Home >> The-science-of-finance >> Administration Of The Tax to Voluntary Aids >> General Conception Respecting Budgets

General Conception Respecting Budgets


As pointed out in the Introductory Chapter to this treatise, the most fruitful source of financial disorder is found in the carelessness and uncertainty likely to attend financial legisla tion; and it is an appropriate task for the Science of Finance to consider somewhat at length those parliamentary rules de signed to render the several steps in financial legislation cer tain and clear, as also those constitutional provisions by which publicity may be secured and responsibility realized. The evils of which complaint is made are, for the most part, beyond the domain of statutory enactment, and consequently the po litical remedy must be relied upon for holding them in check. In order that this remedy may be effective, and that they who vote taxes and legalize appropriations may do so with a just regard to public interest, it is essential that certain general rules of procedure should be laid down before the business of fiscal legislation be entered upon. A consideration of these rules and all that they imply, both historically and analytically, is now entered upon; and, in conformity with accepted nomenclature, is presented under the name of Budgets and Budgetary Legislation.

20. The Meaning of the Word Budget. The origin of the word budget is perhaps of antiquarian rather than scientific interest. " The word budget, bouge, or bougett, according to Pasquier and other ancient authorities, as well as in the old language of Rabelais, is derived from the Latin word bulga, become Gallic, which expressed a bag, a pocket, a purse. Its origin is therefore Latin and French. England has applied it to the great leather bag which for a long time contained the documents presented to Parliament to explain the resources and the wants of the country." The transi tion in the meaning of this word from the bag carried by the treasurer to the documents which the bag contained, and finally to the scheme of rights and rules of procedure which arise in connection with their use, was a most natural one in view of the paramount importance of carefully drawn and detailed -documents for sound financial administration. When in 1803 the word appeared for the first time in French financial no menclature it was used as a substitute for the phrase " esti mates of receipts and expenditures." The desire to substitute this somewhat indefinite word for a definite expression is pos sibly explained by the fact that the phrase " estimates of re ceipts and expenditures " was joined in the minds of the French people to the financial abuses of the ancient regime, while the word budget had been dignified by the role it had played in England in the development of constitutional government. This incident in French financial history should at least suggest to our minds what is undoubtedly true, that the word budget is more comprehensive than a report upon the income and expenditures of the State. An estimate of income and expenditures is possible for the individual or for the sovereign who conceives of the State as a private property; but a public budget, as that phrase is interpreted by modern political development, is impossible except for a people which enjoys, in some degree at least, the constitutional right of placing a limit to public income and of exercising a control over public expenditures.

Without undertaking a formal definition of the word • Cf. Journal of the Statistical Society of London, Vol. XXIX, p. 325.

budget it may be well to consider one or two of its general characteristics as preliminary to a comparative study of the several forms which budgets have assumed among various peoples. In its formative stage the budget is a report upon a nation's finances designed primarily to show to the legislator the condition of the public treasury and the fiscal needs of the State. This is true whether the government in question be imperial or democratic. If imperial the report will be made by the monarch in his capacity as administrator to himself in his capacity as legislator; if democratic it will be made by the administrative to the legislative department of govern ment. The aim of this report is to give information to the legislative body, and this fact determines many of the technical questions which arise respecting it.

The budget regarded as a report for the information of the legislature will cover at least twice the fiscal period; that is to say, it will contain a statement of the results of the opera tion of fiscal laws during the period closed, and an estimate of what reasonably may be expected during the period to come. These two parts of the budget are sometimes called the executed and the estimated budgets. The former enables the legislator to determine the adequacy of existing fiscal laws, and to judge of the efficiency and economy of those who ad minister them; the latter is made the basis of current legis lation.

If in its first stage the budget is a report, in its second stage it becomes a project of law. The conversion of the re port into a legislative bill is a process respecting which one can make no very definite statement except the political conditions and parliamentary methods of some particular people be held in mind. Nor is this the point that should claim the atten tion of the student. The essential fact is that a report upon past fiscal operations must precede new fiscal legislation.

