Finance

Question 1
Public finance and business finance are different. Although public finance may borrow tools and concepts from private finance, they are often

applied in different ways and for different reasons. Citing the text, explain how and why public and private finance are different. In your

response, highlight the different types of goods each sector provides and include examples. Please use information from Mikesell, John. Fiscal

Administration book if possible.
Please provide references

Question 2 (please use case-1 below to answer this question.
As a public manager, it is important to be well versed in the strategies used to maintain and increase agency budgets. Read Case 2-1 in your

text and provide a response addressing the following issues: First, identify the budget strategies from the text used by Weinberger. Is there a

common logic running through them, or is each independent of the others? Also consider to what extent these strategies would be transferable

outside the national defense budget, as well as how successful they may be in a different, more peaceful time.
Please provide references

Question 1

Public finance and business finance are different. Although public finance may borrow tools and concepts from private finance, they are often

applied in different ways and for different reasons. Citing the text, explain how and why public and private finance are different. In your

response, highlight the different types of goods each sector provides and include examples. Please use information from Mikesell, John. Fiscal

Administration book if possible.

Please provide references

Question 2 (please use case-1 below to answer this question.

As a public manager, it is important to be well versed in the strategies used to maintain and increase agency budgets. Read Case 2-1 in your

text and provide a response addressing the following issues: First, identify the budget strategies from the text used by Weinberger. Is there a

common logic running through them, or is each independent of the others? Also consider to what extent these strategies would be transferable

outside the national defense budget, as well as how successful they may be in a different, more peaceful time.

Please provide references

CASES2-1

CASE 2–1 Strategies in Defense of the Defense Budget

Once the budget justifications and numbers have been prepared, agencies face the task of marketing the package to the legislature. Conditions

vary from year to year; the tactics applicable in one session may not be at all appropriate in the next. The changing approaches are described

in the following review of strategies used by Secretary of Defense Caspar Weinberger in selling the budget for fiscal years 1982 through 1986.

Recall that these years were the ones immediately before the collapse of the Soviet Union and the defense build up may have been instrumental in

ending the Cold War.

Consider These Questions

Identify the budget strategies Weinberger used. Is there a common logic running through them, or is each independent of the others?
Would the strategies he used be applicable to the post–Cold War environment? Would the current secretary of defense be able to learn

anything by reviewing Weinberger’s script? How has the war on terrorism changed the budget environment?
To what extent would these strategies be transferable outside the national defense budget?
Use the historical statistics section of the most recent federal budget to trace the pattern of defense outlays and budget authority from

1980 through 1989. What pattern do you identify? Compare the patterns there with comparable data for 2000 to the present.

Weinberger Finds His Well-Worn Strategies Always Succeed in Blunting Defense Budget

By Tim Carrington

Washington—Defense Secretary Caspar Weinberger has privately referred to his campaign for a bigger defense budget as Kabuki, a highly ritualized

Japanese art form in which all movements are tightly choreographed in advance. Despite the furor surrounding the Reagan administration’s push to

add $29 billion to the military budget for the next fiscal year, many aspects of the contest seem to follow a set script. And after four years

in the fray, the tireless Mr. Weinberger is nothing if not well-rehearsed. Since President Reagan launched his military buildup, Congress has

provided the Pentagon with about 95 percent of the spendingauthority it has sought. A look at the defense budget debate over the past four years

bears out Mr. Weinberger’s observations that it’s less a political brawl than one of Washington’s most stylized dramas. And the past could well

foreshadow what happens this year.

1982

In March 1981, Congress granted the Pentagon a startling 20 percent increase, bringing its budget for fiscal 1982 to $216.5 billion, just below

the $222 billion the administration sought. However, five months later, Mr. Weinberger faced dissent from within the Reagan administration.

David Stockman, director of the Office of Management and Budget, proposed rescinding part of that increase and scaling back the projected

military expansion for future years. The budget chief had just learned that the fiscal 1982 federal budget deficit was likely to rise to $62.6

billion, small in relation to today’s deficits of more than $200 billion, but for that time a record. Mr. Stockman recognized that Mr. Reagan’s

goal of showing a balanced budget by 1984 was in jeopardy, and he considered the defense buildup part of the program. In staving off Mr.

Stockman’s assault on the planned buildup, Mr. Weinberger turned to a tactic for which he has since become famous, the chart and easel. The

defense secretary’s charts, presented in a meeting with the president, showed large soldiers bearing large weapons, which were labeled “Reagan

budget.” They towered above small soldiers with small weapons labeled “OMB budget.” President Reagan went along with the “Reagan budget.”

