year (changed from July 1 to October 1), Congress could pass another concurrent resolution. If the aggregate of spending and taxing decisions would result in exceeding the totals in the concurrent resolution, Congress could pass a reconciliation bill that would force specific committees to revise previous decisions to report out totals that would bring them into accord with the concurrent resolution. Although originally intended to be a minor procedure at the end of a fiscal year, reconciliation has come to be used as an enforcement mechanism passed along with concurrent resolutions. When it is paired with an omnibus budget bill, it must be signed by the president and can, thus, be vetoed.
Nixon’s aggressive use of executive power, the new budget process, and increasing deficits changed the way OMB was used by presidents. The presence of more political appointees—Carter added two new executive associate directors above the program associate directors—meant that OMB would be more active in pursuing presidential priorities on the Hill. This trend accelerated significantly in the Reagan administration. By the end of the Nixon presidency, OMB was criticized as being too politicized and responsive to the president’s partisan and political needs to the neglect of its broader institutional duties.26
1980s: President Reagan and David Stockman
The electoral victory of Ronald Reagan gave him the opportunity to make drastic shifts in budget priorities. In the election year of 1980, Congressman David Stockman prepared a “Black Book” of potential budget cuts to agency programs that impressed Reagan so much that he appointed him director of OMB.27 Stockman, only thirty-five years old, soon became one of the most visible budget directors and the architect of the Reagan administration’s budget agenda.
Stockman mastered budget data and the congressional budget process; once he was confirmed, OMB worked overtime to revise completely President Carter’s FY1982 budget proposal. Reagan and his top White House staff delegated broad authority to Stockman to make sense of the numbers and enforce their priorities. 28
Reagan’s FY1982 budget made significant cuts in domestic spending, primarily human resources programs, but defense spending was another matter. At the end of his administration, Carter had increased defense spending by 5 percent; not to be outdone, Reagan increased it by another 7 percent in real terms, resulting in the largest peacetime defense appropriations bill ever passed, totaling $199.7 billion. As a result, real growth in defense spending from 1980 to 1986 amounted to 10 percent per year.29
Although candidate Reagan and Republicans had long denounced deficit spending and the increasing public debt, President Reagan was willing to drop his aversion to budget deficits in favor of increased defense spending and his tax cut priorities. Reagan had adopted the “supply-side” argument that large tax cuts to those in upper tax brackets would pay for themselves by stimulating increased investment by businesses, which would, in turn, result in greater profits and, thus, tax revenues resulting in a balanced budget by 1984.30
Stockman later explained the supply-side approach as a “dangerous experiment of a few supply siders who had gotten the President’s good ear.”31 Reagan’s arguments for tax cuts and defense increases were bolstered by OMB’s “rosy scenario” of unrealistically optimistic projections of economic growth, which Stockman characterized as “our cockeyed economic forecasts.”32
TABLE 2-1. Debt Increased from 25 Percent to 40 Percent of GDP in the 1980s
Budget Deficits and Debt as % GDP
| Year | Deficit as % GDP | Debt as % GDP |
|---|---|---|
| 1980 | 2.6 | 25.5 |
| 1981 | 2.5 | 25.2 |
| 1982 | 3.9 | 27.9 |
| 1983 | 5.9 | 32.1 |
| 1984 | 4.7 | 33.1 |
| 1985 | 5.0 | 35.3 |
| 1986 | 4.9 | 38.4 |
| 1987 | 3.1 | 39.5 |
| 1988 | 3.0 | 39.8 |
Source: Congressional Budget Office, The Budget and Economic Outlook: 2018–2028 (April 2018), Appendix E-1, p. 145.
The failure of the 1981 tax cuts to increase revenues forced Reagan in 1982 to adopt the largest peacetime tax increase in U.S. history.33 But the tax increases in 1982 and 1983 were not able to replace the revenue lost to defense increases and tax cuts, and the budget deficit reached 5.9 percent of GDP in 1983. The result of Reagan’s budget and taxing policies, with their accumulated deficits, was a tripling of the national debt between 1981 and 1989, increasing it from 25 percent to 40 percent of GDP (table 2-1).34 Scholar Iwan Morgan concluded, “Had Reagan not demonstrated such boldness, determination, and skill in pursuit of his agenda, the 1980s would not have gone down in history as an era of huge deficits.”35
The Stockman era at OMB increased the centralization of presidential control of budgeting through top-down imposition of budget cuts in discretionary and mandatory spending. Defense of agency budgets on the Hill had, in the past, been done by agency heads, but Stockman replaced their agency-specific arguments with a top-down imperative that focused on the totals, not the component pieces.
During the 1980s, the shift from bottom-up to top-down budgeting was wrenching for career OMB staff. Barry Anderson, former assistant director for budget review, worked closely with Stockman and imposed the necessary cuts on agencies to meet broad deficit targets. He prided himself on creating “budget gimmicks” in pursuit of presidential goals, and consequently he was effective at thwarting budget gimmicks to maintain or increase spending on agency programs. According to Anderson, resistance to top-down budgeting decreased only as career OMB staff were replaced with new ones.36
During the Stockman era, the executive budget process and congressional decisions became more blended and intertwined, in contrast to the previous practice of handing off the president’s budget proposal to Congress for its consideration and final decisions. Rapidly changing economic circumstances led to constant revisions in estimates and continual renegotiations with congressional committees. The budget process in Congress changed from a regular, annual process to a continual set of negotiations, with Stockman asking OMB staff “what if” questions and demanding quick turnarounds. The focus of OMB leadership shifted from individual programs and agencies to budget aggregates of total expenditures, deficits, discretionary expenditures, entitlements, tax revenues, etc.
Stockman effectively forced President Reagan’s priorities through Congress. From his perspective, Congress was “reduced to the status of a ministerial arm of the White House.… The constitutional prerogatives