The Budget Game and How to Win It
Reed, Leonard
The Budget Game and How to Win it. by Leonard Reed In a desperate attempt to convey to the public the concept of one billion, an earnest political campaigner this year pointed out that “a...
...This gambit is offered by virtually every federal agency in its initial go-around with OMB: overstate what a program will cost for the coming year in anticipation of OMB cuts...
...A budget officer describes the preliminary jockeying for more program money: “Because you deal with essentially the same programs for many years, you know what OMB thinks of various programs...
...However, various forms of collusion, based on long-standing relationships between congressional committee staffs and agency people, can nullify OMB’s efforts to exert executive discipline...
...The Forest Service can sell or withhold timber...
...Even the vague c o n c i l i a t o r y p h r a s e s speechwriters concoct f o r t h e President to toss out to special interest groups become holy writ with which enterprising agency officials justify vaguely relevant programs...
...the way...
...The games budget officers play are, in fact, the symptoms rather than the cause of the expanding budget...
...So he looks again at the food stamp program and this time assumes a slightly rosier outlook for the economy, which will mean a two per cent drop in the number of stamp recipients...
...If more money is later needed to make loans, Congress will have to provide it...
...That’s playing it straight up...
...If the evidence might discourage OM B from providing .more money for more positions, get rid of the evidence...
...The battles are fought by unevenly matched adversaries the public rarely sees or hears about: the President’s champion, the OMB, up against the best and the brightest from the agencies...
...To a department the size of Agriculture, which is about aqerage, OMB assigns responsible for evaluating the proposals of a specific part of the department...
...thereby ensuring continued pressure for still more money...
...Virtually no cabinet officer comes to government with previous experience in overseeing programs costing literally billions of dollars, and the budget officer plays a key role in giving him some perspective on the value and effectiveness of those programs...
...If a program he wants is short-changed, you appeal it through channels-up the line, with the Secretary finally taking it to the Director of OMB and, if he is still refused, to the President...
...and in the tussle for program money all is fair, including whatever tactics are likely to be successful in outwitting or outflanking OMB...
...But we have a bargaining chip and OMB will probably up our allocation...
...Details of the supposedly confidential agency-OM B differences are leaked to the press, and the special interest groups swing into action...
...Once this policy became known, any land the Department of the Interior aspired to own was destined to be classified as an “historic site...
...Most federal agencies have the capacity to generate income, at least temporarily...
...When I go through my programs to see which are the least valuable to the public, these dogs keep popping up...
...To wit, here is how the Department of Agriculture might (and does) play the gimmick game with its Farmers Home Administration: That agency makes housing loans to people in rural areas, and agricultural loans to farmers, to the tune of six or seven billion dollars a year...
...OMB’s top echelon operates from the ornate Executive Office Building, which stands che.ek by jowl with the White House on Washington’s most prestigious acreage...
...You can play the shortfall game because 74.9 per cent of the federal budget is officially designated as “relatively uncontrollable” and unofficially known as being “on automatic pilot...
...The outcome, however, is never in doubt, and the public pays to sit and watch...
...There are dozens of ways to get some of the t h i n g s y o u want...
...They belong to one of the few categories of civil servants who, if they leave government, rather easily find higher salaries in the outside world...
...As the agencies and the OMB go at it, maybe the best image to keep in mind is the professional wrestling exhibitions you see on television...
...It ends in the halls of Congress, but begins with the President and his Office of Management and Budget going through an exercise in macroeconomics...
...English translation: unload money-by spending if you can, by bookkeeping gimmicks if necessary...
...Bearing in mind presidential political priorities, OMB then lets the federal agencies know the size of the pizza and how large a slice each can expect...
...When I say the Secretary is really hot for a program, they have to figure out whether the Secretary is personally interested and really knows and understands the issue, or whether I’m just engaging in gamesmanship...
...The top budget officer of a cabinetlevel agency is invaluable to his department Secretary...
...Irresistible Logic In spite of the special relationship it enjoys as the President’s instrument, OMB is the lightweight and the agencies are the heavyweights in the battle of the budget...
...GSA rescued them by charging $50,000 for $20,000 worth of supplies...
...a billion hours ago, dinosaurs roamed the earth...
...He’s looking for things you can classify as environmental...
