Entitlement Budgeting vs. Bureau Budgeting

Entitlement Budgeting vs. Bureau BudgetingAuthor(s): Joseph WhiteSource: Public Administration Review, Vol. 58, No. 6 (Nov. - Dec., 1998), pp. 510-521Published by: Wiley on behalf of the American Society for Public AdministrationStable URL: http://www.jstor.org/stable/977578 .

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Bureau Budgeting

Joseph White, Tulane University

The problem of how to budgetfor entitlements is often presented in terms of entitlements being an evasion of traditional controls.

Yet the policy reasons for designing a program as an entitlement

can be compelling. Beyond deficit control, then, lies a basic difi-

cultyfor budgeting: due to differences in theprogram types, there

is little reason to expect budgetingfor entitlements and the alter-

native, here called bureau budgeting, to take similar forms. This

article describes differences in purposes, procedures, and tactics as

well as controversies between entitlement and bureau budgeting,

raising the question of how or whether the two types can be com-

bined in a comprehensive budget process.

As entitlements have become a larger part of the federal budget, they have received more attention in discussions of the federal deficit. That entitlements influence budget totals is well known (Bipartisan Commission, 1995, 1994; U.S. Congress 1997a, 1997b, 1995; Schick, 1995). What has been the effect of increased attention to entitlements on the process of federal budgeting? How can entitlements be incor- porated into a theoretical understanding of budgeting?

In this article I will argue that for good programmatic reasons, budgeting for entitlements differs in basic ways from the traditional process of budgeting for bureaus. As a result, many of the practical and theoretical disputes familiar from the budgeting literature have little rele- vance to budgeting for entitlements. Moreover, measures to adapt budgeting to fit entitlements risk losing many of the functional merits of the traditional process of budgeting for bureaus. The challenge of entitlement budgeting, then, is not simply how to control the deficit with tools developed for budgeting different kinds of programs. It is also how and even whether to combine budgeting for two different kinds of programs in one process.

The Decline of "Traditional" Budgeting Budget theory once said little about entitle-

ments. What has been called "traditional" budgeting includes a set of common institutions and goals that evolved from the late 18th century through the mid-20th. In Aaron Wildavskys account, budgeting is annual, incremental, conducted on a cash basis in the form of line items. It serves purposes of accountability, control in many senses, pursuit of efficiency or effectiveness, economic management and planning (Wildavsky, 1978, 502).

510 Public Administration Review * November/December 1998, Vol. 58, No. 6



Naomi Caiden emphasizes that the annual unified budget had goals of program information, efficiency and effectiveness; facilitating choice; directing allocations; reviewing policy; comparison; and control of the executive (Caiden, 1982, 517-518). In the American model, traditional budgeting includes an executive budget docu- ment, specialized appropriations or budget committees within the legislature, and specific budgeting legislation-all on an annual or, occasionally, biennial cycle.

Control of deficits is only one among many functions of traditional budgeting (Caiden, 1982; Wildavsky, 1978; Schick, 1966; Ervin, 1980). In many ways, traditional budgeting was designed to serve administrative as much as policy ends (Schick, 1980b). The resulting institutions never satisfied a series of critics who sought to bring a more structured concern with objectives into budgetary choice, and the history of the attempts to reform budgeting and satisfy those critics is extensive (Axelrod, 1988, 280-303; Key, 1978; Schick, 1966, 1973; Wildavsky, 1978, 1984). In the late 1970s and early 1980s, however, students of budgeting also began worrying that the operating norms of the traditional process, such as annu- alarity and comprehensiveness, were progressively being ignored and perhaps outmoded. Naomi Caiden, for example, wrote about the "Myth of the Annual Budget" (Caiden, 1982).

The traditional focus on agency appropriations was always a limited view of what might be considered "budgeting." Most evidently, it did not include revenue decisions. Revenue decisions have just as large an effect on budget balances, and many economists have argued that any macroeconomic policy of demand management would be better pursued through raising or lowering taxes than by adjusting spending accounts (see Stein, 1996).

Nevertheless, the bulk of the politics of budgeting normally does focus on spending decisions. Even much budgeting discussion of revenues is often phrased in terms of spending, as in critiques of "tax expenditures." Caiden and others perceived an increasing share of government activity that did not work through, and so was not con- trolled by, the annual appropriations process. Tax expenditures and various credit programs, as well as entitlements and other "backdoor spending", could be included in the 1980s list of activities that were not in fact budget- ed annually (Bennett and DiLorenzo, 1983; Ippolito, 1984; Schick, 1980a; Wildavsky, 1980). However, it proved possible to work some of these, such as credit programs, into the traditional framework.' The difficulties posed by entitlements are more fundamental.

Distinguishing Entitlement from Bureau Budgeting

Bureau Budgeting

The budgeting that Wildavsky, Caiden, and other scholars defined as "traditional" was designed to finance

bureaus that provide a service to the public or, more generally, perform some government function: policing, fire fighting, collecting taxes, medical research, space exploration, or whatever. In all these cases, the government establishes some set of goals and then provides a bureaucracy to pursue those ends. Government has not com- mitted itself legally to a precise level of services. Rather, it has promised to provide a bureaucracy that it is to be hoped will provide an acceptable level.

