Appetite for Redistribution: Budgeting for All

Eli Zeger maps out a blueprint for a truly decentralized crypto city underpinned by direct democracy

Text Eli Zeger
Published 07 Oct 2022

Two years after the murders of George Floyd and Breonna Taylor, we still hear frequent calls to defund the police. But few people have ever had the chance to hear the second part of that slogan, sometimes uttered aloud but more often treated by activists as tacit: reinvest in the community.

To justify their cause, advocates of defunding the police directed the public’s attention toward municipal budgets. Legislatures in major cities throughout the country had given local police departments more than twice as much funding as housing, transportation, parks, and libraries combined—with police budgets only getting bigger each year. The infographic accounts which propagated these statistics across social media at the height of the Black Lives Matter protests did so with the assumption that the public could see better than the politicians who made them that local budgets were lopsided. The public knew best how to reinvest in itself.

And yet, even though the defund movement lacked faith in government officials, it expected them to be the ones to ratify its agenda. By placing representative democracy at the center of its vision, the movement overlooked alternative forms of democratization more appropriate to fulfilling its stated agenda.

How might the latter part of the defund rallying cry—community reinvestment—reignite our engagement with local democracy and the commons? The Oakland-based Community Democracy Project (CDP) has a slogan: “Your City. Your Budget. Imagine That.” As part of its messaging, the group points out how much public money flows to the police department year after year at the expense of other slices of the pie chart. Their solution to balancing the budget? Not representative democracy, but direct democracy, where citizens legislate binding policy decisions.

More specifically, the CDP wants to scale participatory budgeting (PB), a deliberative process that can be found in major cities like Chicago, Los Angeles, and New York City. PB lets citizens allocate public dollars towards small projects that benefit their community, namely upgrades to libraries, schools, and parks. Except the CDP isn’t asking for citizen control over a portion of Oakland’s annual budget, but all of it.

While the CDP hasn’t used this exact phrase, I categorize their effort, along with any similar efforts from fellow activist coalitions, as Budgeting for All. The premise is non-ideological and speaks to anyone who wants their city to function better. It doesn’t take a liberal or conservative viewpoint to experience the consequences of disorganized cities: the rising cost of living, public transportation that never runs on time, narrow and uneven sidewalks, infrequent garbage collection. It also doesn’t take a liberal or conservative viewpoint to feel the frustration and powerlessness of not knowing how your tax dollars are being spent. The sentiment is simple and agreeable; that doesn’t mean it can’t be transformative.

Appetite for Redistribution

“How are budgets typically made? A guy or a group of guys makes some guesses based on last year’s budget, and that’s it—that’s the budget,” Shari Davis, one of the leading figures in the participatory budgeting space, told the New York Times earlier this year. Can PB put an end to this impersonal, arbitrary style of lawmaking? After all, existing versions of the program are permitted by many of the same “guys” described by Davis.

In cities that offer PB, legislators set aside a portion of the annual budget for what amounts to a miniature citizens' budget. The council members in New York City, home to the most substantial program of its kind in the country, devoted somewhere around 35 million dollars to PBNYC in 2019 (before the program was paused due to COVID-19 the following year). That number, while it may sound generous, came out of an annual budget totaling well over 90 billion dollars.

PB remains a peculiar sort of half-measure. It’s not exactly radical considering its limited scope, but it has nonetheless radicalized many of its participants or restored their faith in democracy at the very least. When citizens are afforded the ability to collaborate on budgetary decisions which are legally binding, studies have shown that they’re more likely to vote in regular election cycles. Beyond that, the opportunity to democratically redistribute public dollars has motivated citizens to prolong their engagement in collective efforts. Participants go on to become organizers for public housing tenant unions and mutual aid networks, the practice of communities pooling resources to reinvest in themselves. The latter, which was especially popular during the Black Lives Matter protests in the summer of 2020, was a microcosm of the defund movement’s implicit goal for more responsible and inclusive budgeting.

However, many defund supporters soon lost sight of this goal and muddled the defund movement’s links with PB via mutual aid. Political commentator Ross Barkan suggests that such a loss of focus was inevitable due to imprecise messaging. “Defund is contested turf and a slogan that must be explained with caveats and footnotes may not be one that can front a movement in the long term,” he writes.

Budgeting for All recenters the movement’s prefigurative budgetary vision, distributing and decentralizing power away from political establishments that seek to circumscribe PB while turning democracy into a tool for members of the public to shape public goods, and hence their material conditions, themselves. This proposal comports with blockchain technology, which promises to readily enable decentralization and common ownership at scale. It would be the most—or rather, the only—equitable manifestation of Web3 thus far in the realm of city policy.

