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The Office of Management and Budget and the Presidency, 1921-1979
By Larry Berman
PRINCETON UNIVERSITY PRESSCopyright © 1979 Princeton University Press
All rights reserved.
A Treasury Bureau or Presidential Staff Agency? 1921-1938
Prior to 1921, federal agencies submitted uncoordinated financial requests directly to the Secretary of the Treasury, where they were packaged with little alteration into a Book of Estimates and forwarded to Congress. The President played only a limited role in formulating the national budget.
By the end of the 19th century, however, federal government expenditures had been increasing rapidly, with twenty-eight years of uninterrupted budget surpluses suddenly followed by six years of deficits between 1904-1910. "It was a foregone conclusion," Louis Fisher noted, "that debt management problems after the war would require modernization of the budget process and an increased financial responsibility for the executive branch."
In 1912 President Taft's Commission on Economy and Efficiency recommended the development of a national executive budget "whereby the executive may be made responsible for getting before the country a definite, well-considered, comprehensive program." The budget reform movement proceeded slowly as World War I, Taft's opposition Congress, and his own re-election defeat removed reform from the immediate agenda. By 1919 Representative James W. Good, Chairman of the House Select Committee on the Budget, introduced a bill placing the President in charge of estimates and assigning Congress responsibility for increasing or reducing those estimates. The Good bill also provided the President with a budgetary agent — a Bureau of the Budget located in the President's office and reporting directly to the Chief Executive. In the Senate, Medill McCormick's Special Committee on the National Budget also recommended the creation of a Bureau of the Budget. This Senate version, however, located the proposed Bureau in the Treasury Department, not in the President's office.
The House and Senate committees soon compromised by placing the proposed Budget Bureau under presidential control and designating the Secretary of the Treasury as Budget Director. President Wilson vetoed the bill because of a provision that only a concurrent resolution could remove the Comptroller General and Assistant Comptroller General from the General Accounting Office. Concurrent resolutions are not presented to the President for approval and Wilson viewed this as a threat to the Chief Executive's removal powers. The House vote of 198-103 was short of the necessary two-thirds majority to override Wilson's veto. (The 1921 law, which established both the Bureau of the Budget and the General Accounting Office, adopted a joint resolution for removal.)
The impetus for reform could not be stopped. In April 1921, with a new Congress and a new President, the Good and McCormick bills were reintroduced, passed their respective committees, and assigned to conference. By May 25, 1921 a bill emerged calling for the establishment of a Bureau of the Budget, located within the Treasury Department ("in but not of") but headed by a Director and Assistant Director appointed by the President. The Budget Director would be the President's personal assistant, as indicated by the lack of a confirmation requirement. The compromise bill passed both Houses and on June 10, 1921 President Harding signed into law the Budget and Accounting Act.
The Budget and Accounting Act denied federal agencies independent influence in the budget decisions of Congress by specifically empowering the Budget Bureau "to assemble, correlate, revise, reduce, or increase the estimates of the several departments or establishments." The 1921 act also authorized the Budget Bureau to make detailed administrative studies for "secure(ing) greater economy and efficiency in the conduct of the public service." (This particular role in administrative management would be neglected for almost two decades.)
President Harding selected General Charles G. Dawes, a former Chief of Supply Procurement for the American Army in France and a future Vice President of the United States, as the first Director of the Bureau of the Budget. Dawes was an energetic man perfectly suited to the task of bringing the Budget Bureau to life. A BOB Staff Orientation Manual published twenty-five years later acknowledged that "the legislative creation of appropriate budgetary machinery, although a vast advance, could do no more than provide a starting point for the new system. How truly new it would be, how much of a system it would represent, what results it would produce — these were questions unanswerable in statutory terms. Decisive would be the personal leadership in the Bureau of the Budget, the vigor with which it impressed itself upon the departmental structure, and the foresight which it displayed in developing its long-range tasks."
Dawes did not believe the Bureau belonged in the Treasury Department because "the effectiveness of the Budget machinery depends upon its independence of departments and its complete dependence upon the President." In Budget Circular No. 1 of June 29, 1921, Dawes established certain cardinal principles for the Bureau of the Budget. Success of the budget system would depend on basic tenets which needed to be "so firmly established both as concepts and rules of action that they will never hereafter be questioned." These commandments were that the Budget Bureau remain impartial, impersonal, and non-political; the Budget Director act as an advisor to Department officials on matters of business administration; the Director's request for administrative information would take precedence over competing claims of Cabinet officials.
