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Unformatted text preview: CHAPTER 3 Budget Structures and Institutions: Federal and State-Local Budgets perform the same functions for choice-making, management, and control, regardless of the entitygovernment, business, nonprofitthat develops them. The particular institutions and structures that the entity uses, however, are subject to much individuality, sometimes because of real differences in the mission, size, opportunities, and so on, of the entity, but sometimes only because of institutional history (Thats just the way we do it here because thats the way we always have.). In this chapter, we examine the most important federal budget structures and institutions, and then we make some comparisons with similar features of bud- geting at the state-local level. We also discuss how each level spends its money. 79 The Federal Budget As earlier described, a budget is a financial plan. A government budget, however, reflects choices well beyond those of finance. A congressional agency report makes the point: Not only is the budget a financial accounting of the receipts and expen- ditures of the federal government; it also sets forth a plan for allocating resources between the public and private sectors and within the public sectorto meet na- tional objectives. 1 Budget preparation, discussion, and approval thus must be at the heart of public decision-making. Even in a market economy, the budget repre- sents the basic national economic planthe chosen mix of public and private sec- tor uses of national resources. 1 U.S. Congressional Budget Office, An Analysis of the Administrations Health Proposal (Washington, D.C.: GPO, 1994), 41. 07404_03_ch03_p79-140.qxd 4/6/06 10:47 AM Page 79 Spending by the Federal Government For what does the federal government spend our money? Table 31 provides those data for selected years from 1960 through 2005. Most outlays, more than 60 per- cent, are for human resources, including income maintenance, health, support for the elderly and disabled, and education and training. The largest block in the cate- gory, more than 20 percent of all outlays, is for the Social Security system. Much of this human resource expenditure occurs through legal formulas that determine who is eligible and to how much those entitled are eligible. Most elements in this spending category have grown at rates greater than the overall average rate since 1970, and most are expected (or feared) to continue this rapid growth in the future. National defense was once the predominant interest of the federal government. However, 1961 was the last year in which defense amounted to half or more of federal outlays; it had been over 70 percent for 1942 through 1946, with a maxi- mum of 89.5 percent in 1945, no surprise in light of the expense (and importance) of fighting World War II. The secular decline in the defense share of federal outlays was interrupted for 1981 through 1987. Many believe that this increase, by forcing a reaction from the Soviet Union that its inefficient sot economy could not sup-...
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