In an essay on crypto cities, Vitalik Buterin describes the utility of blockchains to hold centralized governments accountable, but he fails to raise an eyebrow over how quickly various establishment figures, not simply within but at the very top of centralized local governments, have been to embrace the technology. The mayor of Reno, Nevada wants to sell NFTs to support the local arts scene; the mayor of Miami endorsed the private project CityCoins, which created a special MiamiCoin cryptocurrency for local businesses. These ideas sound pleasant but are ultimately shallow. More than anything, they indicate that the respective mayors plan to treat blockchain as another way to sugarcoat (their own) centralized authority rather than leverage the technology’s ability to facilitate horizontal power structures.

It’s not surprising that many Web3 evangelists share Buterin’s attitude, characterized by the presumption that blockchain is revolutionary in itself and will naturally decentralize whatever institution it touches. This presumption disregards how blockchain conventions can exacerbate pre-existing problems within cities, like how token-weighted voting can further entrench wealth disparities and set the stage for plutocracy.

Budgeting for All is a blueprint for truly decentralized crypto cities because it affirms the public interest in the development of new technology; it is predicated on direct democracy first, the blockchain second. To people learning about Web3 from the angle of leftist critiques, that description will sound alarming despite the populist tenor. The left’s stance is that crypto is terrible because it financializes everything—as if most aspects of our daily lives aren’t financialized already. Take city budgeting, which places a dollar value on every public good. Blockchain presents a pathway to giving the public absolute decision-making power over the already-present financialization of everything around them.

Citizens, legal or otherwise, could use a secure blockchain interface to allocate city-specific stablecoins from an annual budget towards public goods. This implementation of crypto will allow for a more transparent and more seamless transfer of funds throughout the local commons, allowing people to follow the money without the bureaucratic hassle. It will debunk lawmakers’ favorite excuse for inaction whenever they’re faced with public pressure: “The money to do [blank] simply isn’t there.” Is that true? See if the ledger tells a different story.

Citizens, Assemble!

We need to fundamentally change our existing legislatures before changing our entire democratic infrastructure. I’ve previously written about how concepts like quadratic funding and quadratic voting, otherwise limited to the realm of blockchain governance, can innovate “meatspace” democracy by curbing corporate influence on elections and empowering hopefuls who are running grassroots campaigns aligned with the working class.

Quadratic funding is an approach to matching funds wherein a self-adjusting mechanism determines funds according to the frequency of donors, not donations, attracted by someone or something on the ballot. Quadratic voting enables participants to spread out subvotes, or fractions of their individual vote, across multiple ballot items. With these mechanisms in place, voters could give outsized influence to third parties in favor of full-scale participatory budgeting.

Two electoral reforms at the local level can instigate this shift within major cities. The first is public matching funds with quadratic funding. This program rewards candidates who accrue small-dollar donations from their constituents rather than private interest groups. Outsiders who appeal to a wide base of working-class donors will fare better than establishment politicians reliant upon a handful of wealthy residents who can afford to write larger checks.

The program would entice more locals to run for public office, but this would lead to more crowded races and a greater likelihood that candidates will win their races outright with far less than majority support. The workaround, and my second proposed reform, is multi-winner city council elections with quadratic voting. This system differs from ranked-choice voting, in which your vote ultimately goes to one candidate no matter how many you rank on your ballot.

Each ballot comes with a predetermined number of “voice credits” that can be square rooted into subvotes: four voice credits equal two subvotes for a candidate, nine credits equal three subvotes, and so on. A secure online application would relieve voters from manually calculating their usage of voice credits. The diminishing returns of quadratic voting force more careful consideration of the options at hand. Moderate voters could afford to allocate a few subvotes to contenders outside the two-party system, while independents can wager all their subvotes on a third-party bloc of their choice. Outsider candidates would be driven to form coalitions to increase their ground game.

Imagine that citizens take advantage of these two reforms to elect a wave of politicians into their local councils who are dedicated to public goods and public power to the fullest extent—who understand what it means to be public servants in the most literal sense of the word. Based on these principles, the new legislatures’ shared lodestar must be Budgeting for All. Out of necessity, however, they will offer some ground rules for the participatory budgeting process.

Though processes might differ from one city to the next, they should all follow a few specific guidelines. The core fiscal mechanism must be quadratic funding in order to better reflect what public goods and services have majority appeal and urgency. Each person receives a “universal basic allocation” of city-specific stablecoins to spread across budget items; the matching pool consists of the remaining annual budget. In addition, cities should develop their own blockchains secured by proof-of-personhood (PoP) validation that are expressly for Budgeting for All. PoP resolves any concerns related to environmental damage and plutocracy, and members of the public can be hired as validators through sortition, the lottery selection procedure used for jury duty.

