Budget Guru Takes a Stand

• Author: Elisa Diehl
• Position: Staff of Finance & Development
• Pages: 5-7

A public policy servant underscores the importance of taming unbridled deficits

Page 5

Alice Rivlin has spent much of her 30 plus years in public service trying to keep budgets in check, including that of the U.S. government. When she joined the White House Office of Management and Budget (OMB) in 1994, she inherited a budget deficit of more than $200 billion that required immediate attention. By 1998, only two years after Rivlin had left the OMB, huge budget deficits had been transformed into substantial surpluses. Rivlin attributes this achievement to the efforts of both U.S. political parties and to the extraordinary performance of the economy.

Earlier in her career, Rivlin served as Assistant Secretary for Planning and Evaluation at the U.S. Department of Health, Education, and Welfare. In that position, she gained experience in areas that are often targeted for cuts when budgets need to be balanced-health care, welfare, and Social Security. Rivlin's curriculum vitae thus makes her an ideal candidate to comment on the fiscal policy issues that so many industrial countries are grappling with today, including the United States and the members of the European Union.

Rivlin was at the Brookings Institution in 1971 when she wrote Systematic Thinking for Social Action ,whose theme was using policy analysis to improve the effectiveness of social programs. Today she says of that book, "I thought it would have a very short shelf life because we would solve those problems and move on." But, she laughs, "some people still assign that book in their classes." Some of those problems were still on the table in 1992, when Rivlin wrote Reviving the American Dream.

For example, the U.S. economy had been performing poorly for almost two decades, and Americans were worried about their economic future. Moreover, she wrote, "the political system appears unable to take decisive actions, such as eliminating the federal deficit and improving education, that would brighten prospects for the economy." But she did not consider the country's problems insurmountable. "We will find ways to solve them," she wrote.

The more things change

The problems the United States is confronting at the beginning of the 21st century are strikingly similar to those Rivlin described over a decade ago, and some may even be worse today: the budget deficit, income inequality, mounting medical costs, and inadequate education and training. She maintains that, "in a competititive global economy, these are just things that have to be dealt with-they can't be solved, but they can be made better." Nor are they unique to the United States. In particular,"soaring medical costs are a problem in all developed countries, but we know how to handle medical problems now in a way we didn't used to." Rivlin insists that the richest country in the world can afford better medical care for everyone, as well as better training and schools.

The thesis behind Rivlin's recommendations for the 1990s was that it would be a good idea to sort out federalism "so that people were clearer about which level of government did which job." In recent years, she says now, the federal government has given the states more say over what happens. But the division of labor in the United States today still doesn't appear to be optimal. Education, housing, neighborhood services, and crime are best handled at the state and local levels, Rivlin notes, while major transfers like Social Security and problems that spill across state borders, such as pollution, are best handled at the federal level. But that isn't happening, and Rivlin thinks it is because voters are more concerned about the things closest to them. As a...