice we should be talking about what the practice is, what its content looks like, how it emerged, what its underlying norms look like, etc.etc. An insolvency law is best practice if it is used in a specific way, by specific users who see the world in a specific way. As the student said, we shouldn't talk about the law alone being the best practice...it is the full package that makes the practice work. I couldn't agree more. The problem is that most research notes that those who replicate such practices don't really know what the full package is. So they gravitate to what they see, and replicate that...on its own...without a theorized understanding of what can make it function. So, we find privatized firms failing in contexts that don't support them, internal audit laws flailing because countries with the laws lack accountants to do the audits, and insolvency laws lacking influence because legal capacities are too weak to give them life. The questions this raises for governance are many: How much of the good governance agenda is made up of best practice ideas? How many of these ideas have been effectively unbundled or theorized (so we know what makes them matter)? How often do we introduce best practice good governance solutions into contexts where they do not fit? Do we even know what criteria need to be met for a new practice to fit into a context?

Governance gaps and insolvency regimes

Thus far in this blog I have spoken about governance gaps in areas like public financial management and anti corruption. The observation in both has been that countries are adopting reforms in form but these are not yielding improved functionality because of limited practice. Building on this line, I like the work of Terence Halliday on insolvency reforms in development. http://www.oecd.org/dataoecd/42/47/38184739.pdf He starts the paper by saying that, "It is now a truism to affirm that In all lawmaking a gap opens Up between law on the books and law in action." He goes on to discuss the problems of basing reform on legal adjustment only, noting that law alone does not make an institution. Further, he questions the value of basing reform on global norms instead of local norms. He argues that this can create a major mismatch in institutional dimensions-because the norms underpinning new laws simply are not supported by informal norms implicit in political and social systems of reforming countries. This, he argues, leads to problems with implementation. The paper is really worth a read. It provides another example of reforms that make government look better but don't necessarily make government function better. It also raises some ideas about what a reform agenda focused on making effective governments or states might look like-more aware of extant institutions, for instance, less prescriptive of international norms as answers, more focused on fitting solutions to context.

The governance fashion show

Measuring the gap between form and function: Global Integrity data

I am constantly on the look out for measures of the gap between forms and functions of good governance. This week I have been intrigued by the Global Integrity data on the topic (http://www.globalintegrity.org/report). Global Integrity Reports are described as follows:

"The Global Integrity Report is a tool for understanding governance and anti-corruption mechanisms at the national level. Written by local researchers and journalists, the Report is characterized by an innovative, award-winning research methodology; a robust peer review process; and start-to-finish transparency."

The reports show scores for a range of countries on the quality of laws and the implementation of the laws. It also shows the gap between laws and implementation--how much better form is than function. Here are the highlights and some important observations:

First, consider the following table, showing countries with the lowest implementation gaps.

• All countries have implementation gaps (legal forms are always better than functional implementation)
• All of the wealthier countries in the sample have implementation gaps smaller than 25.
• Very few developing countries have implementation gaps smaller than 25.

Global Integrity Index 2008	Country Score	In Law (L)	In Practice (P)	Implementation Gap (L - P)
Italy	79	82	73	9
Poland	88	92	82	9
Kazakhstan	76	80	69	11
United States (2007)	85	90	78	12
Japan	83	91	76	14
Korea	88	96	82	15
Bulgaria	87	95	79	16
South Africa	79	86	70	16
Hungary	77	85	67	18
Turkey	69	78	59	19
Macedonia (FYROM)	76	86	65	21
Chile	77	87	66	21
Lithuania	74	85	63	22
Canada	80	90	68	22
Morocco	48	58	35	22
Ghana	67	77	55	22
Kenya	69	79	56	23

Second, consider the quality of laws in some of the wealthier countries above, compared with those in the table below.

• A number of developing countries have better scores on their laws than wealthier countries like Italy. Colombia has better scores on laws than Chile.
• Most developing countries have large implementation gaps as well. Colombia's is nearly twice that of Chile's.
• The best laws in the world are in Uganda (100 out of 100). Uganda also has the highest implementation gap (51).
• Uganda's experience is similar to that of many other developing countries: High scores on laws and really low scores on implementation dominate.

Global Integrity Index 2008	Country Score	In Law (L)	In Practice (P)	Implementation Gap (L - P)
Cambodia	46	58	30	28
Indonesia	69	83	55	28
West Bank	53	68	39	29
Serbia	62	75	45	30
Egypt	54	67	38	30
Angola	41	56	26	30
Cameroon	55	70	39	31
Nigeria	64	79	48	31
Bangladesh	68	84	52	31
Ecuador	60	75	43	32
Nepal	64	81	48	33
Belarus	66	81	48	33
China	59	74	41	33
Romania	80	97	64	34
Russia	69	89	52	36
Georgia	59	78	41	37
Colombia	71	90	53	37
Philippines	71	91	54	38
Nicaragua	58	76	39	38
Argentina	70	90	51	39
Moldova	68	88	48	40
Somalia	35	54	14	41
Montenegro	56	77	36	42
Pakistan	72	94	52	42
Yemen	46	66	23	43
Iraq	53	75	32	43
Kyrgyz Republic	64	87	42	45
Bosnia and Herzegovina	63	87	41	46
Uganda	72	100	49	51
Azerbaijan	61	87	36	51
Ethiopia	56	82	31	51

Third, some questions:

• Is it better to be Uganda with 100 on laws and 49 on implementation, or Italy with 82 on laws and 73 on implementation?
• Should Somalia's governance reforms (if and when they start) focus first on improving the quality of laws (from 54) or implementation of existing laws (currently 14)?
• Do externally influenced governance reforms have any impact on implementation? Or are their effects limited to improving laws? What are donors doing to close the implementation gap?