...And for other reasons that make sense only in Government Wonderland, a president whose budget has called for a $30-billion deficit is embarrassed when the actual deficit threatens to be only $25 billion...
...These are programs for which funds are mandated by law so long as the recipients of the money meet specified qualifications...
...The Secretary, his budget officer at his elbow, is the chief witness...
...takes on an apparently irresistible logic...
...I t is a vast undertaking imperfectly designed to reconcile what our society wants and what it is willing to pay for...
...by Leonard Reed In a desperate attempt to convey to the public the concept of one billion, an earnest political campaigner this year pointed out that “a billion minutes ago, Cleopatra was sailing down the Nile...
...That is, without considering individual budget items, the President says, more or less, “I want to hold spending to X, I don’t want a deficit of more than Y, here is what we can bring in with taxes and revenues-so this is about the way I want the budget to come out...
...In most instances that Secretary was appointed because of the constituency he could bring with him...
...The agency is asked to rank in its own order of priority the programs for which it is requesting funds and the amounts needed...
...Normally, after you submit your budget to OMB, the Director sends it back to the Secretary along with the recommendations he intends to make to the President-and the Secretary gets a chance to appeal the recommendations beforehand...
...even the agency budget officer can’t do it with any precision...
...He wants to show the environmentalists (or whomever) that he’s on their side...
...By now most of us have been told how many of these programs in effect subsidized the lobbying efforts of their “clients,” Leonard Reed is a contributing editor of The Washington Monthly...
...This tactic, however, can backfire...
...The Shortfall Game...
...Or, under the restrictions imposed by OMB, the agency regretfully finds it will have to abolish Program X; as it happens, Program X is the pet project of Congressman Clout, a power whom nobody in his right mind wants to antagonize...
...The technique is to go into the OMB negotiations low on funds, having made substantial loans...
...They’re no good, but they have this powerful political support...
...They are wiles developed in response to pressures...
...The OMB’s indignation at agency gamesmanship also sounds a little like the shock of a Tammany politician upon l e a r n i n g t h a t P a t r o l m a n Iloulihan is mooching apples from the fruit stand on his beat...
...A good agency man will always include in his answer those things the committee chairman wants, whereupon it is discovered that OMB knocked some of them out...
...You make your pitch...
...OMB is a small enterprise (by government standards) and hasn’t grown much over the years...
...Well, that works sometimes, but in time he learns other ways to get around...
...selling the loan note brings in money...
...Presidents get upset when pressured by special interest groups on budget conversations those groups aren’t supposed to know about and, as a budget officer put it, “You don’t want to antagonize the guy who’s going to make the final decision...
...the budget officer helps him sort things out...
...Is the continuation of the program really a necessary cost of achieving a larger economy (in this case, sustaining a defense spending veto...
...The budget process is inordinately complex, unique in its language, rife with concepts unknown to standard accounting books, and largely hidden from public view...
...OMB, on the other hand, has the nebulous standing of a hired advisor...
...Of course, as the year wears on and the number of people needing food stamps exceeds the estimate, Congress has no choice but to make up the s h o r t f a l l with a s u p p l e m e n t a l appropriation...
...Ash, fresh from Litton Industries, confided that he’d had no idea there were so many budget people in government...
...An agency budget officer may appear hard-nosed when dealing with contending factions within his agency, but during negotiations with OMB he feels under no obligation to reveal where cuts should be made, where there is waste and inefficiency...
...Making the loan involves outlay...
...An interesting sidelight that emerged from the investigation of the General Services Administration was the plight of Army purchasing agents at Fort Meade, Maryland, who had to get rid of $50,000 for office supplies by the end of the year but couldn’t possibly use that much in pencils and paperclips...
...This flexibility is the deus ex machina of the gimmick game...
...Bowman Cutter, former executive associate director for Budget, called his staff superior to any he has worked with in private industry) and despite OMB’s having its own sources within the agencies, it’s no easy job to determine the real cost of a proposed program...
...So you have to guess at which ones are really presidential decisions, and which you can bull through...
...The agency’s ploy is to include in that first ten a couple of programs it considers vulnerable and to move a couple of “Washington Monuments” back into spots eleven and twelve...
...So, OMB will advise agency budget officers that “it looks like we’re going to have a $5- or $&billion underrun-can you increase your outlays...