1983

In preparing the fiscal 1983 plan, Mr. Weinberger was again confronted with the budget-slashing demands of Mr. Stockman. The defense chief had

many allies within the administration but by now government officials began to refer to the hegemony of the “majority of two,” Mr. Weinberger

and President Reagan. With unwavering White House support, the defense secretary shot down an OMB attempt to chop $20 billion from the proposed

defense budget, then offered an unusual set of cuts himself. In what became a recurring feature of the budget process, the Pentagon stripped

billions from its budget simply by adjusting the inflation assumptions. Weapons programs remained intact.

In defending the budget on Capitol Hill, Mr. Weinberger emphasized “the Soviet threat” and insisted that economic and fiscal concerns shouldn’t

influence the Pentagon’s spending. But deficit concerns were mounting nonetheless and world financial markets were unusually jittery. When the

administration sought $257 billion for defense in fiscal 1983, Rep. Joseph Addabbo (D-N.Y.), chairman of the defense appropriations

subcommittee, declared that defense is not sacrosanct in the deficit-cutting effort. In the Senate, Chairman Pete Domenici (R-N.M.) opened

Budget Committee hearings with the declaration that “the hemorrhage of the budget deficit must be alleviated.” The committee pressed Secretary

Weinberger to suggest modest cuts from the proposed Pentagon budget, but the secretary refused. He said he hoped Congress wouldn’t be “unwise

enough” to reduce the budget request at all. Congress, while hammeringaway at the Pentagon to offer up cuts was loath to impose its own set of

reductions. When the face-off ended, Congress gave the Pentagon budget authority of $245 billion, $12 billion less than the $25 billion the

administration asked for but still 13 percent, or $29 billion, more than it got the previous year.

1984

Preparations of the defense budget for fiscal 1984 brought another confrontation with Mr. Stockman, who demanded that Mr. Weinberger take $11

billion out of his planned $284.7 billion budget. The Pentagon, expert at protecting weapons programs through what observers call “cut

insurance,” was ready to meet these demands almost painlessly. Inflation assumptions were lowered, fuel-price calculations adjusted, and some

military-construction projects postponed. In addition, a planned pay increase was dropped. In presenting a new budget request for $273.4

billion, Mr. Weinberger declared: “We have reached the bone.” Many legislators expressed outrage at Mr. Weinberger’s refusal to consider other

cuts despite mounting economic worries over the government’s budget deficit. Sen. Don Riegle, a Democrat from badly pressed Michigan, asserted

that the United States had a defense secretary “whose basic judgment is dangerous to our country.” Mr. Weinberger replied: “You have

accomplished your principal purpose, which is to launch a demagogic attack on me in time for the afternoon and evening editions.” The debate had

become more rancorous, but the Pentagon’s tactics still produced results. When the war of words ended, Congress granted the Pentagon 93 percent

of the spending authority it sought—a $262.2 billion budget, up 8 percent, or $20.2 billion from the previous year.

1985

Deficit-reduction efforts in early 1984 centered on making a “down payment” against the deficit in fiscal 1985. After another skirmish with Mr.

Stockman, Mr. Weinberger agreed to seek a 15 percent increase that would bring the Pentagon’s spending authority to $305 billion. House

Democrats assailed the plan, but as in the past, they wanted Mr. Weinberger to suggest the cuts, rather than slash on their own initiative

politically popular military programs in an election year. Mr. Weinberger refused, saying: “We need it all.” Congress didn’t give him the full

$305 billion he sought but again provided 93 percent of that; it approved a fiscal 1985 military budget of $284.7 billion, up 7 percent, or

$19.5 billion, from the previous year.

1986

The contest over the fiscal 1986 budget is following the pattern of early years. Mr. Weinberger called for a 13 percent increase in a budget he

said had been “scrubbed” down to the basics. After Mr. Stockman’s demands for cuts gathered support from other cabinet members, Mr. Weinberger

made accounting adjustments to produce $6.2 billion in reductions. Further cuts? Mr. Weinberger asserts that the budget he presented is the

“bare minimum.” When pushed to suggest some cuts, Mr. WeinChapterberger recently resorted to what’s called “the Washington Monument strategy”—

for “cut my budget and I’ll close the Washington Monument” (or something equally visible). During Senate hearings, the defense secretary warned

that if Congress cuts the Pentagon budget, there would be a slowdown in the B-1 bomber project, elimination of two Trident submarines, and

cancellation of a multiple-launch rocket system—all considered high-priority programs. Some participants say the ritual is getting tiring. “It’s

the same Kabuki dance,” says one Senate Budget Committee aide, “but Domenici is getting extremely frustrated with it.”

Mikesell, John. Fiscal Administration (Page 91- Page 94). Cengage Textbook. Kindle Edition.

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