Transcript Slide 1

Philip G. Joyce
November 3, 2010

Sustained economic recovery
◦ 2008-present

Ballooning budget deficits
◦ 2009-?

Bringing more of a performance orientation
to the budget process
◦ 1960-present (in fits and starts, but not when
something else is more important)

How can these three coexist peacefully or
happily?
Year
Deficit
/Surplus
% GDP
Debt
Held by
Public
% GDP
1940
-2.9
-3.0
42.8
44
1950
-3.1
-1.1
219
80
1960
0.3
0.1
238.8
46
1970
-2.8
-0.3
283.2
28
1980
-73.8
-2.7
711.9
26
1990
-221
-3.9
2411.6
42
2000
236.2
2.4
3409.8
35
-9.1
9221.0
61
2010 Est -1342.0
3


Actual deficits:
◦ 2007: $161 billion (1.2% of GDP)
◦ 2008: $455 billion (3.2% of GDP)
◦ 2009: $1,413 billion (9.9% of GDP)
Under “current law”, deficits are very large in short run and
decline in later years (but remember: only with no
significant change in laws/policy)
◦
◦
◦
◦

FY10--$1,342 billion (9.1% of GDP)
FY11--$1,066 billion (7.0% of GDP)
FY12--$665 billion (4.2% of GDP)
FY13--$525 billion (3.1% of GDP)
These projections assume the scheduled expiration of the
tax cuts enacted in 2001 and 2003 (most cuts expire after
2010)
4







Extending all expiring tax provisions--$6.1 trillion
Extend only Bush tax cuts—$3.3 trillion
Extend Bush tax cuts for only taxpayers < $250k—$2.6
trillion
Index the alternative minimum tax for inflation--$720
billion
Increase discretionary spending at rate of GDP growth-$2.1 trillion
Freeze discretionary expenditures at 2010 level--$1.65
trillion (savings)
Reduce troops in Iraq and Afghanistan to 30,000 by
2013--$1.5 trillion (savings)
5
Budget Deficit or Surplus
Percentage of GDP
With
Tax Cuts
Extended
and AMT
Indexed
Debt Burden Across Countries in 2007
Percentage of GDP
Japan
Greece
Italy
Belgium
Portugal
Hungary
Austria
France
United Kingdom
Poland
Turkey
Germany
Netherlands
Sweden
UNITED STATES
Finland
Spain
Korea
Slovak Republic
Denmark
Czech Republic
Canada
Switzerland
Iceland
Mexico
New Zealand
Ireland
Norway
Australia
Luxembourg
2020 CBO
Baseline
0
Source: OECD.
20
40
60
With Tax Cuts
Extended and
AMT Indexed
80
100
120
140
160
180
Projected Federal Spending Over the Long
Term
Percentage of GDP
40
Actual Projected
35
30
25
Medicare and Medicaid
20
15
Social Security
10
5
Other Spending
0
1962
1972
1982
1992
2002
2012
2022
2032
TheCapitol.Net 202-678-1600
2042
2052
2062
2072
2082
8







Will the U.S. restore fiscal responsibility?
Will there be targets, and what will they be?
What will be the impact of the Obama deficit
commission?
What effect will the 2010 midterm election have?
How substantial will the effort be to reduce the deficit in
the President’s fiscal year 2012 budget (February 2011)?
If so, will this include an effort to reduce programs
based on performance considerations?
What about the “big four” spending programs (Social
Security, Medicare, Medicaid, and Defense), which
represented 60 percent of federal spending in 2009?
9
Federal Performance-Informed
Budgeting
 The Bush Agenda and Legacy
 The Obama Agenda
 Observations about the Obama
Agenda in Historical Context

10






Efforts date back 50 years
GPRA brought more attention
Focus has typically been on OMB/Congress
Performance-informed budgeting is
multidimensional
In particular, lots of activity in budget
execution
Enduring challenges
◦ Identifying and measuring outcomes
◦ Getting performance information used
◦ Establishing a culture of performance
11

Traffic light” scorecard

PART--1000 programs in 6 years

Conclusions by studies of PART
◦ Apparent substantial progress—from 1 “green” to 72;
from 110 “red” to 14
◦ Effective or moderately effective—30% to 51%
◦ Agencies said PART lacked credibility
◦ Decentralized approach does not work for crosscutting
functions
◦ Too much work/ too little payoff for OMB/agencies
◦ Congress was apathetic or hostile
◦ One size fits all approach
◦ Measures improved, but still need work
◦ Hard to reconcile PART with GPRA
12





Uneven progress made in measuring outcomes
Attempts made to reduce programs based on
performance (PART) not supported by Congress
Much more success in budget execution
(management) than government-wide resource
allocation
Uneven commitment from top leadership in
departments/agencies
Some confusion as to the appropriate locus of
performance (department or agency v. program)




Evaluating effects of economic stimulus
Determining programs to reduce or eliminate
as part of deficit reduction
Establishing “high priority performance goals”
Significant investment in a limited number of
more in-depth program evaluations


Current estimate--$814 billion in total costs
Major goal is job creation/saving
◦ Administration estimates that 6.8 million jobs will be
created/saved

Recovery.gov tracks spending and jobs
◦ Very difficult to track jobs reliably
◦ Current definition—anyone who works in an ARRA-funded
job

Broader definition involves tracking “multiplier
effect” of jobs

Obama 2010 Budget identified 121 programs for
reduction or elimination ($17 billion)
◦ OMB says 60% of cuts enacted by Congress

Obama 2011 budget included 126 terminations,
reductions and savings totaling $23 billion
(FY11)
◦ Those savings would represent a .7% reduction in
spending for FY11
◦ It is uncertain how much will be approved by Congress
since they left town without passing any appropriation
bills

In both FY10 and FY11 these reductions were
argued on the basis of lack of program
effectiveness




These are agency directed
Emphasis on goals where progress can be shown
within 12 to 24 months
“The ultimate test of an effective performance
management system is whether it is used, not
the number of goals and measures produced.”
Majority of goals are specific and measurable,
although some are ambiguous
◦ Social Security—”achieving an average speed of answer
of 264 seconds by the national 800-number”
◦ Education—”a system with rigorous processes for
determining teacher effectiveness”



“Performance measures can answer only so many
questions. More sophisticated evaluations”
necessary to draw conclusions
It is necessary to “isolate the effect of government
action from other possible influencing factors”
Obama administration established competitive
process to secure funds for evaluation
◦ 17 agencies funded to do evaluations of 36 programs
◦ In some cases funds provided to improve agency evaluation
capacity

A centralized approach to SELECTION of evaluation
topics, but a decentralized approach to the
CONDUCT of evaluations

Agencies instructed to identify 5% of budgets as
lowest priority
◦ Unclear how performance plays out



Also ongoing effort to reform procurement ($40
billion savings estimate)
Continued suggestion that agencies that do
evaluations will be favored
Will deficit commission findings be embraced?
◦ Timing is problematic

Transparent and open government
◦ Creation of performance dashboards








Not as high a priority as other issues (health
reform, the economy)
Short-term could force out long-term
More targeted, in-depth evaluation
Transparency is major stated focus
Quantitative measures may force out qualitative
ones
Performance agenda must fit with pressures to
reduce spending and the deficit
Stated goal is use, but not at all clear how that will
be achieved
Continued uneven results