I will use a simple model of a representative democracy and corresponding budget negotiations. I’m doing this to simplify the arguments and hopefully make them universally applicable.
The parliament is a collection of x MPs (members of parliament) chosen by an electorate in an election every n years.
Every year, the parliament receives a budget proposal (from where is unimportant, POTUS in the US). They can simply approve the budget with a majority vote, or enter negotiations where those who were dissatisfied get together and propose their own budget. The two sides then negotiate and must deliver a proposal to be voted on by a fixed date.
This model fits many western democracies to some extent, but there is a lot of complexity I haven’t mentioned. I hope that I have chosen to emphasize the right elements.
Government shutdowns: The two sides may not be able to reach a majority by the fixed deadline. Consequences here are varied, but rarely good.
Too much power for centrists: Centrists can more credibly threaten to vote with the opposition, and therefore get concessions.
Too little power for extremists/minorities: Extremists have less to bargain with, they can basically only abstain and delay. And the spoiler effect may leave them no option but to vote for the side closest to them ideologically.
Inefficiency on small bipartisan issue (e.g. minting pennies in US): Issue where a large majority has a weak preference and the minority has a strong preference. The minority has an advantage here. Some MPs rely on the minority for support, but nobody relies on the majority on this issue.
Corruption more likely for deciding votes: If the result hinges on the votes of very few MPs, they become attractive targets for bribes.
Status quo bias: Negotiations are costly, and it is therefore easier to keep the status quo than to change it. (The effect of anchoring may also play a role.)
MPs individually allocate one share of government revenue.
Let’s say that the government revenue is $10 trillion and that there are 200 MPs.
Then each MP would be responsible for allocating $10 trillion / 200 = $50 billion as they see fit.
This solves the deadline issue. There are no negotiations.
Budget authority is equally distributed. No-one is disadvantaged.
A passionate minority can only influence decisions by the MPs that rely on them.
No MP is especially attractive to bribe.
Lobbying will become significantly easier. I don’t know if this is good or bad.
Government MPs are more like grantmakers.
It encourages MPs to think independently.
One issue with this approach is the possibility of threatening to make harmful allocation to get concessions from others.
Suppose that Alice doesn’t care about animal welfare, but Bob does.
Alice could threaten to give a subsidy of $100 million to fur farmers, if Bob won’t give her a $500 million concession. Giving the subsidy wouldn’t help Alice at all, but she can gain by threatening it.
Bob might not have something to threaten in return, in which case, he has to concede.
Bad in the extreme (e.g. research grants), but it’s probably good to shift in this direction.
Maybe give funding for multiple years at once.
This is a big flaw (UBI, but only my district!). However, this might not be a problem with a different voting system.
It will probably be important in elections to claim that you funded the most important programs. This might lead to overfunding or rushed decision making.
Probably good. Maybe bad for foreign policy. The leader can make fewer promises, but this has always been a problem for democracies.
May not be as bad as it sounds, but very bad nonetheless. Don’t know what to do about it.
Out of scope for this post, but relevant.
A hybrid system would mostly maintain the disadvantages, while diluting the advantages. A hybrid system would probably be worse than full adoption, but maybe easier to introduce.
The alternative to what I’ve deemed the normal state budgeting process seems to have advantages, but too many downsides to be viable on its own. It would probably need more complicated rules and safeguards to work. State budgeting is in reality a much more complicated process than I’ve described. I’m guessing that many of these steps and procedures are essential for the process to work at all, and I suspect that alternative systems would need to be equally complex.