The comprehensive nature of budgets, however, is not sug gested by regarding them either as a report or as a project of law; they must be conceived as a part of the political ma chinery essential to the realization of the ideal of popular government before their dignity and importance can be adequately appreciated. Inasmuch as the avowed purpose of budgets is to secure care and economy in fiscal legislation, so far as that is dependent on an orderly method of procedure, it follows that a comprehensive study of budgets will embrace a consideration of those parliamentary rules and laws of ad ministration designed to further this end. This being the case, the study of the budget comes to be a study of adminis trative and parliamentary organization and procedure; and since this in turn is dependent on the fundamental organiza tion of states, it will be necessary to make frequent references for the purpose of explanation and argument to the accepted principles of constitutional government regarded as an ideal, and to the peculiar requirements of the constitutional pro visions of particular peoples by which that ideal is worked out. Here, indeed, is the starting-point, historically as well as analytically, for an investigation into budgets and budgetary legislation.

21. The Relation of Budgets to Constitutional Govern ment. The relation between budgetary regulations and the ideal of personal rights and social relations underlying popu lar government is a very close one. Budgets, indeed, are one of the most important means through which those ideals are realized in public administration. It is an old saying that political power lies with whomsoever holds the public purse, and it is the first lesson of history that the struggle for constitutional government has, in large measure, been confined to the question of control over fiscal affairs. It may be well to refer to a few familiar instances which illustrate this point.

(1) General Considerations. As early as 1215 in England it was asserted as an ancient right that the king could not demand payment or service from his subjects in an arbitrary manner. The twelfth article of the Magna Charts reads as follows : " No scutage or aid shall be imposed in the king dom, unless by the Common Council of the realm, except for the purpose of ransoming the king's person, making his first born son a knight, and marrying his eldest daughter once, and the aids for these purposes shall be reasonable in amount." By the fourteenth article, in case a general council is deemed necessary to take into consideration the question of aids, the king is bound to issue a formal summons to those who have a right to meet in council, and to state in the summons the cause for which the council is convened. In these articles may be found an assertion of an ancient right: that without the consent of the subjects no imposts could be levied. This assertion doubtless bore a very different meaning in the thir teenth century from its interpretation under modern political conditions, but it shows that the principle of control over government through control over the sources of revenue is a very ancient one.

As bearing upon this point Creasy says : " Among au the nations of the Gothic stock, whether of its Scandinavian or of its Teutonic branch, and in all the kingdoms founded by them out of conquered Roman provinces, councils or assemblies of some form existed, whose consent the ruling chief was bound to obtain in order to legalize all important measures of State. We have already drawn attention to the assemblies of the principes, and the general assemblies of freemen among the primitive Germans, and to the Tings of the primitive Danes. The student may also here usefully refer to what has been said respecting the witenagemotes of the Anglo Saxons. At least he must bear in mind that it was only with the sanction of this witan that an Anglo-Saxon king could make new laws or impose new taxes; that the prelates and the great nobles and thanes attended these assemblies; and that the inferior class, the ceorls, though not directly repre sented there, yet were not without protectors and advocates, inasmuch as certain of the magistrates whom the men of every borough and township regularly elected from among them selves for the purpose of local self-government might be pre sent at the witan for the purpose of obtaining redress for any wrong which might have been committed, and for the redress of which the ordinary tribunals were inadequate. When once present at the witan, though ostensibly only for the purpose of remedial justice, the ceorl magistrates must have had some influence in other matters also, inasmuch as the cheerful co operation of the bulk of the community in carrying any par ticular measure into effect never can be thought immaterial, even by those who have the power of enforcing sullen obedience. The Anglo-Saxon polity was overthrown by the conquering Normans; but the recollection of this virtual though indirect system of representation must have survived among the bulk of the population, and may have greatly facilitated the adoption and insured the good working of the subsequent parliamentary representation of the commons." In France as well as in England appeal was made to the same principle as a principle of ancient establishment. In 1787 the right of control by the people over revenue in France was declared to be one of the " primitive laws of the State." In an address by the President of the Parliament of Paris to the king are found the following words : " The con stitutional principle of the French monarchy is that all im posts should be consented to by those who are called upon to support them. It is not, sire, in the heart of a beneficent king to alter this principle which holds to the primitive laws of your State. . . . If your Parliament has for many years believed that it was able to answer for the obedience of the people in matters of impost it has more frequently consulted its zeal than its power." The great charter of Holland, also, the origin of which, according to Beaulieu, " is lost in the night of time," imposed upon the executive the duty of coming in person before the assembly should he desire a grant of money. Many other citations might be made in evidence of the antiquity and universality among all peoples of Western civilization of this fundamental principle which, historically at least, must be re garded as the basis of all budgetary legislation.

