Budget: Turf War Is "Tragedy Of The Commons"
October 2, 1995
"The tragedy of the commons" refers to the truth that when land is owned in common, everyone has an incentive to use it as much as possible, while no one has an incentive to treat it like his own. The same principle can be applied to the budget process in Congress and explains why there is a built-in incentive to spend as much as possible.
Today, 15 Senate committees and 17 House committees decide how to spend money. Each has an incentive to spend as much as it can, responding to lobbyists and constituencies, because any money not spent by one committee will be spent by another.
It hasn't always been that way. For long periods of U.S. history, just one committee in each body made spending decisions, so that a dollar not spent by it was a dollar saved. The result was spending restraint:
- From the 1790s to 1885, budgeting was centralized and the average budget deficit was only 0.26% of Gross National Product (GNP).
- However, in the mid-1880s, the House transferred much of the Appropriations Committee's spending authority to other committees, and by 1893 federal spending was 60% higher than in 1886.
- After the Senate also decentralized its budget process in 1899, spending shot up another 35% between 1900 and 1916.
- During the whole period of decentralized budgeting, 1886-1921, the deficit as a percent of GNP doubled.
In 1921, both houses moved back to centralized budgeting, and between 1922 and 1931 they ran a budget surplus averaging 0.77% of GNP. But Congress began decentralizing the budget process again during the 1930s and spread authority widely in the 1960s and 1970s. The result was average budget deficits of 3.7% of GNP from 1932 to 1995.
Returning to centralized budgeting would mean a single appropriations committee in each house would put together one omnibus spending bill for an up-or-down vote. This would make deep budget cuts easier, since the beneficiaries of federal spending receive only about half of each dollar spent, while taxpayers would receive the whole of a dollar saved.
Source: David R. Henderson, "The Real Budget Problem," Fortune, October 2, 1995.
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