Capital Budgeting by the Federal Government

Abstract

What is a capital budget? Why does the federal government not have one? This paper attempts to address both questions. It explains how capital projects at the federal level are budgeted for on a cash-basis, as is the case for all spending in the unified budget, and why this matters. Specifically, it will consider how well this budgetary treatment leads to an efficient allocation of capital spending, government accountability, and long-term planning. It also examines alternative ways to budget for capital spending that have been proposed, their rationales, and whether they might lead to better outcomes. First, however, this paper turns to define “capital” and how other entities besides the federal government budget for capital projects.