Although a bureau's objectives may be defined and sold in personal terms, whether they are met depends on the performance of the bureaucracy in question. Thus, the federal government establishes the medical system of the Department of Veterans Affairs, from which services may be claimed, but what veterans receive depends on two factors-a separate decision about the bureau's funding, and how the bureau performs its tasks. Budgeting for those tasks is a process of deciding amounts to provide to each bureau. We can call this process bureau budgeting.

The traditional questions of budget control are questions about bureau performance and direction. Will the bureau use the money properly? Will Congress, the president, or the bureau's officials control the program? When budgeting added a focus on management to the interest in control, the issue was still the individual bureau's performance of its task (Schick, 1966; Ervin, 1980). Annual budgeting is a form of oversight of bureau officials.

This view of bureau budgeting is especially true of budgeting within the federal government because of the way Congress organizes itself. Within Congress, budgeting for bureaus has long been treated as a process separate from the normal policy-making routines. Without such a distinction, there would be no point to having appropriations committees separate from the authorizing, legislative committees. The division of labor between the authorizations and appropriations processes is, of course, hotly contested at the margins (Fisher, 1979; Rubin, 1988; White, 1993b). Virtually all politicians are inter- ested in policy priorities and the distribution of benefits to states and districts, and those interests are pursued in both authorization and appropriations processes. Never- theless, a sense that appropriations decisions should involve matters that are less likely to be considered in authorizations is extremely common.

The distinctions permeate statements by members and staff of the appropriations committees in off-the-record interviews. In one subcommittee chair's version, "Appro- priations says the most efficient way to spend money. Some think the authorizations should say how to spend it, too. I think they should say what the need is." A subcommittee clerk distinguished "developing your basic legislation" from "get[ting] into how well a program is operating, particularly from a financial standpoint." One member who became a full committee chair after my interview declared that the separate processes "provide

Entitlement Budgeting vs. Bureau Budgeting 511



The process of making entitlement commitments within

Congress involves no distinction between the budgeting

and legislativejfnctions. you with a check and balance." Another future chair explained that authorizers:

should set goals they think would be good to reach to make the programs work in their area. Then have a later decision as to how to fit it in at that time, under the conditions of that Budget year. The authorizers should say what we need to face changing social circumstances. Appropriations should say what we can afford at the time, what programs are working.

Precisely because such distinctions provide part of the justification for their separate authority, appropriators make serious efforts to provide at least the appearance (and I would argue the reality) of attention to management and financial issues.2

Entitlement Budgeting

The process of making entitlement commitments within Congress, however, involves no distinction between the budgeting and legislative functions. Pro- gram design and spending commitments are identical, and the same committees have jurisdiction over each. While the congressional budget resolutions may set targets for changes in entitlement law, that is in principle no different from the same resolutions setting standards for a year's appropriations bills. Actual legislative changes in entitlements still must be reported by the authorizing committees.

In federal budget parlance, "entitlements" are the major category of "direct spending." All direct spending is "budget authority and ensuing outlays provided in laws other than appropriations acts, including annually appropriated entitlements" (Schick, 1995, 209-10). "Entitle- ment authority" in particular is "a provision of law that requires payments to eligible persons or governments"3 (U.S. Congress, 1997a, 142).

The term "entitlement" developed out of the "new property" movement of legal thought that began in the 1960s, and was used by the Supreme Court in Goldberg v. Kelly (397 U.S. 254 [1969]). The General Accounting Office came to define the term as "legislation that requires the payment of benefits... to any person or unit of government that meets the eligibility requirements established by such law." The key is that "eligible recipients have legal recourse if the obligation is not fulfilled" (Weaver, 1985, 308-09).

In an entitlement program, the recipients-whether persons, legal persons (firms) or governments-are entitled by law to quantifiable benefits. Either the benefits

are directly delivered to the beneficiary, or they are payments on behalf of the beneficiary for services purchased in a cash transaction from some third party.

In some exceptional cases, the enticement is not to an amount of benefit but to a share of a capped total, as in the Title XX Social Services Block Grant. But the entitlements that have attracted the budgetary attention and involve the vast bulk of funds are open-ended. Annual spending for Social Security, or Medicare, or civil service pensions is the sum of specific benefits. Therefore, instead of directly allocating sums of money to individual accounts, entitlement budgeting involves estimating and attempting to influence the total of the payments deter- mined by entitlement law.

Spending on open-ended entitlements rises or falls not because of discrete annual decisions about how much money to spend, but through the interactions of demo- graphics, economics, and existing program law. Since Congress (presumably to its regret) cannot legislate demographic and economic conditions, altering entitlement spending then requires altering the underlying program law.

In entitlement budgeting, program beneficiaries are actually entitled to an amount of budget, and spending is the sum of services. In bureau budgeting, the budget is distributed to the program's operators, not to the beneficiaries, and services are what can be bought with the spending.

Since the real question is what a bureau will accom- plish with its funding, the bureau itself is a major object of attention in bureau budgeting.4 How much does the bureau "really need" to fulfill its legal obligations? How good an argument can be made that more (or less) input will lead to more (or not much less) output? Could the bureau operate more efficiently if it operated differently? In this context the primal meaning of the term "budgetary control" is not spending limits, but control of how the bureau spends its appropriation (Schick, 1966).

