How Presidential Budgets Became a Joke

A century ago, reformers embraced the naive belief that politics could be quarantined from the budgetary process. It hasn’t worked out that way. 
President Gerald Ford meets with bipartisan congressional leaders to discuss the budget, including his longtime friend and colleague, Democratic House Majority Leader Thomas P. "Tip" O'Neill, and Senate Minority Leader Hugh Scott January 20, 1976 in Washington, DC. Photographer: David Hume Kennerly/ Getty Images

You wouldn't have known it -- judging from the reaction this week to the release of President Barack Obama's budget -- but the president's annual budget was originally designed to take politics out of the budgeting process.


A little history. The Constitution is explicit: Congress alone has the power to tax and spend. It's more ambiguous on the role of the executive branch. In the 19th and early 20th centuries, the president was almost entirely removed from the budgetary process. Each department within the executive branch submitted budget requests independent of both the president and one another. The president neither oversaw nor approved these requests.

Though the Treasury Department compiled these requests in a biblical tome called the "Book of Estimates," which it then presented to Congress, centralized decision-making was non-existent on Capitol Hill, too. Instead, a constellation of independent Congressional committees decided the funding fate of each separate cog and gear of the federal bureaucracy.

The system worked well enough in the early years of the nation. But by the late 19th-century, Progressives blamed it for sowing waste and inefficiency, and pushed for the creation of centralized budgeting bureau housed in the executive branch.

One advocate of reform, William Willoughby, argued in "The Problem of a National Budget" that only the president could "determine in detail the administrative needs of the governed and intelligently ... formulate an annual work program." Willoughby had little faith in Congress: "the legislature should be largely, if not wholly excluded, from the direct determination of the appropriation of funds."

Other reformers concurred, and this particular Progressive vision became enshrined in law with the Budget and Accounting Act of 1921, which created the "Bureau of the Budget" within the executive branch (forerunner of today's Office of Management and Budget). The legislation also required the president to submit a national budget every spring in consultation with the bureau, which would be run, one reformer claimed, by "men who are students of economics" rather than "men who have been able to control a ward or a county or a State politically."

At the same time, Congress rationalized its own budgetary process, creating appropriations committees in the House and the Senate to replace the older, Balkanized system. Though few recognized it at the time, power had shifted toward the executive branch, which now set the terms of the budgetary process via the newly mandated presidential budget.

The first director of the budget bureau was Charles Dawes, a banker who invested the process with an aura of neutrality. "We are in the hold of the ship, down where the coal is," he declared. "The President and his Cabinet are on deck. They determine where the ship shall sail, but we in the coal hole determine how far she can sail." He memorably described the bureau as "the eyes and ears, but not the fingers, of the Chief Executive." Budgets under Dawes would be separate from politics, and the bureau would check wasteful spending.

This was not to last. The Dawes era was overtaken by, well, everything -- from economic cataclysm to war. As Naomi Caiden, a professor of public administration observed, the "logic of Keynesian control of the economy, the 'permanent emergency' in foreign affairs and the role of the presidency in spearheading social programs, seemed to place the budget process as a major tool of executive policy making." Politics, which had never left the budgetary process, now intruded more forcefully.

This trend continued, hitting its high (or low) point in 1970, when President Richard Nixon transformed the Bureau of the Budget (renamed the OMB) and installed political appointees to guide its actions. He also "impounded" money that Congress had appropriated, refusing to spend it. While there was some precedent for this, Nixon pushed it to an extreme, using the tactic to defund programs he disliked. Impoundment became what one political scientist has described as "line-item veto authority by another name."

From the standpoint of an increasingly restive Congress, too much power had been ceded to the president. As scandal enveloped Nixon in 1974, Congress passed two related pieces of legislation that reasserted its control over the budget: the Impoundment Control Act and the Congressional Budget Act.

The first curbed the president's power to impound appropriations; the second set up a new budget committee in both the House and Senate that would assess the president's budget and write its own budget resolutions in response.

This was overdue, but it also eroded any lingering faith people had that the budgetary process could be navigated in a dispassionate way. In its very first meeting, the newly formed House Budget Committee devolved into an angry exchange, with Democratic Committee Chairman Al Ullman lambasting the Nixon administration and calling for an end to "old, trite, outmoded economic concepts that clearly have failed us." House Minority Leader John Rhodes, a Republican, hit back, declaring "If I'm going to be exposed to any more political diatribes like this, I can assure you that my cooperation will end almost immediately."

And it pretty much did -- along with the quaint but hopeful idea that politics could be quarantined from the budgetary process.

(Stephen Mihm, an associate professor of history at the University of Georgia, is a contributor to the Ticker. Follow him on Twitter at @smihm.)

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