...Everybody plays the umbrella game...
...OMB’s favorite is the gimmick game...
...The examiner assigned to the Forest Service, say, spends much of his time with the Service, reads its reports, talks to its program people, visits its installations, and is directly involved in any legislation affecting the Service...
...Chances are good that along with those projects the committee will restore some of the agency’s pets...
...The budget officer is no less patriotic than anyone else, but the pressures of daily office life inevitably direct his first loyalty not to that abstraction called the government but to his very tangible agency...
...Most of the time, you know OMB is not really representing the President’s view but its own staff‘s view...
...To keep the housing market fluid, HUD purchases mortgages that it can, at any time, sell back to the banks in huge quantities...
...The worse a program is the more likely it has survived because it is somebody’s image builder...
...The explosion of expenditures for both military and social programs during the Johnson administration (and the almost inevitable Nixon revenue-sharing as the programs outgrew t h e federal capacity to administer them) has proved exceedingly difficult to contain...
...The concern has less to do with the effect on the national economy than with preserving the “credibility” of the President’s original requests...
...the budget officer himself is called later to testify in more detail...
...The End-Run Game...
...It is not all that different from the way big corporations and big unions amicably resolve a potentially bruising situation by passing on to the consumer the costs of their settlement...
...A relic of preairconditioning days, its large offices have soaring ceilings that, nevertheless, pay obeisance to the virtues of thrift by peeling copiously...
...More often the co-opting goes undetected until the examiner actually moves to the agency he’s been examining...
...Consider the $6billion-a-year food stamp program of the Department of Agriculture...
...The outright fraud and waste which is kept under the carpet, though, is petty stuff...
...His superiors depend on his knowledge of detail...
...Senior budget officials in the agencies are among the shrewdest and most competent of federal executives...
...This is almost the mirror image of the previous strategy, the technique here being to underestimate the cost of a program...
...After Carter spoke of his concern for the cities, HUD was quick to contest a cut in virtually any of its requests as adversely affecting an important presidential initiative...
...In a common but risky form of the end run, the agency, during budget negotiations with OMB, takes its case to those of its clients who benefit from particular programs...
...It is an e l i t e s t a f f with an exceptionally high proportion of professionals...
...OMB frequently has to guess at the answer, for in spite of recent moves to bring more politically attuned people into OMB, it remains primarily a professional/ technical staff...
...So you send up your list of programs and you say, ‘OK, I’ve cut out the laboratory in the chairman of the appropriations committee’s district and the lab in the district of some other committee chairman, etc.-those are my dozen worst.’Sure, OMB will come back and say, ‘C’mon now, you know you’re playing games,’and they’ll insist we put them back in...
...Budget officers make no bones about playing the monument gamethat is, “finding” money for programs they want by dropping programs they know OMB or Congress will restore...
...Game Time When the “straight” strategies, up to and including intimidation, are found wanting, then it is game time...
...Congress, for example, is a past master at the shortfall game...
...Sometimes, however, the President has already seen the budget, and then OMB presents the revisions to the Secretary as representing presidential decisions...
...This popular budgetary pastime is by now familiar-certainly to readers of this magazine...
...One strategy is to play it straight...
...And the people on the Hill also know it’s the same old program in new clothes, but they’re looking for something to show the public they’re dealing with this urgent problem, so they go along...
...The public, which bears the resultant cost, is in a poor position to defend itself in these day-to-day fiscal skirmishes...
...The General Services Administration can time the sales of stockpiles of supplies to suit its purposes...
...Our current federal budget calls for outlays of $487 billion...
...In the framework of a $500-billion budget, the agency officer’s plea to fatten this program or that (“Look, we’re only talking about $20 million...
...Only the players understand the game, and, although some play better than others, none of the players loses...
...A budget examiner who works with an agency’s officials over a period of time may gradually come to identify with that agency and its ambitions, and any adversary relationship then ceases to exist...
...about half of these recruits replace staffers who have transferred to other agencies...
...Every large agency, for example, has a substantial number of job “slots” that have gone unfilled for so long that they could obviously be eliminated with no peril to the republic...
...And, if the stakes are high enough, the strategy will be to get the President committed before OMB even gets into the act...
...Here’s how some of the games are played: The King’s Pawn Opening...
