From analyst to negotiator: The OMB's new role

Dramatic changes in the executive and legislative budget processes over the last ten years have elevated the Office of Management and Budget (OMB) to a new position of power and importance. Within the executive branch the budget process has become more highly centralized in the president's office; and within the Congress a similar centralization has occurred. In both branches the OMB has become the key institution for coordinating the actions of the budget-making powers. At the same time, the much-discussed “iron triangles” explored by analysts of the budgetary system have lost much of their power to control the process. Although the OMB's active involvement in the congressional budget process diminished in 1983, the institutional relationships necessary for a more centralized budget process remain and can be reactivated to deal with the predicted enormous deficits.     

Games presidents do and do not play: Presidential circumvention of the executive branch budget process

The federal executive budgetary process has been severely criticized in recent years for its apparent inability to curb budgetary growth and limit deficits. Much of this criticism ignores the essentially political, rather than administrative, causes of these trends. Budgetary growth and deficit spending may be viewed in part as the results of presidential circumvention of budgetary and fiscal policy processes. Circumvention consists of the movement of spending decisions out of the annual review and evaluation of current-year budgetary formulation, thus evading the constraints frequently imposed by budgetary and fiscal policies. The precise mechanisms of presidential circumvention have changed over time. However, the long-term impact of circumvention has been a reduction in the controllability and comprehensiveness of the annual federal budget, as well as higher rates of budgetary growth.An earlier version of this paper was presented at the meetings of the American Political Science Association, September 1–4, 1983. We would like to thank George Downs, William Lammers, Harold Seidman, and James Sundquist for useful comments and discussion.     

The influence of the gramm-rudman-hollings act on federal budgetary outcomes, 1986—1989

This article analyzes the impact of the Gramm-Rudman-Hollings (GRH) Act on federal budgetary and fiscal outcomes. Rather than portraying it as a two-on federal budgetary and fiscal outcomes. Rather than portraying it as a two-party game between Congress and the president, each with monolithic policy preferences, we view GRH as a multiparty negotiation game among advocates of different programs and agencies. In this game, agencies subject to sequestration and their congressional advocates have an incentive to reach a budget accord, while those exempt from sequestration do not. Consistent with this argument, we find that GRH has restrained outlays for nonexempt programs and that exempt programs have, if anything, experienced more rapid growth. Overall, GRH is estimated to have restrained outlays by $59 billion by fiscal 1989, and to have restrained outlays more effectively after the 1987 modifications in the Act. The Gramm-Rudman-Hollings Act signals another phase in the decade-long struggle between the White House and Congress over public spending priorities. Our final counterfactual analysis suggests that GRH partially returned federal fiscal and budgetary relationships and priorities to those that prevailed before Reagan.     

Budgeting during the Clinton Presidency

This article assesses the Clinton administration record of budgeting. During President Clinton's two terms, the federal government moved from an era of large deficits to one of equally large surpluses. This turnaround was caused by both the strong economy and the deficit reduction deals of 1990, 1993, and 1997. Defense spending and interest declined as a percentage of the budget, whereas mandatory spending and nondefense discretionary spending increased. Acrimonious interbranch budgetary relationships dominated, with Clinton ultimately winning far more fights than he lost. Executive branch budgetary and financial management capacity improved during the Clinton administration.     

The Budget Enforcement Act and Its Survival: Congress Hears from Experts

The unpopularity of the Budget Enforcement Act of 1990 grew in light of the recession, recent international events, and continuing record budget deficits. This prompted many Congress members and congressional committees to consider the future of the Budget Enforcement Act of 1990. Two hearings, held in October and November of 1991, exemplify the kinds of choices facing the Congress and the type of advice that Congress has been receiving. This article reviews the testimony given at the hearings by experts with established knowledge of federal budgeting.     

Budget Reform Proposals in the NPR Report1

A new round of budget process changes began on September 7, 1993, when Vice President Al Gore released the National Performance Review (NPR) report. The report recommended major revisions in the structure and processes of the federal government. A number of these proposals would alter a broad range of budgetary procedures followed by the president and Congress, borrowing in some cases from the states. This article analyzes seven areas of budget proposals contained in the NPR report, analyzes their benefits and drawbacks, and makes general observations about their likely impact on executive-legislative relations.     

Consolidated Omnibus Budget Reconciliation Act of 1985

This article briefly describes the legislative history of the old-age, survivors, and disability insurance (OASDI) and supplemental security income (SSI) provisions, as well as related Medicare and Medicaid provisions, of the Consolidated Omnibus Budget Reconciliation Act of 1985 (Public Law 99-272). It includes a chronology outlining the interaction of the budget reconciliation process with the development of the OASDI minor and technical changes bill (H.R. 2005) and the development of other social security related legislation resulting in proposals that ultimately combined in the overall Consolidated Omnibus Budget Reconciliation Act of 1985. The article also provides a detailed summary of the provisions of the legislation.     

The Evolution of Budgetary Institutions in Estonia: A Path Full of Puzzles?