My worry with the story emerging from these numbers is simply that governance reforms have created a gap between form and function and continue to do so. There are too many countries that have 'benefited' from costly governance reforms but still have extremely low implementation of laws (many of which were introduced via reforms). 

The data here is quite provocative in telling this story, and raises questions about what reforms have achieved in countries as varied as Cambodia, Ethiopia, Azerbaijan, Egypt and Georgia. Note that the IFC has awarded some of these countries awards as best reformers for Doing Business. (How should we tell this story? Do good 'Doing Business' reforms involve passing great laws you can't implement? Is the goal to look better without being better? Or do we really believe that in time the gap will close?) 

Other examples of data showing the gap will be welcomed. As will any examples of the 'development as functional improvement regardless of form'. As will any comments that tell me that this is all much ado about nothing.

 

Public sector reform, good government and the quest for functional thinking

I thought I would post this link to a transcribed interview I did with our media folks in response to my 2010 Governance article 'Good Government Means Different Things in Different Countries'.

http://www.hks.harvard.edu/news-events/publications/insight/international/andrews

My kids laughed at the video interview...

Malawi: another example of looking better but not being better

I am busy looking into the history of donor-driven anti-corruption reform in Malawi. Interesting. Frustrating.  Amusing. Another case of form and function not meeting.

 Global Integrity did some nice work on the subject (http://report.globalintegrity.org/Malawi/2007/). They show a time-line of events starting in 1999. Reforms actually began a few years prior, with elections in 1994, a new anti-corruption law in 1995, and the creation of an anti-corruption bureau (ACB) in the same year.  The first few years after this were full of positve signals--cabinet Ministers were referencing the struggle in speeches, the ACB was pursuing thousands of leads, etc.

But a scandal errupted in 2000 and 2001, where donor funds destined for classrooms ended up in government officials' pockets instead. Officials at all levels were implicated, including then-President Muluzi. Donors stopped funds.  And started looking at what was really going on in the anti-corruption reforms. They found that the ACB was poorly staffed and resourced, that the ACB had investigated thousands of people but only initiated prosecutions in a handful of cases--very few of which ever reached conclusion. The ACB actually lacked authority to prosecute any of its cases, and was never a major player at all.

The picture was clear: A law plus law enforcer were created but never really had any influence or legitimacy. One would expect a dramatic response from all parties. But this never happened.

The anti-corruption reforms have continued along much the same path, with donors coming behind the ACB with increased funding and assistance. They have sponsored a new strategy document, and have even helped develop new IT-based approaches to designing systems of prosecution. They have also helped consistently modernize and update laws. (I am not sure who did it, but my favorite is the recent law against 'fouling the air' http://www.bbc.co.uk/news/world-africa-12363852). Very few countries in the world have such robust legal frameworks!

The 2007 Global Intergity Report called the situation for what it is: Malawi now has world class laws with a problem of implementation. In fact, the country ranked 90th out of 100 on the quality of its laws and 56th on implementation. The Report identifies a 'Very Large' implementation gap. This dropped a bit in the 2009 report, but still remains significant (http://report.globalintegrity.org/Malawi/2009).

Interestingly, Malawi's laws were rated at similar levels to Italy and the United States, Canada, France, Poland, Korea and South Africa. There are small 'formal' differences between developed countries (and middle income leaders like South Africa) and developing countries like Malawi. Developing countries now 'look better'. The real difference is in implementation, where the implementation gap in places like Italy, the US and others is substantially lower than that in Malawi (and other lower income developing countries like Nigeria, Nepal, Guatemala and Ethiopia--where the legal framework ranked 94 out of 100 in 2010 but implementation lagged at 46...). Developing countries that look better are not better in a de facto sense.

A 2010 review of NORAD/DFID support to Malawi's ACB references similar problems with making forms functional, but in words (http://www.norad.no/en/Tools+and+publications/Publications/Publication+Page?key=207030). Consider the following statements: "The National Anti-Corruption Strategy (NACS) has been launched, but key processes, such as an implementation plan and secretariat, are not in place yet." "The Government of Malawi approved a new ACB staff establishment...However, unsecure funding calls for more donor engagement, risking ACB’s independence." "The  prosecution database has been developed but is not fully operational yet." "A prosecution strategy as proposed by the last review has not been developed and is seen as controversial within the ACB."

These kinds of descriptions raise questions about Malawi's ACB, which could also be raised in respect of legal reforms in many developing countries (especially given the implementation gaps evident in Global Integrity's work): Are these reforms square pegs in round holes? Or are they just examples of new pegs needing 'fitting'? Are they forms that will become functional? Or are they forms that cannot function because they are irrelevant in the context (as Richard Rose would say)?  

Beyond these questions, lies the obvious one: Were there other forms of addressing the corruption problem that could have yielded greater functionality, in Malawi and beyond? Perhaps there are, on the ground, in select corners of Malawi and other countries. It would be great to hear if this is the case. I already know of the Business Action Against Corruption initiative (BAAC) which has emerged quite endogenously in the private sector (http://www.aiccafrica.org/index.php?option=com_content&view=article&id=115:baac-malawi-honoured-with-world-bank-anti-corruption-collective-action-award&catid=35:latest-news&Itemid=81). This seems to be a  functional response by private companies to the problem. Note that it did not emerge because of a new law or specific form. It is really interesting, and begs questions: How is this different to the ACB initiatives?

Simple answers may be too simple: It is local, it is shaped to fit the context, it is the response of real agents to a real problem they care about. This is how 'real' solutions always look. What Lant Pritchett would call local trees with their own roots. My metaphor is a camel in the Sahara (instead of a Hippo).

ps. read Gerhard Anders' 'Like Chameleons..." for further information. http://apad.revues.org/137