Bias in OMB's economic forecasts and budget proposals

The Office of Management and Budget (OMB) annually submits the President's budget for the U.S. government to the Congress. The economic forecasts and revenue and outlay proposals contained in the budget have been criticized as biased, especially during the 1980s. Tests for bias in one year ahead proposals for the 1963–89 period show no bias in economic forecasts and revenue estimates, but substantial bias in outlay proposals. Most outlay proposals are consistently less than actual outcomes, accounting for underprediction of the Federal deficit. OMB outlay proposals appear to be influenced by politics. Republican administrations show more significant proposal biases, with defense proposals higher and domestic outlay proposals lower than outcomes. The Office of Management and Budget consistently understates the deficits by resorting to the most optimistic economic assumptions it can credibly — and now sometimes even incredibly — employ. — Senator James SasserWall Street Journal, 25 January 1990     

An Overview of Adjustments to the Budget Enforcement Act Discretionary Spending Caps

This article reviews the adjustments that have been made to the limits on discretionary federal spending that were enacted as part of the Budget Enforcement Act of 1990. Each type of adjustment authorized by that act is described, and the actual adjustments made by the U.S. Office of Management and Budget are discussed. Tables that display the amounts and timing of the adjustments are used to support the narrative. The article also discusses the relationship of cap adjustments to changes in the federal budget deficit.     

Performance‐Based Budgeting: The Contribution of the Program Assessment Rating Tool

Under the President's Management Agenda for performance and budget integration, the Office of Management and Budget (OMB) designed the Program Assessment Rating Tool (PART) to breath new life into performance‐based budgeting as envisioned by the Government Performance and Results Act (GPRA). This article discusses what PART is designed to do and how the PART process works. Based on recent Government Accountability Office (GAO) reports addressing implementation of PART in the last four fiscal years, the article answers such questions as: Has PART made a difference in program operations? What is the relationship between PART and GPRA? Has progress been made in improving the evidence base for PART assessments? How well does PART assess programs related to a common goal? What has been congressional reaction to the PART process? Are PART and performance budgeting making a difference in government?     

The Role of Civil Servants in National Budgeting: An International Comparison

Beginning in October 1988, a budgeteer-exchange program has existed between Her Majesty's Treasury in the United Kingdom and the Office of Management and Budget in the United States. Cultural and constitutional differences make the jobs of the budgeteers in each country analogous but not equal. Differences that exist include organizational structure, work content, and information presentation to legislative bodies.     

Performance-Based Budgeting to Enhance Implementation of the CFO Act

On August 5, 1992 the United States Senate Committee on Governmental Affairs passed the "Government Performance and Results Act" sponsored by Senators Roth and John Glenn. In introducing this legislation in 1991 Senator Roth made the following statement. ^* This legislation (S. 20) is intended to put teeth into federal efforts to introduce performance measurement currently under implementation by the Office of Management and Budget under the authority of the Chief Financial Officers Act of 1990.     

Does agency competition improve the quality of policy analysis? Evidence from OMB and CBO fiscal projections

Public management scholars often claim that agency competition provides an effective institutional check on monopoly authority, and hence, leads to improvement of administrative performance in public sector agencies. This logic was central for creating the Congressional Budget Office (CBO) in 1975 to challenge the policy information provided by the Office of Management and Budget (OMB). We challenge this conventional wisdom by demonstrating that CBO has failed to enhance the quality of U.S. fiscal policy analysis on its own terms; nor has it spurred improvements in OMB's performance. Our empirical results indicate that the quality of OMB's fiscal projections has often deteriorated since the establishment of CBO as a rival bureau. We also show that both public and private information is being shared by these agencies to produce a similar caliber of task outputs. The broader implications of our study indicate that although politicians face incentives to employ agency competition in governmental settings, this type of bureaucratic strategy does not necessarily enhance the quality of administrative performance. © 2006 by the Association for Public Policy Analysis and Management     

The Office of Management and Budget in a Changing Scene

Authors' Note: It is too early to provide a definitive view and appraisal of the Office of Management and Budget in the Reagan presidency. The discussion that follows is based partly on current and recent articles and a few recent monographs and books, many of which are credited in footnotes. In additon we have relied upon a considerable number of interviews with current participants and alumni of OMB as well as with some observers from outside. It would be impracticable to list those who helped us, but we are grateful to all of them. The substance of this article was completed in mid-July 1982.     

The fight against fraud and abuse: analyzing constituent support.