Dawes operated with a definite theory for the role of a nonpolitical presidential managerial staff. While we would now consider the policy-administration dichotomy naive, it reflected the view of the day about organization. Dawes insisted "that the managerial staff to the President had to be completely nonpolitical — they were only workers in the stoke-hole who had nothing to do with the steering of the ship ... only a nonpolitical staff could do a good managerial job for a political chief executive, and that the best way to let the technicians make their useful professional contribution was to keep them thoroughly subordinated to political authority."
Dawes often insisted that his agency had nothing to do with policy-making and was concerned simply with economy and efficiency in routine government business. "Much as we love the President, if Congress in its omnipotence over appropriations and in accordance with its authority over policy, passed a law that garbage should be put on the White House steps, it would be our regrettable duty, as a bureau, in an impartial, non-political way and non-partisan way to advise the Executive and Congress as to how the largest amount of garbage could be spread in the most expeditious and economical manner." Dawes was, of course, involved in policymaking. The so-called politics-administration dichotomy represented, in practice, not the separation of one from the other, but the dominance of administrative values over political ones.
President Harding gave Dawes great leeway in administrative matters, permitting the Budget Director use of the Cabinet room for scheduling business meetings with Cabinet officers. Harding's visible support allowed the Budget Director to attain the status of primus inter pares. Dawes believed that "no Cabinet officer on the bridge with the President, advising as to what direction the ship of state should sail ... will properly serve the captain of the ship or its passengers, the public, if he resents the call of the Director of the Budget from the stoke-hole, put there by the captain to see that coal is not wasted." This was a period of retrenchment in government spending. To ensure that coal was not wasted, Dawes established several coordinating agencies headed by a chief coordinator appointed by the President. The agencies dealt with problems of dispersing postwar supplies, organizing departmental purchasing, and preventing wasteful activities. One Bureau report recommended that each employee receive only one pencil at a time and not receive a new one until the unused stub was returned.
Dawes's enthusiasm, his excellent working relationship with the President, and his keen sense of historical mission were important in establishing the Bureau of the Budget as the President's primary staff agent for ensuring economy and efficiency in matters of routine business. Yet, Dawes's insistence that "one cannot successfully preach economy without practicing it," was interpreted as a mandatory self-imposed policy for the Budget Bureau. In the final entry of his diary Dawes wrote that "of the appropriations of $225,000 for the Bureau of the Budget, we only spent $120,313.54 in the year's work. We took our own medicine." Taking its own medicine almost destroyed the usefulness of the Budget Bureau. The emphasis on matters of routine business was countered by Dawes's neglect of government-wide administrative reform. He viewed administrative management as part of the budget review process of identifying waste and reducing spending. The Bureau's Staff Orientation Manual noted that "Dawes had not prepared the Bureau for the assumption of functions more typical of a general administrative staff agency. The broader aspects of administrative management, outside the province of economical conduct of business transactions, had not received the attention they deserved."
Dawes's successors, General ?. M. Lord and Colonel J. Clawson Roop, showed similar disinterestedness in the broader issues of administrative management. Lord actually checked employees' desks for excessive use of official stationery, paper clips, and other government supplies. Lord engaged in such quaint-sounding ploys as establishing a "Two Per Cent Club" for agency heads who trimmed that amount off their estimates, a "One Per Cent Club" reserved for the less efficient, and the "Loyal Order of Woodpeckers," whose motto read: "All hail to the Loyal Order of Woodpeckers, whose persistent tapping away at waste will make cheerful music in government offices and workshops the coming year." Administrative management activities were reduced to supervising travel regulations and negotiating reduced hotel rates for government employees. The Bureau directed federal agencies to use the Army radio network instead of telephones and gave commendations for taking upper berths in Pullmans and for using brooms until they were completely worn out. Between 1921-1939 the Budget Bureau undertook no organizational studies (despite explicit guidelines of the Budget and Accounting Act.)
A self-imposed parsimony (illustrated by a meager appropriation and staff of forty-five) forced key issues of administrative management to the background. The Bureau consisted of roughly 45 employees. The Bureau's 1921-1938 organization (Appendix Two, A) consisted of the Director's office, two Assistant Directors, an Estimates Division (two or three investigators), clerical assistance, and a General Counsel. The Budget Bureau's own evaluation of the period provides an appropriate epitaph. "The Bureau came to operate increasingly on the basis of settled routines. The indefinite postponement of administrative reorganization and the pride the Bureau took in its diminutive size combined to deprive it of opportunities for significant self-development. ... At the end of its first decade, the Bureau was no longer able to show effective leadership."