In entitlement budgeting, the main object of attention is the specific promise to recipients. There must be an administering bureau (the Social Security Administration for pensions or the Health Care Financing Administra- tion for Medicare and Medicaid), but its personnel and performance normally are a secondary theme in budget disputes. Administrative campaigns to tighten eligibility determinations for nonuniversal programs (such as Sup- plementary Security Income or Disability Insurance) do occur. But even these efforts often require some tweaking of eligibility standards or review procedures, that is, basic program law. Medicare could indeed save money by better claims administration that reduced fraud. Yet the secondary nature of this theme is clear in policy discussion; indeed, the general public's focus on potential savings from such measures is commonly dismissed by the cognoscenti as evidence of insufficient public education (Blendon, et al., 1997).




Three Issues in Traditional Budgeting

The extent of the difference between budgeting for bureaus and entitlements may be further illustrated by considering three common concerns of traditional budgeting theory and practice: "coercive deficiencies," the level of detail in line items, and the conflict between focusing on inputs or "programs" in budget decisions. These concerns do not exist if the program involved has been designed as an entitlement.

The so-called Antideficiency Act has been called the "cornerstone of congressional efforts to bind the executive branch of government to the limits on expenditure of appropriated funds" (quoted in U.S. GAO, 1992, 6-9). Its terms as they have evolved address a problem that was especially significant in the 19th century: agencies might use up their budgets before the end of the fiscal year so that, faced with the prospect of operations being sus- pended, Congress might feel "coerced" to make up the deficiency. Although complex in operation, the basic principle of the law, as the GAO reports, is simple: "Government officials are warned not to make payments-or to commit the United States to make payments at some future time-for goods or services unless there is enough money in the 'bank' to cover the cost in full. The 'bank', of course, is the available appropriation." (U.S. GAO, 1992, 6-1 1). But the assumptions behind this principle, namely that officials' discretion in program spending decisions can and should be limited by available budget authority, are false for entitlements.

If the agency administering an entitlement spends more than has been appropriated, that is either because (a) it paid the wrong recipients too much, or (b) the orig- inal estimate was wrong. In the first case the agency has misapplied the laws explicitly, which it should not have done regardless of the spending result or the availability of budget authority.5 This is different from the normal coercive deficiency case, in which the "excessive" spending could be expected nevertheless to fit the bureau's basic mandate. If spending instead exceeds the estimate because the estimate was wrong, the agency is just doing its job, and there should be no suggestion that it is manipulating or coercing the legislature. Instead, the major remedy for deficiencies, coercive or otherwise, is apportionment of the appropriation over a shorter time period by some control agency, but this remedy is inap- propriate. If costs were higher than expected, and the Office of Management and Budget (OMB) were to say, "sorry, we can't release more than thirty percent of the estimate for the year in any one quarter," it would violate the underlying entitlement.

Another traditional issue is the level of detail in line items. Does one want the control advantages of detailed specification or the management flexibility of broader terms? Yet this issue too is meaningless for entitlements. An entitlement program's rules are the program's rules; they cannot be funded at a higher or lower level of detail.

Much of the basic character of budget decisions for

entidementprograms differsfrom the nature of decisions

for bureau programs. Many decisions in bureau budgeting involve the level

of inputs (money for salaries, buildings, travel, etc.) needed to produce some level of output (medical care, arrests, or whatever). The attendant focus on inputs is continually criticized as leading to insufficient attention to the values of alternative outputs. The proposed reforms, which by various names call for greater emphasis on com- paring alternative programs, have their own weaknesses (Wildavsky, 1978, 1984). Whatever the merits, this debate also has no meaning when applied to entitlements. The vast majority of the objects of expenditure are the actual outputs. The relationship between money and social security checks is not subject to the same kind of question as that between, say, military purchases and combat performance.

The Policy Choice Between Program Forms

Much of the basic character of budget decisions for entitlement programs differs from the nature of decisions for bureau programs. Subsequent sections will discuss how budget conflicts differ according to the program type. First, however, we must consider why the two forms exist at all.

Budgeteers may instinctively see entitlements as a tactic to evade traditional controls. Yet there are strong policy justifications for the entitlement approach, just as there are programs for which the bureau approach seems more natural.

On the whole, an entitlement should be for a benefit that can be quantified and divided up. Protection from crime, a classic "public good," would be hard to deliver in this way.6 Space exploration, the census -in short, most bureau programs in the real world-do not have benefits that can be divided so neatly. A pension, however, is quite precise. The likelihood that classic "public goods" do not make easy entitlements should not, however, be interpreted to mean that entitlements are not in the "public interest." For instance, although the direct benefits of Social Security go to individuals, its supporters should argue that its consequences for the community as a whole, in terms of fairness and a general sense of security and perhaps a greater sense of community, are major virtues of the program.