Most efforts to combat fraud and abuse have relied on a punitive-deterrent approach, assuming that higher penalties and stricter enforcement will both punish present offenders and deter potential ones. Social science perspectives, particularly that of systems theory, suggest that a more effective approach is prevention grounded in an understanding of the constituencies involved. Constituency analysis can identify the constellations of social and political power that sustain existing opportunities for fraud and abuse, and those that will support countermeasures. Illustrations are drawn from the author's experience with New York State's attempt at reform in nursing homes and with efforts by the General Accounting Office and the Office of Management and Budget to combat fraud and abuse in federal programs.     

The Evolution of the Office of Management and Budget Under President Reagan

This article introduces a series of retrospective articles on the Reagan administration. The Office of Management and Budget became a major actor in the budget debate over the last eight years. The Reagan administration has seen a change in OMB's role from that of an advisor to the president, to an agency with a central role to play in the development of the president's foreign and domestic policy within budgetary constraints. The article focuses on how OMB has reacted to these changes producing budget conventions and techniques unique to the 1980s.     

The Federal Accounting Standards Advisory Board: A View of Its Role One Year Later

The secretary of the Treasury, the Director of the Office of Management and Budget (OMB) and the comptroller general established the Federal Accounting Standards Advisory Board (FASAB) at the end of 1990. The Board recommends accounting principles for the United States government, including those to implement the Chief Financial Officers Act. This article reviews some results of research conducted by the Board during the past year and presents a conceptual framework for understanding the role of the Board and how it differs from the roles of FASB and GASB.     

The Federal Accounting Standards Advisory Board: An Introduction for Non-Accountants

This article discusses the disagreement over set accounting standards for federal agencies that GAO published in "Title 2" of its Policies and Procedures Manual for the Guidance of Federal Agencies . The Office of Management and Budget has declined to require agencies to follow the standards although many agencies do follow the standards in completing financial statements. These differences are a result of doubt regarding the appropriateness of the standards as well as the constitutionality of the standards. Therefore, the Federal Accounting Standards Advisory Board was created with the goal of securing agreement on standards for federal accounting.     

Implementing the Chief Financial Officers Act and the Government Performance and Results Act in the Federal Government

The Chief Financial Officers Act of 1990 and the Government Performance and Results Act of 1993, along with other legislation passed by Congress, are stimulating major financial management reform in the federal government. This article evaluates reform implementation against nine criteria developed in previous research on this topic. The criteria are accounting system adequacy, congressional intent, ability of Congress to use financial statement data, executive branch implementation incentives, capability of the Office of Management and Budget, utility of financial statements for decision making, use of performance measures in budgeting, coordination of federal organizations charged with implementation responsibility, and executive and congressional support for reform.     

Systems analysis and welfare reform: A case study of the family assistance plan

This paper discusses the impact that systems analysis has had on the welfare reform legislation of the last four years. After a general discussion of welfare reform's objectives and constraints, and their particular application to the family assistance proposal, the state of the art of systems analysis as related to welfare problems is described. The successes and failures of the cost-effectiveness approach in developing and modifying the proposal are outlined in analyses of major issues, including the proposal's impact on state welfare programs, work incentives, the integration of cash assistance with assistance in kind, and alternatives for welfare administration.Presented at the 41st Meeting of the Operations Research Society of America on April 27, 1972.The author participated in the development of the family assistance legislation while an employee of the Office of Management and Budget and the Department of Health, Education, and Welfare (Office of the Secretary).The views expressed in this article are the author's and do not necessarily reflect the views of the members of the Joint Economic Committee.     

Playing the Wrong PART: The Program Assessment Rating Tool and the Functions of the President's Budget

The extensive literature about the George W. Bush administration's Program Assessment Rating Tool (PART) has not emphasized an issue that appears quite clearly in interviews with senior Office of Management and Budget (OMB) and congressional staff. Budget analysis can pursue efficiency in two ways. One, the object of traditional analysis, involves assessing programs to understand the ratio of inputs to outputs within an agency, and thus the effects of more or less funding. Another approach, termed “budgeting for results,” measures program performance so as to allocate funding among programs in a way that increases total welfare. The second approach is much more difficult because it necessitates comparison of measures of unlike phenomena, requires expertise that often does not exist, and is more easily contested as invoking values rather than facts. Both congressional and OMB sources report concerns that PART weakened budget analysis by diverting resources from traditional analysis. If one goal of reformers is for the OMB to provide analysis that will influence Congress, the focus should be on strengthening the capacity to do traditional budget analysis.     

