A Real "Third Way" Budgeting Approach, Part 1

What would a real "third way" budgeting approach look like?

Try this idea:  based on the revenue that we can reasonably expect to collect, under the current tax code, we set a fixed budget.  That amount will not be changed, to account for expected inflation, or population growth or any other factor.  The amount of spending will be set at a level that is sustainable, and will continue to fall in real terms.

But the flip side is, advocates can count on that level of funding going forward.  It will be up to them (the advocates and program managers) to find ways to improve productivity.

Under the perverse incentives of our current system, if a program manager finds productivity gains, produces the same or better outcome with fewer resources, the manager is rewarded with a budget cut.  Thus there is no incentive to increase productivity in government.  In the private sector, if a manager increases productivity, the result is greater profit for the enterprise.  In the public sector, greater productivity results in fewer resources being allocated to that activity.

Under my "third way" approach, public sector productivity gains can be plowed back into greater access or more services.

Alternatively, if program managers choose to pad the payroll, spend on greater pensions and benefits for government workers, rather than on more services to the public, they will be faced with ever diminishing resources, in real terms, to serve the public.

My "third way" approach would unleash the entrepreneurial zeal of program advocates.  You (advocates) want to serve more people or expand the menu of benefits?  Then find better ways to deliver those services.

Here is an example:  Set the health and human services budget at $10 billion.  Provide assurances that the budget level will remain (neither more or less) at $10 billion going forward.  Then allow advocates to choose the priorities:  more health care access, a broader range of services, or whatever.  But these choices will have consequences:  more access will only be possible with productivity gains, automatic spending increases will be no more.