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Office of Management and Budget

OFFICE OF MANAGEMENT AND BUDGET

OFFICE OF MANAGEMENT AND BUDGET (OMB), established by executive order in 1971 when President Richard M. Nixon issued his Reorganization Plan 2. The Plan created the OMB as part of the reorganization of the Bureau of the Budget, the agency within the Executive Office of the President responsible since 1939 for the formulation of the national budget. (Prior to 1939 the Budget and Accounting Act of 1921 had placed the Bureau of the Budget in the Treasury Department.) The president selects the director of the OMB, who has cabinet-level status within the federal bureaucracy.

The primary function of the OMB is to assist the president in preparing the national budget and to "supervise and control the administration of the budget." In addition, it has a number of other functions of considerable significance and influence. It is charged with aiding the president in achieving governmental efficiency; advising the president about the potential costs of the administration's legislative program and coordinating the legislative requests of governmental agencies; developing information systems and assembling statistical data; monitoring the performance and efficiency of federal programs; developing programs for recruiting, training, and evaluating career personnel; and coordinating all programs of the executive branch in order to achieve maximum efficiency and efficacy. In short, the reorganization and change in agency title from Bureau of the Budget to Office of Management and Budget reflect a significant expansion of the managerial responsibilities and influence of the agency.

In fulfilling its primary responsibility, the preparation of the national budget, the OMB addresses itself not only to fiscal policy but also to the substantive aims of the administration's policy goals for the fiscal year. During the process of drafting the budget, agencies present their program plans and appropriation requests to the OMB, where its staff examines them in detail. Beginning in the mid-1960s the Bureau of the Budget instituted an evaluation process known as "Planning, Programming, Budgeting" (PPB) for assessing agency programs and appropriation requests. In the PPB process the OMB scrutinizes the efficiency with which the available alternative means, or cost effectiveness, meets the program goals stated in the appropriation requests. The objective of PPB is to achieve the program objectives by choosing the alternative with the optimal cost-benefit ratio.

The Office of Management and Budget, the Department of the Treasury, and the Council of Economic Advisors work together to formulate government fiscal policy and to coordinate the performance of the economy in general with government programs and spending. Once the OMB has evaluated the programs and appropriations of all agencies within the eleven cabinet departments, it prepares the annual budget that the president submits to Congress each January.

During the 1980s and 1990s, critics increasingly attacked the OMB for being a political tool of the administration, in part because it had enormous influence without being accountable to the public and in part because its budget projections were frequently much more optimistic than those coming from the Congressional Budget Office (CBO), founded in 1974. Between 1996 and 1999, however, growth defied the CBO's conservative expectations and generated an enormous surplus more in line with President Bill Clinton's OMB projections. In 1999 the CBO revised its projections to mirror more closely those of the OMB, a move that critics decried for allowing budget projections to drive policy rather than using them simply to forecast actual economic growth.

BIBLIOGRAPHY

Mackenzie, G. Calvin, and Saranna Thornton. Bucking the Deficit. Boulder, Colo.: Westview Press, 1996.

Myers, Margaret G. A Financial History of the United States. New York: Columbia University Press, 1970.

Wildavsky, Aaron, and Naomi Caiden. The New Politics of the Budgetary Process. 3d ed. New York: Longman, 1997.

Stefan J.Kapsch/c. w.

See alsoBudget, Federal ; Bureaucracy ; Council of Economic Advisors ; Treasury, Department of the .

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Office of Management and Budget

OFFICE OF MANAGEMENT AND BUDGET

The Office of Management and Budget (OMB), formerly the Bureau of the Budget, is an agency of the federal government that evaluates, formulates, and coordinates management procedures and program objectives within and among departments and agencies of the executive branch. It also controls the administration of the federal budget, while routinely providing the president of the United States with recommendations regarding budget proposals and relevant legislative enactments. The Bureau of the Budget was first established in the Executive Office of the President pursuant to reorganization plan No. 1 of 1939 (5 U.S.C.A. app.), effective July 1, 1939. Its functions were reorganized and the office renamed OMB by executive order No. 11,541 of July 1, 1970. Since the reorganization, the OMB has played a central role in analyzing the federal budget and making recommendations for changes in the budget. Its director, who is appointed by the president, is a key advisor on fiscal policy. The director often appears before congressional committees to explain budgetary proposals.

The OMB assists the president in developing and maintaining effective government by reviewing the organizational structure and management procedures of the executive branch to ensure that the intended results are achieved. It works to develop efficient coordinating mechanisms to implement government activities and to expand interagency cooperation.

