Philip Joyce, George Washington University describes US federal deficit and debt questioning whether the United States will restore fiscal responsibility suggesting that performance management is not as high a priority for the current administration as other issues

1. Performance-Informed Budgeting in the United States—Tastes Great or Less Filling? Philip G. Joyce November 3, 2010

2. 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? Competing Imperatives in the United States

3. 3 Historical Deficits and Debt ($ billions)

4. August 2010 CBO Baseline Projections 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

5. Ten-Year Cost (2011-2020) of Policy Alternatives Not Included in the CBO Baseline 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

6. Budget Deficit or Surplus Percentage of GDP With Tax Cuts Extended and AMT Indexed

7. Debt Burden Across Countries in 2007 Percentage of GDP Source: OECD.

8. Projected Federal Spending Over the Long Term TheCapitol.Net 202-678-1600 8 Percentage of GDP

9. 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 Key Questions Related to Fiscal Responsibility

10. Federal Performance-Informed Budgeting The Bush Agenda and Legacy The Obama Agenda Observations about the Obama Agenda in Historical Context 10 The Current State of Performance-Informed Budgeting in the U.S.

11. 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 Federal Performance-Informed Budgeting

12. Traffic light” scorecard Apparent substantial progress—from 1 “green” to 72; from 110 “red” to 14 PART--1000 programs in 6 years Effective or moderately effective—30% to 51% Conclusions by studies of PART 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 The Bush Administration Performance Initiatives

13. 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) Continuing Challenges Present at Outset of Obama Administration

14. 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 Developments in Obama Administration

15. 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 American Recovery and Reinvestment Act (Stimulus)

16. 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 The Role of Performance Information in Deficit Reduction

17. 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” Obama High Priority Performance Goals

18. “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 Program Evaluation

19. 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 Preparing for the 2012 Budget

20. 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 Concluding Observations about the Obama Performance Agenda