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Formula Budgeting: The Economics and Analytics of Fiscal Policy under Rules

Author/s: 
Eric A. Hanushek
Published Date: 
Fall 1986
Publication: 
Journal of Policy Analysis and Management
Details: 
6(1)
Pages: 
pp. 3-19

The dramatic change in aggregate fiscal policy in recent years has contributed to a shift from process rules to allocation rules in federal budgeting. Although the allocation rules inherent in formula budgeting seem to offer fairness in times of fiscal constraint, they actually impose arbitrary program-level budgets that reflect the peculiarities of baselines, accounting conventions, and time horizons. Formula budgeting also changes the analytical environment, forcing policy analysts to pay greater attention to institutional arrangements.

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