The relation of fiscal affairs to the development of consti tutional government appears most clearly in connection with the later history of the English people. After the downfall of feudalism, and the consequent political enfranchisement of the great body of the people, a struggle arose between the sovereign, who claimed exclusive privileges, and the com mons, who claimed to represent the people. It was the principle of democracy arrayed against the principle of monarchy; and as the feudal lords on the occasion of the Great Charter asserted as a primitive right the right of con senting to supplies, so now the representatives of the nation asserted as an inheritance of the past this same primitive right. The struggle between the commons and the crown is too familiar a chapter of history to warrant our dwelling at this time upon the events which it narrates. The result of that struggle was a concession to the commons of the right of control over the source of public supplies.

Speaking, then, historically and for peoples whose govern ments recognise constitutional limitations, the budget is not merely a report from the administrator to the legislature upon the finances of the country, but it involves a constitutional right that such a report shall be made in order that the people may control the finances of the nation. Indeed, the extent to which this right is recognised may be regarded as one of the surest indications of the degree to which popular government is developed. The fundamental law of every State which pretends to enter upon a constitutional regime contains some specific mention respecting the fiscal rights of the people, or of the popular legislative branch which is corn monly accepted as representing in a peculiar manner the in terests of the people; and as preliminary to the further study of budgets it may be well to consider briefly the form in which these rights are expressed.

(2) Basis of Budget Right in England. In England the constitutional fiscal rights of the House of Commons are three and as follows : First. The right of consenting to the imposition of taxes, of raising the rate of existing taxes, or of the renewal of pe riodic taxes.

Second. The right of consenting to public loans in every case.

Third. The right of consenting to expenditures; that is, of making specific grants for specific purposes, and of limiting such grants to a specific time. Such is the legal basis of the English budget.

(3) Basis of Budget Right in France. Since the Revolution of 1787 the French people have lived under eighteen different constitutions; all of them, however, recognise the right of the representatives of the people to control fiscal affairs. Al though the form of government in France may still be re garded as a political question, the lesson of absolutism seems to have been thoroughly learned, and all the constitutions of the present century have been in substantial conformity with the principles laid down in the Constitution of 1787, so far as questions of fiscal right and procedure are concerned.

This principle was also asserted in the Declaration of Rights. In Art. XIV, sec 9, of that Declaration may be found the following : " All citizens have the right of proving either by themselves or their representatives the necessities of public contributions, to consent to them freely, to scrutinize their employment, to determine their amount, their assessment, their collection, and their duration." The Constitution of 1789 had three statements which may be accepted as the basis of the French budgetary system : First. It is stated in section 5 that no tax, impost, charge, duty, or subsidy can be established without the free consent of the representatives of the nation.

Second. It is stated in Article VI that the representa tives of the nation ought to hold surveillance over the em ployment of subsidies. In consequence the administration -ought to render a strict account to them.

Third. It is stated in Article VII that the ministers and the other agents of royal authority are responsible for every in fraction which they commit against the laws, whatever may be the order they have received.

(4) Basis of Budget Right in Germany. It lies in the theory of the German Government that the representatives of the people should control expenditures, although the machinery for working out that control is not as yet fully developed. The principle finds expression in the Prussian Constitution of 185o, which grants in a definite manner to the representa tives of the country the right to control through their vote public receipts and public expenditures. and German publicists are fond of narrating the following incident as proof of the loyalty with which this constitutional provision is regarded. In 1862, a plan for reorganizing the army having been sub mitted, the deputies of the Prussian Landtag refused to make an appropriation for carrying out the proposed reorganization. Without narrating the incident in detail, or reviewing the arguments by which the measure was urged, it is sufficient to say that the reorganization of the army was carried through without the consent of the representatives of the people. The question was a matter of controversy for several years. When, however, in 1866 the battle of Sadowa demon strated the merit of the reforms in the military by the victory of Prussia over Austria, and the Prussian people in conse quence were well disposed toward the government, the king of Prussia asked the pardon of the deputies for his illegal act. " The public expenses made during this period," said the king, " were without legal sanction," and he requested of the Landtag a vote to legalize what the government had thought it wise to do. It would be foolish to grant to this incident all the significance which the German publicists as sert for it, but it at least shows that the constitutional lawyers of the Prussian kingdom did not regard success an adequate sanction for the fracture of a clearly expressed constitutional provision.