The OMB assists the president and executive departments and agencies in preparing the budget and in formulating the government's fiscal program. It also publishes the president's proposed Budget of the U.S. Government every year. Once Congress approves a budget, the OMB supervises and controls the administration of it. In addition, it advises the president on proposed legislation and recommends to the president whether to sign or veto legislative enactments.

The office also assists in developing regulatory reform proposals and programs for paperwork reduction, especially reporting burdens of the public. The OMB helps in considering, clearing, and, where necessary, preparing proposed executive orders and proclamations that will have an impact on the federal budget.

The OMB has assumed an oversight role in determining the effectiveness of federal programs. It plans and develops information systems that provide the president with program performance data, and it plans, conducts, and promotes evaluation efforts that assist the president in assessing program objectives, performance, and efficiency.

The office also keeps the president informed of the progress of government agency activities with respect to work proposed, initiated, and completed. It coordinates work among the agencies of the executive branch to eliminate overlap and duplication of effort and to ensure that the funds appropriated by Congress are expended in the most economical manner.

Finally, OMB works to improve the economy, efficiency, and effectiveness of the procurement processes by directing procurement policies, regulations, procedures, and forms for the executive branch.

OMB is comprised of divisions that are organized by agency or program area and also by function. Resource Management Offices develop and support the president's Budget and Management proposals. The Budget Review Division provides technical support for budget-related negotiations and decisions. The Legislative Reference Division coordinates the position of the administration regarding budget-related legislation. Statutory offices include the Office of Federal Financial Management, the Office of Federal Procurement Policy, and the Office of Information and Regulatory Affairs.

further readings

Office of Management and Budget. Available online at <www.whitehouse.gov/omb> (accessed August 1, 2003).

cross-references

Executive Branch.

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Office of Management and Budget

Office of Management and Budget

The Office of Management and Budget (OMB), established in 1939 within the office of the President, determines both how much money will be spent by the federal government and what kinds of regulations will be adopted to implement all environmental and other legislated programs.

According to the 1946 Administrative Procedures Act, regulations "interpret, implement or prescribe law or policy." Draft regulations must be publicized, and agencies must incorporate public comments into the final regulations. Executive Orders 12291 and 12498, issued in 1981 and 1984, respectively, gave the Office of Information and Regulatory Affairs (OIRA), a division of OMB, the authority to review and approve all regulations and paperwork drafted by the Environmental Protection Agency ,as well as all other federal agencies.


RESOURCES

ORGANIZATIONS

Office of Management and Budget, 725 17th Street, NW, Washington, D.C. USA 20503 (202) 395-3080, <http://www.whitehouse.gov/omb>

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Office of Management and Budget

OFFICE OF MANAGEMENT AND BUDGET

The rapid growth of the federal government in the twentieth century has created the need for an institution to coordinate both fiscal and substantive policy. In 1921, Congress empowered the President to prepare and submit a budget for the government. Previously, the government had had no central budgeting function: the various agencies had made funding requests directly to the appropriations committees in Congress. The President exercises the budgeting function through the Office of Management and Budget (OMB). Although OMB controls the requests that Congress receives, Congress is free to appropriate any amount that it considers appropriate.

The budgeting function accords the President an important opportunity to set the agenda for congressional deliberations over appropriations. Notwithstanding the modern presence of a budget process within Congress itself, Congress finds itself responding initially to the President's views of the best resource allocation for the government. And, of course, Congress is aware that its departure from the President's recommended budget may result in the presidential veto of an appropriations bill. In consequence, through OMB the President exercises great influence on actual appropriations. Moreover, appropriations usually confer discretion concerning the amounts to be spent and the precise uses to be made of the funds. The President supervises the agencies' actual spending through OMB.

OMB also exercises limited control over the substantive policies that the agencies follow. The Supreme Court, in myers v. united states (1926), recognized presidential power to "supervise and guide" the executive agencies in their exercise of power that Congress has delegated to them. This does not extend to the independent regulatory commissions because, in humphrey ' s executor v. united states (1935), the Supreme Court declared those commissions to be independent of the President except for the constitutional power to appoint their members, and except for powers over them that Congress explicitly grants the President, such as budget review.

Policy supervision therefore concentrates on the executive agencies. In part because of doubts about the extent of the President's power to dictate policy even when it is formed in the executive agencies, OMB has usually limited its supervision to requiring agencies to comply with procedural directives imposed by Presidential executive orders. These directives are thought to be less intrusive than outright commands setting substantive policy. Several Presidents have directed the agencies to prepare analyses of the costs and benefits of their regulations, and to submit them to OMB for review and comment. In view of the size of the executive establishment and the complexity of the issues it considers, this kind of procedural supervision and occasional ad hoc consultation on major policy decisions is the most that the relatively small bureaucracy that serves the President in OMB can hope to accomplish.

Harold H. Bruff
(1986)

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