Cyclopædia of Political Science, Political Economy, and the Political History of the United States
BUDGET. The word budget is immediately derived from the French bougette, a bag or purse, and is applied in modern times to the statement of receipts and expenditures of governments for the year. This use of the word had its origin in England, in applying the name of the bag containing the papers and documents laid before the house of commons by the chancellor of the exchequer, to the financial exhibit which the bag contained. France and other countries, which have borrowed so much of their parliamentary usages and terms from Great Britain, have adopted the word budget, which has a fixed meaning in the financial vocabulary.
—While the fiscal year varies widely in different countries, beginning and ending in France with the calendar year, or the 1st of January, in Great Britain with the 1st of April, and in the United States with the 1st of July, there is a uniform usage in all nations for the government to present a budget to the legislative body at the beginning of its sessions. The consideration and examination of these estimates are devolved upon committees, though the system of permanent committees upon the budget prevails only in Belgium, in Holland and in the United States. In other countries the legislature appoints commissioners or special committees upon financial matters. The finance ministers in different nations, sometimes orally, and sometimes by written reports, advance their views and estimates, and defend them before the standing or special committees or before the committee of the whole house, according to the established custom of each country, the legislative body reserving to itself (everywhere except in Russia and Turkey, where no representative government exists) the final power of voting upon all estimates submitted.
—Notwithstanding this general control by the representatives of the people of the expense of government, there is a constant tendency toward increased expenditure of the public money, in the multiplication of offices, in the advance of salaries, in the expense of administration, and in the erection of costly buildings and extensive systems of public works. That this increased costliness of government advances in a much greater ratio than population or public wealth, is manifest; and the rapid strides made in this direction during the last 25 years in three countries may be seen in the following:
—In the United States, a statement of the annual receipts and expenditures of the government has been laid before congress by the secretary of the treasury ever since 1790, and published as required by the constitution. A committee of ways and means, to consider and report upon estimates for supplies needed in the administration of the government, was first constituted in congress in 1789, at its earliest session, consisting of one member from each state. In 1795 this committee was made a standing or permanent committee of the house. Reduced to 7 members in 1802, it was increased to 9 in 1833, to 11 in 1873, and to 13 members in 1879. The functions of the ways and means committee, which once included all matters relating to the revenue, the public debt, and the expenditures of the government, were divided in 1865, on account of the very great amount and variety of public business pressing upon this one committee, and a distinct committee on appropriations was created. This has direct charge of all measures appropriating money for the support of the government, while to the committee on ways and means are referred all matters relating to the revenue and the bonded debt of the United States. Bills proposed by the committee on appropriations take precedence of other business in committee of the whole house, and the yeas and nays on the passage of such bills are required to be entered in detail on the journal of the house. But the house has repeatedly suspended this rule, and passed river and harbor appropriations without debate.
—The constitution provides that no money shall ever be drawn from the treasury but in consequence of appropriations made by law, and the checks upon unnecessary or extravagant expenditure are all in the hands of congress. That body has provided apparent safeguards to the treasury by adopting rules that no appropriation shall be reported in any bill or admitted as an amendment, unless previously authorized by law, or in continuation of such public works and objects as are already in progress, also prohibiting any provision in such bills or amendments to change existing laws, except such as shall retrench expenditures.
—The senate, like the house of representatives, has a committee on appropriations, but its committee to consider revenue measures is styled the committee on finance.
—The treasury estimates for appropriations are prepared by the various departments and bureaus of the public service in the autumn, and are required to be sent by the secretary of the treasury to the speaker of the house on its annual meeting in December. They set forth: 1, the authority in previous legislation for the expenditure estimated for; 2, the estimated amount required under each item of expenditure for the service of the fiscal year ensuring; 3, the same estimate for the fiscal year then current; and 4, the amount actually appropriated for the fiscal year preceding. These estimates, with the annual report of receipts and expenditures of the United States for the fiscal year ended on the 30th of June prior to the assembling of congress in December, form the basis upon which the secretary of the treasury makes up his annual report to congress, which embraces a careful review of the working of the revenue system, and an estimate of the probable receipts of the government from all sources for the remainder of the current fiscal year, as well as for the ensuing one, for which congress is asked to appropriate. At the same time, or by special communications at a later period of the session, estimates for deficiencies in the appropriations of the current year to meet expenditures, are laid before congress, which is asked to grant the amount necessary to defray them. These deficiency bills are occasioned sometimes by unforeseen sources of expenditure, sometimes by careless accounting or extravagance, but more frequently by the failure of congress to incorporate in the regular advance appropriation bills a sufficient sum to defray the whole expenditure for a year of certain branches of the public service.
