Joachim Wehner

Assessing the Power of the Purse: An Index of Legislative Budget Institutions

To compare parliamentary capacity for financial scrutiny, I construct an index using data for 36 countries from a 2003 survey of budgeting procedures. The index captures six institutional prerequisites for legislative control, relating to amendment powers, reversionary budgets, executive flexibility during implementation, the timing of the budget, legislative committees and budgetary information. Various methods of index construction are reviewed. The results reveal substantial variation in the level of financial scrutiny of government by the legislature among contemporary liberal democracies. The US Congress has an index score that is more than three times as great as those for the bottom nine cases, predominantly Westminster systems. Even allowing for US exceptionalism, the top quartile of legislatures score twice as high on this index as the bottom quartile. These findings suggest that the power of the purse is a discrete and non-fundamental element of liberal democratic governance. For some countries it is a key safeguard against executive overreach, while others maintain a constitutional myth.

It Isn't Just about Greece: Domestic Politics, Transparency and Fiscal Gimmickry in Europe

This article analyzes the political origins of differences in adherence to the fiscal framework of the European Union (EU). It shows how incentives to use fiscal policy for electoral purposes and limited budget transparency at the national level, combined with the need to respond to fiscal rules at the supranational level, interact to systematically undermine the Economic and Monetary Union through the employment of fiscal gimmicks or creative accounting. It also explains in detail how national accounts were manipulated to produce electoral cycles that were under the radar of the EU budget surveillance system, and concludes with new perspectives on the changes to (and challenges for) euro area fiscal rules.

Institutional Constraints on Profligate Politicians: The Conditional Effect of Partisan Fragmentation on Budget Deficits

The literature on the common pool resource problem in budgeting has thus far not explored the likely interaction between size fragmentation (the number of decision makers) and procedural fragmentation (the structure of the process in which they interact).The argument put forward in this article is that the effects of these two types of fragmentation should not be additive, but multiplicative, because theory suggests that the impact of size fragmentation on fiscal policy is conditional on the extent of procedural fragmentation. Using panel data for 57 countries over the period of 1975 to 1998, the author empirically investigates this interaction in the legislative context and finds strong evidence that partisan fragmentation is associated with higher deficits only when it is not moderated by limits on parliamentary amendment authority.

Principles and patterns of financial scrutiny: Public Accounts Committees in the Commonwealth

Public Accounts Committees (PACs) are ubiquitous features of the legislative landscape in the Commonwealth. Based on a broad comparative overview and specific examples, this article looks at the role of PACs in financial scrutiny. It unpacks the concept of financial scrutiny, identifies key principles and procedural features that these committees share, and surveys some of the challenges they frequently encounter. The article concludes that PACs have an important and well-established role to play in ensuring sound public spending. However, they need to find innovative responses to several key challenges in order to safeguard and maximise their contribution to financial scrutiny.

Budget reform and legislative control in Sweden

ABSTRACT The literature on fiscal institutions argues that there is a pro-spending bias in legislative budgeting, which can be mitigated by institutional arrangements. In the mid-1990s Sweden carried out reforms to the budget process that fundamentally restructured parliamentary decision-making, including the voting process and the role of different committees. This paper assesses the impact of these reforms on legislative budgeting. It concludes that the new process helps to safeguard fiscal discipline, but also cautions against a simplistic interpretation of the fiscal institutionalist literature that treats institutional arrangements as exogenous. The constraints of the revised legislative process are essentially self-imposed, which in the final analysis makes it difficult to argue that the Swedish Parliament has lost budgetary control. Moreover, separate reforms of external audit and improvements in the provision of performance information provide an opportunity to strengthen accountability for results.

When Do You Get Economists as Policy-Makers?