This article examines the evolution of budgetary institutions in Estonia between 1993 and 2008, with a main focus on rules governing the preparation, adoption, and implementation of the state budget. It discusses the initial choice of budgetary institutions in 1993 and subsequent developments in the light of theoretical propositions put forth by the fiscal governance literature. The case of Estonia poses a number of puzzles, and the article seeks to explain the institutional choices in Estonia: Why did the coalition government opt for a delegation mode of fiscal governance in 1993? Why has the preparation phase of the budget process evolved toward a contracts approach from 1994 onward, while the adoption phase has moved closer to a delegation mode? The article demonstrates that alongside government type, institutional choices can be influenced by lesson‐drawing from history, examples of other countries, and negative experiences gained in legislative budget process.     

Is the U.S. Congress an Insurmountable Obstacle to Any “Far‐Sighted Conception of Budgeting”?

In recent years, Congress has recurrently failed to meet its minimum responsibilities in federal budgeting. This article analyzes whether it is possible to repair this problem, using concepts popularized by Allen Schick in his influential article “The Road to PPB.” His article compared the PPB reform effort to the history of budget process reforms that started with the design of the executive budget. It publicized a logical sequence of budget process improvements that started with control and then advanced through management and planning. The article did not substantially address the role of Congress, but eight years after it was published, Congress reasserted its constitutional role in the budget process. Its record of performance since then has ranged from mixed to dysfunctional. The Congress has been criticized for budgetary delays, micromanagement, myopia, procrastination, indiscipline, and an inability to prioritize intelligently. If these faults are set in stone, then an integrated system of budgeting, as described in “The Road to PPB” and related work, is unattainable. On the other hand, if reform of Congressional budgeting is politically feasible, improvements to that system can utilize the unique contributions that a legislature can make to a good system of budgeting.     

Statebuilding and the Politics of Budgeting in Afghanistan

Anchored in a framework drawn from the public finances literature and executive–legislative studies, the purpose of this article is to assess the impacts of Afghan budgetary institutions on the statebuilding project. Two main questions drive the analysis: what is the nature of the relationship between central government and subnational units concerning the allocation and distribution of resources, and – regarding budget preparation – what is the role played by the legislature? It is argued that beyond Afghanistan’s dependency on foreign aid to fund ordinary expenditures and development projects, the presence of a set of budgetary rules which not only centralizes the preparation and execution of budget decisions at the expense of provinces but also marginalizes the legislative involvement in the decision-making process are two important features that prevent further development in state capacity and the representative government.     

The Evolution of Federal Spending Controls: A Brief Overview

This article reviews spending controls in the federal government over the past two decades. During this period, federal spending has grown significantly, despite budgetary controls. The article discusses various Impoundment Control acts throughout this time period with a focus on the Gramm-Rudman-Hollings Act of 1985 and the budget reforms of the 1990s. The article also gives an overview of whether current spending and deficit control procedures are inadequate and, if so, what stronger measures may be adopted.     

How Weak Recognition and Measurement in the Federal Budget Encouraged Costly Policy: The Case of "Supervisory Goodwill"

The budget process is the primary means by which federal policymakers allocate resources. The failure of the budget to recognize and measure the full cost of federal programs encourages the Congress and president to skew resource allocation toward policies whose budgetary costs are underestimated. These "low-cost" policies often increase costs to taxpayers without providing taxpayers with benefits. Recent examples of this phenomenon are found in the "supervisory goodwill" cases. This article reviews these cases, the budgetary weaknesses they identify, the influence these weaknesses had on legislators, and the unnecessary costs for taxpayers that result from the supervisory goodwill policy. Specifically, the federal budget did not recognize the cost that would result from encouraging financial institutions to assume the assets and liabilities of insolvent savings and loans. The budget's recognition of costs failed a second time by not recording expenditures when the government abrogated its contracts with acquirers. Both actions raised costs to taxpayers unnecessarily. In addition to analyzing budgetary weaknesses and their potential costs, this article also reviews two proposed budgetary reforms that could address the budgetary failures highlighted by the supervisory goodwill cases.     

The OMB Budget Examiner and The Congressional Budget Process

This is the second of a two-part retrospective on the evolving role of the OMB budget examiner. The examiner has become more active in negotiations with the legislative branch and tracking the legislative status of various fiscal measures. A new central budget management system was created to monitor appropriation bills. The OMB budget examiner has also been increasingly used to provide information for advocacy purposes before Congress and the public. The institutional effect on OMB of these changing roles is examined and suggestions for organizational reform are made.     

Budget institutions and taxation

While a number of different studies have explored the effects of budgetary procedures and the centralization of the budget process on government debt, deficits and spending, few of them have explored whether such fiscal institutions matter for public revenue. This article argues that centralizing the budget process raises the levels of taxation by limiting the ability of individual government officials to veto tax increases in line with common-pool-problem arguments regarding public finances. Using detailed data on budgetary procedures from 15 EU countries, the empirical analysis shows that greater centralization of the budget process increases taxation as a share of GDP and that both the type of budget centralization and level of government fractionalization matter for the size of this effect. The results suggest that further centralizing the budget process limits government debt and deficits by increasing public revenues as well as constraining public spending.     

