The Budget System and Popular Control

ROBERT H. TUCKER

Associate Professor of Economics, Washington and Lee University

In President Wilson's annual message to Congress, delivered December 4, 1917, the following paragraph occurs:

"And I beg that the members of the House of Representatives will permit me to express the opinion that it will be impossible to deal in any but a very wasteful and extravagant fashion with the enormous appropriations of public moneys which must continue to be made, if the war is to be properly sustained, unless the House will consent to return to its former practice of initiating and preparing all appropriation bills through a single committee, in order that responsibility may be centred, expenditures standardized and made uniform, and waste and duplication as much as possible avoided."1

This admonition is very mild, coming as it does from a man who in a masterly treatise written more than thirty years ago pointed out the evils of the congressional committee system and advocated, by implication at least, the British system of cabinet responsibility; but it is significant in connection with the growth of the budget idea in the United States.

The movement toward the adoption of the budget system in the United States is one of the notable political developments of recent times. Within a very few years numerous American cities have installed scientific budget systems and many American states have made substantial improvement in their budgetary procedure. The enormous appropriations required by the war will undoubtedly hasten the adoption by Congress of more efficient methods in conducting the business of the federal government. The question of the budget, therefore, is one of unusual interest at the present moment, and it is important that the citizen should see clearly both the technical issues involved and the relation of the budget system to popular control in matters of public finance.

The present article represents an attempt to present the leading issues in connected and intelligible form. It is written

1 Congressional Record, Vol. 56, No. 2, p. 21.

with the purpose of setting forth the essential facts and principles of the budget, rather than of making a distinct contribution to the subject,2 and will be limited, in the main, to some remarks concerning financial systems in general, to a description of the British budget system as compared with the American system, and to a consideration of the remedies proposed to meet the American conditions.

One of the most interesting things in the history of public finance is the changing relation of the citizen to the public treasury. Under the ancient financial system this relation was mainly that of a beneficiary. The citizen contributed directly to the government only in time of emergency and then in the form of gift or personal service. Funds for the support of the state were secured chiefly through exactions from outside persons-from the labor of slaves, from foreign merchants, from foreign states through war and tribute. A tax was nota captivitatis, a badge of slavery and disgrace.

Later, in the Middle Ages, society passed from a condition of status to a condition of contract. There arose then a contract theory of the state and a sort of contract theory of taxation-quid pro quo, protection and, in return, support. The first "taxes" were in reality money payments in remission of feudal dues, and the public treasury was completely identified with the royal purse.

Only in modern times have state financial systems become susceptible of clear and definite characterization. Only recently has the field of governmental activity become normal and calculable.3 Statesmen can now calculate, to a fraction of a per cent, budgets involving hundreds of millions. The recognition of definite and periodical exactions from the citizen for the support of the state is also comparatively recent. Blackstone, writing as late as 1765, spoke of taxes as "extraordinary revenue." Only in modern times, too, has come the full ideal of popular control of public income and expenditure, and along with it a return of the older idea of the state as

A very considerable volume of literature on the budget has appeared in recent years. Acknowledgment is made here particularly to the publications of the New York Bureau of Municipal Research and of the Wisconsin Board of Public Affairs and to a suggestive series of articles in the Annals of the American Academy of Political and Social Science for November, 1915; also to the treatment of the budget in such standard texts as Adams, Daniels, and Bastable in public finance, and Wilson and Lowell in political science.

'Cf., in this connection, Daniels, Public Finance, pp. 9, 10, 11.

an organism of which we are all a part, to whose life we contribute, not through exaction, not through contract, not even through benefit mainly, but through some still indefinite conception of justice and equality.

These changes have come to pass through the growth of democracy-popular participation in the affairs of the state and control of financial legislation by the people.

But democracy has failed to bring the expected reduction in public expenditures. "Gentlemen," exclaimed the French Minister of Finance, when the French budget for the first time reached a billion francs-"salute these figures; you will never have an opportunity to contemplate them again."4 That was in the early part of the nineteenth century. Never since that time have the national expenditures of France been so small. The French budget voted for the year 1914 reached a total of 5,191,000,000 francs. The growth of public expenditures in recent times has been progressive and universal. It has not been confined to any one country or any particular form of government. It might almost be regarded as one of the weird and mysterious phenomena of modern social development; for it has been true both of local governments and of national governments, of democracies and of autocracies, of large countries and of small countries, of warlike countries and of peaceful countries.