—The original estimates submitted by the departments usually undergo considerable reductions by the house of representatives (as reported by its committee on appropriations) and while the tendency to restore the full amount in the senate, which is the less popular body, is very strong and prevails to a considerable extent, the net result is a compromise between the two houses, in which the aggregate appropriations are made less than the senate passes them, but larger than limited by the house, while still much below the estimates as submitted by the several departments. It is usual for the committees on appropriations of both houses to receive, orally or in writing, statements from the officials seeking appropriations, pertaining to the amount and the necessity for the public service of the sums asked for. As none of the heads of departments have seats in either branch of congress, where they could make public statements or answer inquiries relating to appropriations under consideration, letters from these officers are frequently read in open house, although addressed only to the chairman of the appropriations committee.
—Besides the sums specifically asked for in the annual budget, and appropriated by congress with or without amendment, there are what are known as "permanent annual appropriations," which are expended by the treasury in pursuance of acts continuously operating, without annual re-enactment. These permanent appropriations are of two kinds: 1. Specific, including only three items of expenditure—1, the cost of collection of the customs revenues, $5,500,000 per annum; 2, the arming and equipment of the militia of the United States, $200,000 per annum; 3, the payment of 6 per cent. interest on the bequest to the Smithsonian institution, held by the government of the United States, $39,000 per annum. II. Indefinite annual appropriations, which include the interest on the public debt, the amount annually paid into the sinking fund, the interest on bonds issued to the Pacific railways, and a great variety of refundings, indemnities, etc., liable to be paid out under obligation of existing laws, but the amount of which is indeterminate, or varying from year to year. The aggregate of all these permanent specific and indefinite appropriations for the year 1880 was $145,939,438. Of this sum, no less than $134,000,000 was on account of the sinking fund, and interest on the public debt. The aggregate of the annual appropriations specifically made by congress for 1880 was $162,404,647, while the actual expenditure, as rendered by the treasury report for the same year, was $171,885,383. The appropriations "to supply deficiencies" have ranged in the past 10 years from $1,000,000 to $15,213,259 per annum. The following shows the various heads of expenditure under which the appropriations were made for the fiscal year 1881:
Under a general law, all unexpended balances of appropriations are covered into the treasury after two years.
—In Great Britain the budget is annually prepared and printed by the officers of the treasury. It is carefully and minutely classified, each head of expenditure under the different departments of government being subdivided in detail. It makes three folio volumes, one devoted to estimates for the civil service, one to the army, and one to the navy. Indefinite expenditure or extravagance is almost impossible under the strict system of the British budget. The speech of the sovereign at the beginning of each session asks the commons for supplies of revenue, and that body appoints a day when it will resolve itself into a committee of the whole house to consider the supply bill. The member of the government representing each department explains to the committee the estimates, answers questions, and proceeds to propose each grant in succession. This comes after the set speech on the budget delivered by the chancellor of the exchequer, who has the duty of proposing to the house of commons any increase of taxation rendered necessary by deficient revenues, or any abolition or reduction of the customs or excise taxes which a surplus of revenue may justify. Very rarely does the British budget entail the necessity of an increase of taxes; it is much more common for the chancellor of the exchequer to have the pleasing duty of proposing a reduction. This is in part owing to the careful accounting which prevails in all departments, as well as to the great resources of a people occupying a front rank among commercial and manufacturing nations. The rarity of a deficit is also owing in part to the fact that the budget, in place of being voted a whole year in advance, as in many countries, is adopted usually about the time when the expenditure of the fiscal year it provides for begins. Thus the wants and the resources of the treasury can be estimated with greater precision, while the ministry can avail itself of the fluctuations in receipts and expenditures to a late period of the session of parliament, thus avoiding the miscalculations that lead to deficits.
—There is in the British budget what is termed the consolidated fund, made up of the receipts from customs and internal revenue. This fund is specially set apart to the expenses of the public debt, the civil list, pensions and allowances, (including the royal family), and salaries of government officers. These expenses are not submitted to an annual vote in parliament, but the surplus of the consolidated fund over and above these necessary charges can not be expended without appropriations voted in the usual form of a supply bill. A similar feature is found in the expenditure under what are known as "permanent appropriations" in the United States. In both cases, the provisions of law on the faith of which the various public loans have been contracted constitute a special and inalienable guarantee of their payment, so that neither parliament nor congress can disturb the public faith by refusing to appropriate money to pay the interest as it falls due. In France, on the other hand, no pledge of a special revenue is attached to the public debt, the interest being paid out of the treasury funds without distinction of source.
