John R. Gist

The economics of choice in the allocation of Federal grants: An empirical test

Concluding remarksIn this paper, we have provided strong evidence in favor of the Niskanen model of bureaucratic behavior and against the ‘public interest’ hypothesis by considering the selection process used by HUD in awarding Urban Development Action Grants. Specifically, we did not find that any distress measures specified in regulations dealing with the program were statistically significant in explaining the awarding of grants. The only consistently significant factors of those considered were the level of private commitment to the project and the ratio of private funds committed to total amount requested. We argue that use of these variables, especially the latter, as primary selection criteria by HUD bureaucrats reflects their desire to enhance their budgetary environment by making what the market perceives to be the best investments available to them, avoiding risk and spreading available UDAG funds as widely as possible.We conclude that HUD officials may attempt to limit the number of projects in severely distressed cities (despite contrary regulations) and to maximize the spread of available resources among funded projects.

Political and economic influences on the bureaucratic allocation of federal funds: The case of Urban Development Action Grants

Abstract The distributive theory of politics predicts that federal budget allocations will be responsive to the committee position of congressmen and their majority/minority party status. But such political allocations are less likely where bureaucrats rather than legislators make the allocative decisions. In such cases we must take into account bureaucratic motivations as well. Niskanens bureaucratic budget maximization theory emphasizes such bureaucratic maximands and the efficient production of output or activity by the budget constrained bureau. In this paper the two theories are tested using data from the Urban Development Action Grant program, a capital subsidy program operated by the Department of Housing and Urban Development. A set of political and bureaucratic decision criteria is employed as independent variables in a series of logit and Tobit models in order to predict the likelihood of projects being funded and the amounts they will receive. The political criteria are not significant in any specifications, but the bureaucratic criteria suggest an investment-maximizing, risk-avoidance strategy on the part of HUD bureaucrats. Thus the results support the Niskanen theory, but do not support the distributive theory.

“Stability” and “Competition” in Budgetary Theory

This article argues that the differences in the findings of the incrementalist budgetary theory of Davis, Dempster, and Wildavsky and the “competition” theory of Natchez and Bupp have been wrongly attributed to the different units of analysis—program or organization—used in these studies. “Competition” as measured by Natchez and Bupp and incremental change as defined by Davis, Dempster, and Wildavsky can both be found among either programs or organizations. The differences in the findings of these theorists depend instead on the particular theoretical construction of budgetary behavior and the budget measures chosen. The same data will support either theory of budgeting if one adopts the theoretical constructs and budget measures peculiar to each theory. Thus the theories are not really in competition with each other.

Retirement Replacement Rates and Retirement Wealth Inequality Among Baby Boomer and Other Birth Cohorts

The retirement readiness of baby boomers has been a topic of considerable but inconclusive research. Using data from the Panel Study of Income Dynamics (PSID), the authors evaluate the relative retirement readiness of five discrete birth cohorts: Depression babies (born 1926–1935); World War II babies (born 1936–1945); two halves of the baby boom generation (older, born 1946–1955, and younger, born 1956–1965); and Gen-Xers (born 1966–1975). They construct a comprehensive measure of retirement wealth that combines both accumulated private net worth and the annuity values of Social Security and defined-benefit pensions at age 65. The authors then calculate replacement rates as the ratio of annuitized wealth at age 65 to average preretirement income. They find that median replacement rates decline steadily over the four birth cohorts from World War II babies to Gen-Xers and that younger generations appear to be considerably less well situated for retirement than baby boomers and earlier cohorts. By comparing ratios of replacement rates at the 99th and 50th percentile, the authors determine that retirement wealth inequality in the top half of the wealth distribution increases steadily across the five birth cohorts, reaching a peak among Gen-Xers.

Fiscal Implications of Population Aging

Publisher Summary The aging of the US and world populations has caused grave concern among experts about the ability of the nation, and other developed nations, to afford the programs that benefit the retired population, especially public pensions and health insurance. The linkages between population aging and the looming fiscal crisis are both direct and indirect. The most direct fiscal impacts of population aging will come in the form of rapidly increasing budget outlays for entitlement programs—those programs that provide automatic benefits to individuals based on statutory eligibility. The indirect fiscal impacts of aging stem from its effects on the three sources of economic growth: the composition of the workforce, national saving, and productivity. Slower projected growth in those factors means slower future economic growth, which has important impacts on both revenue and spending growth. This chapter describes these indirect impacts on the economy and their linkages to fiscal outcomes and discusses the direct impacts of population aging on budget outcomes and the long-term gap between revenues and outlays. One measure of the severity of the imbalance between spending and revenues in the current budget projections is the “fiscal gap,” which is a “present value” measure of the long-term deficit. Slower growth in the labor force and lower saving rates will cause the economy to grow more slowly, which will cause revenues to grow more slowly and spending to be higher.

Tax Reform, Revenue Windfalls, and Elderly Taxpayers

Federal and state income tax reform will have far-reaching effects on the distribution of income and tax burdens in the United States of America. It was expected that tax reform would shift the burden of taxation from individuals to corporations and from lower to higher-income pérsons, but it has also shifted the aggregate burden of federal income tax from the general population to US citizens over the age of sixty five. Total federal income taxes for the general population declined by nearly

Increment and "Base" in the Congressional Appropriations Process

36 US billion, but increased for older citizens (that is, those over the age of sixty five) by nearly

Boom and Bust: Housing Equity Withdrawal and Consumption Decisions and Their Impacts on Household Wealth

3 US billion. The shift in taxes is progressive, however, in that low-income older Americans pay less federal income tax and those with high incomes pay more. At the same time, state income tax payments increased for most US citizens as a result of federal tax reform, but more so for older citizens than for the general population. These ‘windfall’ increases in state income taxes added to the increased federal income tax borne by upper-income and middle-income older persons, and partially or fully offset the reduction in federal income taxes for lower-income older persons. However, the income tax burden on the elderly population remains relatively low, with 75% of the elderly paying less than 5% of income in federal income tax and over half paying less than 1%, with most of these not filing tax returns at all.