The guidelines of Budgeting for All could also draw upon policy ideas that emerged during the Black Lives Matter protests. One of them is a given: using PB to determine the scope of municipal police budgets. Another calls for community control over police departments in the form of boards composed of local citizens chosen via sortition, recycling on an annual basis. However, boards shouldn’t just be appointed to oversee the police; there should be boards for every single public department. Members will still be randomly selected, ensuring that all citizens have a potential stake in each facet of the commons, while countering any accusations of partisan bias or a blatant anti-cop agenda.

Of course, better public spending must address the reality of big business. Major cities are prone to entice large corporations with generous public subsidies, but the positive intention of job creation inevitably translates to low-paying, no-benefit jobs alongside the gentrification of the neighborhoods in which the corporations set up shop. Instead, consumers can be the ones to decide which big businesses receive subsidies, all while keeping free enterprise intact. The catch is progressive taxation. Businesses that would normally be eligible for subsidies would need to pay a substantial “pay-to-play” tax which gets funneled into the matching pool for quadratic funding.

If the big businesses receive a minimum level of funding (to be determined for subsidies) during the PB process, their matching rewards would equal the subsidy. If not, likely because citizens don’t believe the businesses will support their communities, they would be outright barred from setting up shop and the rewards they might’ve garnered would instead go into next year’s budget. Perhaps corporations would campaign to put local customers first by expanding worker representation on their boards or footing the bill for green public housing initiatives.

There are still questions around barriers to participation. Blockchain validators and board members need comfortable salaries; parents, workers, and students need time off from their busy schedules to pore over the budget; everyone needs guaranteed access to broadband. When it comes to deliberating complex policy aspects such as these, citizens’ assemblies have proven to be productive in Colombia, France, India, Mongolia, and many other countries. Applying this model in the United States, city councils can convene locals to hear from lawmakers, organizers, and technologists across diverse perspectives to help fill in the legislative gaps of Budgeting for All. The citizens’ recommendations will then be formalized and instituted. 

An open democratic framework in the spirit of Budgeting for All would make civic engagement feel ordinary again, but at the same time, because of the immediate correlation between interacting with the blockchain and shaping the budget, it would be more consequential than ever before.

Bowling, and BUIDLing, Together

Political commentators are keen to recite how polarized our society is and how isolated we are from each other, often gesturing towards the phenomenon of “bowling alone.” That phrase has its roots in a famous observation from the sociologist Robert D. Putnam. Studying middle-class dynamics during the latter half of the 20th century, Putnam found that more and more Americans preferred to go bowling by themselves as enrollment in organized bowling leagues dropped nationwide. This trend tracked with the sharp decline in the membership sizes of labor unions, church groups, book clubs, and countless other civic organizations which had been imperative to communal bonding, social trust, and political engagement.

Since Putnam first published his analysis in 1995, it has become apparent that the anti-New Deal crusade of Reaganomics was probably to blame for the fragmentation of civic ties. Thanks to a weakened social safety net and heightened economic precarity, Americans were deprived of the ease to gather as they once did. Putnam noted that social isolation correlated with institutional distrust. Millions opted out of voting because they felt disconnected from the establishment politicians who, regardless of whether they had a “D” or “R” next to their names, lacked serious policy ambitions and failed to reflect the ideological diversity and nuances of the public.

An open democratic framework in the spirit of Budgeting for All would make civic engagement feel ordinary again, but at the same time, because of the immediate correlation between interacting with the blockchain and shaping the budget, it would be more consequential than ever before. As for restoring institutional trust, keep in mind that council members would still be around; the difference is that their electability would hinge on their willingness to support the budgeters they now represent. Closed-door legislative sessions would be replaced with open-door assemblies like town halls, perhaps on a daily basis.

There’s reason to suspect that blockchain may take years to evolve past its narrow function of recording crypto transactions. But for the growing faction of Web3 enthusiasts who care more about the “De” than the “Fi”, high on our agenda should be the question of whether local electoral processes can properly distribute power enough for blockchain to step in and streamline community-governed reinvestment. High on America’s agenda should be the question of how to scale these trends in direct and deliberative democracy, thus giving Web3 the opportunity to prove itself a stimulant for civic engagement and trust. Here’s a chance for everyday people to not just go bowling together, but build—or should I say, BUIDL—the bowling alley together from the ground up.

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