The Federal Budget: Politics, Policy, Process.

Reviewed by GFOA member Philip M. Dearborn, director of intergovernmental finance at the U.S. Advisory Commission on Intergovernmental Relations.

This is a book that has been sorely needed. It provides a comprehensive explanation of the development and current operation of the federal budget process. It is written in a clear, simple fashion that permits non-budget readers to understand a very complex and confusing budget system while providing valuable insights for those already familiar with federal budgeting.

The book begins with a simple analysis of the condition of the federal budget as it existed at the end of fiscal year 1994, a view ahead into the next century, and some history about how the budget got into its current condition. Schick observes that federal government revenues were 18.3 percent of gross domestic product in 1960, before the Great Society and the Vietnam War, and before Medicare and Medicaid even existed, and they were still 18.3 percent in 1993. The result has been large intractable federal deficits that even severe curtailments of discretionary spending have not controlled. Defense spending is 35 percent below its 1985 peak after adjusting for inflation, and by 1999, domestic discretionary spending is projected to be a smaller percentage of gross domestic product than it was in 1960. The key federal budget problem is entitlements and what to do about them.

The arithmetic of budgeting is described next. This review includes explaining such things as the differences between general, special, and trust funds as they are used in federal budgeting; budgeting for on-budget entities; and how direct and guaranteed loans are treated. The author also does a good job of explaining the somewhat mystical relationship between federal budget authority and outlays. All of this leads up to five different definitions of the federal deficit. At this point, the reader begins to understand why even so-called budget experts have trouble understanding the federal budget.

As if this were not bad enough, the reader then is treated to the mysteries of the process, including features such as reconciliation, sequestration, scorekeeping, and spending ceilings. While this description of the early chapters sounds very technical, the writing is simple and easy to understand. Budget jargon and complexity have been avoided when possible, and sample full-page illustrations of actual budget examples with brief explanations are used here, as well as throughout the book.

After providing a good foundation of definitions and general procedures, the book then reviews in considerable detail how budgets progress from initial requests by agencies, to the President, to Congress, and back to agencies for implementation. At every step of the way, the technical and political issues and strategies are reviewed. A chapter on managing federal expenditures after the budget is approved explains such things as apportionments, allotments, deferrals, transfers, and rescissions.

The final chapter returns to the inherent problems of controlling the federal budget, especially as it relates to the deficit. It reviews proposals such as the balanced budget amendment, line item veto, enhanced rescission authority, biennial budgeting, and entitlement caps. The author does not find any magical, painless solution among these suggestions. The closest he comes to a clear statement on solutions occurs early in the book, when he declares, "Regardless of the causes, no solution will be durable unless it includes significant revenue increases." Otherwise, the book is relatively neutral on the current controversies surrounding the federal budget.

Problems, their causes, and potential solutions to them are presented factually and unemotionally. At times, the reader wishes Schick had put more of himself into the book. He is obviously one of the few true experts on the federal budget, and one of an even smaller group who can write and speak on the subject so others understand what he is saying; his conclusions as to the best course of action for the future of the federal budget would have added value to the book.

Nevertheless, this is now the basic primer for understanding the federal budget. Even those who think they understand federal budgeting, or who have taught it for many years as I have, will find the book carries their understanding to a new level. For state and local officials, it will provide an insight into how fortunate they are to have budget processes that are relatively simple and effective by comparison. Everybody who is confused about what is going on in Washington and why the federal budget is such a mess should read this book.

Available for $15.95, plus $3 shipping and handling, from The Brookings Institution, Publications, Dept. 029, Washington, DC 20042-0029 (800/275-1447).