...you can’t reprimand a man for his personal view, and, if in that view an additional carrier is necessary for the national defense, then so much for the screened testimony he has just given...
...As in the monument game, budget officers are frank about this kind of fooling around, but accept no blame for it...
...After the budget process has run its course within the executive branch, the pertinent congressional committees hold hearings on each agency’s budget as submitted by the President...
...There is some haggling...
...The end run describes a variety of techniques agencies use to bypass OMB budget examiners, the OMB itself (“I’ve never had a budget,” one 20-year veteran said, “when 1 didn’t go around OM B”), or, sometimes, the President...
...The President is going to need his vote on the nuclear carrier veto, and it wouldn’t be smart to embarrass Jones to save a few million bucks...
...Each agency, atter going through its own internal pie-splitting routine, submits its proposed programs and budget to OMB...
...The King’s Pawn strategy is particularly popular with i n t e r n a t i o n a l programs, such as foreign aid, which are open-ended in the sense that nobody can pinpoint the benefits or catastrophes that will result from spending half a billion dollars more or less...
...Some are specific programs, some broad perspectives, but all offer alert bureaucrats the opportunity to initiate new programs, shore up vulnerable ones, and fatten still others by presenting them as tailor-made to meet the President’s expressed wishes...
...In sheer numbers, as well, OMB is heavily outgunned by the agencies...
...Frequently, the original agency budget .draft is leaked to t h e c o m m i t t e e . Or else the committee is made aware of the differences in the drafts and it calls OMB to demand the original...
...He “low-balls” his food stamp estimate, shifts the hundred million out of it and into the other program-and is still within his budget limit...
...But Harvard and Stanford M BAS are well-represented at the higher levels of OMB...
...Winks and nods among committee, agency, and special interest groups are the currency of the end-run game...
...How many people will qualify for payments under each of these programs in a given year is subject to changing circumstances, and estimating the number is a fertile field for gamesmanship...
...After examining a housing program, for example, OMB may argue that the results don’t justify its continuation...
...If they can be slipped under the umbrella of presidential intent, the agency has OMB on the defensive...
...He makes his best estimate on the latter, but there is a variable: if the economy improves, fewer people will be entitled to food stamps and, conversely, if it worsens, more people will become eligible...
...One agency officer tells of running into Roy Ash, then OMB’s director, at a budget officers’ banquet in the State Depart men t ’s cavernous Benjamin Franklin Room...
...You start with that knowledge and you build your strategy around it...
...At first glance, these agency witnesses appear to be at a distinct disadvantage-not only is the story of the negotiations with OMB supposed to be kept secret, but OMB screens the proposed congressional testimony of agency officials to ensure that the agency is supporting the President’s submission...
...The current staff of 556 compares with 5 12 employees 27 years ago when it was the Bureau of the Budget...
...A game with many variations, it is based on one idea: to resist cuts by threatening to eliminate essential services or programs that it would not be politically feasible to drop...
...And, In This Corner...
...Instead, what is done is to pressure supervisors to fill the v a c a n c i e s , even to accept marginally qualified applicants...
...The oldest end-run play carries the ball directly to Congress...
...The object is to have the decision made before the routine staff analysis takes place-to get the Director committed before his staff recommendations reach him...
...But seven budget examiners overseeing the $20 billion in programs operated by a massive organization like the Department of Agriculture can do little more than spot sample what goes on...
...The President’s January budget message is only the mid-point of this process...
...And they are not there to help OMB find out where the bodies are hidden...
...The budget officers are frequently in better touch with the political realities than are the OMB officials with whom they deal...
...1 had to tell him,” the agency man said, “that this was just the tip of the iceberg-those willing to pay $15 for a dinner...
...In 1978, as a result of public outcries against welfare fraud, Congress righteously instructed HEW to clean up the situation and, on the stated assumption that about $1 billion could thereby be saved, cut the HEW appropriations request by something like t h a t s u m . I t was largely a grandstand play...
...Well, you know damn well they don’t take every item in your budget to the President, just some basic issues...
...Sometimes you use a strategy of intimidation...
...I once appealed eight itenis in our budget and was turned down on all of them...
...Few people in the country can follow what’s going on, and the reporters who once a year file a budget story the size of a column on this page can’t help them out much...