The Budget Bureau initially fared no better under President Roosevelt. Roosevelt's first Budget Director, Lewis Douglas, accepted the BOB Directorship with Roosevelt's assurance that the budget would be balanced. One of Douglas' first tasks was to prepare legislation for reducing federal salaries and veteran's pensions at a combined savings of $500 million. Roosevelt began his first term relying extensively on Douglas. Each morning the Budget Director and Raymond Moley met with the President (in FDR's bedroom) to discuss the important business of the day and, at A Treasury Bureau or Staff Agency Roosevelt's request, Douglas attended Cabinet meetings. Ideological differences soon developed between the President and his fiscally conservative Budget Director, primarily over the government's economic policy to combat inflation. Douglas believed that Roosevelt's decision to leave the gold standard was "the end of western civilization." Douglas urged Roosevelt to cut back on New Deal Public Works programs because "history demonstrates, almost without exception, that huge expenditures plunge governments, even though reluctant, into paper inflation. This, history again demonstrates, is one of the most destructive things a government can do to its people." Obviously Roosevelt believed that his New Deal policies were saving people, not destroying them. He questioned Douglas' loyalty and suspected the Budget Director of keeping a secret diary critical of the President's policies. By August 30, 1934 Douglas submitted his resignation to the President, explaining that because temporary measures designed to meet extraordinary conditions had evolved into permanent policy, "in your interests it would be better to replace me with someone who is in more complete accord with your budgetary policies."
The Douglas-Roosevelt split meant that the Bureau's budget work would continue, but the Budget Director would not be an intimate advisor. Wann explains that Roosevelt decided to circumvent the Bureau by devising "other administrative patterns which minimized the role of the Budget Director, and had developed the habit of relying upon personal assistants in the White House to do some of the tasks involved in coordination and administrative management which the Director might have performed better." This decision was reflected in the President's selection of Daniel Bell as Douglas' successor. Bell was a Treasury Department bureaucrat who held a position subordinate to the Secretary of the Treasury, which he refused to surrender in order to maintain his civil service pension. For the next five years Bell served as Acting Director of the Bureau of the Budget.
Yet, between 1932-1936, the Budget Bureau as an institution slowly acquired functions which today still constitute the lifeblood of the American political system. First, as is well documented in Neustadt's work on central clearance, Roosevelt complained at a December 1934 meeting of the National Emergency Council (NEC) about the lack of coordination in agency requests for legislation. All proposals for appropriations would now be cleared by the BOB. All "other" proposed legislation was to go through the Executive Director of the NEC, but with the NEC's demise in 1936 the BOB assumed legislative clearance duties. The new system served Roosevelt's interests. Neustadt observed that "this was Roosevelt's creation, intended to protect not just his budget, but his prerogatives, his freedom of action, and his choice of policies, in an era of fast-growing government and of determined presidential leadership."
In 1938 the Public Printer was persuaded to make multiple copies of enrolled bills so that the Budget Bureau, Congress, and the affected agencies could study proposed legislation before it arrived at the White House. The Budget Bureau immediately seized the advantage by issuing Circular 346, officially identifying the BOB as the President's agent on enrolled enactments. Federal agencies were instructed to report within 48 hours their opinions on enrolled enactments, and all agency opinions were to be accompanied by factual information.
The real payoff, however, was that the BOB was able to implement its new veto recommendation authority into the central clearance process. Neustadt describes how "the Budget Bureau's work on agency proposals and reports built up a general, comprehensive record, unmatched elsewhere in government, to buttress its consideration of enrolled bills. At the same time, its mandate on enrolled enactments now lent special point and purpose to clearances of measures in proposed and pending stages."
By 1937, however, President Roosevelt was simply overwhelmed by the administrative aspects of an expanded modern government. The proliferation of New Deal agencies with little regard for administrative patterns, as well as the fact that most of Roosevelt's assistants were assigned to the White House, but on the payroll of other agencies, motivated the President's demand for increased executive control. Roosevelt, believing that expanded government required management tools commensurate to the task, commissioned Louis Brownlow to devise a plan for increased staff support.
On January 10, 1937 President Roosevelt met with his Committee on Administrative Management, several committee staff members, and the majority leaders of the House and Senate to review the Brownlow Committee recommendations. In no uncertain terms, he informed his guests that he needed both personal and institutional help.
The President's task has become impossible for me or any other man. A man in the position will not be able to survive White House service unless it is simplified. I need executive assistants with a "passion for anonymity" to be my legs.
I also need managerial agencies to help me in this job on fiscal, personnel and planning. Greater aid should be given to me by the Bureau of the Budget, which now reports to me directly. It should be authorized to improve its staff and to perform certain services on coordination of informational activities.
Excerpted from The Office of Management and Budget and the Presidency, 1921-1979 by Larry Berman. Copyright © 1979 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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