Social Security is one example of a wider class, social insurance programs. Social insurance programs displace uncertainty from individuals onto the government. Whether the risk is of unemployment, expensive illness, or a longer than normal life (so greater need for pen-




I One may raise awkward questions about what

budgeting on a 30-year horizon couldpossibly look like. sions), socializing risk protects individuals. But that protection would be less reliable if programs were not designed as entitlements, with predefined benefits for people in certain circumstances. If the point of a program is to provide certainty, making benefits subject to annual appropriations and bureau performance would be an inferior means toward the program's ends.

Entitlement promises may also be the better way to pursue policies in which a government seeks to encourage or reward specific behaviors such as interest paid in return for loaning the government money, veterans' benefits distributed in return for serving in the armed services, or pensions for current workers in the future in return for their paying for the pensions of current retirees now.7 In this sense entitlements involve a form of contracting behavior between a government and members of the public, in which the entitlement form makes the promise of benefits sufficiently concrete to be credible.8

In some cases either the bureau or entitlement form is theoretically possible, but there are strong policy or political but nonbudgetary reasons to choose one or the other. Health care can be provided as an entitlement (as in Medicare or Canadian National Health Insurance) or through bureaus (as in American veterans' programs or the British National Health Service). The political reasons why Medicare had to be designed to reimburse existing physicians and hospitals, rather than as a national health service, are well-known. Why might the veterans' programs have been an exception? One likely factor is, when they were created, a sufficient supply of service- delivering institutions (e.g., hospitals, especially those capable of treating service-related conditions) did not exist. So creation of government-owned supply was much easier to defend than when, decades later, Medicare was created in a country that already had an ample supply of hospital beds. In any event, it should be clear that physicians' and hospital advocates' opposition to a national health service model for Medicare was not simply a budgetary strategy-though it surely increased costs!

To a substantial extent, therefore, the choice to have entitlement programs is a matter of policy design, to which budgeting must adjust. When we look at the difference between social insurance programs on the one hand, and activities such as armies and research institutes and the weather service on the other, we may go so far as to say (with one of this article's anonymous reviewers) that "the two types of programs that are the purview of these control systems represent two very different functions of the modern state." How, then, does entitlement budgeting work?

Budgeting for Entitlements in the Federal Government Entitlements and the Annual Budget

From the standpoint of entitlement budgeting, it is commonly argued, the annual budget is not only mythi- cal but undesirable. Thus the Bipartisan Commission on Entitlement and Tax Reform (1995, 2) reported that "the first and most important of our recommendations" was to make "major spending and tax decisions" on a 30-year timeframe. "When discretionary spending was the largest share of our budget," the commission explained, "short term planning may have been appropriate." After all, agencies operate, relating inputs to outputs, in the short term. But that would not be appropriate for budgeting the massive social-insurance programs that are the major entitlements.

One may raise awkward questions about what budgeting on a 30-year horizon could possibly look like. Should programs be looked at every 30 years? Or should they be changed every year in response to any alterations in the (extremely unreliable) 30-year forecast? One might also remember that annual budgeting never looked only at the coming year. Bureaus do have to program spending for longer terms, if only to purchase items that take more than a year to build. In spite of these caveats, commitments to entitlements do, on the whole, require that budgeting for entitlements have a longer time frame than is used for bureaus.

Actual allocation of money to entitlements therefore is not made on an annual basis. For some programs that is extremely explicit: Social Security and Medicare Part A have permanent budget authority consisting of receipts to their trust funds. In other cases, such as Medicaid, money must be appropriated annually. Yet events in the 1980s made clear that this was not viewed as a matter for discretion-it is "mandatory" spending.

The Reagan administration continually proposed spending levels for such programs that assumed enact- ment of legislative changes that authorizing committees in fact refused to report. Appropriators did not believe they could themselves report those legislative changes.9 Instead, they tended to report, and Congress to pass, appropriations that met the president's figures but therefore did not fund the commitments created by continu- ing law. It was presumed that the courts could order the government to make good those commitments (absent changes in the law), so the Reagan administration requested supplemental appropriations as the funding began to run out, and Congress always responded (though not without some close calls). The 1985 Gramm-Rudman-Hollings Act recognized that this process made little sense and formally took the appropriators out of the entitlement budgeting business by writing the distinction between "mandatory" and "discretionary" annual appropriations into congressional budget rules.




So the appropriators now are expected to devote their attention to the discretionary (bureau) accounts.

New Institutions for Entitlement Budgeting

As the bureau budgeting process could not address entitlements, new institutions were developed. The ris- ing share of mandatory spending within the federal budget was one reason for the "Seven-Year Budget War" described by Allen Schick and, thus, for passage of the Congressional Budget and Impoundment Control Act of 1974 (Schick, 1980a). Dissatisfaction with the 1974 act's procedures led to the invention of reconciliation on the first budget resolution in 1980 and the various overarch- ing constraints produced in the 1985 Gramm-Rudman- Hollings and 1990 Budget Enforcement Acts (White and Wildavsky, 1991; Schick, 1995).

The key component in the new budget process for entitlements is reconciliation, which occurs on what might be called a quasi-annual cycle. Although the opportunity for reconciliation is annual, significant reconciliation legislation does not pass on anything resem- bling an annual basis. As the process was invented, bills were passed in 1980, 1981, and 1982. Since then, however, only the laws passed in 1984, 1987, 1990, 1993, and 1997 could reasonably be termed major-and in some years (e.g., 1983 and 1995, for very different reasons), ambitious instructions from the budget resolution failed to result in the planned legislation.