...One of them put it this way: “There is almost an inverse relationship between the value of a program and the amount of political pressure it generates...
...The worst aspect of the gimmick game is that it can help agencies m a i n t a i n in perpetuity antiquated or bad programs by keeping them out of the reach of OMB and, by extension, of the White House...
...Knowing what your Secretary wants, you send in your budget proposals accordingly...
...Sure,” one of the departments’ top budget men said with a grin, “If the President comes out with an environmental message, you begin to reclassify all the programs you can as ‘environmental’ and beef them up...
...once in office, he acquires additional constituencies and is a political power with whom the President has to deal gingerly...
...In that category are such programs as social security, federal employment retirement benefits, unemployment assistance, veterans benefits, medicare, farm price supports, and a host of others which are called “entitlement programs...
...Within the framework of this seemingly simple scenario, bitter skirmishes take place, and much hanky panky...
...Less is known, however, about the actual mechanisms through which these pressures, reflected in the demands of the federal agencies, operate-the annual budget process...
...For a lot of reasons, among them problems associated with letting complicated contracts and the slow development of new programs, the government tends to “underspend” what is has budgeted...
...Agency budget officials, on the other hand, are in touch with the po I i t ica I currents through their intimate contacts with congressional staffs, pressure groups, and the political leadership of their agency...
...In the maneuvering between agency and OMB, the agency holds its cards close to its chest, and OMB tries to peek...
...The Carter administration’s Zero Base Budgeting has made this game more sophisticated...
...After an agency official gives his cleared testimony, he may be asked for his personal view...
...You find t h a t done most often in a new administration, the new Secretary playing by the rules...
...The problem is not too different from the old revolving door relationship between government regulators and the industries they regulate...
...Your facts are right,” the agency budget man concedes, “but Congressman Jones has made some strong commitments on that program...
...A glance at the roster of the division that deals with the Defense Department’s budget tells you that of 49 employees, only 12 are clerical...
...The OMB’s foot soldier in the effort to contain the monetary aggression of the agencies is the budget examiner...
...In time, the President is able to give Congress his detailed budget proposal...
...In one form or another, the most common question is, “What did you ask OMB for...
...Within his own agency, the budget officer deals with a host of individual bureaucracies, each with a built-in expansion dynamic, each with its own constituents and congressional allies, each led by people convinced that the fate of the nation hinges on their getting a larger appropriation...
...For every dollar dissipated by the well-publicized tendency of the GSA to pay for services not rendered, thousands are spent on questionable projects and the bureaucracies created to administer them...
...To arrive at his request figure, the Department’s budget officer needs only to multiply the cost of the food per person by the number of participants...
...The Secretary’s other top officers head competing bureaucracies within the department...
...Or, as the case may be, ‘water control.’ Or ‘energy.’ Or whatever the current presidential initiative is...
...The average grade of the OMB employee, GS-12, matches up well against the government-wide grade average of GS8. Economists and political scientists, rather than business administration graduates, predominate in the lower professional ranks...
...This is a universal f a v o r i t e with federal agencies...
...You see, these fellows are trying to figure out my poker cards...
...The pressure then is on OMB to raise the ceiling to include eleven and twelve...
...Despite the high degree of professionalism (W...
...The growing acceptance of this expansion creates a dynamic of its own: “Bureau chiefs come to me,” a budget officer relates, “and they say, ‘If you take out inflation, I’m just asking for a two per cent increase.’ Well, you know, if every program has a real annual growth of at least two per cent, it won’t be long before a// the money has moved from the private to the public sector...
...The chief spear-carrier for a federal agency is its budget officer...
...Even were they not better situated and more numerous than their adversaries, agency budget officers would know that in a real locked-horns situation between OM B and agency, the President is more likely to come down on the side of the department Secretary...
...But these are the people I live and work with, and it’s their case I’m making when I go up against OM B.” The monumental size of the budget itself breeds increased expenditures...
...I got the Secretary to get on the phone to a low-level OMB man and we had our way on every one...
...Since you are dealing with OMB mostly at the staff level, you may whip out the big guns-get the Secretary to call one of the lower-orintermediate level OMB bureaucrats and put the heat on...
...If the National Park Service is faced with a budget cut-to cite the 1971 genesis of the name of the gameit threatens to close down the Washington Monument to tourists, knowing that Congress, fearful of a peevish public, will rescind the OMB cut...
