I.O.U.S.A. (31 page)

Alice Rivlin

Alice Rivlin has been surprising teachers and peers since college, when she switched majors to study economics after taking a summer school class. Known as a “ defi cit hawk ” with Robert Rubin on the team that balanced the budget during the Clinton Administration, she served as the fi rst director in 1975 of the Congressional Budget Offi ce, an impartial, quasi - governmental agency created by the Congress as a source of reliable, untainted numbers on the economy. Today she works at the Brookings Institution, a liberal think tank in Washington, D.C.

Q: The fi eld of economics feels like a very male - dominated world.

How did you get into this?

Alice Rivlin
: I got into economics sort of by accident, but maybe everybody does. I took a course in summer school, when I was between my freshman and sophomore year, and I loved it. I had a charismatic teacher who was very good at explaining, and sort of turned us all on to economics. And then I went back to my regular college and said, “ Here I am. I want to major in economics. ”

And I did.

Q: What is it about economics that you fi nd interesting?

Alice Rivlin:
Well, I think what fascinated me is not so much economics, per se, but public policy. I really care about how things like taxes and budgets and policies on welfare or health policy, how they affect people and how they affect the economy.

Q: Do you ever feel that the American economy and the world
economy are something you are never really going to
completely fi gure out? Is that part of what makes it appealing,
or is that part of what makes it frustrating?

Alice Rivlin:
I do not think anybody thinks they can fi gure out everything in economics. It is very complicated. Economies are 99

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complicated. They are the result of what individual people and companies do. And nobody is ever going to be able to predict that absolutely. But that is why it is interesting. In a way, I think it is like medicine. The human body is very complicated, and doctors are always trying to fi gure it out, and they are never certain. And that is why economics is interesting to me.

Q: You were the fi rst director at the CBO. How did that come
to be?

Alice Rivlin:
The Congressional Budget Offi ce, which has been around now for quite a long time, more than 30 years, was brand - new in 1975. The Congress did not have a budget offi ce that helped them look at the federal budget and make decisions about it the way the Offi ce of Management and Budget helps the president make his decisions. So they thought they needed one.

They passed a law called the Budget Reform Act of 1974 that set up the Congressional Budget Offi ce. And I was very lucky; I got to be the fi rst director of that offi ce. I was there eight and a half years. I loved it. It was a fascinating thing to do. I loved it in part because I like working for the Congress. It is a very interesting group of people, and the issues are interesting. And I think I also liked it because it was entrepreneurial. I got to set up this whole new organization. That is a little bit like starting a new company.

Q: Let ’ s jump ahead to 1993 and the Clinton administration. What
was your title during the Clinton administration, and can you
explain to me how the policy was determined in January of
1993? How did that battle go about, and how do you feel the
results turned out?

Alice Rivlin:
In early 1993, I was the Clinton administration ’ s designated deputy director of the Offi ce of Management and Budget. The fi rst director was Leon Panetta. Somewhat later he became Chief of Staff for the president, and I became the Offi ce of Management and Budget director. But in the early period, even before the inauguration, when we were working out of Little Rock, we were really focused, the whole economic team was focused on c07.indd 100

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what the president thought was the highest priority: Figure out what I am going to do about the budget. The budget was in defi cit, [and] everybody was worried about it. We knew that if it stayed on the track that it was on, that the budget defi cits would keep rising. We would have to borrow more and more money.

And we would be paying higher interest rates on that government debt. So it was a high priority among the economic team to fi gure out how we were going to get the budget defi cit to come down. We had a lot of discussion about how fast it should come down.

The president had made promises during the campaign. He had said he was going to have a big infrastructure program to improve roads and bridges. He had said that he was going to have a middle - class tax cut. He had said that he was going to do health care reform which, indeed, he tried to do. And that he was going to do welfare reform, which eventually we did achieve. But we could not fi gure out exactly how we were going to do all of that and still have the budget defi cit coming down. So we had a lot of discussions about it, fi rst around a big table in the Governor ’ s Mansion in Little Rock, and later around an even bigger table in the White House. And there was controversy within the Clinton team about how fast the budget defi cit could come down. I was one of the so - called hawks, along with Bob Rubin and Secretary Benson at Treasury, and Leon Panetta. We all thought that getting the budget defi cit down was extremely important to the future of the economy, and that making a strong move on the budget defi cit would bring interest rates down. So we were focused on that. Others were focused on two things: One was whether the president ’ s campaign promises could be paid for. And the other was whether bringing the defi cit down too quickly would be bad for the economy, because we thought that the recovery from the recession was a bit shaky, and nobody wanted to derail the economy and bring it to a screeching halt. As it turned out, the economic recovery was actually stronger than we thought it was going to be. So we were not skating on quite as thin ice as we thought. But that was a worry.