—All the other expenditures of the British government have to be provided for by annual vote. No expenditure is permitted in the course of any financial year beyond the sums voted, and if the whole amount appropriated has not been expended, the surplus has to be turned into the treasury.
—In time of war, to provide for unforeseen expenses during the recess of parliament, a vote of confidence for so many million pounds sterling has been customary. These funds can be employed for no other than military objects, and if they are exhausted, the government must summon parliament and lay before it its demands for additional credits.
—In France, where order and method were introduced into the management of finances early in the middle ages, we find a classification of ordinary and extraordinary expenses as early as 1314. There were then general administrators of the finances, with a receiver-general, who administered the treasury, and apportioned the revenue and expenditure to the wants of each succeeding year. Each deficit was provided for by a general tax, which in case of war frequently amounted to very large sums. In the reign of Francis I. the financial operations of the government were further concentrated in the hands of a treasurer general, charged with the disbursements and collections of the state, while the management of the public debt was placed in the hands of a special agent. The treasurer presented the budget to the king at the beginning of each year, but no publication of it was made. Not until 1789 was any requirement made for annual publication of the statement of receipts and expenditures. The constitution of the republic of 1795 re-affirmed this provision, and gave the sole power of levying taxes to the corps législatif, limiting the operation of each tax law to one year. By the same constitution the government was for the first time required to submit a statement of expenses to the corps législatif. From this time dates the use of the term "budget" in French finance. During the whole period of the French revolution there was great looseness of control as to the expenses of the government, and, under the first empire, the annual accounts of revenue and expenditure were published in a very inexact and imperfect form. Sometimes, even, the government forgot to have the budget voted by the corps législatif. A simple imperial decree sufficed for the most enormous taxation, and no thought was given to the legitimacy of any expenditure ordered by the same authority.
—On the establishment of the constitutional government in 1814 great changes were made. The budget became the faithful balance-sheet of the debits and credits of the state. Every item of expenditure and of revenue had to be reported to the two chambers. In 1818 parliament returned to the rule of fixing the expenditure of the government, which had been for years determined by the administration. The functions of the receiver charged with the revenues, and the treasurer charged with the expenditures, were consolidated in a single minister. By degrees the budgets were systematized, and in 1831 all their statements were required to be specific, and divided into separate heads. This secured the immense advantage of concentrating any reduction or increase of expenditure upon a definite object or of throwing out any item by refusing to appropriate at all. In 1833 the control of the chambers was extended by ordering the distribution of printed reports of the cour des comptes among the members, and requiring a special act for every expenditure on public works or buildings. In 1850 the payment of any expenditure not directly authorized by law was prohibited, but this restriction was repealed in 1852, and the budget was required to be voted in mass, the law of special divisions being abolished. Much extravagance and increased expenditure resulted.
—In 1862 a reform in the budget, proposed by M. Fould, was legalized, dividing the public expenditures into three categories: 1, the ordinary budget, providing for the necessary and permanent expenses, the execution of the laws, the collection of the revenue, etc.; 2, the departmental budget, or expenditures discharged by taxes imposed by localities; 3, the extraordinary expenses which, without being of absolute necessity, are of public utility. To these has been added by a later act the budget of redemption (sinking fund).
—The court of accounts, under the present French system, is a branch of the civil service charged with reducing to order and system the whole of the public accounts, and submitting them to the legislative chambers with an elaborate report. The minute completeness with which everything is stated in the budget prevents misappropriation of the public moneys, supplies exact information for checking any needless expenditure, and brings the revenue and expenses of successive years into parallel view. showing how far the anticipated income and outgo have been realized. But the French republic has inherited a most expensive system from the second empire; government without control and constant extravagance have entailed the costliest government in Europe, which the enormous debt, the indemnity of a thousand million dollars to Germany, and the military disease which is eating out the substance of so many European peoples, have contributed to maintain.
—The German empire exhibited a budget of 539,252,640 marks for 1880-81 of ordinary expenses, and 72,962,921 marks extraordinary, or a total of only $135,000,000, in which, however, the military expenditure figures for over 90 millions of dollars. Each member of the German confederation has its own separate budget also. The revenue for federal administration is voted by the reichstag under similar general regulations as those which prevail in Prussia. A finance commission is selected from among the members of the reichstag, having charge of the budget in its details.
