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Budget directly effects housing quality, housing quality directly effects happiness and thus approval ratings
There's rarely a reason to go above the default (unless you need a temporary boost during the year before an election, or you just happen to be super wealthy), but if you were going to try and lower the budget to save money, you might as well have not bought any new/upgraded housing at all and leave everyone in the cheapest building or even in shacks (and just deal with the rebels that will cause)