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Q: Are you proud of what you were able to accomplish as a team
and as an individual?

Alice Rivlin:
I am extremely proud of what happened as a result of the Clinton budget reform. We made some really hard decisions in 1993. The president was very much into it. We spent hours and hours in the Roosevelt Room in the White House with the president discussing how we were going to cut spending, and what we were going to do about taxes. We put together a package that passed the Congress with great diffi culty, by one vote in each house. That was a squeaker. But in retrospect, it worked. Interest rates came down, and the economy improved.

I am not saying that was all because of the Clinton plan, but it certainly helped. And by about four years later, we not only had a balanced budget, the budget was moving into very substantial surplus.

Q: Can you tell me, was it just the White House that was able to
get those victories in the late 1990s? Or did you benefi t from
having a Republican - led Congress, and if so, how?

Alice Rivlin:
I think almost all progress on fi scal responsibility has been as a result of a bipartisan compromise. That was quite obvious in 1990, when President Bush Sr. made a deal with the Democratic Congress to reduce the budget defi cit and to put in place some rules about how the Congress could consider the budget. And it was even more obvious, I think, in 1997, when the Clinton administration had to cut a deal with the Republican Congress to keep progress on the defi cit going. It was not fun. It was a very diffi cult negotiation that went on for several years, actually, between the Republican - led Congress and the Democratic Clinton administration, with the president vetoing frequently and using the veto as a weapon. But we cut a deal. And the Budget Act of 1997 was the one that really pushed the budget from defi cit into substantial surplus.

Q: On the Fiscal Wake - up Tour, and just around Washington
in general, there are many sets of numbers that refer to the
same thing. Why is it that the numbers generated by the CBO

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tend to be the most commonly used numbers in and around
Washington?

Alice Rivlin:
The Congressional Budget Offi ce was created to give the Congress a solid, nonpartisan, professional set of numbers.

And it has existed for more than 30 years through lots of different administrations, but working for the Congress. The [CBO]

produce the best numbers that they can. There is always some uncertainty, but they do not have any political axe to grind. They work for both the House and the Senate, and they work for the Republicans and the Democrats. So their charge is, just give us the best numbers that you possibly can. It is not that they do not ever make mistakes, but they are a reliable source.

Q: So did you ever have a congressman or senator call you after a
report and say, “ These numbers just do not help me at all ” ?

Alice Rivlin:
When I was running the CBO, now quite a long time ago, there were lots of controversies. It was during several presidencies, of Ford, Carter, and the beginning of Reagan. So there were different administrations and different control in the Congress. And I thought it was a success when we were being criticized from both sides. And it often happened that we were cited. The CBO ’ s report was cited in a debate over energy policy or defense policy or health policy, on both sides or several sides of the argument. And that I considered was a success because we were raising the content of the argument to a higher level.

Q: Numerically speaking, what does life look like in a recession
as opposed to what life looks like during economic growth and
good times?

Alice Rivlin
: From a budgetary point of view, recession is a very diffi cult thing. Now, it is diffi cult for everybody. People lose their jobs and companies cannot make a profi t in a recession because they are not selling as much. But from the point of view of the federal budget, the result is since people are not earning as much, they are not paying as much tax, and some of the programs that the government has actually increase automatically when there is a recession — unemployment compensation, for example. More c07.indd 103

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people are making unemployment compensation claims because more people are out of work. So that spending goes up, and the tax revenues go down, and you have an automatic larger defi cit in a recession.

Q: In a recession, what are the key numbers that you are looking
for and hoping not to see?

Alice Rivlin:
The thing that economists watch all the time is the unemployment rate — how many people are losing their jobs. If the unemployment rate is going up, clearly, that is bad. It is not always the fi rst sign of a recession. Sometimes a recession will start with profi ts going down, and sales going down. Those things happen before the job layoffs happen. But the thing that is hardest on most people, of course, is a rise in the unemployment rate.