It’s a really broken system that no one seems interested in fixing.
If you could hide the budgeting effects from anyone with the ability to 1. start projects or 2. add scope to projects, then it seems like it'd work out just fine.
(Of course, actually doing that would require splitting "planning" roles into separate, almost-adversarial "defining projects + increasing scopes for projects" and "feasibility-analyzing + cost-optimizing + decreasing scope for projects" roles. But that seems like exactly the sort of thing the DHS would be fond of. War-games for the project managers; and separate levers for both kinds of sitting presidents to pull on to satisfy their bases, where building up one capability doesn't tear down the other.)
That's the generous interpretation. There's also the case when project managers deliberately low-ball their project estimates to take advantage of the phenomenon. I'd put that in the trust problem category.
The same dynamic can occur with hedge funds, where the incentive is to increase variance (because high volatility pays the fund managers a lot more on average) or increase risk (example swing for the fences if underwater).
It is a trust problem because organizations generally aren't worried about losing money they don't spend that year or the next. They're worried about never getting it back. When you use a ratchet approach to budgets it doesn't allow organizations to respond to responsibilities which may be cyclical in nature. This leads to permanent worst case thinking which leads to hording.
edit: on the other hand: If I'm going to quit the job next year and I don't like my successor I'm definitely going to cut corners and budget.
We already know the answer to this, on average at least the system will be gamed to put money in their pockets, to overall detriment of service.
A market economy does not really help, that just means you don't have a budget to cut in the first place.
It’s more the opposite, that many people have a strong financial interest in maintaining the system.