We analyze when economists become top-level “economic policy-makers,” focusing on financial crises and the partisanship of a country’s leader. We present a new dataset of the educational and occupational background of 1200 political leaders, finance ministers, and central bank governors from 40 developed democracies from 1973 to 2010. We find that left leaders appoint economic policy-makers who are more highly trained in economics and finance ministers who are less likely to have private finance backgrounds but more likely to be former central bankers. Finance ministers appointed during financial crises are less likely to have a financial services background. A leader’s exposure to economics training is also related to appointments. This suggests one crucial mechanism for affecting economic policy is through the selection of certain types of economic policy-makers.

Reconciling accountability and fiscal prudence? A case study of the budgetary role and impact of the German parliament

Based on a case study, this article argues that the goals of accountability and fiscal prudence can be reconciled in the context of the parliamentary budget process. It captures the institutional setting for the budgetary work of the German parliament, in legal, organisational and procedural terms and with regard to its resources. The article then provides an assessment of the budgetary impact of the legislature against the goals of public expenditure management: aggregate fiscal discipline, allocative efficiency, and operational efficiency. The conclusion indicates that some standard arguments cannot explain why the budgetary work of parliament in this case has tended to result in lower deficits and improved public expenditure management. Rather, it is argued, a system that allows for parliament to buy into the overall budgetary aims and policies of the government through a co-operative process facilitates the reconciliation of accountability and fiscal prudence. At the same time, there is scope to refine the public expenditure management model for its application to the comparative study of the budgetary outcomes of legislative behaviour.

A Better Life for All? Democratization and Electrification in Post-Apartheid South Africa

Does democracy affect basic service delivery? If yes, who benefits, and which elements of democracy matter—enfranchisement, the liberalization of political organization, or both? In 1994, 19 million South Africans gained the right to vote. The previously banned African National Congress was elected promising “a better life for all.” Using a difference-in-differences approach, we exploit heterogeneity in the share of newly enfranchised voters across municipalities to evaluate how franchise extension affected household electrification. Our unique data set combines night-light satellite imagery, geo-referenced census data, and municipal election results from the 1990s. We include covariates, run placebo regressions, and examine contiguous census tracts. We find that enfranchisement increased electrification. In parts of the country where municipalities lacked distribution capacity, the national electricity company prioritized core constituencies of the ANC. The effect of democratization on basic services depends on the national government’s ability to influence distribution at the local level.

Moral Hazard in an Economic Union: Politics, Economics, and Fiscal Gimmickry in Europe

This paper examines empirically how transparency of the budget process affects fiscal rules and incentives for fiscal gimmickry or creative accounting in the European Union. Using stock-flow adjustment data for EU countries from 1990-2007, we show that pressure from a deficit limit rule as in the Stability and Growth Pact creates incentives for fiscal gimmicks, as does political pressure from the electoral cycle and economic pressure from negative shocks in the business cycle. However, we show that where institutional transparency is higher, these incentives are damped and largely disappear. We infer that fiscal rules do not work well when institutional transparency is low.

Assessing the Power of the Purse

The requirement for legislative approval of financial measures is a democratic foundation stone that is enshrined in constitutions around the world. Despite this widespread formal recognition, the actual budgetary role of national legislatures apparently differs sharply across countries. Members of the US Congress ‘have long seen themselves as the bulwark against [executive] oppression’ and their ‘major weapon’ is the constitutional requirement for congressional approval of appropriations (Wildavsky and Caiden 2001: 10). Scholars and practitioners agree that the US Congress is a powerful actor that can have decisive influence on budget policy (Wildavsky 1964; Schick 2000; Meyers 2001). On the other hand, the budgetary influence of legislatures is said to be marginal in several other industrialised countries including France and the UK (Chinaud 1993; Schick 2002). Existing comparative work on legislative budgeting contributes selected country studies (Coombes 1976; LeLoup 2004), but lacks systematic analysis on the basis of a common framework. Moreover, while the literature on the US Congress is extensive, legislative budgeting in parliamentary systems and developing countries in particular remains understudied (Oppenheimer 1983). As a basis for more systematic comparative work, this chapter proposes and applies an index of legislative budget institutions that can be used to assess and compare the budgetary power of national legislatures.