GOP congressman pushes zero-based budgeting
Agencies would have to justify all expenses
Kraft Foods is the latest in a long line of acquisitions by a private equity firm whose budget-cutting initiatives are so aggressive that employees complain they are asked to justify the cost of a photocopy.
Now some politicians and potential Republican presidential contenders are imagining a world where the U.S. federal government is asked to do the same.
The streamlining tactic, known as zero-based budgeting, requires each agency or business unit to justify its budget requests from scratch for all existing and newly requested programs. It’s something the federal government hasn’t attempted since President Carter advocated for it in the 1970s. It relies instead on past budgets as a baseline of money that is guaranteed, and then requests additional sums year over year.
“We have to justify our existence every day in the private sector — change to attitudes, trends. You have to adapt. Government doesn’t adapt. Instead it just incrementally adds on,” said Rep. Dennis A. Ross, who introduced last week — for the third time — his Zero Based Budget Act in the House of Representatives in the hope that the public sector can take a lesson from private enterprise’s playbook.
“We should be painfully honest with the American people, because it’s their money,” said Mr. Ross, Florida Republican and a member of the House Committee on Financial Services. “When we do the budget process, we want to have some justification for every appropriation that is sought — a legal basis for it, an amount that is less than last year’s and a summary to express the outcome of it,” he said.
The thought behind zero-based budgeting is that it shifts the burden of proof to each agency head, congressional member or manager to give justification for why they should be spending any money at all. It requires them to analyze all activities and rank them in order of their costs and benefits.
The tactic has become so successful for 3G Capital Partners, the Brazilian group that purchased Kraft and other food chains like Burger King and Tim Hortons, that other industry leaders are taking note, with CocaCola adopting the measure to strip $3 billion in costs out of its budget by 2019.
But there’s doubts the public sector has enough discipline to make zero-based budgeting successful.
“It just doesn’t work with Congress, because they all believe in the spending. If you’re on the Agriculture Committee, you believe in farm spending, [and if you’re on the] Transportation Committee [you believe in] transportation,” said Chris Edwards, the director of tax policy studies at the Cato Institute, a libertarian think tank. “There’s no cost-benefit trade-off for members in Congress — they just fight for much more every year.
“Private companies — and why the government fails — is that private companies are in search [of] profits, and it’s ruthless. They cut costs, innovate and improve quality,” he said. “Profit motivation is the fundamental ingredient that the government doesn’t have. There’s no pressure to cut costs in Congress because there’s no incentive to.”
Still, some state legislatures have taken on the initiative.
In 2000, during Jeb Bush’s tenure as governor, Florida was one of the first states to enact an eight-year cycle of agency reviews to help it better evaluate budgetary requests. The effort was abandoned a few years later after state legislatures found the process expensive and time-consuming, according to a report by the National Conference of State Legislatures.
The same thing happened in Oklahoma, where lawmakers passed legislation requiring a four-year cycle of zero-based legislative reviews in 2003, but the process became so laborious, lawmakers didn’t have time to consider the budget, so instead they revised the law to get out of the zero-based process, the report said.
Zero-based budgeting gets messy in government because there isn’t one predominant goal, multiple agencies have different missions, and their leaders evaluate them by their own standards, said W. Clif Wilkinson, a political science professor at Georgia College & State University.
However, in business there is an agreedupon bottom line that everyone — no matter the job or unit — rallies around and toward which everyone is held accountable.
“The difference in government is the accountability, the way the hierarchy is diffused and what is your mission. There are multiple missions in government, and profitability isn’t one of them,” said Mr. Wilkinson. “The mission and goals in private industry are so much more simple and clear than they are in government.”