In the Constitution of the German Empire adopted in 1871 the following articles are to be observed as bearing upon the legalization of financial measures.

Article 69 affirms that " all income and expenditure of the empire must each year be estimated and brought into the imperial accounts." This, it will be noticed, does not state that all income and expenditure must be voted each year, but that the budget, so far as it is a report, must be comprehen sive and complete. Article 70 defines the sources of im perial income. Article 71 states that common expenditures must, as a rule, be agreed to (brwilligt) each year, although in certain cases a grant extending for a longer period may be allowed. Article 72 imposes upon the Imperial Chancellor the duty of laying before the Bundesrath and Reichstag an annual statement respecting the expenditure of the imperial income.

These articles, like all constitutional provisions, bear the meaning placed upon them by the laws passed to secure their enforcement, but a casual reading must give rise to the impression that the influcnce of the people upon the general policy of government by means of their control over income and expenditure through the popular branch of the govern ment—that is to say, the Reichstag—is much less direct than in the case of England or France; and this impression will be strengthened when the nature of that influence is sub jected to a more careful analysis. No special provisions are made for the enactment of financial laws, these being re garded in all particulars in the same manner as other legis lative enactments, and subject to 'the general rules which control the exercise of legislative power. Indeed, it is a significant fact that the articles of the Constitution referred to above, and which may be regarded as providing the basis of German budgetary legislation, pertain primarily to matters of administration rather than to questions of fundamental right. The " agreeing " to appropriations provided for in Article 71 is, from the constitutional point of view, an essen tially different act from the consent of the House of Com mons in the case of English fiscal legislation, as will be seen when the effect of a failure to agree, or to consent, to pro posed governmental measures in the two countries is con sidered.

It should be noted further that the Constitution itself is regarded as complementary to the fundamental provisions of the established institutions of the land, and must be inter preted in the light of its relation to these institutions. When, for example, in Article 7!, it is asserted that common expendi tures should be agreed to each year, the words do not quite mean what they seem to imply. German jurists assert that the power of the Reichstag to withhold supplies is limited by the established institutions and principles of the empire. Thus the Reichstag cannot deny those supplies essential to the carrying on of the government. Expenditures are divided into two classes : first, those which can be withheld, or " op tional expenditures "; and second, those which cannot be withheld, or " necessary expenditures." For all supplies of this second class—that is to say, those necessary for the main tenance of the established governmental institutions—the con current vote of the Bundesrath is necessary before they can be legally withheld. It thus appears that the popular branch of the legislature has at most a veto power upon expenditures, and this veto power is limited in its exercise. The German Empire is doubtless a constitutional government, but it is not a popular parliamentary government in the sense in which that phrase is commonly understood; and the budget as a means of exercising control over governmental policies is, in Germany, in a decidedly rudimentary state.

(5) Basis of Budget Right in the United States. The funda mental law of the United States upon financial matters, as, indeed, upon all others, is found in the constitutions of the Federal Government and of the several States; and it may be said of all these constitutions that it is their aim to secure to the people absolute control over income and expenditure, and in this manner to guarantee to them supreme influence over governmental policies. Omitting from consideration the constitutions of the several States, there may be found in the Federal Constitution four provisions designed to accomplish this end.

First. In Article I, sec. 8, clause X2, it is stated that " no appropriation of money [for the support of armies] shall be for a longer term than two years." In view of the use to which standing armies were put in the eighteenth century, and of the practice, more or less prevalent, of employing mer cenaries for the purpose of military service, and, further, in view of the popular jealousy with which a strong central au thority was regarded at the time the Constitution was adopted, it is not strange that this provision should have found place in the fundamental law of the land. Whether or not this clause would be inserted in the Constitution were that instrument in process of formation to-day is a question respecting which there may be some difference of opinion. There are, however, many who, in view of current events, profess, even at the present time, to regard this clause as of paramount impor tance to the realization of popular government.