Assessing the Power of the Purse: An Index of Legislative Budget Institutions

To compare parliamentary capacity for financial scrutiny, I construct an index using data for 36 countries from a 2003 survey of budgeting procedures. The index captures six institutional prerequisites for legislative control, relating to amendment powers, reversionary budgets, executive flexibility during implementation, the timing of the budget, legislative committees and budgetary information. Various methods of index construction are reviewed. The results reveal substantial variation in the level of financial scrutiny of government by the legislature among contemporary liberal democracies. The US Congress has an index score that is more than three times as great as those for the bottom nine cases, predominantly Westminster systems. Even allowing for US exceptionalism, the top quartile of legislatures score twice as high on this index as the bottom quartile. These findings suggest that the power of the purse is a discrete and non-fundamental element of liberal democratic governance. For some countries it is a key safeguard against executive overreach, while others maintain a constitutional myth.     

The Administrative Costs of Congressional Earmarking: The Case of the Office of Naval Research

Discussions about congressional earmarking often focus on their direct costs in the federal government's appropriations bills. This article shows that this conventional view neglects the administrative costs of earmarking by examining the extensive transaction and opportunity costs that come with the political, budgetary, and programmatic management of these earmarked projects in Congress and in the Office of Naval Research. One policy conclusion from this study is that the executive branch should make these costs transparent, as they remain largely hidden from public discussion and the consideration of the federal budget.     

Budgetary Decision Making by Executive and Legislative Budget Analysts: The Impact of Political Cues and Analytical Information

We explore the extent to which attributes of individual analysts and institutional factors lead to budgetary decisions based on political cues and/or analytical information among executive and legislative budget analysts. We surveyed executive and legislative budget analysts in 13 western states to ascertain the factors that influence their budgetary decisions. The findings build on evidence from previous studies that confirms the complexity of factors affecting budget analysts' decisions, and they provide empirical support to analysts' use of a combination of information labeled "budget rationality" by Thurmaier and Willoughby. Also, we provide more conclusive evidence that both executive and legislative analysts follow similar decision-making patterns.     

Incremental Thinking: "Congressional Debate on the Budget and Accounting Act of 1921 (Excerpts)"

Editors' Note : The Congressional Budget Act of 1974 was designed to improve the budget-making process of the national legislature. Although this new process has been in use for less than a decade, proposals for a constitutional amendment to limit the budget powers of the federal government are advancing through Congress. In assessing the potential and problems of budget reform, it would be wise to recall the expectations that animated the introduction of presidential budgeting more than 60 years ago. The following excerpts from the October 1919 debate in the House of Representatives on the legislation that ultimately became the Budget and Accounting Act of 1921 have a contemporary ring. The problems are not new, and one wonders whether the solutions are as easy as some claim.     

Nonpartisan Legislative Budget Offices: A Tentative Step toward Improving Legislative Oversight

Strengthening the budgetary powers of legislatures through nonpartisan budget offices adds to the capacity‐building repertoire of development donors. Budget offices are supposed to provide legislatures with information and analysis independent from the executive. The United States Agency for International Development believes that strengthening the legislature's power of the purse improves governance. We highlight USAID‐funded legislative strengthening projects implemented in Jordan, Kenya, Morocco, and Afghanistan to show how these budget offices function. There is a significant potential for these units to assist members of parliament in understanding the budget process, the broad fiscal challenges facing government, and expenditure control and budgetary trade‐offs that affect present and future spending. These cases demonstrate the challenges of creating and sustaining a parliamentary budget office. Finally, in an effort to make budget offices effective and sustainable, we outline several key steps that we believe are important both for donors and the legislative bodies.     

The Bush Administration's Proposal for Credit Reform: Background, Analysis, and Policy Issues

Large recent and forecasted federal outlays to cover losses on deposit insurance and federally-assisted credit have increased concern in the executive and legislative branches about potential future liabilities of the federal government. These potential liabilities include federal credit; consequently, this renewed interest in federal credit reform. Credit reform would have to change the budgetary treatment of federal direct loans and federal guaranteed loans. Currently, the unified budget measures the cost of federal credit on a cash flow basis. Critics (including the Bush Administration) maintain that the appropriate budgetary measure of the costs of federal credit is the present value of the subsidies to credit recipients in the fiscal year that the credit is advanced. The Bush Administration's proposal for credit reform is presented in most detail in the Federal Credit Reform Act of 1989 (the Act), which was proposed but not enacted. The Act would have had federal officials estimate credit subsidies based on the equivalent interest rates in private credit markets. These subsidies would have been used to measure the budgetary cost of federal credit and would have required annual appropriations. Two credit revolving funds would have been established in the Treasury to finance credit flows. Many of these credit reform practices were included in the Omnibus Budget Reconciliation Act of 1990 though.