Are the years of inaction a budget choice comparable to appropriating to bureaus an amount adequate to maintain current services? Not really. Even if totals are straight-lined, appropriators make many changes in the details of agency proposals. Even more fundamentally, if annual appropriations do not occur, the affected programs are shut down. That is why the appropriations process cannot be allowed to fail, but reconciliation can. As Richard Fenno explained in his classic account, the expectation that appropriators "finance programs and projects" was prior to any expectation that they do so "economically" (Fenno, 1966, 7-8). Financing programs is the main activity of budgeting, the actual financing of entitlements simply is not annual, and reconciliation thus is not analogous to appropriations.

Reconciliations evolved from being scored over one year to three years, five years, and seven years.'0 Such evolution was needed to cope with some aspects of entitlement spending. Entitlement expansion can be phased in over time, or scheduled to occur at some future date, and program rules can be manipulated to create spending in future years even when there is an ostensible spending reduction in the coming year. Various tactics of hidden expansion do exist in bureau budgeting, but they are not so committing.'" Revenues involve the same basic dynamics as entitlements, and the very size of the deficit required that anyone who wished to pursue a balanced budget had to adopt a longer time horizon (as in 1995).

The key component in the new budget process for

entitlements is reconciliation, which occurs on what

might be called a quasi-annual cycle. As entitlements became the major portion of spending, however, they alone became sufficient reason to extend the time-horizon of spending control beyond the norms of the annual budget.12 Reconciliations, then, do not occur every year, and when they do, their scope is not confined to one year.

The reconciliation process makes changes in entitlement law so as to reduce projected deficits (though it could in theory also be used to increase deficits). Anoth- er new set of institutions, the "PayGo" points of order and sequesters, are designed to inhibit action by Congress on either entitlements or revenues that would increase the deficit (or, I suppose it is possible now to say, dissi- pate a surplus). These procedures and the underlying nature of entitlement programs lead to different strategies, tactics, and roles than in traditional budgeting as described by Wildavsky and others.

Strategies and Tactics of Entitlement Budgeting

Inasmuch as budgeting is a political conflict, there will be similarities among cases of that struggle even when the program designs differ as broadly as between bureaus and entitlement programs. Constituencies with more resources will normally do better. Opponents of a program will seek to downplay, and supporters to exaggerate, the consequences of cuts. Efforts will be made to define the program base in a favorable way (Meyers, 1994; Muris, 1989; Schick, 1995). The federal government and state and local governments will seek to blame each other for disappointing constituencies. In short, all budgeting will involve power politics, blame avoidance, and attempts to manipulate knowledge.

Nonetheless, the programmatic characteristics of entitlements create differences in both tactics and roleplaying from what is common in bureau budgeting. Some of these differences follow from the concept of entitlement itself. Discourse about entitlement programs tends to involve a language of "rights," and the courts may become involved in the enforcement of those rights (Straussman, 1988). Because the legislature can alter statutory rights, however, the most important differences involve the need to effect changes in underlying law for entitlements, rather than just appropriate a spending total. Most of the tactics of entitlement spending controllers can be understood as weaker analogues of the tactics used in bureau budgeting.

For example, budget controllers often can give less money to bureau managers and assert that capable managers will be able to increase agency efficiency and still




In bureau budgeting, inaction leads to the money running

out, so advocates mayfeel some need to compromise

with budget controllers so as to get legislation at all. provide the same benefits. Controllers cannot really use the same tactic with the public agencies that manage entitlements, which makes it harder for controllers to deflect blame for the consequences of disappointing people about spending levels. In some entitlements, however, payments to private operators with a stake in a program may be reduced while budget cutters claim that benefits do not have to decline commensurately.

Medicare provides a good example of both the success and conditions for this tactic. Once someone (either a Republican president or Congress) puts cuts to Medicare beneficiaries on the table, someone else (a Democratic Congress or president) proposes payment reductions for hospitals, physicians, or other providers. Provider cuts are then possible because the issue is posed as either breaking the promise to beneficiaries or cutting providers, and because some politicians (to the glee of their opponents) have been willing to take the blame for proposing the former. While highly successful, this is not a model on which budgeteers can safely rely.13

In bureau budgeting, inaction leads to the money running out, so advocates may feel some need to compromise with budget controllers so as to get legislation at all. This is not normally the case for entitlements, with one exception-when programs that are financed from trust funds approach "bankruptcy" (Patashnik, 1997a). The annual reports by the trustees of the Social Security and Medicare Part A funds are used by advocates of budget control to raise fears that might impel program supporters to cede some ground. Crises of the Social Security trust fund in 1977 and 1982 did force action, and projec- tions in recent years that the Medicare Part A trust fund would go broke provided the occasion for Republican claims that they had to cut Medicare in order to save it (Rich, 1996; Rosenbaum, 1996). Therefore some budgeteers who believe the distinction between Medicare's Parts A and B and a separate trust fund make no policy sense seek to preserve it so as to retain the action-forcing aspects of Part A trust fund shortages. 14

Although trust funds can add impetus for action, imminent default does not happen very often. Moreover, impending default is not necessarily an impetus for spending restraint. It may equally encourage revenue increases. Thus if "budget control" is defined as "deficit control," then trust funds are a more desirable measure than if the person calling for "budget control" really wants to limit the total budget. So long as a trust fund is in surplus, its existence makes it particularly difficult to justify program cuts. Indeed, surpluses can be used to promote spending increases (Patashnik, 1997a; Derthick,

1979). Thus, trust funds do not provide an impetus for program advocates to compromise that is remotely comparable to the effect of annual appropriations.