Second. In Article I, sec. 9, clause 7, it is asserted that " no money shall be drawn from the treasury but in con sequence of appropriations made by law," a provision designed to impose responsibility for expenditures upon Congress, and to provide against any encroachment by the executive upon the rights and prerogatives of the people.

Third. It is further asserted in the same article that a "regu lar statement and account of the receipts and the expenditures of all public money shall be published from time to time." In this clause is found the constitutional necessity for a re port, which, as already stated, is the first form in which a budget makes its appearance, the demand for which by the representatives of the people was, as a matter of historical record, the first step toward the realization of popular govern ment. It is interesting to notice that the phrase " from time to time " was never interpreted to mean an annual report until i800, and that so long as the Federalist party was in control of government the question as to the nature of these reports from the Treasury Department to Congress was con tinually in dispute. In that year, however, largely through the influence of Albert Gallatin, a law was passed which provided for an annual report. By this law the provi sion of the Constitution referred to was given effect, and its result has been, what was undoubtedly the purpose of the framers of the Constitution, to increase the importance of the legislative body in matters of public policy by giving to it absolute control over all questions of income and expendi lure. " The law undoubtedly increased the power of Con gress over money matters, and this power was still further increased by the creation of a House Committee of Ways and Means, with well-defined duties and privileges. From this time on the control of the Secretary of the Treasury grew weaker and weaker, until finally the House, through the Com mittee of Ways and Means, became the sole judge of all kinds of budgetary legislation. Occasionally there was a Secretary who, by superior force of character, so imbued the House with a belief in his ability to manage the finances that his plans were accepted almost without question; but as a general -rule the chairman of the Ways and Means Committee had far greater influence than the Secretary of the Treasury in the preparation of financial measures." Fourth. The fourth provision of the Constitution which presents itself in seeking for the legal basis of the American budget relates to the origin of revenue bills. In Article I, sec. 7, clause i, it is asserted that " all bills for raising revenues shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other bills." So far as formal expression is concerned, this is an unique feature of the Constitution of the United States and of those constitutions modelled upon it, although the end which it aims to secure is recognised by all peoples who en deavour to realize popular government. The minutes of the convention which framed the Constitution do not indicate that this provision was regarded as of very great importance. considered it the most convenient ground on which to base a compromise, others thought it necessary in order to secure the adoption of the Constitution by the people, while there were a few who were either in favour of it because of a firm belief in the principle or were opposed to it because of an equally firm disbelief in the wisdom of such a provision.

" It was, however, of very little importance that the ma jority of the framers of the Constitution did not regard the restriction of the origination of money bills to the House of Representatives as a great constitutional principle, for the people did regard it as such, and Gerry was right when he said that the presence or absence of such a provision would have much to do with the acceptance of the Constitution by the people. That this provision has come to be regarded as a constitutional principle is clearly shown by the fact that many of the State constitutions which have been either altered or adopted since 1787 contain sections al most, and in many cases exactly, similar to Art. I, sec. 7, of the Constitution of the United States. It cannot be said that the principle of the English Constitution in this matter was accepted by the constitutional convention and therefore placed in our form of government. But once placed there it was accepted by the people as what they were pleased to call " a self-evident truth "; and it has been believed by the American people ever since the adoption of the Constitu tion that the people, through their representatives, should control the extent and purpose of taxation." From the above summary it is evident that 'budgets rest upon the fundamental law of states, and assume an impor tance in proportion as the people or their representatives con sciously aim at control over public policies. The treasury is the heart of the State. " Money is the vital principle of the body politic." He who controls the finances of the State controls the nation's policy. Constitutionalism is the idea, budgets are the means by which that idea is realized. Not until the proprietary conception of government shall again attain supremacy, as was the case under the absolutism of the French monarchy, will the question of budgets and budgetary legislation cease to bear a popular as well as a scientific in terest.

people, government, budget, constitutional and control