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Wall Street Journal.

The Accountability Budget
February 4, 2002   

By William D. Eggers

It has become a predictable ritual of a president's first year in office: He announces an ambitious effort to transform the federal budget process, and then quietly shelves it a few news cycles later. Lyndon Johnson's "planning-programming-budgeting system," Jimmy Carter's "zero-based budgeting," and Richard Nixon's "management by objective" were all unveiled with great fanfare only to get buried in the budget graveyard soon afterward, doomed by congressional indifference and bureaucratic inertia.

Reform Swamp

With today's release of his budget, George W. Bush takes his own first brave steps into the budget reform swamp. His strategy: linking funding to actual performance for scores of federal programs. His catchphrase: "performance-based budgeting." His primary goal: get legislators and interest groups to focus less on how much each cherished federal program's funding has increased over last year's base level, and more on (you may want to sit down for this) what said program has actually accomplished. The goal, says budget director Mitch Daniels, the architect of the new approach, "shouldn't be merely how much, but how well."

Of course, if your program is lucky enough to be classified as "defense" or "homeland security," you're likely to get a big increase in Mr. Bush's budget, which doubles spending for the latter, while giving the former a 12% boost. Thanks to these increases, discretionary spending overall jumps by 9%. The loser, if there is one in this budget, is all non-defense and non-homeland-security discretionary spending, which is held to a 2% rise, the lowest in years. This is sure to raise considerable liberal hackles on Capitol Hill.

But Mr. Bush hopes that linking budgetary bottomlines to specific performance criteria will avoid the nasty ideological fights that scarred Republicans in budget seasons past. The Bush/Daniels model resembles less Reagan/Gingrich and more the pragmatism practiced in the past decade by leading GOP governors. "There are plenty of places to reduce spending when you separate the effective programs from the ineffective programs," says Mr. Daniels. "The budget will take a long step toward governing with accountability."

Performance and accountability. Mr. Daniels and the White House will repeat these words so often in the coming months that we may find ourselves longing for the days of the "lockbox." And the administration is putting its (which is to say, your) money where its mouth is. The Bush budget, in a distinct departure from the Beltway practice of rewarding failure with more spending, specifically links spending cuts and increases to actual performance. Programs that the OMB rates "ineffective" are slated for reduction, or axing, while programs rated "effective" will see budgets boosted.

Example: Mr. Bush's budget recommends that the Department of Agriculture's $80 million watershed program be shut down. Why? Of the federal agencies that build dams for farmers -- the Federal Emergency Management Agency, the Army Corps of Engineers, and USDA -- the latter is the worst performer.

And it's hardly the only case; each of the federal government's 478 lines of business is performed by an average of 19 agencies, pointless overlap that costs taxpayers billions of dollars a year. One flagrant example is the 48 different federal job training programs, a third of which reside in the Department of Labor. The Bush budget proposes cutting the ineffectual Youth Opportunity Grants by $180 million -- and granting a $73 million increase to the effective Job Corps.

Some programs are on the chopping block because government shouldn't be doing them at all. For instance, the president wants to axe the $33 million shipbuilding loan program, which subsidizes the construction of cruise ships, not because it's ineffective but because he believes government doesn't belong in the cruise ship business -- even when they're built in Trent Lott's home state.

Reflecting the Bush administration's growing reformist priorities, the new budget also contains an Office of Management and Budget scorecard grading each federal agency on how well it manages its operations. Green dots signify that nearly all management goals have been met; yellow dots say some have been met; red dots indicate that, ahem, substantial improvement is necessary. This year, over 75% of the OMB's grades were red dots. Simplistic? Sure, but it gets the point across, especially since Mr. Bush has been touting the grades in budget meetings with Cabinet secretaries.

Will Mr. Bush's result-oriented budget model herald permanent changes in the way Washington funds programs? Many old Beltway hands are skeptical, to say the least. "Congressional committee heads and appropriators," says a former Reagan administration official, "aren't suddenly going to zero out their favorite program because some junior analyst sitting in a cubicle at OMB says it's ineffective."

This said, there's ample cause for cautious optimism that things will be different this time. First, unlike previous reform efforts, Mr. Bush's performance-based budgeting is firmly rooted in over a decade's experience -- in the U.S., Australia, Britain and New Zealand.

Second, whereas legislators traditionally regard budgeting reform efforts as executive branch unilateralism, the Bush model builds directly on the 1993 Government Performance and Results Act, which seeks to focus government decision-making on results. This should help win over at least some legislators to the president's crusade for government accountability. "Some of us have been asking agencies for years to tell Congress and the American people what results we're getting for our tax dollars," says Sen. Fred Thompson (R., Tenn.). "Finally, this president's budget begins to do this."

Walk and Talk

"There comes a time when every program must be judged either a success or a failure," then-Gov. Bush said during his presidential campaign. "Where we find success, we should reward it, repeat it, make it the standard. And where we find failure, we must call it by its name. Government action that fails in its purpose must be reformed or ended."

At the time, not many people noticed this obscure line, and those who did probably dismissed it as a typical example of a candidate's election-year talk. With his first budget, President Bush has shown that he also intends to walk the walk. The question that will be answered in the months to come is how hard it will be to convince Congress to take that walk with him.

Mr. Eggers, a senior fellow at the Manhattan Institute, is writing a book on how technology is transforming government.

©2002 Wall Street Journal

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