The Deficit Commission and Enactment Strategies

For Discussion- Should Public Commissions include concrete implementation strategies in their reports as David Brooks alleges below;

The report from the chairmen lists some of the best ways to raise revenue and cut spending. But it comes with no enactment strategy. In this climate, asking politicians to end the mortgage deduction and tax employer health care plans and raise capital gains taxes and cut benefits for affluent seniors is like asking them to jump on a buzzing sack full of live grenades. They won’t do it.

Related:
Deficit commission leaders are not addressing the root causes of the long-term deficit

The PowerPoint

So, About That Deficit Commission ...

Tax revenues capped at 21% of GDP

The deficit commission report
Mankiw is happy, Krugman and DeLong are upset.

Panel Seeks Social Security Cuts and Higher Taxes

The deficit commission’s plan

Korea Fact of the Day

Korean household debt has reached 148 percent of disposable income, high by emerging market standards.

The debt of the Korean households reached 82 percent of GDP in 2007

Assorted Technical Assistance- ADB

Nepal: Knowledge Transfer for Public Procurement

Bhutan- Strengthening the Debt Management Capacity of the Department of Aid and Debt Management-Undisbursed $6,672;

• A debt policy. The TA final report produced a “borrowing policy and strategy.” It includes a framework for government borrowing, recommended borrowing ceiling and parameters, an on-lend policy, and guidelines on the use of guarantees. Despite the delivered output, it took additional Government efforts to finalize the debt policy, which was drafted independently by the Government after the TA completion. Nonetheless, the exposure from the consultants’ preparation of the “borrowing policy and strategy” was helpful to the DADM staff in finalizing the debt policy. In 2008, the debt policy is in the process of being mainstreamed into the decision-making process. This TA output was therefore relevant but not sufficient, as well as less effective.

A loan procedures and regulations manual. A brief loan manual was prepared under the TA. The manual described government borrowing cycle and the responsible agency functions. MOF used such information to produce the Standards Operating Procedures (SOP). SOP is in use and effective. However, this TA component did not contribute to the more comprehensive “Aid and Debt Management Manual” because of government reorganization that separated aid and debt management functions. Therefore, the Government was unable to produce a combined manual. Under such a circumstance, this TA output was still relevant, effective, and sustainable.

• A complete and consolidated database on all loans and grants. Procurement and installation of the database were the largest TA component. In early 2006, the CS-DRMS for loan and grant recording was procured. Significant efforts were made by ADB to reduce the price for a non-Commonwealth member. As a result, the system procured was cost effective and suitable in the Bhutanese context. The system has been essential for the country’s debt policy management and formulation. This TA output was highly relevant, highly effective, and most likely sustainable.

• Strengthened debt management capacity of public debt management staff. Continuous ADB TA support from 2003 to DADM delivered concrete results in strengthened debt management capacity. Six DADM staff members have been trained and are now proficient in using the CS-DRMS. All six are still with DMD, and the developed capacity is retained. Because of the complex nature of the software system, DMD staff requires continuous support to use the new database. This TA output was highly relevant, highly effective, efficient, and most likely sustainable.

• Timely feedback provided in the form of descriptive and analytical reports to other user departments of the Government and aid agencies. The information generated by CS-DRMS provides descriptive and analytical reports to line ministries. Such reports helped MOF formulate critical decisions in macroeconomic management and development planning. This TA output was highly relevant, effective, efficient, and sustainable.

Major Lessons
The TA completion was delayed because the TA design did not foresee the extended time required for software procurement and launch. The selection of a suitable system, especially fitting the Bhutanese context was time consuming. The Government conducted exhaustive reviews, including country site visits, and extensive negotiation of the price. Database conversation from original Excel sheets to the CS-DRMS also took longer time than originally planned. The extensive time on software procurement and launch therefore affected some remaining TA outputs. These issues need to be taken into consideration for the subsequent TA design and implementation.

Capacity Building for Fiscal Reforms in Sikkim- Undisbursed-$183,889;

Overall Assessment and Rating: The TA was successful in introducing VAT in the State, and designing a fiscal consolidation program in conjunction with capacity building trainings in several areas (see the previous section). The consulting firm was selected under the Quality and Cost Based Selection Process (QCBS) at a significantly lower cost than anticipated during TA processing. Thus, the objective of the TA was accomplished without utilizing the entire amount of the original TA budget. The proposed overall rating of the TA is successful

Major Lessons: Sustaining the capacity building effort in a small state like Sikkim is a difficult challenge. The follow-up actions are often not pursued after the period of assistance. In such a situation, designs of the capacity building initiatives become very crucial. The capacity building process needs to be completed within the TA period so that the desired sector outputs could be achieved without immediate follow-up actions. For example, the VAT manual and the VAT rules were designed under the TA, and adequate training was provided to the concerned staff. In other words, the desired output was not exposed to exogenous risks in terms of Government’s commitment for training.