The Incredible Shrinking Budget Office

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 copies."

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."