—The Prussian budget is voted for a calendar year beginning the 1st of January. Amendments to it can be proposed only by the representative body of the diet, where its items are first discussed, before being sent to the house of lords, which can only accept or reject it in mass. In case of disagreement on the budget, the two chambers propose to each other financial bills until they come into accord. This direct agency of the people's representatives in voting on revenue and expenditure dates only from 1848, before which the lower chamber had no control over the finances. But it has sometimes happened that when the diet would not pass the financial bills of the government as offered by the ministry, no account has been made of their refusal. The budgets which were rejected have been published as ordinances, and the people have acquiesced.
—In Austria the second chamber of the reichsrath has the power of fixing the receipts and expenditures. The public debt has grown heavily, especially since the war of 1866, the result of which obliged Austria to cede her rich Italian provinces. A commission of finance, embracing 36 members of the lower house (or one-tenth of the entire chamber), examines the estimates of the budget, and has charge of the bills of supply.
—The budget of the Russian empire was, up to 1863, an unknown quantity. In that year a balance sheet of receipts and expenditures was published, showing a deficit of about 15,000,000 roubles. The financial statements since published have been neither regular nor exact. There being no legislative control whatever (for Russia has no parliament), the enormous expenditure goes on at a rate which strains even the prodigious resources of an empire of 90,000,000 of inhabitants. The Russian budget is prepared by the minister of finance, then subjected to the scrutiny of the committee of council of the empire, and finally it is submitted to the emperor's approval.
—The unification of Italy as a kingdom, while greatly increasing its power and resources, has obliged the new government to expend vast sums in maintaining a great military force. At the same time the development of public works has been entered upon on a grand scale. Notwithstanding numerous and heavy loans, the demands of the treasury have been such that it has been impossible to balance the receipts and expenditures. The annual budget of the ministry is referred in parliament to a commission composed of 30 members of the chamber of deputies and 15 from the senate.
—The Spanish budget must, by the constitution, be voted by the cortes. The ordinary budget represents the produce of the taxes; the extraordinary budget is derived largely from the alienation of the ecclesiastical benefices. The total expenditure for 1880 was $181,647,000.
—The budget of Portugal sets forth continual deficits, the state maintaining its regular expenses only by means of loans and financial expedients.
—In Switzerland there is a federal budget for the whole republic, and as many local budgets as there are cantons. The federal treasury has in its hands the customs, postoffice, the telegraphs, and special imposts. These yield an annual revenue of about $8,000,000. The heaviest charge of the federal budget is that of the military, which amounts to $2,600,000. The general expenses of the government amount to only about $8,000,000 annually, showing Switzerland to be, perhaps, the most economical government in the world. The salaries of the principal officers vary from $800 to $1,200, and every officer is required to be faithful and intelligent. In the cantons of Switzerland the larger part of the budget goes to education and public works, the roads absorbing about 40 per cent. of the taxes raised.
—The Turkish budget has only been made public since 1864, and then only through the persistent demand of the English and French governments. The necessity of continual loans to keep the Ottoman porte going as a government, has also precipitated this publication. The budgets, however, have been denounced as deceitful, all of them exhibiting an excess of receipts over expenditures, while the actual condition of the treasury was a continual deficit.
—In Belgium the budget is voted in the year preceding the expenditure provided for. Deficiencies are met by supplementary credits. Expenses have risen from 87 million francs in 1835, to 386 million francs in 1880. Public works are not provided for in the regular budget, but by special taxes, or more frequently by loans. The budget, when submitted to the chamber of deputies, is distributed among six sections of the members, each corresponding to one of the six ministerial departments, viz., of justice, of foreign affairs, of the interior, of finance, of war and of public works.
—The system of the Netherlands is similar, the upper and lower chambers of the legislature being each divided into five permanent committees, each of which has charge of a specific portion of the budget.
—In Denmark the budget is voted for two years in advance by the diet. Indirect taxes bring in the greater part of the revenue. The very democratic constitution throws the power of appropriations into the hands of the peasants, who form the majority of the lower house. The expenses of education, public communication, etc., are readily voted, but the folksthing keeps a firm hand on the salaries of public functionaries, and rejects many proposed expenditures for fortifications and the increase of the army.
—In Sweden the right of the nation to tax itself is exercised exclusively by the diet. The king is required to submit annually a detailed report on the condition of the finances. The diet appoints three commissioners of finance: the first reports on the financial administration and the public debt; the second brings in the necessary bills for raising revenue, and the third is charged with the regulation of the national bank. Besides the regular appropriations, the diet places at the disposal of the king an extraordinary credit, to be used in the interval of its sessions, only for great emergencies like the national defense, under advice of the council of state.
—Sweden and Norway have each their separate budget, that of the former amounting to about $25,000,000, and that of Norway to about $18,000,000.
A. R. SPOFFORD.
Return to top