[[White House]] | [[Washington, D.C.]] | [[United States of America|USA]] # Office of Management and Budget (OMB) ## The Unelected Agency That Controls the Federal Government's Purse Strings The **Office of Management and Budget (OMB)** is the most powerful agency most Americans have never heard of. Located within the Executive Office of the President, OMB prepares the President's annual budget proposal (determining spending priorities for the entire federal government), reviews all federal regulations before they're issued, oversees executive branch management and procurement, and coordinates implementation of the President's agenda across all federal agencies. OMB's director is often called the second most powerful person in Washington after the President because they control what agencies can spend, what regulations can be issued, and which presidential priorities get funded. The office wields enormous power with minimal public accountability, operating largely in secret while making decisions affecting trillions in federal spending and fundamentally shaping what government can and cannot do. ## Origins and Creation (1970) **The Bureau of the Budget** (1921): OMB's predecessor was the Bureau of the Budget, created by the Budget and Accounting Act of 1921. Before this, federal agencies submitted spending requests directly to Congress with no central coordination. The Bureau was supposed to rationalize this process by having the President submit unified budget. **Nixon's Reorganization** (1970): President Richard Nixon reorganized the Bureau of the Budget into the Office of Management and Budget through Reorganization Plan No. 2 of 1970. The change added "management" functions - not just preparing budgets but overseeing how agencies operate, implementing presidential priorities, and controlling the regulatory process. **The Power Shift**: By creating OMB within the Executive Office of the President (not as independent agency), Nixon ensured it would be directly controlled by the White House. This centralized enormous power in the presidency at the expense of agency independence and congressional oversight. **The Current Structure**: OMB is headed by a Director appointed by the President and confirmed by the Senate. Below the Director are political appointees managing different divisions. OMB employs about 500 people, mostly career civil servants who are policy analysts, budget examiners, and management experts. ## The Budget Process: How OMB Controls Federal Spending **The Spring Review** (April-May): Federal agencies submit budget requests to OMB for the next fiscal year (which starts October 1). Agencies request what they want to spend and justify their needs. **OMB Review** (Summer): OMB career staff ("budget examiners") analyze agency requests, comparing them to presidential priorities and available resources. They identify where to cut, where to increase funding, and where to maintain levels. **The Passback** (Fall): OMB sends agencies their budget allocations ("passbacks") - telling them what they'll actually get, almost always far less than requested. Agencies can appeal directly to the President or OMB Director if they disagree. **The President's Budget** (February): OMB compiles all agency budgets into the President's Budget Request - a multi-thousand page document proposing spending and revenue for the fiscal year. This is submitted to Congress by the first Monday in February. **Congressional Action**: Congress is supposed to pass budget by October 1, but usually fails. Instead, Congress passes continuing resolutions maintaining previous year's spending levels, then eventually passes appropriations bills (often months late) setting actual spending. **OMB's Power**: By controlling what's in the President's Budget, OMB determines: - Which programs get funded or cut - Which presidential priorities receive resources - What new initiatives can be proposed - How agencies can operate Agencies know they must satisfy OMB to get funding, making OMB enormously powerful despite having no direct operational authority. ## Regulatory Review: OIRA's Hidden Power **The Office of Information and Regulatory Affairs (OIRA)** is OMB's division that reviews all significant federal regulations before they can be issued. This is where OMB wields massive power over policy: **Executive Order 12866** (1993): Clinton's executive order (building on Reagan's E.O. 12291) requires agencies to submit all "significant" regulations to OIRA for review before publication. OIRA determines whether regulations are justified by cost-benefit analysis. **Cost-Benefit Analysis**: OIRA requires agencies to prove that benefits of regulations exceed costs. This sounds reasonable but is fundamentally biased against regulation: - Benefits (lives saved, pollution prevented, injuries avoided) are difficult to quantify in dollars - Costs (compliance expenses for businesses) are easy to quantify and often