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.     

On the value of formal assessment of uncertainty in regulatory analysis

The US Office of Management and Budget introduced in 2003 a new requirement for the treatment of uncertainty in Regulatory Impact Analyses (RIAs) of proposed regulations, requiring agencies to carry out a formal quantitative uncertainty assessment regarding a regulation’s benefits and costs if either is expected to reach $1 billion annually. Despite previous use in other contexts, such formal assessments of uncertainty have rarely been employed in RIAs or other regulatory analyses. We describe how formal quantitative assessments of uncertainty – in particular, Monte Carlo analyses – can be conducted, we examine the challenges and limitations of such analyses in the context of RIAs, and we assess how the resulting information can affect the evaluation of regulations. For illustrative purposes, we compare Monte Carlo analysis with methods typically used in RIAs to evaluate uncertainty in the context of economic analyses carried out for the US Environmental Protection Agency’s Nonroad Diesel Rule, which became effective in 2004.     

Public Attitudes About Land Use Policy and Their Impact on State Policy-Makers

Results from a study in Ohio, and replicated in six additionalstates, show public opinion toward state land use regulationto be aggregated around two major attitudes: the Environmentalistsstress the impact of negative developmental externalities andfavor broader review of land use decisions; the Localists areconcerned with accountability and local control of decision-making.An intensive analysis of the Ohio Land Use Work Group revealsthe policy-making elite in basic sympathy with the Environmentalists,but constrained by intra-agency rivalries and apprehensionsabout public reaction. Discussion focuses on the shifting publicconsensus toward greater land use control, and the implicationsfor state policy-making. ^*Originally read at a meeting of the Midwest Political ScienceAssociation, Chicago, 1975. The authors gratefully acknowledgefinancial assistance from the Academy for Contemporary Problems,Columbus, Ohio, and from the Ohio Office of Budget and Management.Special appreciation is expressed to the Academy's president,Ralph R. Widner, and to Dean Clark and Paul Goesling who, atthe time of the study, were affiliated with OBM. Gratitude alsoto individuals who facilitated the national-regional interviewing:David Gillespie, Brij Khare, Michael Obrey, Michael Shay, JosephThomas, and Hugh Winebrenner.     

MORE VALUABLE CONFERENCE BOOKS

Public Administration in Australia: A Watershed. Edited by JOHN POWER (Sydney: Hale & Iremonger in association with the Royal Australian Institute of Public Administration, 1990, 168 pp).
Decision Making in Australian Government: The Cabinet and Budget Processes. Edited by BRIAN GALLIGAN, J.R. NETHERCOTE and CLIFF WALSH (Canberra: Centre of Research on Federal Financial Relations and Royal Australian Institute of Public Administration, ACT Division 1990, 141 pp).
Budgetary Management and Control: The Public Sector in Australasia. Edited by JOHN FORSTER and JOHN WANNA (Melbourne, Macmillan, 1990, 206 pp).     

The OBR and the March 2023 Budget: The Travails of UK Economic Growth and the Politics of Technocratic Fiscal Governance

This article places the Office for Budget Responsibility's commentary on the March 2023 UK Budget in political context. It explores how increased independent expert input has transformed the UK economic policy regime, focussing on the complex relationship between rules-based economic governance, independent oversight and fiscal discipline. The technocratic veneer that enshrines the UK fiscal watchdog obscures the inevitable politics of rules-based fiscal governance. The recent budget revealed OBR scepticism about how far budget measures can address the UK economy's long-term structural weaknesses. This underlined the key role for judgment inherent within technocratic fiscal oversight.     

The Variety of State Capital Budgets: A Survey

In 1986 the staff of the U.S. Office of Management and Budget reviewed issues concerning the possible development of a federal capital budget. As part of this study, a survey of all 50 states was conducted concerning state capital budgets. This paper summarizes the results of the survey. According to the survey responses, 42 states have capital budgets. Of these 42, 37 generally borrow to finance some public capital and 5 generally do not. Of the 8 states that said they do not have a capital budget, 4 generally borrow to finance some public capital and 4 generally do not. The survey also found that the form of a governor's capital budget, the way legislatures enact capital spending, the coverage of the capital budget, and the method of financing capital vary widely among states, making it virtually impossible to define a state capital budget in a precise way. Large amounts of state capital spending, especially for transportation, are generally not included in state capital budgets.