The easiest way to reduce any program's burden on the budget or economy is to allow inflation to make stable or increasing nominal spending hide a real decline in a program's purchasing power and shares of the economy and budget. Unfortunately for budgeteers, however, entitlements lend themselves especially easily to indexation of benefits by including automatic inflation adjustments in the underlying law (Weaver, 1988). Moreover, beneficiaries will notice inflation-related losses more easily than the consequences of squeezed budgets for bureaus. So entitlements are less subject to control by erosion.

Given the disadvantages of the entitlement form, budget controllers often look for ways to make an entitlement operate more like a bureau program. The common proposal to "fix" Medicare by replacing its fee-for-service reimbursement with some form of voucher to buy insurance follows this logic (Aaron and Reischauer, 1995; But- ler and Moffitt, 1995; Cutler, 1997; White, 1993a). What services a person actually received would depend, as with a bureau program, on an organization's performance-except that it would be a private organization, the managed care organization or insurer. Advocates of such proposals may or may not be correct in arguing that market competition provides an incentive for productivity that government bureaus do not enjoy. But even if this difference were real, the logic of budgetary control remains the same whether the bureau is public or private. Rather than pay per service, the government pays a fixed sum to an organization.

Some of the differences in tactics may also be perceived by asking about "guardian" and "claimant" roles, and how they might be played for entitlements. In this context, the questions would be who takes the role of "guardian of the purse" for entitlements, a role supposed- ly once taken by the appropriations committees for bureau budgets, and how the role is played (Fenno, 1966; Wildavsky, 1984).

Such role theory has limited use even for bureau budgeting, and one should not expect perfect role stability even in that case (Schick, 1980a; White, 1989; Cox, Hager, and Lowery, 1993). It may be far more useful to think in terms of controller and advocate positions being specific to individual disputes, rather than being personal identities (Meyers, 1994). Yet, however they are framed, the roles or positions of guardians and claimants should work differently for entitlements than for bureau programs.

Most evidently, the problem is different. Entitlements may expand automatically due to demographic or economic conditions or both, so "guardianship" may require positive action and "claiming," merely defensive action, rather than the reverse.

Moreover, the roles are not as easily separated as in bureau budgeting, even acknowledging the ambiguities in




that case. The authorizing committees that are traditionally viewed as claimants also must be the major sources of law that "guards." Though members of the budget committees may claim to be guardians, they do not have the power to impose anything. Party leaders do not have the technical knowledge, and so, in practice, significant reconciliation legislation has frequently been designed and pushed by authorizing committee leaders such as former Senator Robert Dole (R-KS) and former Representative Dan Rostenkowski (D-IL).15

Guarding against entitlements spending increases requires somewhat different skills than for bureau spending. Instead of being explicitly asked for higher spending, politicians may be asked about a change in eligibility or some other provision whose spending effects cannot be seen without technical knowledge. In order to say "no" to requests for more bureau spending, it is nice to have a rationale, but technical knowledge is less important than political strength. Budget controllers have the option of telling an agency to work out its own plan within a lower total. In entitlement budgeting, the proper provisions to lower spending must be written into law so the politicians have to get the answers right.

Technical analysts are therefore more important in entitlement budgeting than in bureau budgeting. Some estimators (for example in agencies, or in the Office of Management and Budget if a president seeks a programmatic expansion) may act as claimants, underestimating costs so as to enable spending.16 The Congressional Bud- get Office plays a version of the guardian role for entitlements that could not be played in the same way by other parts of Congress before. In fact, since it requires analytic credibility, it may have to be played by nonpoliticians in order to work.17

Overall, tactics for entitlement budgeting differ signif- icantly from those for bureau budgeting. Previous sections of this essay showed that the purposes of the programs, the purposes of their budgeting, the time frame for budgeting and common disputes about how budgeting should be done also differ. Other than tactics, roles, purposes, issues, and time frame, budgeting for entitlements and bureaus are the same process.

Conclusion: An Uneasy Combination The difficulties in applying traditional budgeting theo-

ries and practices to entitlement budgeting derive from the fact that they were developed to address a fundamentally different program type, bureau programs. A new entitlement budgeting pays little attention to the irrelevant traditional concerns. One might infer, therefore, that the two processes should be analyzed and proceed separately. Yet that is not conventional wisdom at all.

Instead, the bureau and entitlement budget processes are integrated in the budget resolution process. Multi- year reconciliation requires multiyear budget resolutions. Multiyear budget resolutions require multiyear figures for

bureau budgeting. So the combination creates multiyear bureau budgeting.