inflated by industry - The analysis inherently favors industry over public protection **The Black Box**: OIRA review happens in secret. Agencies submit regulations, OIRA reviews them (taking input from industry lobbyists and White House political operatives), and regulations come back changed or blocked. The public rarely knows what OIRA did or why. **Industry Access**: Regulated industries meet extensively with OIRA during review, getting opportunities to weaken or kill regulations they dislike. Public interest groups get less access. OIRA meetings with industry aren't always disclosed, creating opacity that enables corruption. **The Delays**: OIRA can delay regulations indefinitely. Agencies spent years developing regulations based on congressional mandates, but OIRA can sit on them for years, effectively blocking implementation of laws Congress passed. **Examples of OIRA Power**: - **EPA regulations**: Climate change regulations, air quality standards, and pollution controls routinely weakened or delayed by OIRA under pressure from industry - **Labor regulations**: Workplace safety rules, overtime pay expansions, and worker protections blocked or watered down - **Financial regulations**: After 2008 crisis, Dodd-Frank regulations were delayed and weakened during OIRA review - **Consumer protections**: Product safety rules, food labeling requirements, and consumer financial protections all subject to OIRA weakening **The Administrator**: OIRA Administrator is among the most powerful unelected positions in government. They determine which regulations protecting public health, safety, and the environment can be issued. The position is held by regulatory skeptics who see their job as protecting industry from "burdensome" regulations. ## Budget Impoundment and Presidential Power **Impoundment**: The practice where President refuses to spend money Congress has appropriated. Nixon used impoundment extensively, refusing to spend billions Congress had allocated for programs he opposed. **The Impoundment Control Act** (1974): Congress passed this law after Nixon's abuses, restricting presidential impoundment. Presidents can propose rescissions (canceling appropriated funds) but Congress must approve. Presidents can also defer spending temporarily but not permanently refuse to spend appropriated money. **OMB's Role**: OMB manages impoundment process. When President wants to impound funds, OMB submits rescission requests to Congress and tracks responses. **The Trump-Ukraine Impoundment** (2019): Trump directed OMB to withhold $391 million in military aid to Ukraine that Congress had appropriated. OMB held the money while Trump pressured Ukrainian President Zelensky to investigate Biden. This was central to Trump's first impeachment. GAO (Government Accountability Office) later ruled OMB's withholding violated the Impoundment Control Act - the President cannot refuse to spend appropriated funds for political purposes. **The Trump Precedent**: Trump's use of OMB to illegally withhold aid showed how the office can be weaponized for corrupt purposes. Future presidents now know OMB can be used to block congressional appropriations. ## The Performance and Management Role Beyond budgets and regulations, OMB oversees how federal agencies operate: **Performance Management**: OMB reviews agency performance, supposedly ensuring they achieve their missions efficiently. In practice, this often means pushing agencies to cut costs regardless of impact on effectiveness. **Procurement Oversight**: OMB reviews major federal contracts and acquisitions. The office is supposed to prevent waste but often rubber-stamps contracts while failing to catch fraud. **Information Technology**: OMB oversees federal IT spending, which totals $100+ billion annually. The office has repeatedly failed to prevent massive IT project failures: - Healthcare.gov launch disaster (2013) - VA medical records system failures - Countless failed agency IT modernization projects **Personnel Policy**: OMB influences federal workforce policy, often pushing for workforce reductions and hiring freezes regardless of impact on services. **Data and Statistics**: OMB oversees federal statistical agencies (Census Bureau, Bureau of Labor Statistics, etc.) through the Statistical Policy Office, giving it power to influence what data government collects and publishes. ## The Census Bureau Citizenship Question Scandal (2019) **The Controversy**: Trump administration, through Commerce Secretary Wilbur Ross, attempted to add citizenship question to 2020 Census. The question would have asked whether respondents were U.S. citizens. **OMB's Role**: OMB approved the citizenship question despite Census Bureau experts warning it would produce massive undercount of immigrant communities (who would fear answering honestly or refuse to respond). **The Real Purpose**: Internal documents revealed the question was designed to undercount immigrant and