Q&A with Alice M. Rivlin ’52: A World Stage in Economic Policy-Making

Posted October 21st, 2009 at 1:37 pm.

rivlin-aliceAlice M. Rivlin ’52 is a Senior Fellow in the Economic Studies program at the Brookings Institution and director of the Brookings’ Greater Washington Research Program. Before returning to Brookings, Rivlin served as Vice Chair of the Federal Reserve Board (1996-1999). She also has had a remarkable career in public service, including her appointment as the founding Director of the Congressional Budget Office (1975-1983) and director of the White House Office of Management and Budget (1994-1996).

Rivlin spoke with Bryn Mawr S&T about her career and offered her insights about health-care reform and the impact of technology on the economy. Here is part one of that interview. Part two will be posted in S& T next week.

Global Perspective

Rivlin: At the end of my freshman year at Bryn Mawr, I thought I would be a history major. I had taken a couple of courses in history that I really liked, and I hadn’t discovered economics. In the summer between my freshman and sophomore years, I took a summer-school course in introductory economics at Indiana University [Bloomington], which is where I lived. It was a very interesting course taught by a very charismatic professor, and I loved it. When I went back to Bryn Mawr, I decided I’d like to take more economics courses, and I became an economics major.

S&T: What was it about that summer-school course, in particular, that drew you to the subject?

Rivlin: I think it was because economics has clear public-policy implications. I already knew that I was interested in public policy, especially, at that time, in international affairs. It was not long after Word War II, and we were all caught up in the issues of foreign aid, international understanding, and avoiding future wars. We were a very idealistic group of young people. The appeal of economics was that it was important for the future of the world rather than being more backward-looking, like history.

S&T: And, I suppose, more practical, especially when one considers the influence of the Marshall Plan [formally, the Economic Recovery Program, under which the United States provided over $13 billion for European recovery after World War II] …

Rivlin: … which I worked in. Before I graduated from Bryn Mawr, I worked as a summer intern in the Marshall Plan agency. When I graduated, I went to work in the Paris office of the aid agency that has since become USAID [U.S. Agency for International Development]. I had done my senior thesis on the economic integration of Europe, which was a topic of interest at that moment. That was at the tail end of the Marshall Plan and the beginning of NATO.

At a very beginning level, they were talking about customs union and monetary union, but they didn’t achieve it for another several decades. Some of the things they were working on after the war were the Coal and Steel Authority and other pan-European efforts to get the economies going again and to work together. It was a very interesting job, and I decided I ought to go to graduate school.

National Policy

S&T: After you earned your master’s and doctoral degrees in economics at Radcliffe, you joined the Brookings Institution and, soon thereafter, began a remarkable and distinguished career in government service.

You served as the first director of the Congressional Budget Office, which was established under the Budget Reform Act of 1974 to provide long-term analysis and planning of federal government spending. Why did it take 200 or so years for Congress, which has constitutional power over the nation’s purse, to establish such an office?

Rivlin: It is quite remarkable that Congress got along without such an organization for much of history because, of course, Congress does have such an important role in spending and taxing. The president had the Office of Management and Budget to do budget analysis and help him make budget proposals, but the Congressional end of the process was very fragmented. There were no budget committees. Congress did not really act on the budget as a whole; they acted on pieces of it.

Questions about how much we should be spending, how much we should be taxing, and how much deficit we should be running were not specifically addressed.

S&T: How did you come to be appointed as CBO’s first director?

Rivlin: I had done a good deal of writing about budget priorities. At the Brookings Institution, I had co-authored a series of books called Setting National Priorities, with Charles L. Schultze, the former budget director under Lyndon Johnson. So I was a logical person to be considered for creating the Congressional Budget Office.

S&T: As the CBO director, you had the unenviable role of speaking “truth to power.”

Rivlin: Oh, that’s a wonderful role. I think the Congressional Budget Office plays a wonderful role, and I enjoyed playing it. It is crucial to have a group of well-qualified people estimating the cost and impact of legislation, and it should be nonpartisan and objective. I think we did quite a good job of getting it started in that direction, and it’s still performing this function.

S&T: You took criticism from both parties—from Republicans under the Ford administration and from Democrats under the Carter administration. What was their complaint about the CBO?

Rivlin: Everybody wants to believe that a piece of legislation won’t cost very much and will be extremely effective if they are in favor of it, or that it will cost a lot and it won’t be very effective if they are against it. The role of the CBO is to try to provide objective numbers. Of course, if the cost was too high, then the people who were in favor of the legislation would be upset, and vice versa.

In general, if we were getting criticism from both sides, we thought we were hitting it about right. That’s probably still true.

Surplus Out of Deficit

S&T: Let’s talk about the federal budget for a moment. In 1970, under Richard Nixon, the government ran a deficit of about 3 billion dollars. By 1992, under the George H.W. Bush administration, the deficit had skyrocketed to about 300 billion. But by 2000, under the Clinton administration, the government showed a surplus of more than 235 billion—the largest in U.S. history. Even before Clinton was inaugurated in 1993, you were part of his economics team, along with Robert Rubin and Leon Panetta, who made good on his budget-reform campaign promise. How did you manage it—especially with a Republican-controlled Congress?

Rivlin: The Clinton administration came into office with a campaign behind them that had promised to move the deficit down. By 1992, when President Clinton was elected the first time, there was a bipartisan consensus that the deficit had to come down. In fact, that consensus was reflected in the Budget Act of 1990, which was an agreement between Bush senior and the then-Democratic Congress to put new budget rules in place to make it more difficult to increase spending, add to entitlement programs, or cut taxes. We inherited those rules in the Clinton administration.

Our goal was to cut the deficit in half in the first term, but it meant restraining spending and raising taxes. The first Clinton budget package in 1993 did both: it had spending cuts, small increases in the gas tax, and an increase in the income tax in the top tax bracket. There was an enormous amount of resistance in Congress, which was still controlled by the Democrats at that point. The budget bills passed by one vote in each house, so it was very, very close, and the administration had to do a lot of arm-twisting to get them through.

When the Republicans gained control of Congress, they had a more ambitious goal to balance the budget. So there were big arguments during this period and, at one point, you may recall, the Congress closed down the government because it would not agree to the president’s budget proposals. In the end, a compromise budget agreement resulted in the Budget Act of 1997, which cut spending but did not raise taxes. The economy was recovering by then, and we moved much more rapidly than most of us thought possible into balance.

In part two of S&T’s interview, Dr. Rivlin will talk about health-care reform and the impact of technology on the economy.

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