Unfortunately, the standard decisions in bureau budgeting-what W. F. Willoughby called a "general and financial work plan" for agencies (Mosher, 1984, 21)- cannot logically be made on a schedule much longer than a year. Not enough is known about bureau operations and challenges and input variables such as the price of fuel. Commitment far in advance must sacrifice some of the goals that are balanced in bureau budgeting: legislative control, or efficiency, or flexibility for good management.

At one point this was a not a problem, since outyear figures for bureau spending were not taken seriously. Since 1990, however, the reconciliation legislation of 1990, 1993, and 1997 has put the outyear figures for discretionary (bureau) spending into law, as "caps" on bureau appropriations. Indeed, the savings scored from these caps have been a major component of the savings in the reconciliation acts of 1990, 1993, and 1997. Precise- ly because the legislature and executive do not have to specify the programmatic changes to enforce those caps, it is easier to project savings that way than through legis- lating entitlement changes (Reischauer, 1997).

Combining bureau and entitlement budgeting in one process, therefore, has created a strange form of multiyear bureau budgeting. Decisions about totals are supposed to be made on a multiyear basis, and decisions about details annually. The danger of this approach is that the decision about totals can be made without consideration of its consequences on the details.

Deciding separately on details and totals is bad budgeting. Budgeting should be a process in which details and totals are considered together, so preferences about one dimension can be refined by awareness of consequences on the other. Rather than such an iterative process of mutual adjustment, federal bureau budgeting is becoming a process in which targets are set one year and in later years politicians scramble to meet the targets. Such a process makes the traditional questions of control-how much is needed to achieve certain ends efficiently, or to guarantee that agencies pursue legislative intent-in essence irrelevant, supplanted by, "how on earth can we meet this target?" Politicians can only be less accountable for their decisions because they would not in fact be considering targets and their policy consequences at the same time. Those who set targets do not have to admit to policy consequences, and those who vote on details can blame previous politicians who set targets.

Current caps have values in the outyears that are extremely hard to justify for the usual purposes of bureau budgeting, or simply good public policy. (Reischauer, 1997) It is possible to imagine easier budgetary environ- ments in which caps might be high enough to be basical- ly meaningless.18 Yet political controversy early in 1998 about possible uses of a budget surplus suggested that,




once adopted, the device of long term caps on discretionary spending was proving a remarkably powerful way of deflecting attention from budget details. Raising the caps, somehow, was not on the agenda.

Under current circumstances, therefore, conflicts between the needs of entitlement and bureau budgeting raise severe doubt about the traditional norm of comprehensiveness. Meaningless caps are no more appropriate for a sensible budget process than are caps that are implausibly low. So is it really possible to budget sensi- bly, and simultaneously, for different time frames?

Logically, yes. The multiyear portions of budgeting could be combined with more flexible outyear targets for the bureau programs. Being a little less strict about totals for discretionary programs is more practical on fiscal and policy grounds than it would have been 30 years ago precisely because the bureau portion is becoming a smaller share of the total budget, so the same percentage varia- tion would have less effect on either budget totals or the economy.

Such a flexible approach, however, requires acknowledging that budget totals in the outyears are not hard and fast policy. And if the totals are not hard and fast policy, why should supporters of entitlement spending accept programmatic changes that are justified, after all, by the supposed targets for budget control in the future? What- ever the analytic merits, one may predict political diffi- culty selling a budget process that sought to combine multiyear entitlement spending control with bureau spending flexibility.

This article began by arguing that entitlement budgeting and bureau budgeting are different and have different

needs. Aaron Wildavsky stated the difference nicely, but in terms of a budget dominated by the one or the other. In The New Politics of the Budgetary Process, he wrote that "whereas in earlier times government faced inward, doing and controlling its own programs, in our time government faces outward, to the people it must support" (1992, 274). Facing inward is bureau budgeting, and facing outward is entitlement budgeting. It is true that most of the budget is now entitlements so budgeting as a whole might be said to face "outward."

Yet the federal government still budgets half a trillion dollars for bureaus, and the traditional functions of bureau budgeting still have value. So this article ends with a conundrum. Budget process analysts should no longer believe that the conflict between entitlement budgeting and bureau budgeting is a matter of the former being an "evasion" of the disciplines of the latter, which was the analysis of the 1970s and early 1980s. Nor is it so obviously wise to subsume bureau budgeting into new structures invented to control entitlements, which has been the relatively unconscious trend of the 1990s. How, then, can they best be brought together, and what could be the norms and values of a process that recognized that their differences are necessary and legitimate?

Joseph White is associate professor in the Department of Health Systems Management of the School of Public Health and Tropical Medicine, and adjunct professor of Political Science at Tulane University. He has written extensively on both budgeting and entitlement politics and policy. His current research focuses on policy issues about long-term Social Security and Medicare "reform."