Latino populations, reducing their representation in Congress and skewing political power toward Republicans. The undercount would last a decade (censuses are every 10 years). **The Outcome**: Supreme Court blocked the citizenship question, ruling Commerce Department's justification was pretextual (lying about the real reasons). But the case revealed how OMB can be used to manipulate fundamental democratic processes. ## OMB Directors: Who Wields the Power The OMB Director position attracts ambitious political operatives who want to shape government from the shadows: **David Stockman** (1981-1985, Reagan): Slashed social programs while increasing military spending. Stockman later admitted Reagan's "supply-side" tax cuts were really about cutting taxes for the wealthy, not economic growth. **Mitch Daniels** (2001-2003, George W. Bush): Cut domestic spending while increasing military and homeland security budgets post-9/11. Later became Governor of Indiana. **Peter Orszag** (2009-2010, Obama): Focused on healthcare costs and deficit reduction. Left OMB to become vice chairman of Citigroup, making millions - classic revolving door. **Mick Mulvaney** (2017-2020, Trump): Far-right ideologue who tried to dismantle Consumer Financial Protection Bureau before becoming OMB Director. Mulvaney simultaneously served as OMB Director and White House Chief of Staff, concentrating enormous power. Described himself as "interim Chief of Staff" to emphasize he was keeping OMB power. **Russell Vought** (2020-2021, Trump): Conservative activist who used OMB to implement Trump's agenda, including illegally withholding Ukraine aid. After leaving, founded Center for Renewing America, a think tank preparing for Trump's return. When Trump won in November 2024, Vought was immediately positioned to return to OMB. **Shalanda Young** (2022-present, Biden): First Black woman to serve as OMB Director. Career budget expert who worked her way up from House Appropriations Committee staff. Has focused on implementing Biden's legislative agenda while managing massive pandemic spending. ## The Apportionment Process: Controlling When Agencies Can Spend **Apportionment**: After Congress appropriates money, agencies can't just spend it freely. OMB controls the timing of spending through apportionment - dividing appropriated funds into time periods (usually quarterly) and approving spending plans. **The Control**: Agencies submit apportionment requests to OMB explaining how they'll spend money over the fiscal year. OMB can restrict spending timing, effectively controlling how agencies operate. **The Abuse Potential**: OMB can delay spending for political reasons, as with Ukraine aid. By controlling apportionment, OMB can undermine programs Congress funded by preventing agencies from spending money efficiently. **The Footnote Power**: OMB uses "footnotes" in apportionment documents to impose conditions on spending beyond what Congress specified. These footnotes can restrict how agencies use funds, effectively rewriting congressional intent. ## OMB and Shutdowns: Weaponizing Appropriations **Government Shutdowns**: When Congress fails to pass appropriations and continuing resolutions expire, OMB determines which government operations continue and which stop. **The Antideficiency Act**: This law prohibits agencies from spending money not appropriated by Congress. When appropriations lapse, agencies must shut down except for essential functions. **OMB's Role**: OMB decides what's "essential" during shutdowns: - Military operations continue - Law enforcement continues - Air traffic control continues - National parks close - Many federal employees are furloughed **The Politics**: Shutdowns are political weapons. OMB, controlled by the President, determines how painful shutdowns are for the public. Presidents can make shutdowns hurt constituencies they want to pressure. **The Trump Shutdowns**: Trump caused longest government shutdown in history (35 days, December 2018 - January 2019) over border wall funding. OMB determined which agencies closed, affecting 800,000 federal workers who went unpaid. ## Legislative Clearance: Controlling Agency Testimony **The Hidden Power**: Federal agency officials cannot testify to Congress without OMB approval. Any testimony, reports to Congress, or communications with Congress must be "cleared" by OMB through the "legislative clearance" process. **The Control**: OMB reviews testimony to ensure it aligns with presidential positions. Agency officials can't tell Congress what they actually think if it contradicts White House positions - they must present OMB-approved positions or refuse to answer questions. **The Censorship**: This allows Presidents to prevent Congress from getting truthful information: - Scientists can't testify about climate change if White House denies it - Budget experts can't explain true costs of policies - Agency heads can't ask Congress for resources they need