The United States has proved no exception to the rule. The annual expenditures of the Federal government have grown from $1.76 per capita in 1850 to $9.81 in 1913. Within a single generation—that is, since 1880-federal expenditures have increased over 400 per cent; a growth nearly five times as great as the increase in population and perhaps somewhat greater than the increase in national wealth. Local expenditures have grown at a greater pace. In other words the average citizen of the United States contributes, in normal times, over $100 a year, or the proceeds of more than one month's income, to the uses of government-not to mention the countless billions to which expenditures rise in time of

war.

Whether we believe, then, that this world-wide increase in

Quoted in Adams, Science of Finance, p. 84.

public outlays arises from "a universal malady of democracy,' or is the natural outcome of the growing functions of the state, or represents the crushing burden of modern armaments and modern preparation for war, the question of popular control is a matter of paramount interest, and the importance of the budget and an intelligible budgetary procedure can hardly be overestimated.

What then is the meaning of the term "budget" and what is its significance as a means of popular control?

The budget is a summary of the financial program of a state or political unit. It is the fiscal plan of a government. As such it must set forth in clear and intelligible form, first a review of past receipts and expenditures, then a definite program for the ensuing period-all the expenditures to be made, all the revenues to be collected, and the sources from which these revenues are to come—and finally a balance of accounts, a definite correlation of the receipts and expenditures of the

state.

The passage of the budget to history involves three distinct processes; its preparation, an administrative function; its legalization, a legislative function; its execution, again an administrative function. Add to these the audit, or accounting function, and we have completed the cycle of every efficient budget system.

Conceived in this broad way, the budget represents something very different from the popular conception of it as a book of estimates or an appropriation law. It is the complete financial program of the government, dealing with far-reaching questions of public policy.

And the object of the budget is to set out the issues in perfectly clear and definite fashion. To the legislative body the budget is a means by which it may enquire both into the use of former grants and into the nature of grants to come. To the people it is a means by which they may know that the public funds are applied efficiently to purposes of which the state or community approves.

A knowledge of the British budget system is essential to a proper understanding of the problems of American budgetary procedure. The British system has served as a model

for all other modern budget systems. And justly so. In no phase of representative government have the English people so challenged the admiration of the world as in the field of financial administration. The ideal of popular control of the public purse existed in their minds almost from the inception of the nation, and it forms, as we know, the entire background of their great struggle for representative government. Section 12 of the Great Charter of 1215 provides that "no scutage or aid shall be imposed in the kingdom, unless by the Common Council of the realm, except for the purpose of ransoming the king's person, making the king's first-born son a knight, and marrying his eldest daughter once, and the aids for these purposes shall be reasonable and just." This ancient pledge was renewed many times in the succeeding centuries, and the whole transformation of the Council into an independent legislative body was accomplished through the power of the Council in controlling the purse strings. By the beginning of the 15th century the House of Commons was recognized as the sole source of revenue and appropriation bills. The British budget system as we know it today emerged in crude form in 1688, but it took the parliamentary reforms of the latter 18th and earlier 19th centuries to make it, from the standpoint of financial technique, the most perfect system the world has yet known.

In order to follow the British budgetary procedure, it is necessary to keep well in mind several of the fundamental characteristics of the British constitutional system:

1. The Constitution itself, based on custom and precedent and supported by parliamentary rules and legal interpretations.

2. The Cabinet, representing members chosen from the majority party in the House of Commons and charged with common responsibility requiring collective resignation in case of parliamentary disagreement or censure.

3. Parliament, consisting of the House of Commons, chosen by the people and transacting most of the people's business; and of the House of Lords, hereditary or appointed by the King, and reduced since the reforms of 1911 to a more or less advisory capacity.

4. The Prime Minister, appointed by the King and choos