...Arrayed against the six or seven budget examiners OMB assigns to it, the average cabinet-level federal department has 450 to 500 budget people on the payroll...
...The Washington Monument Game...
...Of course it’s transparent-but the President wants us to play that game...
...A ruler and hand calculator will tell you that if you scotch-taped one billion dollar bills end to end you could run a green belt twice around the equator, loop it near Quito, Ecuador, and run it twice more across the polar caps...
...The approach may be made directly to the President or indirectly through the Domestic Policy Staff, which, if sold, will take the program to the President with its endorsement...
...You don’t use one strategy for your whole budget-you adopt a lot of strategies for different pieces of your budget...
...Three hundred sixty-three of these OMB employees are on the “B” side of the organization (a fraction of these work on the OMB’s own budget, which, for 1979, comes to $3 1 million...
...Sometimes the higher echelons of OMB spot the symptoms of an examiner being coopted by the agency...
...The best-known manifestation of this attitude is the spending spree on which federal agencies embark toward year’s end in a desperate attempt to unload surplus funds...
...the average budget examiner has been with OMB for seven years and usually has taken his apprenticeship in the agencies themselves...
...Generally, such transfers involve promotions...
...Although everybody involved knows that this is going on, the bidding is sometimes wild because so large an element of guesswork is involved...
...A lot of it is poker playing...
...The committee hearings are often charades in which questions designed to demonstrate the need for additional funds are written out in advance by the agency officials and obligingly mouth9d by the congressmen...
...And there a r e o t h e r difficulties...
...After OMB has settled on the amounts it will recommend for the various programs to be funded, the budget officer and the Secretary have a session at which they discuss some additional programssay, two or three hundred million dollars worth-that the Secretary really wants, programs that perhaps are threatened with extinction or malnutrition because they didn’t quite fit under the ceiling negotiated with OM B. “Well,” says the budget officer, “here’s something I can do to pick up the extra dough-we can sell off some of those loans and use the money to fund those programs...
...To simplify, let’s say an agency lists 15 programs (a major department may in fact have 500), of which o‘nly the first ten come in under the ceiling set...
...Few of these games are played solely by the agencies...
...Since it is most unlikely that HEW is going to save the taxpayers a billion dollars in welfare and related abuses, the legislators knew t h a t t h e President would probably have to ask for a supplemental appropriation for HEWwhich Congress quietly would pass...
...But although some leave and some switch agencies, more stay with the same department for their adult lives...
...The same logic in the congressional phase of the process can wear down the resistance of the most determined President...
...There is a lot of grunting and groaning, some contorted faces and dirty tricks...
...The Umbrella Game...
...But they insist that it is frequently a tactic with some civic merit...
...Carter, for example, has been strong on his American heritage program, which calls for the preservation of historic sites through their purchase by the government...
...Under ZBB procedures, OMB sets a “ceiling” for each agency-the maximum amount that presumably can be allocated to it...
...The line between being the Secretary’s good right hand and actually making policy decisions for him is sometimes fuzzy...
...When a budget man knows from experience and from tentative feelers that the OMB staff, right up to the associate director, is going to turn down a program, he will get his Secretary to start working on the OM B Director...
...And a single OMB budget examiner who has six or seven weeks to review about $3-billion worth of such programs is at a decided disadvantage in his ability to dispute the potential cost of each item...
...If an agency calculates that a program will require a minimum of $10 million, the agency may very well ask for $40 million on the a s s u m p t i o n t h a t it will be negotiated out at a comfortable $20 million...
...The Gimmick Game...
...Every President comes in with announcements of certain initiatives or directions, and others are unveiled along...
...As a result, OMB must recruit between 60 and 80 professionals every year, an inordinately high number for so small an organization...
...Now, after working up Agriculture’s entire budget in line with the limit OMB has given him, the budget officer finds he needs to scrape up a hundred million bucks for some program that has been neglected...
...Programs are the big game...
...After reviewing the Forest Service’s annual budget submission, he will make his recommendations to his superior at OM B. These recommendations will be amended as a result of the gamesmanship at higher levels, but the examiner is by no means a non-entity...
Vol. 10 • January 1979 • No. 10
