The Incredible Shrinking Budget Office

January 1, 2002

The more the war on terrorism intensifies, the less relevant the
President’s budget office is to the organization, and even the
cost, of the war effort. It has had little to contribute in the
discussion of how much to spend on homeland defense,
except to say that it should cost as little as possible. It has
contributed nothing much to discussion of how to organize for
the defense effort, even though the largest federal
reorganization in recent history may result. Even on the
economic stimulus package, it has been minimally involved in critical

As if to demonstrate OMB’s marginal role, Daniel’s talented deputy director,
Sean O’Keefe, recently announced that he was leaving his post to become
administrator of NASA, hardly an agency that moves him closer to the front lines
of the war on terrorism. That O’Keefe could feel comfortable leaving Daniels as
the only senior officer at OMB just two months after Sept. 11 suggests just how
little the budget office has to say about who gets what, when, and how at this
critical moment.

Part of the problem lies in the evisceration of the “M”
in OMB. The agency’s once-proud administrative
management division had 224 employees in 1970,
when President Richard Nixon renamed the old
Bureau of the Budget to emphasize management.
Thirty years later, the OMB director for management
can call on less than a dozen employees, and the slot
for a deputy director for management remains unfilled
a full year after the Bush administration took office. One candidate after another
has turned down the toothless, staffless post. Part of the problem is Daniels. He
is bright and articulate, but he has spent so much time bad-mouthing Congress
that he is persona non grata on Capitol Hill. “Their motto is, ‘Don’t just stand
there, spend something,’” he said of congressional appropriators in October.
“This is the only way they feel relevant.”

Daniels has also spent so much time belittling federal employees that he has
little influence among the agencies he oversees. Speaking before a sympathetic
audience of federal contractors last July, Daniels showed just how sarcastic he
can be. He described the Interior Department, which manages the national
parks, as “the world’s largest lawn-care service.” Then he ripped federal
employees, saying their idea of a stretch goal is “going from 10 to eight carbon

Daniel’s ideological commitment to job competitions has led to a needless
distraction in the war on terrorism. He insists that all agencies, including
Defense, State, Treasury, Transportation and Justice, put 5 percent of their
commercially available jobs up for competition by October, in spite of the fact
that those agencies have more important plans to make. “I don’t want the 5
percent goal to result in poor management decisions,” says one OMB official. “If
it means some agencies are at 4 percent, and some agencies are at 6 percent,
that’s OK.”

The war has not been enough to stop OMB from rolling out its silly “red
light/green light” scorecard for tracking progress on the President’s management
agenda. Announced Oct. 30, the proposal is based on the “balanced scorecard”
that has been sweeping the corporate and nonprofit worlds. On the scorecard,
agencies will get green, yellow or red lights for their performance on five
management initiatives: human capital, electronic government, job competitions,
financial performance, and the link between budget and results. The scorecard
does track many of the right things, most notably the need to create and sustain
a high-performing federal workforce. But the scorecard is not even remotely
linked to the budget process in helping agencies achieve green lights on the five
initiatives. The scorecard offers no guidance, for example, on how agencies
should create incentives to improve employee performance or absorb continued
cuts in their administrative budgets while making long overdue investments in
information technology.

The scorecard shows just how weak OMB is in leading the federal government to
the higher performance it says most agencies need. Rated on the connection
between its own budgetary decisions and the need for improvement, OMB would
get red lights on filling the deputy director for management post, staffing the
office with enough experts to answer the inevitable agency requests for help, and
providing even a nickel in new budget authority to help agencies improve.

The question is what to do with the “M” in OMB at a time when management
improvement might well spell the difference between victory and defeat in the war
on terrorism. Congress should split off the agency’s management responsibility
and merge it with the Office of Personnel Management and the General Services
Administration to form an Office of Federal Management. This new agency would
need the authority, staffing and vision to actually make government work. Such
an organization would end the illusion that the “M” in OMB somehow stands for
something other than “minimal.”