if White House opposes **The Constitutional Problem**: This arguably violates separation of powers. Congress has oversight authority, but OMB prevents agencies (which are part of executive branch but also serve Congress and public) from providing candid information. ## OMB Politicization and the Civil Service **Career Staff vs. Political Appointees**: OMB has about 500 employees, split between career civil servants (budget examiners, policy analysts with decades of expertise) and political appointees (serving at President's pleasure). **The Tension**: Career staff are supposed to provide objective analysis. Political appointees want to implement the President's agenda regardless of evidence or expertise. **Trump's Assault**: Trump administration tried to convert career civil service positions to political appointments through **Schedule F** executive order (issued November 2020, rescinded by Biden). Schedule F would have allowed firing thousands of career civil servants and replacing them with political loyalists. **OMB as Target**: OMB career staff would have been primary target for Schedule F conversion. By politicizing OMB, Presidents could ensure budget analysis and regulatory review reflected political preferences rather than expertise. **The Return**: Trump won 2024 election and immediately signaled he would reimpose Schedule F, politicizing OMB and other agencies. This would fundamentally undermine professional civil service and enable authoritarian control of government. ## OMB and National Security: The PDB and Intelligence **The President's Daily Brief (PDB)**: OMB Director typically receives the PDB - the daily intelligence briefing given to President. This gives OMB Director access to highly classified intelligence. **Budget Control Over Intelligence**: OMB reviews intelligence agency budgets and operations. This gives OMB power over CIA, NSA, and other intelligence agencies, though intelligence budgets are classified and get less scrutiny than domestic spending. **The Dual Role**: OMB Director is simultaneously budget manager and national security player, creating potential conflicts when budget priorities clash with intelligence or military needs. ## The Biden Infrastructure and Climate Spending **The Inflation Reduction Act and Infrastructure Investment**: Biden signed massive spending bills - American Rescue Plan ($1.9 trillion), Infrastructure Investment and Jobs Act ($1.2 trillion), and Inflation Reduction Act ($750 billion including climate provisions). **OMB's Implementation Role**: OMB coordinates implementing these laws across agencies: - Ensuring money flows to projects - Preventing fraud and waste (theoretically) - Coordinating between agencies - Tracking spending and outcomes **The Contractor Bonanza**: These spending bills created opportunities for contractors to get federal money. OMB oversees contracting but has repeatedly failed to prevent fraud, waste, and abuse. ## Why OMB Matters **Unelected Power**: OMB Director and OIRA Administrator are unelected officials who determine what government can spend and what regulations can be issued. They shape American life more than most elected officials. **Presidential Control**: OMB is the President's tool for controlling the entire executive branch. By controlling budgets, regulations, and management, OMB ensures agencies serve presidential priorities rather than their statutory missions or the public interest. **Corporate Capture**: OIRA's regulatory review serves corporate interests by blocking, delaying, and weakening regulations protecting workers, consumers, and the environment. Industry lobbyists have more access to OIRA than the public. **Opacity**: OMB operates largely in secret. Budget negotiations, regulatory reviews, and policy decisions happen behind closed doors with minimal public visibility or accountability. **Budget Politicization**: OMB prepares budgets reflecting political priorities rather than agency needs or program effectiveness. Spending decisions serve presidential politics, not governance. **Congressional Impotence**: OMB has eroded congressional power. Congress passes laws and appropriates funds, but OMB controls implementation, timing, and effectiveness - often undermining congressional intent. **Authoritarian Potential**: OMB's power to control agencies, withhold funds, and coordinate government operations could enable authoritarian control. Schedule F conversion of career staff to political appointees would complete this transformation. **The Revolving Door**: OMB Directors and senior staff routinely leave government for lucrative private sector positions, particularly at companies that benefited from their policy decisions while in government. **The Invisible Government**: OMB is shadow government most Americans don't know exists but which shapes their lives through spending decisions, regulations (or lack thereof), and control over what government agencies can do.