Incremental Budgeting

How are annual budgets really determined? Does the budgetary process rely on rational comparisons of each proposed expenditure against all potential alternatives? Are benefits arrayed against costs in a comprehensive methodology? Recall our previous discussion of the limitations of rationality within the policy formulation process. It broke down, giving way to the narrower logic of incrementalism. well, it's happening again.

Budget-making is an incremental process: The best guide to this Year's budget is last year's budget, plus or minus a small percentage. Budget determination is short run and incrementalism runs rampant. Why?

Too many decisions must be made by too many parties in too complicated a process with too little information and with too little time. The answer to this dilemma is to use the convenient shorthand of incremental decision-making. Rationality is again reduced in time and among alternatives. It is not pretty, tidy, or intellectually satisfying. It's another expedient within the policy cycle which cries out for reform.

As a method of decision making, incrementalism is a practicable device for coping with the overwhelmingly complex job of budgeting. This year's budget is simply based on last year's budget, with minor increases or decreases around the edges. So, the current budget decision is the product of previous decisions, which admits that precedent and past commitment in policy formulation is essential in the long term. This is reinforced by the rarity of termination, which we will see later in the course, and the failure of past efforts of reform, usually entailing more centralization and rationalization.

Why is incrementalism functional in the budget-making process? Incrementalism averts risk, provides an adequate rationale for decision-making, reinforces an existing equilibrium of political forces (potentially upset by a shift in party in either the executive or the legislative branch), averts intense and destabilizing conflict, and is easily understood by all. Long range Policy commitments have been made and must be honored, more or less. Mandatory programs have been authorized and their budgetary needs met, more or less. Powerful political forces will be unleashed if other methods, more radical such as overhaul or termination, are used. Bargaining, negotiation, coalition formation coalesce into a rough agreement on the status quo, reflected in the tendency to continue the practice of incrementalism.

There might be a single advantage to a process often criticized as irresponsible and simplistic: Incrementalism allows the possibility that the decision-making process focuses more closely on the few new programs and the targeted major recisions which take much political controversy to enact. Such budget battles are great distractions, and must be fought one at a time, if they are fought at all.

An important caveat must be acknowledged here: Under rare historical circumstances and for a fleeting moment, a shift to more radical proposals may be undertaken, as with Roosevelt in the early 1930's and Reagan in 1981. The political alignment must be right: Public opinion must clearly be in favor of change and a mandate for a positive program must have been achieved by a landslide in the last election. Also, an absence of countervailing forces, such as intense resistance by entrenched interest groups, must be present. This .1 window of opportunity" is brief, assuring that whatever policy is proposed will have little time for sustained and detached analysis. This rush through the window of opportunity ma), have contributed to the acknowledged failure of Johnson's War on Poverty.

The Clinton administration does not enjoy the full set of requirements cited above to overhaul the budgetary process. The main battleground of the new administration may become the perennial request of the modern executive, the line item veto. President Bush asked for such authority, but was rebuffed. The campaign promise to cut the national deficit, forced by the maverick candidate, Ross Perot, will also inflict a fiscal discipline not previously shown by Democratic presidents.

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Initialized: November 3, 2002 | Last Update: 8/16/2008