Matthew Yglesias: Ramaswamy likes one of Jimmy Carter’s worst ideas

Somehow a failed good-government initiative from Jimmy Carter’s presidency — “zero-based budgeting” — has become an applause line for Vivek Ramaswamy on the 2024 campaign trail.

So-called zero-based budgeting did not succeed in accomplishing anything in the 1970s, other than waste some people’s time, and it’s not going to accomplish anything if it’s tried again in the 2020s. But its allure to contemporary conservatives is illustrative of several important points.

One is that while private-sector insights can illuminate public-sector problems, the idea of literally managing the government like a business is profoundly impractical, mostly due to this thing called the U.S. Constitution. Another is that while Republicans remain committed in principle to large cuts in federal spending, in practice they cannot articulate a vision for what they want to cut.

No doubt the federal bureaucracy could be more efficient. But it’s well-known where most of the money goes — interest on the debt, national defense, and a handful of big health (Medicare, Medicaid) and income security (Social Security) programs. A case can be made for cutting these programs, but the idea that the budget could be balanced by adopting new business processes is risible.

Zero-based budgeting was formalized, named and branded by Texas Instruments executive Pete Pyrhh in the 1960s.

In the usual budgeting process, managers assume they’ll have the same money next year as they have this year, and only go through the work of documenting spending if they want to ask for more money. This approach simplifies everyone’s life and helps give everyone stable expectations and clarity. A given department might get cut anyway. But that would be an affirmative decision.

With zero-based budgeting, middle management is told that the past is irrelevant, and they have to justify every penny that they plan to spend next year. They can’t just put this year’s office Christmas party in the budget at the same cost as last year. They need to explain anew why it’s important to string blinking lights and how they’ve hit on the optimal budget for them.

The upside of zero-based budgeting is that it’s supposed to impose discipline. And it’s true that “because that’s how we did it last year” is not really a good reason for doing something this year.

The downside is that this budgeting process generates a lot of extra hassle and work. The goal is to identify waste and prevent inertia — but it can be wasteful to relitigate the same disputes about spending priorities every year rather than accepting certain matters as settled.

When the Carter administration decided to implement zero-based budgeting in 1977, the immediate impact was a surge in spending on special management classes to teach mid-level bureaucrats how to do it. Over the long term, the effect was minimal, because the president is not the “boss” of the federal government in the way that a CEO is the boss of a company. It doesn’t matter whether the person running some grant program can make a compelling case to the president for expanding or continuing it, because the president does not have the legal authority to spend more or less than Congress appropriates.

In fact, the appropriations process itself is kind of a zero-based budgeting exercise, in which the government literally ceases to operate unless the relevant actors in Congress can reach an agreement on how much to spend. But what it takes to get an appropriation approved is a political bargain — typically a bipartisan one. Sometimes this means one side gets what they want even if the other side doesn’t think they’re right.

Some countries do have a more hierarchical and top-down budgeting process. UK Prime Minister Rishi Sunak could, perhaps, ask each civil service department to justify its existence and then impose a fiscal package based on his assessment of the merits. But even in a parliamentary system, the more common practice is to have a multiparty coalition (as in Germany) or a minority government (Canada) or even a multiparty minority coalition (Sweden). In those cases, just as in the U.S., spending priorities have to be negotiated.

For Ramaswamy, who is on the political right, complaining about wasteful government spending feels like a right-coded undertaking.

Something also is utopian about the idea that imposing zero-based budgeting on the federal government would make a big difference. Carter’s enthusiasm for this was a fit of technocratic progressive hubris. Ronald Reagan simply saw the government as inherently wasteful, so he wanted less of it. The difference is that Reagan really was willing to tilt at some major programs. But when he tried, he mostly got burned — as did George W. Bush and Donald Trump.

The absurdity of the current field of Republican presidential candidates is this: They are as opposed as ever to higher taxes, but no one wants to run the risk of cutting popular programs, even as they inveigh against high inflation and high interest rates. Ramaswamy’s invocation of zero-based budgeting is his attempt to find a way out of this dilemma. It would be wonderful if it worked. But it’s just not going to.

If you don’t believe me, ask Jimmy Carter.