Acknowledgement I would like to thank the Brookings Institution, the Twen-

tieth Century Fund/Century Foundation, and Carleton Col- lege for support in various ways at the time I was writing this article. I also would like to thank anonymous PAR reviewers, as well as Roy Meyers, John Ellwood, and Irene Rubin for comments on related drafts, and John Gilmour, Robert Hart-

man, and Susan Irving for comments when I presented a version at the 1997 meeting of the Association for Public Policy Analysis and Management, Washington DC, November 1, 1997. No one other than myself should be associated with any demerits of this argument, and many people, not limited to those above, contributed to any merits.

Notes

1. In essence, budget authority must now be appropriated to cover the direct costs of any interest subsidies as well as discounted future costs of the estimated level of defaults. This does change the incidence of loan cost or the timing of when they compete for resources with discretionary appropriations. But, if anything, this reform, by smooth- ing the impact of loan programs, reduces the extent to which uncertainty from credit programs should destabilize other accounts. As in any process involving estimates, there is still room for some gaming and errors (see U.S. GAO, 1998).

2. Such work is performed mainly by staff, not legislators, but for purposes of justifying the institution of appropria-

tions committees, that does not matter. See White (1989).

3. As the definition suggests, "annually appropriated entitlements" are not generally believed to be in fact provided by annual appropriations acts. See below for the evolution of that belief.

4. A reviewer of this article noted that the administering personnel are likely to be a more important factor in budget politics for bureau programs than for entitlement programs. This should certainly be true relative to dollars spent on programs because there are likely to be more personnel per dollar in bureau programs.

5. Thus spending improperly for an entitlement for which




budget authority is available, such as Social Security given the current balances in its trust funds, would be no less improper than spending improperly for an entitlement for which the money could therefore run out, such as Food Stamps.

6. As Roy Meyers said in a private conversation, states or localities could be entitled to a given amount of money for crime fighting, or to funding for a certain number of new police officers. But this is a step removed from citizens' concerns; there could be no comparable "entitlement" to safety for citizens at the local level.

7. Although interest on government borrowing is sometimes not counted as an entitlement, it should be evident that it fits all the conditions of entitlement budgeting and has none of the attributes of bureau budgeting.

8. Much of the case for the entitlement form in general also argues for indexing of benefits in particular. For instance, an intergenerational contract for pensions ought to have an inflation adjustment; otherwise, "the contract, by its nature being of a long-term character, becomes meaningless" (Musgrave, 1986, 110). Which is not to say that all entitlements are indexed or that a desire to ensure commitments is the only cause of indexing, as the story of Social Security indexing itself shows (Weaver, 1988).

9. It is perhaps conceivable that such legislation on appropriations bills could be approved with a liberal interpretation of the Holman rule in the House. The point of order also could be waived by a special rule when the appropriations bill is considered in the House, or waived on the Senate floor. In 1996, for example, a freeze on inflation adjustments to food stamp benefits was passed in the Agriculture Appropriations Act. Nevertheless, such legislation is decidedly not the norm.

10. Actually, the Senate has used ten-year scoring since 1993, but I use the shorter periods in House scoring because the shorter periods have in fact been the effective targets within budget debate.

11. Aside from the well-publicized "camel's nose" (Wildavsky, 1984), another form is to invest so much in a project that there comes a point where even people who do not like it want to finish it so as not to waste the investment. One close observer of the appropriations process commented that he was sure Mr. Whitten (House Appropriations Chair) and Mr. Bevill (House Energy and Water Appro- priations Subcommittee Chair) knew exactly when spend-

ing on the controversial Tennessee-Tombigbee waterway (serving their states of Mississippi and Alabama) reached that point. But they still had to win the funding each year.

12. In confirmation of the importance of entitlements to a change in time-horizon, I should add that in spite of the supposed disappearance of deficits as of 1998, arguments for a long-term focus, based now almost entirely on entitlement concerns, remain prominent.

13. See White (1995c). The sequence of proposals and results from 1995-97 fits the argument fully.

14. My source for this report is personal conversations. This attitude towards trust funds is another difference between bureau and entitlement budgeting. In the former case, trust funds are traditionally seen as an evasion of control, as seen both in the traditional public finance case for a unified budget, and current disputes over the transporta- tion trust funds.

15. Dole largely led development of the 1982 and 1984 reconciliations from his position as Senate Finance Chair, and Rostenkowski assisted in those efforts and in the end shaped much of the 1990 reconciliation (White and Wil- davsky, 1991).

16. In personal conversations with CBO and GAO staff, and with other health care policy participants, I encountered a consensus that the Clinton administration's OMB has tended to estimate the baseline spending in state Medicaid programs generously so as to encourage coverage expan- sions through the Section 1115 waiver process. See Robert Wood Johnson Foundation, State Initiatives in Health Care Reform July/August 1995), 7-9, 12.

17. Roy Meyers (1994) argues powerfully that technical knowledge is important to budget control in general, not just for entitlements. He is surely right that programs that appropriate discretionary budget authority but have unusual spending and financing patterns, such as revolv- ing loan funds, require just as much technical skill for control as do entitlements. Yet the broad difference between the requirements for most bureau spending and entitlement spending still fits my description. Moreover, his own perspective as a former CBO analyst is a good example of the ways in which more technical budgeting requires a redefinition of any controller role.

18. An optimistic though plausible suggestion from John Ell- wood.

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Entitlement Budgeting vs. Bureau Budgeting

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