by Gene Steuerle

Economic Perspective columnist Gene Steuerle applauds the appointment of Alice Rivlin to director of the Office of Management and Budget and offers advice and encouragement for strengthening the role of the OMB in the formation of policy.

Date: Jul. 11, 1-94

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There is little doubt the recent reshuffling of the White House staff was due primarily to concerns about the ways the president was using his time, the flow of information around him, and the types of decisions that were being brought to him. One of the more interesting moves for those concerned with long-term policy development, however, was the promotion of Alice Rivlin to director of the Office of Management and Budget. In my view, the executive branch's ability to develop good policy has been weak for a number of years and has not kept pace with the demands of our modern era. Redressing this problem is possible only with years of effort -- the type not likely to emanate directly from the crisis-type focus within the White House of almost any president. The OMB, however, just might be the place to lead the way, but only if it increases significantly its own capabilities. Alice Rivlin is also one of the few top policy makers who understand the importance of developing the capacity to perform top-notch policy work and not simply to presume that it will be there in the future. I invite her to exercise as much leadership here as is possible.

Over the past three decades, policymaking has moved increasingly to Congress. Congressional staffs have become large and increasingly sophisticated. In no place is this clearer than the Congressional Budget Office, whose own development is due largely to Alice Rivlin's tenure as its first director. As one of the few bipartisan staffs directly serving legislative committees, the CBO has in many ways become preeminent. The information it is now developing dominates the debate over health care.

Some shifting in the balance of power probably was inevitable. The executive branch's power was enhanced through a long period of growth partly in response to the Depression and World War II. The creation of the OMB itself, and its placement in the executive office of the president, enhanced the president's ability to direct the budget process through command of information.

As the CBO and other congressional agencies grew in influence, however, they took on some tasks that the executive branch began to ignore. One of the these was the production of public papers describing and analyzing different policy options. While the executive branch also produces papers, often in response to congressional mandates in legislation, today they usually receive little attention either by policymakers or policy researchers.

Unless accompanying some presidential initiative, the papers of the executive branch are often toothless. Discussions of controversial issues that might contradict any political claim are avoided. In many cases, items not on the president's current agenda also cannot be examined in any depth. The implication is that if the president wanted to make a proposal, he would already have made one, so a study usually shouldn't suggest a proposal that hasn't been made. If he has made a proposal, on the other hand, then the study will take the form of a justification for the proposal already made rather than an analysis of the complex nature of the problem being addressed.

As one consequence, students of government turn increasingly to the congressional branch and not to the executive branch when trying to understand a policy issue. This, too, is misleading, for it is mainly the workers within the executive branch who provide most of the information -- the data files, the internal analyses, the verbal explanation of problems -- on which all the studies are based. The congressional branches, moreover, often are constrained in their own way to present two sides of issues when merit rests mainly with one side or to analyze only the nuances of policies that may be unworkable from a broader perspective. By hiding its information as much as it does, however, the executive branch has weakened its ability to guide the debate, to influence legislation, and to fill in the many gaps in the congressional studies.

Take recent health care legislation as a case in point. When President Clinton first decided to make health care a principal initiative of his administration, the executive branch simply was not prepared. Many of the crucial pieces of information -- data that take years to gather, document, and put into usable form -- had not been developed. There was also no clear-cut place for the health care legislation to be put together, partly because no department or agency had the models or the staff required.

The health care debate would have been just as contentious even with better preparation; many of the issues remain extraordinarily difficult. But there was much time wasted in the process, and many crucial secondary issues still haven't even been touched. Good staff work does not always determine the overall direction of policy, but it is much more likely to ensure that the details are addressed better.

In my view, health care reform is only one example of the type of legislation required in the current era. Recent examples include large budget agreements, tax reform, and past and forthcoming Social Security reform. In each case, a vast array of interrelated decisions must be made. The issues are often crosscutting, involving taxes and expenditures simultaneously. Another modern and increasingly important aspect of recent policy efforts such as health reform is the attempt to pay for some domestic expenditures by a paring of others.

Responsibility for advanced preparation for future reforms of this type must rest primarily with the OMB. White House staff come and go and seldom stay the length of time necessary to carry out long developmental processes. The departments, with the exception of Treasury, generally are too parochial in their concerns. The rewards for such preparation, however, are more likely to enhance decision- making next presidential term than to have any influence for the next couple of years.

Right now, the OMB is not up to this task. Although one of the finer offices in government, it no longer stands at the fore. Education levels generally are higher in places like the CBO or Treasury's Office of Tax Policy. These offices also can run data files and models -- capabilities that the OMB has never developed in any depth. If the OMB decides to remain dependent on other offices for such work, then it must ensure that those offices, in turn, are better staffed. The weakening of staffs in such places as the planning and evaluation offices of Health and Human Services and the Labor Department, however, has left the executive branch vulnerable and unprepared outside of the OMB as well. Even with fuller development of these staffs, it is unclear that they would be able politically to resolve departmental differences with respect to crosscutting issues.

The OMB should not be afraid to fight to strengthen both itself and important allies in preparing for future reforms. Across-the- board cuts in staff sizes is an absurd policy; a smaller executive branch must be leaner by being tougher and more capable in those areas where responsibilities are certain to increase. An OMB for the future, it seems to me, should have much more influence on the development of statistics, increase even further the education levels of its staff, develop internal model capability, and ensure that other necessary research was being conducted within the appropriate departments. It would protect a portion of the staff from fire fighting and ensure that long-term policy issues were not always put on hold, just as it would protect and promote a portion of its staff examining management, not just policy issues. Its capabilities would be tested openly through the issuance of White Papers and analyses of crucial budget and management issues.

I believe that Alice Rivlin would agree with much of this vision, and I strongly encourage her to develop one of her own. This is the right time -- modern policy requires a newer and reinvigorated OMB. The opportunity for internal reform is also greater once the intense focus on campaign promises wanes after the first couple of years of any president. Finally, Dr. Rivlin is one of the few who has a grasp of the future role of the OMB and is now in a position to do something about it.

Gene Steuerle is a senior fellow at the Urban Institute and an economic consultant to Tax Notes.

Tax Analysts Information

Code Section: No Code Section Applicable
Jurisdiction: United States
Index Terms: tax policy
OMB
Author: Steuerle, Gene
Institutional Author: Tax Analysts
Tax Analysts Electronic Citation: 94 TNT 135-42
Cross Reference: