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President's Reorganization Project-Decision Analysis Report,
6/28/77
Folder Citation: Collection: Office of the Chief of Staff Files; Series:
Hamilton Jordan's Confidential Files; Folder: President's Reorganization
Project-Decision Analysis Report, 6/28/77; Container 36
To See Complete Finding Aid:
http://www.jimmycarterlibrary.gov/library/findingaids/Chief_of_St
aff.pdf
NATIONAL ARCHIVES AND RECORDS SERVICE
WITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)
FORM OF
DOCUMENT
CORRESPONDENTS OR TITLE
DATE
RESTRICTION
case studies
E. Wiretap Legislation
6-28-77
A
case studies
F. Breeder Reactor Program
6-28-77
A
case studies
C. Conventional Arms Transfer
6-28-77
A
Opened
J
5/12/97
:
FILE LOCATION
Chief of Staff (Jordan)/Box 2 of s (org.)/President's Reorganization Project--Decision
Analysis Report--June 28, 1977
RESTRICTION CODES
(A) Closed by Executive Order 12065 governing access to national security information.
(B) Closed by statute or by the agency which originated the document.
(C) Closed in accordance with restrictions contained in the donor's deed of gift.
GENERAL SERVICES ADMINISTRATION
GSA FORM 7122 (REV. 1-81
PRESIDENT'S REORGANIZATION PROJECT
DECISION ANALYSIS REPORT
JUNE 28, 1977
Copy #7
DECISION ANALYSIS REPORT
TABLE OF CONTENTS
EXECUTIVE SUMMARY
1. INTRODUCTION
7
2. CASE STUDY FINDINGS
10
3. CARTER ADMINISTRATION PERSPECTIVE
22
4. REORGANIZATION IMPLICATIONS
27
5. CASE STUDIES
A. FOOD STAMPS PURCHASE REQUIREMENT
44
B. MINIMUM WAGE DETERMINATION
61
C. SOCIAL SECURITY FINANCING
72
D. FOOTWEAR IMPORT AGREEMENTS
84
E. WIRETAP LEGISLATION
97
F. BREEDER REACTOR PROGRAM
110
G. CONVENTIONAL ARMS TRANSFER
135
H. RURAL TELECOMMUNICATIONS TESTIMONY
151
CONFIDENTIAL
(Unclassified Upon Removal of Case Studies E, F, and G)
DECISION ANALYSIS REPORT
EXECUTIVE SUMMARY
A. Purpose
The Decision Analysis project was undertaken to
develop a better understanding of decisionmaking in the
Executive Office of the President (EOP) As a study of
EOP dynamics the Report provides a strong complement
to the more static review represented by the functional
analysis of Executive Office units.
No previous Administration has allowed a detailed
study of its ongoing policy-making processes. No previous
reorganization study of the Executive Office has ever
been permitted to examine the way in which the staff system
operates on concrete policy issues.
What has been attempted in the Decision Analysis
project is thus unique, and has involved heavy demands
on both the incumbents and on the project analysts to be
open, exacting, and sensitive to the multiplicity of
perspectives which involvement in the policy process
naturally generates.
Eight case studies are included involving domestic
and international affairs, encompassing a broad range of
EOP units, and covering a variety of Presidential - and in
one case - non-Presidential decisions. For each study
the responsible analyst interviewed major EOP participants,
examined supporting files, and reviewed the analysis with
principals.
Insofar as the analysis identifies problems, the
Report suggests how reorganization of both the decisionmaking
process and the staff structure might avoid these difficulties,
and might also assure the President of the reliability and
efficacy of his Office in performing the roles he has assigned.
The following is a brief summary of specific case
study findings and their reorganization implications. A
full discussion of each point is provided in the supporting
documents.
B. Findings
The findings below are derived primarily from the case
studies and their analyses, but also draw upon information
obtained in EOP unit studies by other analysts. The following
problems have been identified:
2
(1) The Presidential Review Memorandum (PRM)
process works well enough to be emulated for domestic
policy formulation, but not well enough to be adopted
without modification.
(2) The Economic Policy Group is not effective
as currently operating. As a result, the President does
not always receive a full and systematic staffing of
economic issues.
(3) Departmental specialists have demonstrated
high competence in support of EOP decisionmaking, but their
utilization is inconsistent and inefficient varying widely
across policy areas.
(4) Strong departmental advocacy exists and should
be balanced by early interdepartmental review by departments,
agencies and EOP units (i.e., structured conflict).
(5) Political analysis within the EOP, related both
to Congress and the broader political environment, is not
applied to decisionmaking on a systematic basis.
(6) The advocacy and "neutral broker" roles per-
formed by the President's policy staffs need to be more
carefully delineated; in particular, the President's primary
"issues handlers" (NSC, DC) should not allow advocacy to
compromise their objective presentation of alternative
viewpoints regarding policy issues.
(7) Follow-up procedures regarding Presidential
decisions need to be formalized.
(8) Presidentially-imposed short leadtimes and
the intrusion of crises into the EOP decisionmaking process
make the development of better process control mechanisms
all the more necessary.
(9) The form and content of written material for
the President need to be better planned to enhance the use
of the President's finite review time.
3
C. Reorganization Implications
The case study findings above have the following
structural and procedural implications for the Executive
Office of the President:
(1) A Policy Staff Management System (PSMS) should
be established for the formulation of domestic policy
options. The Presidential Review Memorandum (PRM) process
now used in foreign policy formulation should be modified
and extended to the Domestic Policy staff process. The
process would be the formal framework within which many
(though not all) domestic issues would be developed for
Presidential decisionmaking.
(2) The Economic Policy Group (EPG), if it continues
to function as a Cabinet Working Group, should examine cross-
cutting economic issues at the beginning, not the end of the
policy development process. Its policy review process should
be governed more broadly by an agenda-setting Senior Advisers
group, and by a PSMS process as noted above. The EPG
should be staffed by a major policy staff group, not by the
Cabinet Secretary.
(3) White House units responsible for political
strategy should be assigned collective accountability for
the provision of critical political intelligence to the
decision process. Development of policy options should
reflect a detailed political assessment of congressional,
public interest group, and general public reactions. The
President and senior advisers should be alerted early of
the need to discuss salient issues with key non-executive
branch interests. Such discussions should then be
scheduled in such a manner as to assure the possibility
of real input to the policy development process.
Coordination early may make cooperation more possible
later.
(4) Two paper circulation processes now exist in
the White House Office: The Cabinet Secretariat and Staff
Secretariat. Though the two normally integrate at some
point, this usually occurs too late in the process. To
assure the most timely circulation of both Cabinet and
senior White House staff papers, both circulations
should be coordinated or controlled by the Staff
Secretariat.
4
(5) The Policy Staff Management System (PSMS)
mentioned above must include a detailed process for
building and continually updating the President's
decisionmaking agenda. Careful scheduling will not
eliminate externally-induced decision situations; it will,
however, provide a more controlled approach to decisions
which can be predicted, and could also build in the
organizational capacity to react to crises which do
arise. Such a process might alleviate some of the
excessive deadline pressures many EOP personnel have
noted.
(6) The bulk of long-term (i.e., in excess of six
months) policy planning should be delegated to the Cabinet
departments. Nonetheless, to assist in the agenda-building
process above, the President and his senior advisers should
consider the establishment of small (i.e., 1-2 professionals)
long-term policy planning groups who would be attached both
to the domestic and national security policy staffs. These
groups (later simply called the Long-Range Groups) would
provide the staff link between the President and the
long-term policy planning activities conducted inter-
departmentally. If separate *long-range groups seem infeasible,
senior staff in each of the two policy staffs could be tasked
with this forecasting responsibility.
(7) The President should build the
capacity to review his decisionmaking apparatus
periodically. Presidents historically have been unable
to assess the performance of their Office. Through a
combination of comprehensive interviews and case study
analyses, the President might periodically reevaluate
the EOP.
(8) Follow-up procedures for Presidential decisions
would be incorporated in the PSMS process identified above.
However, there should also be established a pilot data col-
lection and management system to provide the President
systematic indicators of the performance of the Executive
Branch in selected areas (e.g., housing, employment, water
project development, arms sales) of Presidential interest.
5
Supporting material with respect to both case
study findings and reorganization implications is
contained in sections 1-4 of this report. However,
the case studies in section 5 provide the reader the
fullest understanding of the symptoms identified in
this summary. Section 2, by identifying the supporting
case study (s) for respective findings, offers the
reader a quick indication of case studies of direct
interest.
DECISION ANALYSIS REPORT
SECTION 2: CASE STUDY FINDINGS
10
2. CASE STUDY FINDINGS
This section identifies and describes problems documented
in one or more of the eight case studies. The discussion
highlights problems which seem to be amenable to reorganiza-
tion actions, and offers the reader a direct reference to
those case studies which most directly illuminate each
specific finding.
A. Economic Policy Group (EPG) Effectiveness
The Economic Policy Group (EPG) was developed to
provide Cabinet coordination and review of the Administration's
economic policies. Our case studies indicate that with
respect to at least three issues - two primarily domestic
and one primarily international - the EPG could have
performed a more valuable service. It is ineffective in
terms of its current objectives.
With regard to Conventional Arms Transfer, EPG was
extraneous, and in process terms was passed over by the
Presidential Review Memorandum (PRM) process. In Footwear,
EPG aligned participants in terms of a narrow set of options
that did not include the option finally adopted, and afforded
the President an unstructured EPG meeting which may have
actually misinformed the President regarding his true
decision options Finally, in terms of Minimum Wage, the
EPG enabled participantsto reflect existing agency
positions (Council of Economic Advisers (CEA) and
Department of Labor (DOL) ) but did not expand the
President's range of options
In fairness the EPG did perform an option expansion
function with respect to Social Security Refinancing. Here,
however, the EPG entered the process SO late that the
alternatives surfaced in the meeting were understaffed by
agencies which advocated them. Had the President wished
to choose any other than the HEW proposal, he would have
probably had to postpone final action.
B. Presidential Review Memorandum (PRM) Utility
The Presidential Review Memorandum (PRM) system is
utilized by the National Security Council staff to develop
an orderly tasking and researching of international and
security policy issues requiring Presidential attention.
(The PRM process will be discussed in detail in section 4).
The case studies indicate that the PRM process works well
enough to be emulated for domestic policy formulation, but
not well enough to be adopted without refinement. The
discussion below indicates the potential nature of such
refinements.
11
Three cases illuminate the PRM process: Breeder
Reactors, Conventional Arms Transfer; and Wiretapping.
Together the three cases support a mixed judgment regarding
the effectiveness of PRM in establishing an acceptable
tasking protocol for the development of Presidential
decision options, which with respect to the PRM process
are called Presidential Directives ("PDs").
On the one hand, PRM does in principle identify
those EOP units and Cabinet departments which should be
involved in the development of a given issue. However, in
the case of Arms Transfer, the PRM did not adequately
identify the issue in the first place. This is not a
flaw in the process. It does suggest, however, that the
success of PRM process is critically dependent upon a
careful outlining of the issue (s) at the very outset.
Extra resources applied at the front end may reduce
overall effort.
In the Wiretapping case, PRM generated multiple
lead agencies, stimulating competition and the need
for a mid-process Presidential intervention. Here the
problem was not issue identification, but rather a
problem of inadequately delineating a single lead agency.
Alternatively, recognizing the very strong and conflicting
departmental interests involved, the PRM drafters might
have specified heavier "honest broker" involvement of an
NSC staff person.
The Breeder Reactor case is distinct from each of
the two cases above, in that the issues were in some ways
so broad as to preclude incorporation of all issues within
one PRM process. However, the costs of a non-inclusive
set of decision processes regarding Breeder Reactors
were very high. First, the President was provided with
uncoordinated decision memoranda over several weeks
whose various options allowed the President
to make decisions, each of which was slightly inconsistent
with its predecessor. These apparent inconsistencies
created decision ambiguities which afforded "decision
losers" on the previous memorandum the chance to re-enter
their preferred option for another discussion round.
12
The second case is directly related.
This sequential recycling of decisions created a very
high level of confusion among senior EOP staff. In
some cases planned ambiguity creates flexibility; in
this case, the ambiguity was unintended and created
substantial administrative confusion.
Finally, the PRM process, while establishing
procedures for coordination during the issue examination
phase, currently excludes lead agency participation in
the drafting of the Presidential Directive by the
National Security Council (NSC) staff. This end-of-
process exclusion may unnecessarily reduce the expertise
applied to the actual document which reaches the
President's desk, and may generate uncertainty among
the agencies as to whether their views are adequately
and objectively conveyed.
C. Specialized Expertise
Three case studies highlight the use of specialized
staff talent in the development of Presidential options:
Food Stamps; Footwear; and Social Security Refinancing. In
each of the three cases, primary technical support was
supplied by non-White House staff, and in two of the three
by non-EOP personnel. The case studies together evidence
policy development strength where it is (and will be)
needed: If White House and EOP staff are reduced, strong
permanent government expertise is available and can be
drawn upon. A Policy Staff Management System (PSMS)
discussed in Section 4, would build upon this departmental
strength.
In Footwear, the background issues paper (by the
Office of Special Representative for Trade Negotiations
(OSRTN) staff), raised and discussed an array of salient
issues. In Food Stamps, the Department of Agriculture
provided a broad range of cost and caseload distribution
information related to the elimination of the purchase
requirement (EPR) and marshalled support data for all
decision options. In the Social Security Refinancing case,
HEW performed analogous services, providing an articulate,
comprehensive and well-thought out paper to the EPG,
facilitating what was, by all accounts, one of the
best-structured and productive EPG discussions to date.
13
D. Departmental Policy "Objectivity"
As a corollary of the specialization factor,
the case studies document political common sense: that
the Cabinet departments cannot be expected to espouse broad
public interests. The departments by definition must
respond to a narrower mission and constituency than the
President's A process (similar to NSC's PRM) is therefore
needed which will assist in ensuring a timely and comprehensive
inter-departmental consideration of policy issues. This
accumulation of selectively narrow but distinct positions
might afford the President a range of options more
representative of broad public interests.
Several case studies illuminate this point. In the
Breeder Reactor decision, for example, the experts at the
Energy Research and Development Administration (ERDA)
informed the President of a range of options in nuclear
reactor technology from which the President could select.
However, perhaps feeling that the plutonium fuel cycle
would win through, ERDA failed to inform the President of
the availability of alternative breeder fuel cycles - thorium,
for example, - which offered him a middle position that would
more adequately deal with the problems in Ohio and Tennessee
that cancellation of Clinch River created. ERDA failed to
provide this advice, and only very late in the process was
the Science Adviser, Frank Press, able to point out to the
President what was available.
In Minimum Wage, the Department of Labor (DOL) adhered
through several meetings and memoranda to its position, and
provided extensive technical material to support that position.
DOL did not discuss alternative options. The same is true
of HEW in Social Security: adherence to a well-staffed
single agency option.
The point of these cases is obvious, but yet
neglected: agencies can perform work of a technically
superior quality, and can provide (as noted above)
substantial policy support material. However, the
President's decision prerogatives are only served if
other agency and EOP positions are also requested very
early in the issue staffing process. Otherwise, a
14
single-minded well-presented option will overwhelm the
consideration of alternative positions. Key senior
White House advisers must assist in this process by
attempting to assess continuously whether the policy
discussion includes representation of the array of
interests-at-risk in the issue.
E. The Application of Political Information
to the Policy Process
The case studies are relatively silent with respect
to the generation of political information for decisionmaking.
However, the absence of coverage results from the fact that
there seemed to be very little systematic input to the process.
The resources for EOP political analysis are not applied to
decisionmaking on a systematic basis.
In the Minimum Wage case, Congressman Dent saw the
President the morning the decision was made. Media coverage
since that decision indicates that subsequent discussions
have focussed heavily upon the political implications of
the Administration position. In retrospect, a much earlier
discussion - perhaps not changing the final decision -
would have been valuable.
In the Breeder Reactor case, analysis documents
the participation of the Assistant to the President and
his staff only after the President's April 20 decision.
Involvement after the fact becomes a fence-mending process;
before the fact involvement may allow for the building of
more useful congressional and public consensus.
A contrast is provided by the Foodstamp case.
Extensive intelligence was gathered concerning Congressional
opinion and content in advance of the Presidential decision.
However, even here an external stimulus was necessary.
According to a major participant in the case, the Washington
Post disclosure of March 12 was decisive in clarifying
to Administration officials working on the plan that they
had failed to consult the one man whose opposition spelled
almost certain defeat for the Bill - Congressman Tim Foley.
Though very damaging as it appeared at the time, the Post
article initiated a process of meetings and consultations
which effectively won Foley over. Congressional committee
staff were brought into the drafting of proposals and
kept informed as the EOP discussions proceeded.
15
What resulted was little if any compromise on the
part of the executive drafters of the foodstamps proposal,
but a great deal less resistance on the congressional side.
Foley was swung round from opposition to support, clearing
the way in the House. Talmadge's opposition was not
changed but was neutralized just the same, clearing the
way through the Senate Agriculture Committee. The Chairman
may have regarded the process as a personal defeat, but
he saw the process as a fair and fully consultative one
and accepted the defeat in good faith, itself an outcome
which was valuable in the Senate Committee deliberations.
The case points to a major problem for the Executive
Office. At present, Congressional Liaison is limited to
a firefighting and crisis management role which absorb
almost all of its resources.
F. The Efficacy of Neutral Broker Roles
The question of Cabinet objectivity has been discussed
above in terms of a reasonable expectation of policy advocacy
at the department level. Such advocacy, it was suggested,
should be counter-balanced at the department level through
the inclusion of alternative department viewpoints. That
counter-balancing function should be monitored by those.
staffs who serve the President as process managers (i.e.,
the Domestic Council, the National Security Council, and
if it continues in present form, the EPG).
Analysis of the case studies indicates that the
"neutral broker" functions of the President's policy staff
need to be more carefully delineated in order to protect
the President's ability to decide.
In the Social Security study, the Domestic Council
became a strong advocate for a single position (HEW's),
though other legitimate options had been presented within
the EPG forum. Certainly, these other positions were
unsupported by in-depth analysis, but the role of an
advisory staff is to provide objective perspectives
with respect to both policy ideas and the staff work which
supports them. The Domestic Council focused too strongly
upon the well-staffed HEW option, relegating alternative
options to secondary status primarily because they were
not developed as extensively on paper. An alternative
Domestic Council approach more consistent with an honest
broker role would have involved a fuller presentation of
all options for the President, with the additional proviso
that some options would require additional staffing. In
actuality, the proviso was included; a fuller presentation
of alternatives was not.
16
The Minimum Wage study raises a similar question,
but a more complicated reaction, with regard to the
role of the Council of Economic Advisers (CEA). CEA did
provide technical support with respect to unemployment
and inflationary aspects. However, no detailed treatment
of indexing was presented, nor was there a systematic
discussion of alternative indexing bases (CPI VS. average
manufacturing wage). Moreover, CEA provided no sense of
the range of options available to the President, choosing
instead to counter the Department of Labor's position
with support of their own option.
The CEA role in Minimum Wage does illuminate the
complexity of its position vis-a-vis the Domestic Council.
The CEA should be perceived more as an advocate of economic
rationality in decisionmaking, than as an "honest broker"
staffing out the economic implications of alternative
decisions. However, if there is no other close support
staff to the President which can provide an economic
policy counterweight to CEA advice, then the CEA must accept
a tension between the advocacy and advisory roles. The
existence of an EPG staff separate and distinct from the
CEA has resolved some of this potential role mix problem;
EPG staff assignment through reorganization to the domestic
policy staff would be a further step toward resolving the
problem.
The Breeder Reactor case raises a related issue:
the non-utilization of a Presidential adviser ideally
positioned to perform a neutral, or honest broker function.
Here, the Science Adviser to the President was screened
out of the process until almost the end of the issue.
There was almost no opportunity to apply technical advisory
skills to an assessment of the decision.
The Footwear case exhibits another concern. In this
study, one option, Orderly Marketing Agreements (OMAs), was
dropped after the first EPG meeting, only to be raised
verbally in the following meeting. However, it was not then
supported by any written material to structure discussion.
Given the fact that the case study indicates that the Domestic
Policy Adviser, EPG, and STR knew about the option, the
question becomes: should the President's advisory staff
ensure that all useful options are analyzed on paper?
17
The answer is clearly affirmative, though in Footwear,
Domestic Council intervention to assure staff analysis by
OSRTN or EPG may have been precluded by confused role
definitions between EPG and Domestic Council (e.g., should
the Domestic Council intrude in the middle of an EPG issue
analysis process?). As noted in the case studies there is
a natural tendency for the departments to present only
preferred options. However, since the "public interest"
might be best served by a Presidential decision option
which is no departments' first preference, only continuous
scrutiny by the President's advisory staff will ensure the
protection of the President's ability to decide.
A final concern in this regard is provided in the
Arms Transfer case, and its discussion of the Presidential
Review Memorandum (PRM) process. The termination of
communication between those agencies and departments and
the National Security Council staff regarding the final
NSC preparation of the Presidential Directive may, in some
cases, decrease
the possibility that the NSC can
perform a neutral broker function. This shift of lead
agency responsibility provides an unfortunate discontinuity
in the decisionmaking process.
G. Compliance
The case studies indicate insufficient EOP attention
to adherence at the departmental and agency level to the
intent of Presidential decisions. The decision follow-up
process is not necessarily haphazard; there is yet the
feeling that follow-up is performed less systematically than
would seem appropriate. Follow-up procedures for Presidential
decisions need to be formalized.
The Breeder Reactor case is instructive in this
regard. As a consequence of poor issue identification and
agency involvement initially, logically related issues were
not related, logically related memoranda did not arrive at
the Oval Office together, and the consequent decisions were
sufficiently unsynchronized as to confuse affected parties.
18
The confusion over the meaning of the President's decision
then resulted in incomplete follow-through and a reopening
of the decision process. The obvious theme returns us to
the beginning of the process: the best way to achieve policy
adherence is to reach an earlier definition of the problem,
SO as to clarify the parameters of the decision process,
and thereby to clarify the meaning of the decision per se.
At that point, a follow-up mechanism will help to ensure
proper pursuit of a clear Presidential decision.
H. Deadlines
The case studies exemplify the intrinsic tension
which exists in staff work between adherence to a deadline
and product quality. Deadlines are easiest to maintain if
four conditions obtain: (1) excess staff are available to
deal with peak loads; (2) detailed procedural guidelines
exist to handle decisionmaking processes; (3) the tasks
themselves impose routine requirements; and (4) no
unforeseenevents intervene to consume staff time.
Our analysis indicates that none of the conditions
noted above are now operative. With respect to Condition (1)
(excess staff), the President has clearly indicated a desire
to reduce staff. The Breeder Reactor, Minimum Wage, Wiretap,
and Arms Transfer cases cast doubt on the existence of
Condition (2), durable procedural guidelines. With respect
to routine tasks, Condition (3), the cases suggest though
processes for handling some issues may be devised, many
issues may continue to be original (i.e., requiring
non-routine combinations of analysis), and therefore
organizationally challenging. Finally, external events
always intervene, violating Condition (4). Elizabeth Drew
made the point in a recent New Yorker article:
"The President
set an agenda and deadlines
but he found himself faced with an even
larger agenda and even more deadlines imposed
by others.
With respect to Social Security Refinancing, it
appears that no senior staff foresaw the extent to which
the London Summit would reduce the President's ability to
focus on domestic issues. Therefore, the Social Security
decision received less Presidential time than otherwise
would have been accorded it.
19
In Minimum Wage, a delay in EPG discussion pushed
final option development to within 18 hours of Secretary
Marshall's testimony. In Breeder Reactors multiple
uncoordinated deadlines forced incremental decisions on
discrete issues, and abrogated the integrated consideration
of the package of those issues. In Arms Transfer all
participants noted the excessive time pressure, to the
point where an uneasy trade-off was implied: an early
much less informed decision VS. high quality analytic
support.
The Footwear case is germane here, but in a different
way. Here, high level discussion by principals
seems to automatically shut off further in-depth explora-
tion of issues. Because OMAS had been eliminated after the
first round of discussion, they were not carried along in
the subsequent draft memorandum for the following week's
EPG discussion. However, OMAs were reintroduced at the
meeting, but from all accounts in a very messy context.
Nonetheless, the press of an April 8 deadline (or perhaps
just "organizational momentum") obviated the possibility of
systematically specifying OMA VS. voluntary restraint options.
A decision was then made April 1 to go with OMA.
In summary, self-imposed short leadtimes and the intrusion
of crises into the EOP decisionmaking process mandate the
development of better process control mechanisms. Deadlines
and work quality are normal problems, but staff limitations,
uncontrolled events, and non-routine issues create three
process requirements:
1. Long-term scheduling.
2. Precise decision process guidelines.
3. Reliance on non-EOP government personnel.
I. Presidential Relevance
The relevance of issues and organizations to
Presidential decisionmaking is a key reorganization
inclusion criterion. The criterion has at least three
components:
1. Should the unit's functions be performed
in the EOP?
2. Should the issue be resolved by the President?
3. Even if the issue should be resolve by the
President, in what form and quantity should
Presidential material be presented?
20
The case studies illuminate all three questions.
The Rural Telecommunications case raises the first question,
of EOP inclusion: Was the issue of rural telecommunications
policy so critical as to require the direct involvement of a
Presidential aid in the Domestic Council? The case notes
this was a temporary arrangement; and, of course, other
Office of Telecommunications Policy (OTP) issues may have
been more salient. Yet, the case suggests that even this
temporary arrangement may have been too permanent.
The wiretap case raises point two. The President
should be involved at the beginning of an issue analysis
process (to prescribe the Presidential policy boundaries
within which the issue should be developed) and at the end
of the process, when decision options with respect to an
issue are presented to him. There is less reason,
excepting his direct preference, for the President to be
involved in the middle, as he was in Wiretap, to resolve
jurisdictional disputes regarding lead agency status.
Given the degree to which his intervention seemed to
resolve process conflicts, however, an infrequent
Presidential intervention may be efficient.
The third point - the form and content of
Presidential papers - requires internal management
attention. The case studies collectively indicate that
much greater planning should go into the form and con-
tent of Presidential papers. This is particularly SO
given this President's reading proclivities.
In Breeder Reactors the President was compelled
to re-focus on the issue several times with new papers.
In Minimum Wage, technical appendices were submitted
to support two positions, but seemed inappropriate to
Presidential review. The President needs findings
and implications, not research. In Footwear, four
separate memoranda were submitted, all focussing on
the same issue but none providing an accurate synthesis
of the problem. The Social Security Refinancing package
included five papers. Again, no one paper synthesized
the five. Together, they must have been intimidating
to even a speedreading Chief Executive.
Written Presidential communication needs to be
better planned in terms of both form and content to
enhance the President's use of his finite review time.
DECISION ANALYSIS REPORT
SECTION 3: A CARTER ADMINISTRATION PERSPECTIVE
22
3.
A CARTER ADMINISTRATION PERSPECTIVE
The Executive Office of the President
is -- or should be -- exactly that: the President's
Office. Whatever the other criteria for proposing
organizational refinements within the EOP, a foremost
consideration should be our best perception of those decision-
making processes and structures which are most consistent
with the President's organizational objectives and style.
The following is a brief definition of those objectives as
inferred from both available statements of Presidential in-
tentions and his public activities.
In discussing these "decisionmaking objectives" it
is important to note that the Carter Administration is
still evolving. No large organization settles in over a
five-month period. Consequently, the Carter decisionmaking
objectives presented below are inferences of objectives
which are yet being formulated and refined. We recognize
the possibility of change in those intentions, and have at-
tempted in the subsequent section to harmonize our reorgani-
zation proposals with direction of the changes which may be
occurring naturally.
Our "snapshot" of current objectives includes the
following:
A. Efficient Management
In a question and answer session at the State
Department, the President stated:
"I am deeply committed to the principle that
we ought to have an efficient, economical well-
organized, well-managed Federal Government."
The image conveyed is of a tightly organized and defined
government. One should infer the same objective to the
design of the President's own decisionmaking apparatus.
B. Cabinet Government
In his swearing-in of several Cabinet members
on January 23, the President emphasized the importance he
assigned the operation of Cabinet government:
23
"There will never be an instance, while I
am President, when the members of the White
House staff dominate or act in a superior
position to the members of our Cabinet.
When a directive is relayed from the White
House to the members of the Cabinet, it will
indeed come directly from me.
"I believe in a Cabinet administration of
our Government. And although the major
decisions will be made ultimately by me as
President, which is my constitutional per-
rogative and responsibility, the Secretaries
will run their Departments. And this is
the way it ought to be."
The President has since reinforced this concept,
including remarks at the White House Conference for the
Business Community on February 9:
"I do have one thing that need not cause
you any concern. Because of the quality of
my Cabinet officers and their own independence,
I think you might find a reduced need to come
directly to the White House for an answer to
a question or to relieve a problem that you
might face
You can go directly to those
Cabinet members. They speak for me. They
speak with authority. They speak with sound
judgment. And they need your help just like
I do."
These statements indicate the President's commit-
ment to a decisionmaking process broadly inclusive of the
Federal departments. Such an objective requires heavy com-
munication between the Executive Office of the President
and the Cabinet, and clear collective understanding of
Presidential policy. The case study findings suggest that
in some cases such understandings could indeed be made more
clear.
C. Multiple Policy Initiatives
The absolute number of issues pursued by the
Carter Administration thus far has a substantial impact
upon the quality of the decisionmaking process. If
decisions are to be made by the President in several policy
areas (i.e., water projects, farm price supports, reorganiza-
tion, the energy package, minimum wage, the environmental
message, the Economic Summit, welfare reform, social security
24
refinancing, and others), and must therefore be-staffed
out by at least one (usually several) EOP units, then
there is the potential for staffing overload at the
senior EOP level. The simple quantity of Presidential
policy initiatives therefore becomes an "objective" per
se and affects the quality of the decisionmaking processes
employed.
D. Openness
The President has indicated his desire to provide
greater access to the governmental process. The objective
has been operationalized in a variety of ways depending upon
the issue involved. If access involves some form of parti-
cipation in the decisionmaking process by selected publics
(e.g., trade associations, interest groups, individuals),
the price paid is usually delay, additional staff energy
(to consume and respond to new participant "input"), and
early compromise of decision options. Sometimes the price
is cheap, if one gains a better decision and a greater
willingness to accept and implement it. The case studies
document the need for better (i.e., more structured and
open) input from both the general public (via public interest
groups, associations, and citizens) and the Congress.
E. Simplicity and Responsiveness
This objective is again less explicitly stated
than others, but is consistent with the idea of openness.
An open process is of little consequence if the process is
either unnecessarily complicated or ultimately non-respon-
sive. With respect to decisionmaking, the relevant question
is: Does the decisionmaking process involve those units and
individuals within the EOP that should be involved? Were
the contributions of those units responsive in some manner
to the multiple publics to which such EOP units might relate?
F. A Decentralized Senior Staff
The President has indicated a desire not to have
a "Chief of Staff," relying instead upon a number of channels
of communication to the Oval Office. This objective has a
substantial impact upon (1) the level of "issue consensus"
which reaches him, and on (2) the quantity of information
which he must consume. The first effect increases his
decisionmaking flexibility, but the latter reduces the time
and energy he may apply to each decision and may eventually
reduce the number of issues which he will be able to handle.
25
Pushing issues down to lower levels may, however, be a quite
favorable outcome, if the decisionmaking process pushes
down the right issues.
An appropriate decisionmaking structure must
strike a balance between the need for multiple advisory
channels on the one hand and for economy in the use of, the
President's time on the other.
G. A Reduced White House Staff
The implications for decisionmaking attendant to
a reduced White House staff are enormous. Organizations
normally attempt to reduce the possibility of decision-
making error through a combination of two techniques:
1) maintain excess staff which can be applied quickly to
cover crisis situations or to apply additional review
layers; and 2) develop elaborate procedural guidelines
such that most routine decisionmaking issues and situations
elicit consistent and predictable responses. However, since
many Presidential decisions are non-routine, and are required
because no "policy" has been established, the second error
reduction tactic is not available to the EOP. More
elaborate policy process management guides are therefore
needed, particularly since White House staff reduction will
undermine the alternative error reduction tactic: staffing
redundancy. Extra staff, it should be noted, may on occasion
increase the potential for error and confusion.
H. The President's Research Time
This "objective" or style can be inferred from
the ongoing analysis of the President's use of time pre-
pared by the scheduling office.
According to their analysis, more than 40% of the
President's working hours over the first 12 weeks were
consumed in "private working time" (which includes telephone
conversations and perhaps undocumented evening meetings with
advisers). The reorganization inference to be derived from
this finding is that to the extent that such time is spent
reviewing decisionmaking packages, reorganization proposals
should incorporate a careful consideration of the format,
content, and quantity of material provided to the President.
These objectives and style considerations are
reflected in the next section, the reorganiza-
tion implications of the decision analysis report.
SECTION 4: REORGANIZATION IMPLICATIONS
DECISION ANALYSIS REPORT
27
4.
REORGANIZATION IMPLICATIONS
The following are structural and procedural suggestions
which build upon the case study findings, Presidential style
considerations noted in section 3, and upon more general
discussions among EOP reorganization staff.
The proposals below will be reflected in different ways
within the specific options papers. Moreover, some proposals
such as the Policy Staff Management System discussed below,
will require modification in order to conform with each of
the several major organizational alternatives. In that
sense, these proposals provide the detailed framework for
discussion of those alternatives.
A. Create a Policy Staff Management System (PSMS)
The most conspicuous and pervasive weakness identified
in the case study analysis has been the absence of an integrated
decisionmaking process for domestic policy formulation. The
discussion below proposes such a process modified from
Presidential Review Memorandum (PRM) process already in
place under the National Security Council (NSC) The
process would be called the Policy Staff Management
System (PSMS).
The PSMS would govern policy development activities
in both the domestic and international affairs areas, basically
by applying similar process management techniques to both the
Domestic Policy Staff (DPS) and the National Security Staff
(NSS) ("Council" is dropped from the title to distinguish
staff functions from Cabinet convening functions; the
National Security Council would only exist when Cabinet
principals met for discussion). The DPS and NSS would
become the key Presidential staff support units under this
arrangement. The system would function within the following
general guidelines:
(1) Purpose
The fundamental intent of the "policy staff
management system" is to foster the development of coordinated,
Cabinet-oriented government. The policy staff (s) would act as
28
the coordinating and facilitating bodies which insure the
preservation of Presidential perspective in the interagency
development of policy and programs. The staffs would also
provide the mechanism for establishing the long-range
goals or purposes of the government and obtaining a mutual
commitment to those goals by the Cabinet members.
It is not our intent that this system somehow
reflect all contingencies or all "policy issues." No system
can, nor can any scheme eliminate occasional untidiness, the
frequent need for informality, or less often, the base process
of "muddling through" in the resolution of Presidential issues.
Recognizing this reality, the framework below provides a system
which in modified form has worked for the NSC, and with
appropriate adaptation can work for domestic policy.
Moreover, in those cases where "muddling through" does
seem the wisest course, the PSMS provides a standard of
comparison.
For purposes of discussion the policy development
functions of the EOP can be divided into five distinct phases.
The comprehensive nature of the PSMS insures proper attention
to all five, yet maintains sufficient flexibility to cope
with the inherent uncertainties of the policy process.
Simply stated the five phases are:
a. Goal setting/agenda planning and
prioritization.
b. Issue identification/assignment of
responsibility.
C. Policy analysis/option formulation.
d. Recommendation/decisionmaking
e. Implementation/compliance/reassessment.
The system is illustrated in Figure 4-1.
(2) Goal Setting
The first activity is an extension of the
Presidential calendar currently being prepared by the Vice
President's staff and the agendas developed during transition.
In the policy staff management system, responsibility for
policy forecasting would belong to small (1-2 professionals)
29
long-range groups in the two policy staffs. Through consultation
with other policy staff members, departments and agency staffs,
and other EOP White House staffs, direction from the President
and Vice President, and initiatives by the White House senior
staff, the long range groups would develop separate domestic
and foreign policy goals and agenda covering periods six
to twelve months into the future.
The basic purpose of such agenda would be both
to reduce the number of "short leadtime issues" which are
self-generated, and to provide a better linkage of several
short-term policy issues to larger concepts. For example, a
long-term agenda might help establish a consistent overall
trade policy within which specific trade issues (e.g.,
specialty steels, mushrooms, footwear, sugar, and television)
could be considered.
These goals and agenda would be forwarded through
the Assistants for National Security and Domestic Affairs,
2B16
respectively, to an Executive Committee of the senior staff
STU
for initial review and comment. That Executive Committee
LANCE
might include the OMB Director, the Chairman of the CEA,
SCHULTZ
JORDAN
the Assistant to the President, and the Assistants for
+
MOORE
National Security and Domestic Affairs. The Vice President
might also be included, depending upon his preferences.
After the Executive Committee had reviewed and
consolidated the agendas, the single agenda would then be
circulated among the senior staff for review and comment.
The purpose of such a consolidated domestic/national
security agenda would be to specify in written form the
complex decision schedule imposed by the separately driven
staff agendas. Presumably, the consolidating process itself
would force many rescheduling decisions.
At the conclusion of this phase the single
agenda would be submitted to the President for approval.
Depending on the situation, the Executive Committee would
meet biweekly to assess the continuing appropriateness of
the agenda, and if necessary update the agenda to reflect
changing contingencies. Of course, numerous short-term
issues will not be anticipated within this six-month to
one-year agenda. Nonetheless, a properly prepared
schedule would both provide some slack time for such
30
contingencies and would indicate, where possible, the
appropriate lead department and senior staff adviser for
the disposition of crisis problems in specified areas. In
such a manner, this agenda building process would at least
partially address "crisis management" needs. Untidiness
would, of course, not disappear; there would, however, be an
alternative to it.
(3) Issue Identification
Issues arise from a variety of predictable and
random sources. Some would emerge from the agenda building
process above; others would be generated through the long-
range group staff in the DPS or NSS. A majority of issues
would presumably emerge from sources external to the EOP
(i.e., from Congress, the public, national disasters,
international incidents).
Once identified, an issue would be communicated
to either the DPS or NSS for first review. (Issues with
significant domestic and international components would
require contact between the two staffs.) If the issue
were deemed sufficiently important to warrant Presidential
attention, a draft Policy Review Memorandum (PRM)
would be prepared. Very "short-fuse" issues would, of course,
bypass much of this system. Nonetheless, the system could
identify "most probable participants" for at least telephone
consultation.
Issue identification would then be handled much
the same as the "Presidential Review and Directive Series"
used by the National Security Council System.* Figure 4-1 on
the following page outlines the process. The PRM is drafted
by the appropriate policy staff, and coordinated at the
working staff level to assure incorporation of germane
department or EOP unit comments. The draft PRM then is
submitted to the President, and contains the following points:
* Presidential Directive/NSC-1 of January 20, 1977,
describes the Review and Directive Series.
Presidential Directive/NSC-2 of January 20, 1977,
and NSC Memorandum entitled "Executive Order 11905,
and PD/NSC-2," January 26, 1977, describes the
National Security Council System.
INTERAGENCY
REVIEW
INTERAGENCY
REPORT
PRC/SCC
DISCUSSION
WORKING GROUP
RECOMMENDATION
INTERAGENCY
TASKING
PRC/SCC
ANNOTATED
MEMO
REPORT &
COORDINATION
INTERAGENCY
DECISION
POLICY STAFF
POLICY STAFF
DECISION
& SENIOR
PRESIDENT
MEMO
MEMO
STAFF REVIEW
DRAFT
COORDINATION
PRESIDENTIAL
DISTRIBUTION
PRESIDENTIAL
POLICY STAFF
& REVIEW BY
PRESIDENT
DIRECTIVE
POLICY STAFF
&
DIRECTIVE
SENIOR STAFF
MONITORING
31
32
O A description of the issue and its
significance.
O An identification of lead agency
staffing responsibility.
O A task assignment to the lead
agency and other participating units.
O A schedule for completion of a
Presidential Directive (PD).
If accepted by the President, the PRM then
returns to the DPS or NSS and is transmitted to the
Policy Review Committee/Special Coordinating
Committee (PRC/SCC) to begin the actual policy analysis
and option formulation process.
The PRC is an interagency group currently
responsible for developing national security policy for
Presidential decisions in those cases where basic
responsibility falls primarily within one department but
where the decision would have major implications for
other departments. The SCC primarily develops policy on
cross-cutting issues which require a great deal of
coordination. An overall Policy Staff Management System
would include both a PRC and SCC with a differently
constituted principal membership to cover domestic issues.
The composition of both would change depending upon the
specific issue in question.
(4) Policy Analysis/Option Formulation
Two important points characterize this policy
analysis phase. The first is that wherever possible (a majority
of cases) this phase of the PSMS process is staffed by units
outside the EOP. The DPS or NSS staffer provides a continuous
link between the White House and the working groups to
set the outside limits of issue discussion, but is not
normally responsible for the day-to-day staffing work. The
exception to this proviso is when the interests of two non-EOP
units are SO intense as to warrant more "neutral" chairing of
an interagency task force by a DPS or NSS staff member.
33
The second point also differentiates this proposed
process from the policy formulation patterns documented in this
report. This process intentionally forces interagency involve-
ment at the outset of the policy formulation process. Such
early involvement reduces the possibility of a narrow
approach to the issue.
Such expanded participation does consume more
time at the outset. However, our case studies suggest that
time not spent early in cooperatively focussing on an issue
will be spent at the end of the process in competitive
attempts to stop a narrowly formed set of policy options
from reaching the decision phase.
(5) Recommendation/Decisionmaking
In the normal PSMS case, the working document
is developed by a Cabinet-chaired group, submitted through
the PRC/SCC, and leads subsequently to the formulation of
final options, and (where a strong consensus has emerged) a
particular recommendation by the department principals.
The options, recommendations, and final
discussions are then incorporated in a PRC/SCC report and
Decision Memorandum. The package is submitted to the White
House Staff Secretary, and quickly routed to Cabinet and
White House senior staff for comments. However, unlike the
current process, if this last circulation process produces
comments which qualitatively change the sense of the
Presidential Directive, then the comments will be
incorporated into the PD, not appended to it. Certainly,
in some cases, timing may preclude this final step.
Nevertheless, the intent of the process is to produce one
useful working document for the President, not several at
slight cross-purposes to one another.
(6) Implementation/Compliance/Reassessment
Decisionmaking can be meaningless without
assurance of compliance. Therefore, after the President
has reached a decision, the policy staffs would monitor,
as Presidential umpires, the implementation of the policies
and the progress towards the goals being achieved by the
various agencies of government. Such monitoring would be
34
enhanced to the extent that the long-range groups in both
NSS and DPS identified program indicators within major
Administration goal areas. With the assistance of both depart-
mental personnel and OMB ZBB specialists, the two staffs could
also develop a continuous goal monitoring system employing
quantifiable program measures. Though ambitious in
intent, even partial attainment of such a system could
increase the President's ability to maintain an ongoing
perspective regarding key policy areas. A monitoring
system should be attempted on a pilot basis.
B. Redefine the Role of the Economic Policy Group (EPG)
The case studies and numerous interviews with EOP
officials reinforce this proposal. The EPG has not worked
well for several reasons:
(1) EPG meetings too often address issues seriously
only at the decision-end of the policy option development
process, rather than at a much earlier stage.
At the end of a process, agency positions are
highly researched and staffed, and incorporated in staff
papers presented to the EPG. If alternative viewpoints
have not been carried along in the process, and also
afforded detailed analysis and review, they are unlikely
to be considered serious options for Presidential
consideration, simply by reason of the momentum built
into any decision process. Therefore, though such options
might emerge in the course of an EPG discussion, the weight
of researched positions and decision deadlines will overwhelm
serious consideration of these options.
If an issue is important enough to warrant
review by Cabinet officials (more on this below), it is
sufficiently important to obtain Secretaries' perspectives
early enough to affect the issue staffing process.
Certainly, this "front-end" EPG approach will not be easy
to implement. Agency self-interests militate against the
exposure of "their" proposal to cross-cutting peer review.
Therefore, if EPG assumes a "front-end" approach, the
identification of EPG agenda items will be a critical
component of the process. Such identification could occur
through the "long-range groups" established within both
the National Security Staff and the Domestic Policy Staff.
35
(2) The EPG may be addressing the "wrong" issues.
For a Cabinet forum to be effective, there must
be a good match between the agenda and participants' skills and
responsibilities. Applying this self-evident position to the
EPG, however, creates a mismatch. The EPG did not
address the energy package, though that package may be
the most "interdepartmental" of all issues. The EPG did
not discuss trade policy in general, but has dealt with a
trade decision (e.g., footwear). In short, the EPG may be
addressing thoseissues in which Cabinet Secretaries might
have the least comparative advantage. From this perspective,
the "right issues" would seem to be comprehensive issues
(i.e., anti-inflation package, macroeconomic policy,
long-term collective bargaining imports, government
transfer payments) requiring initial Cabinet positions
through which to guide subsequent staff work. Such
initial guidance would assist the President in expanding
as well as deepening the scope of the analysis brought
to bear on a set of related policy issues.
(3) EPG staff cannot, as currently structured,
perform an "honest broker" role.
The President relies primarily upon his
Domestic and National Security Advisers for "synthesis"
of the range of options relative to a given decision.
Consequently, an EPG option paper -- written as if it
were the final options paper -- is of little utility when
it is covered as a matter of procedure by Stuart Eizenstat.
For this reason, the EPG staff should be assigned to the
Assistant for Domestic Affairs and Policy. Should a more
formal Domestic Policy Staff (DPS) be developed under the
Policy Staff Management System, the staff in DPS assigned
to EPG would presumably also work on other interdepartmental
groups.
In summary, EPG should:
O Engage in front-end discussions of
selected policy issues.
O Select general comprehensive issues
as opposed to specific narrow ones.
O Utilize staff reporting to the Assistant
to the President for Domestic Affairs
and Policy.
36
If a PSMS is adopted, the EPG would function,
presumably, only when tasked to do so under a Presidential
Review Memorandum action. Alternatively, the EPG would
remain as one of a few standing committees with'a
presumptive right to focus upon economic policy issues.
C. Develop a System for the Inclusion of Political
Intelligence
Politics is no more an art than is economics or
public administration. Since almost all issues which
reach the Oval Office get there because of legitimate
differences of opinion, there is every reason to develop
the most systematic assessment of political positions in
Congress, the special interest groups, and other less
organized public constituents. The decision analysis
study as well as other EOP interviews suggests that
political intelligence is applied haphazardly to the
decisionmaking process.
The following White House staff are in a position
to develop the necessary system:
(1) Vice President
(2) Counsel to the President
(3) Assistant to the President - Jordan
(4) Assistant to the President - Public Liaison
(5) Assistant to the President - Congressional Liaison
(6) Special Assistant to the President - Administration
(7) Special Assistant to the President - Mitchell
(8) OMB, and Departmental Congressional Relations Staff
Given the proximity of these units and individuals
to the President, it would be presumptuous to detail the
manner in which political intelligence could be applied to
the process. However, it is possible to suggest the
principles which should be employed in developing the
system. At a minimum, the "system" would:
37
(1) Identify a lead political analyst for each
policy issue generated by the PSMS process.
(2) Identify key interests at risk in the decision.
(3) Schedule appropriate contacts with key
representatives early in the policy formulation process.
(Some contacts might involve the President; most would
involve departmental and White House personnel.)
(4) Provide political assessments of each of the
major options under review, in a sufficiently timely manner
to allow for full discussion of political implications
before final option preparation.
(5) Identify the potential congressional
"bargaining market" within which a Presidential decision
will be placed (i.e., will Congress separate farm price
supports from food stamps?)
There is no expectation that a "system" modeled
around the above five points would be a panacea, nor that
it would act like a system for all issues. Nevertheless,
no "model" exists now against which to compare White House
performance. At the very least, the definition of a system
in operational terms would help direct this key policy
development component.
The Congressional Liaison role requires particular
attention. The job is done as well as it can be in the
circumstances, but to serve the President's needs more
effectively the role needs to be broadened and the
resources available improved.
What is needed is an organizational design that will
permit more effective tactical maneuver. At present, the
Senate side of Congressional Liaison is designed for general
coverage of the Senate floor, while the House side is
organized to mirror the agencies rather than the Congress
itself. In neither case does the Office organize its staff
to follow Senate and House Committees. This limits its
capacity for advance intelligence on program development
and confines its tactical operations to the late stages
of committee mark-up and floor votes. Targetting of
resources follows bills rather than committee agendas, and
catches up with proposals only when they have reached the
38
point of a vote that overshoots the Administration's budget
ceilings or flies in the face of Administration commitments.
This in turn requires the President to do more
threatening and bluffing than is tactically desirable,
eroding slowly but surely the credibility of both the
President's negotiating strength and of the policy-making
process which sends proposals to the Hill at the outset.
What is also needed is more effective strategic
planning of liaison operations. This would seek coordination
of the roles of the Jordan staff, the Domestic Policy staff,
OMB legislative reference, and the relevant agency staff
well in advance of the submission of major program
initiatives. Effective strategic planning in the early
stages saves tactical resources at the late stages and
limits the number of conflicts with Congress on which
the Administration needs to expend "bargaining chips."
One final point relates to political strategy.
The greatest price the Administration has had to pay for
conscious or unconscious secrecy in program development
and policy review has been in its congressional strategy.
While premature disclosure can often have an adverse
effect on effective policy review in the EOP, the lack of
congressional consultation that it requires can mean
almost certain death for the policy package when it
reaches the Hill.
D. Merge the Paper Circulation Processes of the Cabinet
Secretary and the Staff Secretary
This action would streamline a circulation process
which at times generates either delays in the delivery of
key communications to senior White House staff, or a lack
of knowledge on the part Cabinet officials regarding the
progress of their paper (i.e., "Has the President seen the
memo I am scheduled to discuss with him today?").
Placing both circulations under the Staff Secretary
would help to assure that a larger number of relevant Cabinet
and White House staff would see papers at the same time,
and would also increase the possibility of a good process
control of Presidential communications. Moreover, this
routing function is separable from the Cabinet Secretary's
larger, representational duties.
39
Under such consolidation, Cabinet communications
would still be channeled into the White House through the
Cabinet Secretary to assure that he remains fully informed
of Cabinet perspectives. There would be a consequent
increase in the potential authority of the Staff Secretary
(i.e., screening, rather than simply circulating papers) :
should this become a problem, decision rules more clearly
detailing "gatekeeper" responsibilities could be added.
E. Design and Maintain a System Review/Decision
Analysis Process
The process of developing this Decision Analysis
Report has generated this proposal, supported by an historical
perspective. A review of the President's advisory systems
should be conducted periodically. Presidents come to office
with predilections and preferences in style that frequently
are internally inconsistent, and even more frequently do not
suit their job or their priorities as they come to define
them. They make some appointments that mesh with these
preferences and predilections, and some that do not. Yet,
they are unlikely to take a serious, overall second look:
they are busy and they don't want to admit failure in
their original efforts.
The decision analysis supports the need to look
back over the process. How well is the system serving
the President? How much has the system in place changed?
Has the change been favorable?
Reorganization is a continuous process. It should
be as concerned with process as much as it is with structure.
Building in a mechanism for change strengthens the potential
for success by identifying activities, structures and processes
that contribute to success and failure. Such an approach
revitalizes any organization. It insures continued flexibility,
builds on accomplishments, consolidates gains and builds
structures and processes that the President can pass
on to succeeding Administrations
The methodology for such a review would be similar
to this decision analysis process, in that case study material
offers the possibility of in-depth study in a few major areas.
This process would be complemented by more general interview
methods, which gain in breadth of coverage what the case
studies achieve in depth.
40
More important than how such a review is conducted
is the function of who conducts it. Ideally, the group
would consist of individuals independent of the EOP who
yet have a sufficient working knowledge of the EOP to
perform the review expeditiously.
A review process applied periodically (every 18
months perhaps) eliminates the need for permanent staff to
administer the review function, while simultaneously
synchronizing the review more closely with normal staff
turnover periods. What is lost in this periodic review --
as opposed to continuous monitoring -- is that dynamic sense
of an organization in evolution. Reviewees recruited from
outside the EOP would necessarily experience a new learning
curve at each period. Permanent review staff have the
opposite problem: knowing the organization too well to
establish an objective perspective.
Conclusion:
(1) The review should be implemented.
(2) The review approach should combine decision
analyses and more comprehensive interviewing.
(3) Professional independence might best be
maintained through the use of skilled personnel hired on a
temporary basis.
F. Explore the Possibility of a Program Indicators Svstem
No system now exists to afford the President a
quantifiable measure of the "output" (whether that output is
in the form of services, products, or processes) of his
government in operational terms. Although this suggestion
is beyond the immediate purview of the decision analysis
report, the team proposes that the President consider the
development of a pilot program employing a series of
indicators in selected program areas to measure the progress
of Federal departments in key Presidential program areas. The
indicators could be developed by National Security Staff and
Domestic Policy Staff personnel working closely with
interdepartmental policy staffs.
41
Should the pilot process seem valuable, the coverage
of these indicators could be slowly expanded, with the
long-term objective being the establishment of. a social
program report system to the President.
The proposed process builds upon a general need
for better governmental accountability, as now manifest in
the attempt to apply ZBB across the government. A social
report system is fully consistent with that effort, but
should be initiated on a very limited scale in order to
avoid the normal oversell problems of "new" ideas (this
is not new) and also, of course, to simply test its
utility for this Administration.
DECISION ANALYSIS REPORT
SECTION 5: THE CASE STUDIES
DECISION ANALYSIS REPORT
CASE STUDY: FOOD STAMPS PURCHASE REQUIREMENT
44
A.
FOOD STAMPS PURCHASE REQUIREMENT
1.
ABSTRACT
This case study examines the process by which a new
Carter proposal was developed. It is unusual in several
respects. The President spent relatively more personal time
on the issue than in other cases which have been analyzed;
it came to Cabinet's attention more frequently. On the
other hand, development of the initiative rested almost
entirely on a single division of a Cabinet agency (USDA).
Coordination of interagency efforts was thus less necessary
in this case but satisfactorily accomplished. Within the
EOP, units of the Domestic Council and OMB worked smoothly
together. Congressional response was well tested in advance.
The key to the success of the process was the
utilization of a high degree of expertise in assessing a
series of complex program options which changed substantially
in detail, impact and cost over the course of the decision
process. This resulted in detailed costing of decision
alternatives and limited to an unusual degree the amount of
guesswork as to the impact of the decisions toward which the
participants were moving. The role of expertise was instrumental
in informing the final expression of the President's view.
Insofar as the case exemplifies an effective decisionmaking
process, it carries an important lesson for reorganization --
the need for the necessary expertise was served not from inside
the EOP, but rather from the agency involved, at the call of
the OMB program staff (principally) and the Domestic Council
staff (secondarily).
2.
BACKGROUND
In this section, day-by-day events are chronicled
in order to identify the important issues and key players
as these emerged.
O Key players or active participants in the decision
process are identified as those individuals who interact
on the food stamps issue outside their EOP unit or
agency, and do SO more than once. Attendance at an
interagency meeting is treated as multiple interaction
for this purpose. For full list, see pages 12-13.
45
O For summary data on Presidential and Cabinet
attention to the issue, see page 12.
Chronology
January
18 S. 275, Senator Talmadge's Farm Bill, is
introduced in Congress.
February
24 Food and Nutrition Service (FNS) of the
Department of Agriculture (USDA) sends a
document outlining the impact of the
Department's draft bill to OMB for
review.
28 A draft version of the "Food Stamp Act of 1977"
is sent to OMB. The principal authors are
John Kramer of the staff of the House Committee
on Agriculture and Bob Greenstein, Special
Assistant to the Secretary of Agriculture.
At OMB, the document is reviewed by David
Kleinberg, Chief, Income Maintenance Branch,
and John Ostenso of OMB.
O Mike Barth (HEW) calls Bob Greenstein expressing
concern that his Department is not being plugged
into the development of the food stamps program.
This call is followed by a series of consultations
over the phone between Greenstein and a number of
HEW officials. These are greatly facilitated by
the fact that the year before, during the Ford
Administration, Greenstein and two of his opposite
numbers at HEW had worked closely together on the
program from outside the Government.
March
2
Lynn Daft (Domestic Council staff) sends a
memorandum to Stuart Eizenstat via Bert Carp,
outlining the USDA food stamps proposal.
O Southern Coalition to Eliminate Hunger writes Carp
urging the elimination of the purchase requirement
for food stamps (EPR). Carp forwards the document
to Raines and Daft (DC).
46
Carolyn Merck, Program Development Branch
(FNS, USDA) / writes memorandum to Bob
Greenstein outlining costs for three of a series
of food stamp program options. The options were
(1) $100 standard deduction, with special
deductions for child care and work expenses;
(2) $80 standard deduction; and (3) a standard
deduction graduated for household size.
March
7
Senators McGovern (sponsor of S. 845) and
Humphrey (S. 903) write the President urging
elimination of the purchase requirement (EPR).
O Staff analysis of the food stamp bills pending
in the Senate is released by the Senate Committee
on Agriculture.
OMB requests comments on the Kramer-Greenstein
draft bill from HEW, Justice, Treasury, Labor,
CEA and Postal Service.
8
FNS (USDA) distributes "Methodology for Estimating
Impacts of EPR." Copy goes to OMB later.
9
Senator Talmadgewrites Director Lance opposing EPR.
Ben Bailar (Postmaster General) comments to OMB
on USDA draft bill. He opposes provision of
expanded role for the Postal Service in distribu-
tion of food stamps.
Secretary Califano meets with Secretary Bergland
to discuss the food stamp proposal in detail.
The two agree on the broad outline but Califano
is emphatic that with the welfare reform plan
imminent, he is not in favor of extending the
program beyond two years (at this stage Agriculture
plans for a four-year reauthorization period).
10
Richard Kasdan (ACTION) comments on USDA bill
to OMB. He opposes the provision to count
VISTA allowances in the gross income of
applicants for the program.
47
March
11
Greenstein writes to Kleinberg (OMB) discussing
program costs of various options. He attaches
studies by Peskin (HEW) and Hoagland
(Congressional Budget Office) discussing
the theory of consumer preference as it
related to income supplements and food
purchasing.
O FNS distributes to OMB an analysis of S. 903
and S. 275 (the Humphrey and Talmadge bills)
Daft (DC) calls an interagency meeting for the
following Monday, March 14. Invited are repre-
sentatives of HEW, USDA, Treasury, OMB, CEA, and
DC. At this stage the food stamp program has
several eligibility options, a four-year
reauthorization period, EPR, and a provision
to recoup the additional program costs through
the income tax system.
O In preparation for the Monday meeting, OMB develops
a detailed briefing book on the program and USDA
proposals. This is done by Kleinberg, Vasquez,
and Ostenso. Copies of the briefing book go to
Suzanne Woolsey, Naomi Sweeney and Jeff Weinberg
of OMB Legislative Reference Division, OMB, and
Lynn Daft (DC)
O Kleinberg raises with Woolsey the range of
budgetary threats posed by the current Food
Stamp Program (FSP) options. He is concerned
that the Monday meeting participants should argue
issues within a realistic budgetary limit. This
requires policy direction which is obtained by
Woolsey from OMB Deputy Director McIntyre. He
states that the cost of FSP will be limited to
the level of current services. The OMB group
goes into the Monday meeting with this policy
position.
O Pat Wald and Ben Civiletti (Justice) comment to
OMB on the USDA draft bill. They argue for
improved fraud controls.
O Lyle Gramley (CEA) comments to OMB that the
recoupment proviso is inconsistent with the
Administration's goal of simplifying tax forms.
48
O Secretary Califano calls Carp (DC) and suggests
that he attend the Monday meeting. The Secretary
is particularly concerned that discussion of the
food stamp options be coordinated with the welfare
reform plan on which Carp is also working.
Wendell Primus (House Agriculture Committee staff
member) calls Greenstein to say that he has found
a flaw in the computer programs he has been using
to estimate option impacts in the food stamps
proposal. The effect is to reduce confidence in
the estimates of what the recoupment provision
would save. In Greenstein's judgment, this,
together with HEW's expressed opposition to the
recoupment provision, significantly lowers the
desirability of keeping the provision in the bill.
March
12
The Washington Post publishes an article
disclosing that the Administration is planning
to drop the purchase requirement. Chairman Foley
(House Agriculture Committee) is furious that the
plan had not been cleared with him in advance;
to make matters worse, he finds that his own
staff had been drafting the bill without his
knowing and are quoted in support of EPR. He
threatens to oppose the bill in the House - a
position which Greenstein believes at the time
would almost certainly have killed it. The
Congressman calls a number of Administration
officials at OMB repeating his opposition while
Greenstein prepares to persuade him of the
value of EPR. This is a major turning point
in the fortunes of the food stamps proposal.
14
Interagency meeting. Attending are Henry Aaron,
Michael Barth (HEW) ; Carol Foreman, Bob Greenstein
(USDA) ; Emil Sunley, Lawrence Woodworth (Treasury);
David Kleinberg, Joe Vasquez, John Ostenso and
Suzanne Woolsey (OMB) ; Bruce Gardner (CEA) ; Frank
Raines, Lynn Daft, and Bert Carp (DC) The
principal issues discussed are budget impact,
EPR, recoupment and the length of the
reauthorization period. Agriculture agrees
to provide additional cost and reliability data.
16
OMB elaborates options. At this stage there are
seven options, and each is costed out to show
winners and losers. Concern is expressed about
the reliability of the method for estimating
program impacts.
49
Greenstein meets with Sunley (Treasury) to go
through the problems that both had been having
with the recoupment provision. IRS officials
make a presentation outlining the enormous
administrative difficulties involved. Greenstein
is persuaded that the provision is impractical
and recommends to Bergland the next day that he
drop it, which he does.
March
17
Greenstein sends memorandum to Carp, Raines and
Daft costing out five program options without
recoupment.
O The Department of Labor reports to OMB that it
opposes the jurisdiction of USDA over the work
requirement that is in the bill as a condition
of eligibility.
19
Greenstein goes to Chairman Foley's home to
brief him on the bill. He outlines the results
of cost estimate studies and goes in detail
through the case for EPR.
21
Secretary Bergland meets with Senator Talmadge
and Congressman Foley. The Congressional Insight
newsletter reports that the Congressmen said
that they did not want to compromise on the
lower price supports the Administration was
planning if USDA pushed ahead with EPR. Other
players say that no such linkage was ever raised.
Carp is told by Greenstein to consider the effect
of the current program options on the northeast region.
Carp agrees to consider including a shelter
deduction in the program to compensate for higher
costs in the region.
O Eizenstat advises Agriculture to prepare a formal
statement to define their concrete proposals. It
is intended that the memorandum will be circulated
by DC staff for comments by affected agencies.
50
March
24
Church organizations around the country cable
their support for EPR to the White House.
Greenstein meets with Chairman Foley. The
Congressman says that he has been convinced of
the genuineness of the effort behind the bill, but
stops short of offering his support for it.
Greenstein then meets with Carol Foreman (USDA)
and Mike McLeod, Staff Director of the Senate
Agriculture Committee, to examine the Senate
response to the bill.
25
Foreman sends memorandum to Eizenstat outlining
the revised food stamp proposals, including in
it the special deductions for shelter and
child care.
26
Informal meetings are held Friday and Saturday.
Included are Kleinberg (OMB), Hoagland (CBO) ,
Primus (House Agriculture Committee staff)
Merck (USDA) and Greenstein. The purpose is to
test the reliability of the Transfer Income
Model for estimating the impact of the program
options on participation rates in the program,
level of benefit and likely cost.
28
Gardner (CEA) writes a brief memorandum to Raines
arguing for total welfare reform with cash-out
of food stamps.
Califano writes Lance in favor of EPR and a
two-year reauthorization period.
29
OMB staff prepare draft memorandum for Director
Lance arguing in favor of EPR. This is held
contingent on an acceptable level of budgetary
threat. Cost is kept down by setting the
standard deduction at $80 and rejecting the
special shelter deduction provision. The
level of budgetary risk on current services
level is estimated at between $75-185 million
and the memorandum recommends accepting the risk.
Secretary Bergland formally writes the President
arguing in favor of EPR together with a shelter
deduction provision.
51
O Attorney General Bell notifies the President
that Senator Talmadge is opposed to EPR.
March
30
Secretary Bergland has a breakfast meeting with
Senator Talmadge and Congressman Foley. Talmadge
attacks the cost figures for EPR and Greenstein
replies with a 20-minute briefing of what
Agriculture, CBO and other staff had agreed on
as reliable estimates.
O Raines asks Secretary Bergland to delay the date
of his testimony on the Hill in order to gain
time to clarify differences in the Administration's
proposals. The date is postponed to April 5.
31
In a second letter to the President, Bergland
defends EPR, but drops his shelter provision
after his staff accept the arguments of other
players.
O A new draft of the Lance memorandum is prepared
changing the agency's position. Standard deductions
are retained -- raised toward $100 -- but the
purchase requirement is also retained. The
shelter deduction is recommended for disapproval.
Raines writes a memorandum to Eizenstat, and then
to the President, favoring EPR among the several
options listed. This is the cover decision
memorandum and details all the still active
proposals and incorporated agency comments
on each.
April
1
The President lunches with Senator Talmadge who
reiterates his opposition to EPR.
The President disapproves EPR as recommended in
the Raines-Eizenstat memorandum, but indicates
that he wants to have a meeting to discuss the
issues with Bergland. Interpretations differ
about the nature and meaning of the President's
decision at this point. A meeting is scheduled
for Monday, April 4.
2
Greenstein calls Parham (Watson's staff) to
brief him on the situation and to ask Watson's
support at the Monday meeting.
52
April
4
Cabinet Room Meeting. Attending are
Eizenstat, Lance, Califano, Watson,
Bergland, Foreman, Greenstein, Raines,
and Moore. The President tilts at first
to retaining the purchase requirement but
then accepts EPR.
3.
ANALYSIS
The Issues for Decision
The food stamps program (FSP) was originally
intended to supplement the diet of people too poor to be
able to afford nutritional adequacy. It has not worked
out that way. Eligibility is broad enough to include
those with assets and income considerably above the poverty
line (effect of temporary unemployment) But in order to
receive an allotment of food stamps, eligible applicants
must pay cash down. This purchase requirement is high
enough to limit the participation of those at or below the
poverty line who cannot afford the outlay. Moreover, for
those now participating, less than half the value of the
stamps received is applied to food purchases as such;
this has not made a noticeable improvement in the dietary
standards of the poor, which have been steadily on the
decline since 1950.
The Carter Administration is committed to
integrated welfare reform but this will take time to
implement, as well as budget resources which are not yet
available. In the short term, there has been a strong
demand from community and welfare groups, reflected in
the Congress, for some measure of added benefit from the
food stamps program; specifically, for elimination of the
purchase requirement to broaden the participation of the
neediest groups. There is a regional character to this
problem. Regional disparities are naturally important
political realities in Congress, and they affected the
development of options in this case, principally the
shelter deduction.
53
a. The Nutrition Issue
The first issue to be identified was the
extent to which the program would remain oriented to nutrition
and food purchase. Elimination of the purchase requirement
(EPR) was a step towards abandonment of the original objective
and final cash-out of the program as a pure income supplement.
This last step could be taken but only
within the coordinated welfare reform plan. This was going
much slower at HEW than the FSP was being redesigned at USDA.
Meantime in Congress, several bills were introduced dealing
with food stamps. Senator Talmadge's bill (S. 275) retained
the PR; S. 845 and S. 903 were for EPR. A step towards EPR
implied a major threat to the jurisdictions of the two
Congressional Agriculture Committees, which at least
Talmadge and possibly Foley wanted to preserve. The former
counted on persuading Attorney General Bell and Director Lance
to argue his view with the President; both did. Talmadge also
argued the case directly. He said that EPR and the USDA
program could lift program costs by as much as $1 billion.
At first the President was inclined to agree with him.
b. The Issue of Cost
This identified a second issue: How much
would the Administration's program cost, and how reliable
were the estimates on which its options were based?
All participants agreed that the program had
to be compatible with the HEW Welfare Reform Task Force; many
of them participated in the Monday meetings of that group.
Strategically some players were after a higher level of
benefit in the food stamp program SO as to up the ante when
welfare reform, as expected, cashed the program out. Other
players sought to keep food stamp spending levels down, both
to limit the pressure on the current budgetary deficit and to
provide longer-term protection for the balanced budget when
the full welfare reform program would be implemented. They
reasoned that the lower the budgetary cost in the FSP now,
the more resources the Administration might have with which
to sweeten its welfare benefits later. Both strategies
depended on accurate estimates of the costs of alternative
options.
54
C.
Budget Options
Within the two strategies a further set
of issues was identified:
O Benefits in the current program could be
increased and the overall (budgetary)
cost enlarged.
O Benefits could be increased but limited
to those in greatest need with those
least in need losing some current
benefits and possibly their eligibility.
O Finally, budget outlays could be reduced
and benefits held constant or even
improved somewhat -- anticipating the
welfare reform plan -- with budget
savings effected by simplification of
the program and reduction in
administrative costs.
These options were never openly debated.
According to one view, the DC staff leaned toward increasing
benefits and budgetary outlays, while OMB tilted against
them in the opposite direction -- benefits could be increased
but only if no further outlays would be required. According
to a second view, there was never any question about
increasing budget outlays; this issue had been settled by
the time the February budget amendments had been released.
Agriculture could have gone to the President for more money
for the FPS, but had it done so it would have weakened the
prior claim it had made for higher farm price supports, also
part of the Farm bill. Then and later most participants were
prepared to compromise on the budgetary outlay side of FSP
to leave more resources for the price support program.
d. The Budget Threat Again
What divided the participants were two
final issues: Where and how to set the level of benefits?
How to offset the costs of increased eligibility and
participation? Note that at no stage was there disagreement
among the EOP players about the desirability of EPR. Greenstein
at USDA reassured them that the Senate would not support
Talmadge, and after lobbying Foley in the House, he felt
that EPR would probably pass there too.
55
The players also agreed that benefit levels
should rise at the neediest, sub-poverty level of income if a
device could be found to recoup benefits paid out above the
poverty line. Such a provision was developed using the IRS
and the annual tax form to require recipients to report the
benefits received over the year. When annual income exceeded
twice the level of eligibility, the benefits would be repaid.
There were many administrative and policy
problems with this. In addition, it created tactical
difficulties by adding jurisdiction over the program and the
Farm bill as a whole to the Ways and Means and Finance
Committees where the consequences for this and other
Administration bills were unpredictable. The participants
consequently agreed to drop recoupment after their meeting
of March 14. What remained to be decided was how to keep
individual benefits up and aggregate costs down. This was
worked out principally through detailed costing of options
that standardized and then raised or lowered the level of
deductions from net income around the poverty line.
To ensure that the technical work was
reliable, the major specialists met with Kleinberg and Ostenso
of OMB to test assumptions and results of projections for the
participation rates expected after EPR at each of the benefit
levels proposed in the options. These meetings (March 25-26)
concluded on general agreement that the budgetary threat
implied in the Agriculture proposal was, at most, $185 million.
Until the last week the participants
managed to preserve substantial consensus as the program
options were developed a step at a time. An exception to
the policy of standardized deductions -- special provision
for the relatively higher costs of shelter in the northeast --
had been raised by Greenstein, considered by Carp, costed
and then discussed by all. It was proposed to the President
in the first Bergland letter, then dropped after USDA adopted the
prevailing view of the others. The trouble was, as everyone
saw it, that one exception opened the door to too many others.
A difference of view about the length of time the new program
was planned to run was similarly brought within the broad
consensus.
56
e. The Lance Position
On March 31, however, Director Lance
decided against EPR, and redrafted the Presidential
memorandum his staff had prepared for him. This
underscored the Talmadge view, and said that although
"this proposal makes sense, it will be difficult to sell
politically, and I recommend against supporting it at
this time."
In his review of the Domestic Council
cover memorandum and of other decision papers on April 1, the
President indicated his disapproval of EPR, but called for a
meeting of the principal players the following Monday. The Lance
memorandum created two issues for decision: Was the
budgetary threat as great as Talmadge viewed it? The
consensus was No. Secondly, was Talmadge's opposition
enough to kill the program or the bill? Again the
consensus was No. The President decided in favor of EPR,
a two-year extension of the program, standardized deductions,
and a poverty line cut-off for eligibility.
Findings
a. Coordination
EOP staff work made it possible to
assess a very broad range of program options in terms of
precise estimates of program impact and cost and clear
budgetary guidelines. One or perhaps two Domestic Council
staff, and two to three OMB staff were enough to direct and
coordinate the entire process. At each stage, players
were generally clear as to the issues requiring decision,
the process necessary to reach a decision, the priorities
guiding the process, and the loci of responsibility for
bringing it to completion. The effect of the staff work
was to reduce a very large number of options to the small
and residual number on which there remained differences of
view among the players. These the President alone was
able to assess with an economy of effort, in a relatively
short time.
57
b. Expertise Coverage
The effectiveness of the assessment of options
depended on the availability of a high level of technical
expertise, of familiarity with the program and of the
capacity to manipulate the relevant data bases and computer
programs that were available. Greenstein (USDA) had expertise
in all aspects of the program (before his appointment to
Bergland's office), and experts in USDA and outside were
drawn into the process as needed. Executive Office staff
coordinated this coverage but did not provide the basic
analysis needed themselves.
C. Congressional Liaison
Assessment of congressional reaction was
methodical and achieved by staff outside the Executive
Office. Again, Greenstein's role at USDA was crucial. But
the experience of Domestic Council staff (not in this case
Moore's or Jordan's staff) in dealing with congressional
staff and their tactical sensibilities in that area ensured
that this process, paralleling the one that had been
piloted by the Ford Domestic Council in 1975, would be
more likely to survive.
In this context, according to Greenstein, the
Washington Post disclosure of March 12 was decisive,
because it made clear to Administration officials working
on the plan that they had failed to consult the one man
whose opposition spelled almost certain defeat for the
bill - Congressman Foley. Though very damaging as it
appeared at the time, the Post article initiated a process
of meetings and consultations which effectively won Foley over.
4.
BACKGROUND DATA
a. Presidential attention: The President read
two staff memoranda plus attachments from Domestic Council;
memorandum from Bert Lance; letters from Senators Humphrey,
McGovern and Talmadge, and Secretary Bergland.
b. Cabinet attention: Issue discussed by Secretary
Bergland at meetings of March 7, 14, 21, 28, April 4 and 11.
58
C. List of active participants in the decision
process: *
The President
Senator Herman Talmadge, Chairman, Senate
Agriculture Committee
Congressman Tom Foley, Chairman, House
Agriculture Committee
Bill Hoagland, Human Resources Division,
Congressional Budget Office
Wendell Primus, Staff Member, House Committee
on Agriculture
John Kramer, Staff Member, House Committee
on Agriculture
Bob Bergland, Secretary of Agriculture
Bob Greenstein, Special Assistant to
Secretary Bergland
Carol Foreman, Assistant Secretary, Consumer
and Food Services, Department of Agriculture
Bert Lance, Director of OMB
Suzanne Woolsey, OMB
David Kleinberg, Chief, Income Maintenance
Branch, OMB
Joe Vasquez, OMB
Stuart Eizenstat, Assistant to the President
for Domestic Affairs and Policy
Bert Carp, Deputy Director, Domestic Council
Lynn Daft, Domestic Council
Frank Raines, Domestic Council
Lyle Gramley, Council Member, CEA
Bruce Gardner, Staff Member, CEA
Joseph Califano, Secretary of HEW
Henry Aaron, Assistant Secretary for Planning
and Evaluation, HEW
Michael Barth, HEW
* Defined as a player who interacts on the
issue outside his/her agency or EOP unit
more than once.
59
Lawrence Woodworth, Assistant Secretary for
Tax Policy, Department of the Treasury
Emil Sunley, Deputy Assistant Secretary
for Tax Policy, Department of the Treasury
Jack Watson, Cabinet Secretary
Jim Parham, Staff of Cabinet Secretary
TOTAL - 26
DECISION ANALYSIS REPORT
CASE STUDY: MINIMUM WAGE DETERMINATION
61
B.
MINIMUM WAGE DETERMINATION
1. ABSTRACT
On March 24, 1977, Ray Marshall, Secretary of
Labor, presented testimony regarding a bill (H.R. 3744)
introduced by Congressman John Dent (Dem.-Pennsylvania)
which would raise the minimum wage to approximately
$2.85 in summer 1977, and to approximately $3.31 on
January 1, 1978. This study describes and analyzes the
decision process immediately preceding the Marshall testi-
mony. It highlights the bartering process which neces-
sarily results from initial differences in departmental
positions, describes the relative contribution of several
EOP units (i.e., CEA, OMB, Domestic Council) to the final
discussions, and focuses directly on two particular issues:
1) the extent to which relevant expertise was applied; and
2) the extent to which the Economic Policy Group contribu-
ted to the decisionmaking process.
2.
BACKGROUND
The earliest political contribution to the issue
may have been provided at a lunch on March 4, at which the
President was joined by George Meany and T. Donohue (AFL-
CIO), Vice President Mondale, Secretary Marshall and Domes-
tic Policy adviser Stuart Eizenstat. No minutes for the
meeting are available, though it is reasonable to assume
that minimum wage issues did come up.
On March 10, 1977, Bowman Cutter, Executive
Associate Director for Budget, sent a memorandum to EPG
coordinators Gould and Hessler, proposing inclusion of
minimum wage legislation on the EPG agenda, and suggest-
ing an "emergency meeting" during the week of March 12.
Cutter had been alerted of this need by OMB Legislative
Reference (i.e., Naomi Sweeney).
Written notice of the minimum wage issue appears
again a day later in Schultze's Weekly Report of CEA Activ-
ities on March 11. The memorandum indicated that the CEA
62
was examining both farm price supports and possible
changes in the minimum wage, and that early analysis
suggested inflationary and unemployment effects from
increases in the minimum wage.
EPG held its meeting the following week on Wed-
nesday, March 16. The minutes from the meeting indicate
that the issue would be brought up at the following Mon-
day meeting (March 21). Given the fact that Secretary
Marshall was to testify on Thursday, March 24, this dis-
cussion left little maneuvering time for senior White
House staff.
a.
Discussion Memoranda
On March 17, both CEA and DOL submitted
memoranda to the EPG with respect to the minimum wage
issue. The Marshall memo supported the Dent Bill with
a four-page document, and appended tables indicating his-
torical relationships between the minimum wage and average
manufacturing earnings. The Marshall memo also took issue
with CEA's interpretation of the same historical trends.
Marshall's memo provided no option other than that pro-
vided in the Dent Bill, and was not specific with respect
to the bill's particulars.
The CEA memo of the same date addressed
the particulars of the Dent Bill, raised new options in
a general way (e.g., split the minimum wage, and phase in
indexing to some wage base), and discussed the negative
economic impact of the bill in terms of inflation and teen-
age unemployment. The CEA memo also raised the option
of not indexing minimum wage at all. This option was
included at the suggestion of OMB's Housing, Veterans,
and Labor Division (HVLD) (i.e., Tom Morgan) who argued
in writing that (1) indexing wages but not prices intro-
duces distortions, and (2) indexing may make inflation
more palatable and therefore harder to control.
Morgan made similar arguments in his brief-
ing memorandum to Director Lance on March 17. He listed
all options available, and noted HVLD's recommendation
of not indexing the rate, but raising it to $2.65. Accord-
ing to Morgan, the $2.65 rate would bear a 47 percent
63
relationship to average manufacturing earnings. (Actually
it seemed closer to 50 percent, assuming a $5.35 mid-1977
manufacturing earnings base. The percentage translation
was handled differently by all participants, such that
there was never clear agreement until the final decision
as to what index percentage resulted from a specific
rate increase.)
Morgan followed a day later with another
memorandum to Lance commenting on Marshall's DOL sub-
mission statement of the 17th to EPG. He noted: (1)
Marshall had discussed indexing to gross hourly earnings
(including overtime), and that no minimum wage proposal
raised this possibility; (2) the Dent Bill increases would
be inflationary and destabilizing and that other DOL papers
on unemployment insurance tax increases made the same
point (contrary to DOL's minimum wage paper) ; (3) index-
ing to average hourly earnings is inflationary unless earn-
ings increase at the same rate as productivity; (4) purchas-
ing power increases may be overwhelmed by price increases;
and (5) minimum wage compliance has not (contrary to DOL
assertions) been very high, and DOL currently had a back-
log of 40,000 complaint cases.
b. The EPG Meeting
The EPG met on Monday, March 21. According
to one observer, the issue of indexing was raised, but was
not discussed in terms of alternative index bases (i.e.,
CPI vs. manufacturing wages). The CEA position on index-
ing prevailed, and all participants (with the exception
of Richard Cooper from State -- see below) agreed to it.
As a consequence of that meeting, a three-page memorandum
to the President was drafted for Secretary Blumenthal's
signature. Blumenthal's memo to the President included
two options: the first was the Dent Bill option, supported
in the meeting by DOL and HUD, that included an immediate
rise to $2.70 and pegged future rates at 57 percent of
average manufacturing straight time earnings. The second
option was generated by CEA, and supported by Treasury,
OMB, and Commerce. Whereas the first option could be con-
sidered responsive to Labor's position, the second option
was definitely not: an immediate increase in the minimum
wage from $2.30 to $2.40, and an indexing of the minimum
at whatever percentage rate was indicated (the $2.40 nominal
rate translated into a peg at approximately 45 percent of
64
average manufacturing straight time). This options
memorandum was supported by a CEA discussion paper iden-
tifying potential unemployment and inflationary effects.
C.
Post Meeting Memoranda
The memo was sent to the President, but
entered the Hutcheson paper pipeline and was routed in a
normal manner to Eizenstat late on Monday, the 21st.
Eizenstat then generated two new options, both of which
fell between the DOL and CEA extremes. These two new
options were combined with the two EPG generated options
in an options memorandum submitted to the President on
Tuesday, March 22.
In addition to the four options now avail-
able, the Eizenstat memo: (1) noted EPG's general accept-
ance of the concept of indexing (this acceptance was sur-
prising, given the implications) ; and (2) raised an issue
not discussed in the EPG meeting perhaps the peg should
be to the CPI, not to average manufacturing straight time
earnings. The memo did not note the distinct difference
in the impact of the two pegs (i.e., the CPI moves upward
more slowly than does average manufacturing earnings, and
is therefore less inflationary). However, the issue was
at least surfaced.
Three additional memoranda were submitted
on Tuesday to the President: from Schultze, Marshall, and
Eizenstat.
The Schultze memo identified the intellec-
tual debate with DOL (i.e., disagreement over the employ-
ment and price effects) and came down heavily against the
Dent Bill and DOL's position, but did not recommend any
new options.
The Marshall memo held to the Dent Bill
approach and included the following points: (1) CEA's peg
(approximately 45 percent) was too low; (2) the DOL option
(of $2.70 and $3.10) was appropriate; and productivity
increases would counter inflationary pressures, thus wash-
ing out price effects. Appended to this memo was a 15-
page treatise. The purpose seemed to undermine the
Schultze position by questioning the methodologies employed
by the economist whose research was used by CEA to support
assertions of heavy inpacts on teen-age unemployment.
(It is uncertain whether anyone read this appendix at all;
it seemed inappropriate to a Presidential options package.)
65
d. Meetings with the President
Given the lack of consensus apparent in
the policy papers submitted to the President (i.e., (1)
EPG's two options; (2) Eizenstat's four options; (3)
Marshall's one option; and (4) Schultze's one option), , a
meeting of principals seemed useful, and was suggested
by the Cabinet Secretary, Watson. The meeting was
scheduled for the following day, Wednesday the 23rd,
with Secretary Marshall and others.
Eizenstat was notified of the forthcoming
Marshall meeting and on Tuesday afternoon prepared a brief
"talking paint" memorandum to the President suggesting
that the President should (1) indicate support for the idea
of indexing the minimum wage; (2) waffle with respect to a
specific rate increase; (3) emphasize to Secretary Marshall
the fact that he "should take an Administration position;"
and (4) if pressed, the President might wish to discuss a
phased increase in the minimum to $2.54 in 1977, and $2.80
in 1978 (i.e., pegged at approximately 53 percent of aver-
age manufacturing straight time).
On Wednesday, March 23, the President met
twice on minimum wage. The first meeting (20 minutes) was
at 9:45 a.m., with Representative John H. Dent (D.-Penna.) ;
Robert Vagley, Director of the House of Representatives
Subcommittee on Labor Standards; Valerie Pinson, a White
House Associate for Congressional Relations; and Charles
Schultze, CEA Chairman. Eizenstat joined the meeting at
9:55 a.m. The meeting had been scheduled (at Congressman
Dent's request) by Pinson, and involved a full exchange of
views which provided the President an additional political
perspective on minimum wage. The meeting produced no
decisions, nor was it intended to.
The second meeting (30 minutes) occurred
at 4:00 p.m., and included the President, Secretaries
Blumenthal and Marshall, Presidential Assistants Watson and
Eizenstat; and Bill Johnson, an Eizenstat assistant. The
Vice President knew of the meeting, but had a schedule
conflict and could not attend.
e. The Decision
A decision was made by the President to go
with the $2.50 rate, with a request that details be worked
out by the participants. The technical detail which remained
66
was the determination of the base period against which to
index rate increases. The participants agreed shortly
thereafter on a March-to-March base period, with a rate
adjustment each July. In July 1977, the rate would there-
fore become $2.50, and the index percentage would be
established by matching that rate against March 1976-
March 1977 average manufacturing straight time earnings.
On the following day, Secretary Marshall testified in
favor of the $2.50 rate.
3. ANALYSIS
The minimum wage issue does not end with
Marshall's March 24 testimony. Mark-up hearings have not
been held since, and there have apparently been continuous
discussions between Administration and congressional repre-
sentatives to determine whether some flexibility exists
in the President's position.
Nevertheless, the March 24 testimony established
an Administration position. In that context, the decision-
making theme becomes: Could the decisionmaking process
have proceeded in some other manner as to further illumi-
nate and expand the President's decisionmaking choices?
The response has several components.
a.
Unit Coordination
The case study indicates a reasonable
identification of separate unit responsibilities until
after the March 21 EPG meeting. Labor had presented its
paper to the EPG, as had CEA. OMB staff had provided com-
ments to Lance. Both the Labor and CEA papers were dis-
cussed at the EPG, and Blumenthal had summarized positions
from that meeting in his options memorandum to the Presi-
dent. The memorandum also noted collective EPG support
for the concept of indexing.
However, at that point, EPG as a coordinate
process broke down. Secretary Marshall and CEA Chairman
Schultze both felt it necessary to re-state their positions
to the President; Eizenstat added two options himself; and
all of the interested principals met the following afternoon
with the President. The President, in effect, was com-
pelled to "re-coordinate" the parties involved. (Given
the importance of the issue, the President's participation
at this point may have been inevitable.)
67
b.
Over-Processing
Given the ongoing nature of the minimum
wage issue, and the many additional meetings which have
occurred, one might interpret the multiple activities a's'
either commensurate with the complexity of the issues
involved, or as the re-processing of static positions.
Examining events up to March 24, the latter perception
seems closer to the mark.
It is unclear, for example, whether the
EPG performed a useful role with respect to the minimum
wage. What went in (DOL and CEA positions) came out the
other side without nuance, and with no expansion of
Presidential options. The participants did agree on
indexing, but questions remain: Should the implications
of indexing have been more completely staffed out previous
to the EPG decision? What would have been lost by estab-
lishing a rate increase first, and providing more time
to examine the important implications of (1) indexing,
and (2) the selection of alternative index bases, given
agreement on the principle? This latter position was
expressed by OMB HVLD, but apparently was not articulated
by an OMB official in the EPG meeting.
Dick Cooper, Under Secretary of State for
Economic Affairs, did apparently raise the index issue
at the EPG meeting. If one indexes the minimum wage,
he suggested, why not index other compensation systems,
and perhaps more of the government's transfer programs?
An interviewee who attended the meeting indicates, how-
ever, that almost all participants felt that indexing was
useful, and would be a reasonable contribution to the
labor movement, whatever the minimum wage rate. Schultze
supported the index as a way to smooth wage adjustment
patterns, and to increase the predictability of the rate
adjustment process.
C.
Expertise Coverage
Neither DOL nor CEA provided convincing
material related to employment and price effects. This
may be a failing of the data, not its analysis, but lack-
ing convincing arguments, neither DOL nor CEA's option
proved tractable. Moreover, both transmitted their
technical arguments to the President in their March 22
68
memoranda, doing no more in the process than perhaps
document the failure of the process to provide a common
data base or a better clarified statement of technical
dispute against which Presidential options might be dis-
cussed.
This problem may be dismissed by reason
of (1) the newness of the participants to the process,
and (2) the short time in which action was required
(i.e., the Administration had been in office only two
months). However, there was time to staff out three
issues:
O Indexing as a minimum wage policy, not merely
as a concession (albeit reasonable) to labor.
O The correct indexing base (i.e., CPI vs.
average manufacturing straight time).
O Political implications.
The first was discussed above. The index-
ing base issue was raised in the March 21 Eizenstat memo-
randum, but this occurred after the EPG meeting and does
not seem to have been seriously discussed. "Political
implications" were undoubtedly not ignored in the EPG
meeting, yet the resultant EPG options memorandum afforded
the President only corner (i.e., extreme) options. It
fell upon Eizenstat to generate middle-range options for
the President to review. (These options were gradations
of the established extremes, not qualitatively distinct
alternatives.)
It is, of course, possible to argue that
EPG should not apply political perspectives to issues
under discussion. If that approach is taken, however,
two corollary procedures must apply or the process cannot
be fully useful to the President:
(1) The EPG discussion must be better
staffed out with technical back-up (provided by CEA,
lead agencies, and perhaps OMB)
(2) The process must allow more time
for the application of broader policy judgments by the
Domestic Council, Congressional Liaison, the Vice President
and the Hamilton Jordan group. Conversely, these latter
69
groups should be asked to provide systematic contribu-
tions to the decision process prior to convening EPG
sessions. This suggests the early and formal involve-
ment of the Domestic Council, and the imposition of some
formal structure upon the collection and communication
of "political" information to the decision process.
d.
Focus of Administration Initiatives
DOL came down very hard in favor of
Congressman Dent's Bill, and adhered to that position to
the end of the process. However, having made his case
and lost, Secretary Marshall did align himself with the
"Administration position" in his testimony. In this
sense, Presidential policy direction was appropriately
reserved for the President. Conversely, constituency
support was preserved by DOL.
e.
Forecasting
The issue of outyear implications was
raised above with respect to indexing. The greater the
extent to which the Nation's multiple wage, salary, and
transfer payment scales are indexed, the greater the ex-
tent to which the economic system provides its own economic
"escalators." This is an important long-range issue,
and deserves (deserved) a more long-term analysis. More-
over, indexing has direct implications for the Adminis-
tration's anti-inflation package. The issue does not
seem to have been addressed in terms of that larger con-
sideration.
f.
Organizational Interest
Although departments presumably must respond
to their constituencies (i.e., organized labor here),
should DOL have provided additional options to the White
House? Marshall had three opportunities to do so, and
in each case re-asserted support for the Dent Bill. Did
DOL conceive their organizational interest too narrowly?
If Cabinet government is to work well, it is reasonable
to assert, one would think, that department policy support
work must be comprehensive and high caliber. It is too
much to ask of departments to expect them to enthusias-
tically support positions which are inconsistent with their
70
direct constituents' interests. It is not too much to
expect each department to staff out alternative positions
and their impact. Both DOL and CEA could have performed
a more useful service in this respect. Given a natural
propensity to espouse one's own position, the presenta-
tion of "non-preferred" options will only occur if
demanded by a process approved by the President.
DECISION ANALYSIS REPORT
CASE STUDY: SOCIAL SECURITY FINANCING
72
C. SOCIAL SECURITY FINANCING
1. ABSTRACT
On Monday, May 9, 1977, Vice President Mondale and
HEW Secretary Califano announced a new Administration initia-
tive to stem the depletion of social security reserve funds.
Included was a long-term proposal to remedy a faulty inflation
adjustment formula under which benefits were rising more
rapidly than workers' earnings. Included also was a short-
term proposal to channel an additional $56 billion into the
funds between 1978 and 1982.
This analysis treats the Economic Policy Group and its
role in the decision on the short-term proposal. EPG entered
the process late but met twice on the issue in April; the
second meeting reached consensus on the long-term issue but
generated three alternatives to the short-term proposal put
forward by HEW, the lead agency. In the week after that
meeting, the President received three competing decision papers,
prepared by HEW, the EPG, and the Domestic Council. Only EPG
presented the options in a way that left the President any real
choice. The President selected the HEW option, working off the
Domestic Council paper; a hastily-scheduled Oval Office meeting
was then held the day before his London summit trip, at which
he re-selected it, in slightly modified form. This case there-
fore highlights the problems of competition between EOP policy
staffs, and the danger that advocacy within a staff can drive
out objectivity. DC acted as a partisan for the HEW proposal;
EPG staff was neutral but lacked the leverage to put the options -
it developed effectively before the President. The case also
illustrates the limitations of a frequent EPG procedure to
date--eleventh-hour review of a departmentally-generated
proposal, with insufficient time left for developing fully-
staffed alternatives.
2. BACKGROUND
There are three social security trust funds: for Old
Age and Survivors Insurance (OASI) ; for Disability Insurance
(DI) ; and for Hospital Insurance (HI). These funds are built
73
up when payroll tax revenues allocated by law to their partic-
ular programs exceed outlays; they are drawn down when the
opposite is the case. The short-term problem is that the DI
and OASI funds are being rapidly depleted due to recession-
induced revenue declines and increases in the number of
disability claimants. Under HEW projections, the DI trust
fund will be exhausted by late 1978 or early 1979; the OASI
trust fund will be exhausted by 1983. To allow them to come
even close to exhaustion, officials fear, would undermine public
confidence in the soundness of the system; hence legislative
action is desirable this year, and key congressional committees
are interested in acting. But President Carter came out
against further increases in payroll tax rates during the
campaign. And any proposal to reduce outlavs by changing the
benefit structure would be highly controversial, would probably
require years of debate before enactment, and would have only
a gradual impact on outlays once enacted. Moreover, Carter had
also taken a compaign stand against "reducing the relative value
of retirement benefits as compared with pre-retirement earnings."
Working within these and other constraints, HEW explored
alternative remedies to the problem during the late winter and
early spring. There was some Domestic Council involvement
(Eizenstat and Carp provided in particular some background on
the President's campaign stands.) and HEW Secretary Califano
brought Schultze of CEA into some early discussions. But the
analysis and debate were mainly intradepartmental. By mid-
April, HEW had developed a proposal to bring about $60 billion
additional into the funds between 1978 and 1982, enough to keep
reserves at an adequate level, mainly through two major
program innovations:
a. Counter-cyclical general revenues: Whenever unemploy-
ment exceeded six per cent, the Treasury would tranfer to the
funds from general revenues an amount equal to the difference
between what payroll tax revenues would have been at six per cent
unemployment and the revenues actually collected. Made retro-
active to 1975, this would bring an estimated $14 billion into
the trust funds by 1982.
b. Removal of the ceiling on earnings subject to the
employers' (but not employees') payroll tax: If made
effective in 1979, this increase would bring about $40 billion
into the trust funds without increasing future benefit
obligations, which are tied to wage levels subject to the
employees' tax.
74
There were also HEW proposals for raising modest addi-
tional revenues and shifting revenues among funds. And the two
above had complications beyond what is necessary to describe
here. What is important, however, is that both represented
major departures in budgetary and taxation policy, with
important economic implications. Thus as others in government
learned of the dimensions of the HEW package, concern grew. In
OMB and Treasury officials worried about impact of this step
into general revenue social security financing for budgetary
policy and tax reform. In those agencies and CEA there was
concern also about the overall economic impact of the package,
particularly the contribution of payroll tax increases to
inflation.
3. ENTER THE ECONOMIC POLICY GROUP
It seemed to EPG Chairman Blumenthal and Executive
Director Preeg that social security was an appropriate issue
for their forum, SO they sought HEW's agreement to its placement
on the EPG agenda. HEW initially resisted, with the acquiescence
(and perhaps the support) of the Domestic Council staff. To
the Department, social security was clearly within their
jurisdiction. They had done the analysis of the problem; they
would have to carry the ball on Capitol Hill. HEW was not an
EPG executive committee member, and was understandably reluctant
to undergo the additional burden of review in a Cabinet-level
forum dominated by others. Moreover, the EPG had a reputation
for slowing issues down without always bringing important new
information to bear on them.
Blumenthal persisted, and the issue finally was put on
the EPG agenda for Monday, April 18. HEW was then slow in
completing the paper which was to serve as the background for
the meeting; it was finally distributed by EPG on Friday the
15th. Between then and the meeting, however, another social
security issue moved into prominence - James Schlesinger was
proposing that the energy program (to be announced on Wednesday
the 20th) provide that receipts from the program's well-head
tax be channeled into the social security funds.
HEW was alarmed. The amount provided would only meet about
half of the short-term need, but the President apparently
thought that the well-head tax would solve the social security
financing problem and provide funds for other major proposals
also, tying social security to the energy program, moreover,
placed it in a different legislative framework, one over which
75
HEW would have only limited influence. Action on social
security would become a function of how Congress viewed that
particular tax and the energy program more generally.
There were intensive discussions over the weekend in
which HEW worked to persuade the President, the energy staff,
the Domestic Council, and others that the well-head tax would
not solve HEW's problem.
When social security came to the EPG that Monday,
the well-head tax predictably dominated the meeting. The
discussion was not, apparently, very orderly--Secretary
Califano arrived late, Schlesinger wandered out in the middle,
and Chairman Blumenthal did not lead the discussion very
effectively. EPG members spoke against the linking of the
tax to social security, however, and a consensus decision was
reached to go to the President with an urgent recommendation
that he delete this provision from the energy package, which
he did.
Social security was again placed on the EPG agenda for
April 25, about ten days before the President would have to
make a final decision. (Califano was to testify before the
Ways and Means Committee on May 10, and the President would
leave for the London economic summit on Thursday, May 5.) The
revised HEW paper was circulated on the Thursday before, and
it was of good quality, succinctly describing the problem and
what the department proposed to do about it. It did not, however,
include any other options for short-term financing. And between
its circulation and the Monday afternoon meeting, HEW modified
its proposal somewhat. Schultze had expressed concern to HEW
Under Secretary Champion about the sharp economic impact of
lifting the wage ceiling on employer taxes all at once at the
beginning of 1979. Champion announced at the beginning of the
EPG discussion that the proposal had been changed to phase this
in over a three-year period. This reduced the revenues it would
yield somewhat, and compensating adjustments were made in the
rest of the HEW proposal to make up for the funds lost.
The April 28 EPG discussion of social security was well-
focused and productive. Chairman Blumenthal was clearly well-
briefed on the issue; HEW presented and defended its proposal
ably; no unexpected "crisis" like the well-head tax matter
intervened. Several alternatives to the HEW plan were put
forward, including the granting of authority to the social
76
security system to borrow from the Treasury if necessary--thus
reducing the need for substantial trust fund balances. Two
options were argued with particular force. Commerce Secretary
Kreps saw the employer tax increase as a departure from a long-
standing, respected principle of equal tax liability for
employer and employee. She also saw it as contributing to
inflation and unemployment, as firms adjusted to the labor cost
increase by raising their prices or cutting their hiring. She
concluded it would be best to move to explicit general revenue
financing commitment of up to one-third of total inflow into
the funds (the 1/3-1/3-1/3 approach). The actual amount of tax
revenues channeled into the system would be the amount required,
beyond the counter-cyclical provision, to maintain reserve
funds at the level the HEW analysis indicated was required.
Schultze also endorsed the general revenue approach to meeting
the entire shortfall, out of concern with the inflationary impact
of HEW's employer tax proposal--which had not been part of the
package when he had discussed the issue with HEW earlier. But
he suggested a different way of doing so--linking general revenue
contributions to medicare, since benefits for the hospitalization
program, unlike the other two, were not a function of employee
wages or contributions. Such an approach had been recommended
by the most recent (1975) Social Security Advisory Council.
OMB was represented by Cutter; its participation in the
meeting was limited to expressing general concern about budgetary
implications and a desire that the President see alternatives.
As the discussion concluded, the Chairman stated that
the HEW approach might well turn out to be the best one but
that the President should have other approaches called to his
attention. It was agreed that a memo should reach the President
by Wednesday the 30th. There was jockeying among Eizenstat,
Blumenthal, and HEW about whether EPG or HEW should draft it.
It was agreed that the basis for the memo would be the HEW
product plus the other options raised at EPG. Thus began
a sequence of events that would generate three Presidential
decision memos on the issue.
77
4. THREE MEMOS
The first memo to be completed was HEW's, dated Thursday,
April 27. It was a lucid brief for the department's proposal,
giving the President a place to approve or disapprove it while
consigning the options raised at EPG mostly to TAB C. The
memo did not mention EPG. The descriptions of the CEA and
Commerce options in TAB C were relatively straightforward,
though HEW seems to have overestimated the maximum cost of the
latter by upwards of $40 billion. In presentation of the
substantive issues involved, the HEW memo was, in this reader's
judgment, the best of the three the President received--well-
structured and informational.
The EPG memo was completed next, on Friday. It was
apparently the only one where the drafter engaged in direct
consultation with interested agencies to be sure their options
were presented accurately. Indeed, it was necessary to convert
the CEA and Commerce proposals from attractive verbal
articulations to concrete proposals. CEA participated
directly in the drafting process. Commerce did not partici-
pate, as EPG staff was unable to elicit a reaction to its draft
language despite efforts to do so by phone. (Circulation of
the draft outside the EOP was avoided for fear of leaks.) As
EPG began to draft its memo, OMB staff began to press its
objections to the HEW plan (not stated at the meeting); the
result was development of a fourth option, essentially post-
ponement of major action until the issue could be further
studied.
The EPG memo provided minimal introductory briefing,
moving almost immediately to the four options and going out
of its way to give them balanced treatment. The HEW proposal
(supported also by Treasury, HUD, and Labor) was listed first
and given slightly more space, but otherwise there was no
acknowledgement of HEW's lead role on the issue--the fact that
the department has done the major analysis and would have prime
responsibility on the Hill, and that the other options had far
less staff work behind them. Instead, EPG misleadingly
characterized HEW's option as one that had "emerged from EPG
discussion." From the staff's vantagepoint, this was perhaps
understandable-- good Group meeting had generated some clear
policy alternatives, and EPG staff was seeking to develop an
objective format which would win Cabinet and Presidential
acceptance. Moreover, the meeting and the memo were the EPG
staff's first real involvement in the substance of the issue.
They were coming into it fresh; the other choices were clear,
logical alternatives to HEW's; thus EPG staff would naturally
tend to give them near-equal weight.
78
The Domestic Council staff had not, apparently, contri-
buted to either memo, though EPG at least had invited them to
do SO. The DC social security specialist had become concerned
when the EPG memo did not arrive by Thursday, but after it was
transmitted the following day to the Cabinet Secretariat under
Blumenthal's signature, it was routed as a matter of course to
Eizenstat, who the President generally expected to "cover" memos
on domestic policy problems. By Saturday, DC staff had completed
its own memo of roughly the same length (6 pages) as those of
HEW and EPG. Unlike the EPG memo, it opened with two pages of
background information about the issue. It then gave a full page
to HEW's short-term proposal, followed by brief paragraphs
introducing-- and quickly dismissing--the three alternatives.
There was "no chance" that the OMB option could win congressional
acceptance; the CEA proposal had "not been fully developed or
analyzed by others;" the Commerce proposal also had "not been
fully developed.' It then strongly recommended the HEW option.
Unlike both the other memos, the DC memo did not even mention the
primary objection to the HEW employer tax proposal raised in
EPG - its inflationary impact! In fact, it did not link the
Kreps and Schultze options to any specific problems these
officials saw in the HEW plan; this had the effect of making
them seem trivial, like ideas dropped without any serious
purpose. DC did, however, declare in the opening paragraph
that it was "unfortunate the EPG, which decided this was an
issue it should take up, has presented no indication of the
economic impact of these alternatives" (emphasis in original).
From the DC vantagepoint, EPG had insisted on entering
the issue at the eleventh hour, taken too much time completing
its paper, and then delivered a product which contained very
little economic data to support the generalized economic concerns
of its members and failed to provide adequate introductory
briefing. EPG had not distinguished among the options by their
degree of development, and had offered the President no recom-
mendation. DC saw it as their responsibility to review decision
papers coming to the President and write their own when another
product was wanting (and, according to one senior DC staff
member, they found such papers wanting in perhaps 75 or 80 per
cent of the cases). If they found them adequate, they could
instead cover them with a shorter memo highlighting the issues
and conveying Eizenstat's recommendation.
The DC memo suggested that "a meeting be arranged" with
the President the following week "to discuss these matters,"
and the DC staff apparently was responsible for soliciting th
views of Robert Ball, former Social Security Commissioner, who
had provided advice to Carter during the compaign.
79
The options memos went to the President in a package.
The Eizenstat-DC memo was on top, Califano-HEW next. A memo from
OMB on its position was third, and Blumenthal-EPG fourth. Fifth
was a memo by Robert Ball. The DC staff apparently assumed Carter
would read them all; he frequently did on important issues. But
the President was preoccupied with his forthcoming trip. He
read the top memo and checked the HEW option, making other notes to
Eizenstat as well. He may have looked at the HEW memo; it is un-
likely that he got as far down the package as the EPG memo. He
wrote on top of the package: "Stu - set up brief meeting if
necessary - I can't study this much. J." The memo was returned
to Eizenstat for action May 2; that same day, CEA sent over a
memo spelling out its position, which apparently did not reach
the President until after he had acted on the package. Schultze
argued that the HEW plan would increase employer payroll costs
"by about 0.7 percent;" that "most of this increase will almost
certainly be passed forward into prices"; that "such a boost in
the inflation rate, when combined with the impact on prices from
the energy program, will have a serious adverse effect on the
economy.
EPG staff learned their memo had been buried when the
package arrived back in Watson's office and Preeg received a
phone call indicating that a decision had been made. To EPG,
which had gone to considerable effort to establish a procedural
understanding with Eizenstat on routing of EPG memos and felt that
they were in agreement, this was a clear setback. How could the
staff credibly negotiate with EPG members about the language
for explaining their choices to the President if what the
President acted on was different language entirely, differently
slanted? When EPG protested what had taken place, Eizenstat
was apparently conciliatory, saying that it would not happen
again, suggesting that DC and EPG should work more closely
together in putting together such papers in the future. He
raised with Preeg whether he thought a Presidential meeting would
be desirable. They agreed that one would, and he asked Preeg
if he would arrange one. This Preeg quickly did.
The meeting was held the following Wednesday, May 4, the
day before the summit departure. The major interested agencies
were represented and Eizenstat and Preeg also attended.
President Carter received a short briefing paper for the
meeting from Eizenstat discussing only the HEW option. Other
participants (including Eizenstat) received a paper from Preeg
outlining all four options. The President, who seemed to know
the subject matter very well, went around the room asking people's
views. Califano defended HEW's proposal. Kreps voiced her option
forcefully and at some length; Lance gave some support to Kreps,
though the OMB option was in the opposite direction. Gramley
80
of CEA spoke for Schultze, who was keeping a previous commitment in
Hawaii. Blumenthal explained that he favored the HEW option but
most of his Treasury subordinates felt otherwise. Robert Ball
explained his views. The President opted again for the HEW
position, but this time with a modification proposed by Ball.
The following Monday, the program was announced by Mondale and
Califano and dispatched to Capitol Hill. Thus far it has had
a mixed reception.
5. CONCLUSIONS
It is useful to begin with the obvious. The President
should not, in any well-functioning system, be presented with
three competing options papers, each written in the expectation
that it will be his primary decision document, each giving the
choices a different spin. In cases where alternatives exist,
he should receive one basic decision memo. It should present
options as fairly as possible, with all the important arguments
and all the major information the President needs to make his
decision. The advocates of differing choices should have confidence
that the central decision memo will represent their proposals
fairly. These advocates should be free to send their own
memos developing their views at greater length, with the
assurance that they will go to the President as attachments
to the basic decision memo.
Putting together such a memo is a task that should
usually be performed by an EOP staff--and it is one of the
most important tasks of such a staff. On an issue like social
security where more than one EOP staff has a claim to juris-
diction, there is no simple rule as to which one should do the
job. In this case, EPG was the only staff which seriously
sought to. It should have paid more obeisance to HEW's lead
role and the fact that that department would have to carry the
ball on Capitol Hill; it should not have suggested that the HEW
option had "emerged from EPG discussion," though the employer
tax provision was significantly modified during the EPG process.
It suffered, apparently, from insufficient closeness to the
President to reflect a feel for what he wanted in such a memo.
Still, EPG's was the only memo which left the President any
real choice; the DC memo was at least as much a brief for the
HEW plan as the one drafted in the department, providing
virtually no mention of the arguments developed in EPG against
it. Unless the President had in fact already chosen the HEW
approach and the DC staff knew it, their memo violated one of
the oldest rules of White House staff work: that the President's
ability to choose should be protected. Even if, as interviews
indicate, the DC view was that the President's real choice was
either to accept the HEW plan or to defer action, because of
problems with that plan, until alternatives could be fully
staffed and needed economic impact analyses completed, the
memo should have been written so as to clarify this choice.
It was not SO written.
81
The DC staff admittedly plays another role for the
President--providing advice on which course he should take. The
President clearly wants Eizenstat to provide such advice. The
danger is that advocacy can drive out objectivity--as clearly
occurred here. But this is not inevitable if staff is self-
conscious about playing both roles and about the tension between
them, tempering its commitment to a particular action with a
commitment to procedural fairness and a recognition of its
strategic role in assuring such fairness.
EPG staff has a different sort of problem--it is poorly
placed for making its memos the basic Presidential decision
documents because it does not work directly for the President.
The Executive Director is formally attached to the Cabinet
Secretariat but reports in practice to Chairman Blumenthal.
Established procedures put DC in the position of reviewing EPG's
work on issues where Eizenstat is the President's substantive
staff coordinator- and this includes all domestic EPG issues
plus trade. His staff naturally considers that this makes
them the broad policy brokers (though they do not clearly see them-
selves as neutral brokers), and they tend to cast EPG in a
narrower, economic analytic role. They judge its effectiveness
not on whether it develops new choices derived from the
economic policy concerns of its members (which it did in this
case) but rather on whether it contributes serious additional
economic analysis to the issue (which it did not). By contrast,
the EPG staff sees itself not as an analytic group but as
brokers who help move economic issues forward for Cabinet
consideration and Presidential decision.
What can be done? Already EPG has taken steps to
prevent a repeat--gaining a recognition which it hopes will evolve
into a procedural understanding, that such duplicative memo-covering
is inappropriate and should not recur; there are suggestions
(not apparently favored throughout the DC staff) that they
should work together more on such memos in future. Certainly
EPG cannot develop options papers effectively unless these
papers become, with reasonably frequency, the President's real
decision documents. One reason why EPG had difficulty
communicating with Commerce to clarify its options, presumably,
was that its staff role as options-presenter was not yet
sufficiently recognized and accepted. The question is whether
any DC-EPG procedural understanding will survive serious
jurisdictional disputes between them, or occasions when an
important DC staff person considers the EPG product inadequate.
Under current staff arrangements, EPG cannot be the Presidential
broker on a domestic issue unless DC accepts this role as
legitimate generally and goes along in the particular instance
as well. Such cooperation is made more difficult to the degree
that DC staff regard frequent Cabinet-level setting of issues
as a bad procedure (e.g., as development of frivolous options
by people too high-ranking to understand the details), since for
the EPG staff such discussions are its primary raison de'etre.
82
This last point is related to a broader conclusion about
the EPG process--that discussion at the principals' level just
before an issue goes to the Oval Office is unlikely to produce
strong alternatives to the course a lead agency wishes to
pursue. The EPG meeting on social security was an exceptionally
good one, by all accounts. But real interagency consideration
should have begun weeks earlier at the subcabinet level. The
Commerce and CEA options which popped out on April 28, and the
OMB option developed the day after, should have been surfaced
earlier and presented in writing to the subcabinet and then the
Cabinet level SO that they could undergo the same scrutiny
that the HEW proposal did.
The EPG staff recognizes the need for better subcabinet
consideration of economic issues before they come to the
Roosevelt Room on Monday afternoon. But setting up ad hoc
working groups for particular issues and making them effective
is far more difficult than getting an issue onto the agenda
of the EPG itself. If the lead agency resists and the relevant
EOP staff closest to the President acquiesces in this resistance--
as would almost certainly have occurred on social security--
real dialogue at this level is most unlikely to come about.
Again the need that emerges clearly is to relate EPG
staffing more closely, more cooperatively, to EOP staffing for
the coordination of economic issues generally, whether they
are handled in the formal EPG or not.
DECISION ANALYSIS REPORT
CASE STUDY: RURAL TELECOMMUNICATIONS TESTIMONY
151
H.
RURAL TELECOMMUNICATIONS TESTIMONY
1.
ABSTRACT
This is a case study of current Administration
policy in the area of enhancement of telecommunications
services to rural areas. The position of the Administration
had been requested by the Senate Subcommittee on Communica-
tions of the Committee on Commerce, Science, and Transportation,
chaired by Senator Hollings Carolina). The Administra-
tion's position was presented at public hearings held by that
Subcommittee on April 6, 1977, by Dr. William J. Thaler,
Acting Director, Office of Telecommunications Policy (OTP).
A decision was handed down to Dr. Thaler from the
White House, through the Domestic Council, not to commit the
Administration to any specific activities with respect to
rural telecommunications, particularly those activities
that involved initiation of new programs and additional
expenditure of funds. Rather, the Administration wanted to
take a limited position on support for an interagency
committee to examine options for delivery of telecommunica-
tions services to rural areas, including the possibility of
a rural telecommunications demonstration program. The
initial agencies designated for this committee included
OTP, Department of Agriculture, Department of Commerce, HEW,
and the National Science Foundation (NSF).
This case study is an examination of: (1) the
events leading up to the April 6 testimony (particularly
the period from December 1, 1976, through April 6, 1977) ;
(2) a brief look at what has happened since; and (3) a
background summary of the activities of OTP and other
entities in rural telecommunications prior to the
December 1, 1976, date. The December 1, 1976, date was
chosen as a start point because it was the first documented
activity by OTP on the rural telecommunications issue after
the Carter election (see Chronology).
This case study is useful to
O show very succinctly one of the processes
within EOP for the development of Administration testimony;
152
O indicate the relative lack of involvement
at the higher levels within EOP of formulation of this
Administration policy;
O the non-Presidential nature of the decision
itself; and
O highlight in a direct way, an example of the
problems associated with EOP line-staff relations.
2.
CHRONOLOGY
OTP released a contracted study, "Pilot Projects
for the Broadband Communications Distribution System." " The
study was intended to identify new broadband services which
might be offered on a pilot or experimental basis. Of
particular interest were programs which "involve extensive
wiring of several diverse communities including rural areas."
The study recommended that OTP act as a coordinator between
government and private industry in fostering the initiation
of broadband programs. In light of this recommendation,
Vince Sardella, an OTP staff member, prepared a work
statement for rural broadband system design and cost
analysis contract studies in October 1972. These study.
contracts were subsequently awarded to the Denver Research
Institute in January of 1973. It should be pointed out
that the impetus for OTP involvement in rural telecommunica-
tions at that time also came, in part, from preliminary
recommendations of the Cabinet Committee on Cable
Communications. That Committee recommended the
establishment of new regulatory guidelines which would
"assure that basic cable or other broadband communications
are available to residents of rural areas."
It was in the contracted Denver Research Institute
studies that the FCC regulatory barriers to rural telecommunica-
tions service enhancement, cited by Dr. Thaler in his April 6,
1977 testimony, were first documented by OTP. However, these
study results were debated within OTP management for over nine
months. The point is that parts of the Thaler testimony
reflected a relatively informed judgment on the part of OTP
as to the regulatory barriers that needed to be removed for
adequate telecommunications service to residents of rural
areas in America.
153
On February 13, 1975, OTP released the Denver
Research Institute studies. Around that same time, Acting
Director John Eger sent a letter to FCC Chairman Richard
Wiley summarizing the results of both studies, and suggesting
that the FCC reexamine the cable-translator cross-ownership
ban and prohibitions against use of FM microwave by translators.
Early in 1975, the Congressional Office of
Technology Assessment (OTA) also undertook its own study
of broadband telecommunications for rural areas at the
request of Senator Talmadge (D., Georgia), Chairman of the
Senate Agriculture and Forestry Committee.
In April 1976, OTP sponsored a Telecommunications
Policy Research Conference at Airlie House, with one of the
sessions devoted to Rural Telecommunications. Participating
in this session was the staff who undertook the OTA study.
The OTA study reaffirmed the position that had been taken by
OTP in the past, but as the Acting Director of OTP indicated
in a letter to Senator Talmadge, OTP felt that the study did
not adequately recognize the range of costs and services
options available to rural areas.
In October 1976, OTA sponsored a conference on
the "Feasibility and Value of Broadband Communications in
Rural Areas.' OTP was a key participant in this conference.
Vince Sardella, of OTP Planning and Policy,
prepared a memorandum for OTP Director Tom Houser which
summarized the October OTA conference on rural telecommuni-
cations. Sardella's memorandum focused on the key
recommendations of the conference which was "a carefully
considered, but immediately initiated program of
telecommunications demonstration projects in rural areas.
The leadership and coordination of this, and possibly other
similar new communications policy ventures, would be a
special assistant or special adviser at the White House
perhaps
the new Director of the Office of Telecommunica-
tions Policy.
"
Sardella also went on to suggest even further
evaluation of this issue by OTP (above and beyond the
Denver Research Institute studies).
154
On January 19, 1976, another memorandum,
prepared by Sardella and Roland Heard, on loan from the
Rural Electrification Administration, was sent to OTP
Director Houser. The subject matter was proposals by the
National Telephone Cooperative Association (NTCA) The
telephone cooperatives had been heavily lobbying OTP's
Houser to support their (NTCA's) petition to the FCC to
waive FCC Rules 47 CFR 63.45, 64.601 and allow cross-
ownership to provide CATV service to rural areas. The
Sardella/Heard memorandum suggested that Houser send a
letter to FCC Chairman Wiley, stating the views of OTP
in regard to the NTCA petition. The memorandum also
appended a draft of the letter to be sent.
On that same day (January 19, 1976), the draft
letter was forwarded from Houser to FCC Chairman Wiley.
Also that day, two additional letters were sent by Houser
to Senator Talmadge, Chairman of the Senate Committee on
Agriculture and Forestry, and Mr. C.R. Ballard, Assistant
Administrator, Telephone, Rural Electrification Admin-
istration, respectively. The letters enclosed the NCTA
position and indicated OTP's continued support of and
interest in rural telecommunications services. However,
Houser did not indicate that the positions espoused by
OTP were anything more than OTP positions. These were
clearly not those of the President, for there was no
contact and no apparent awareness by President Ford (in
his last day of office) of this activity. In addition,
Houser neither indicated that he was speaking for the
Administration, the Executive Office of the President, nor
the Executive Branch. Yet, a position was taken by an EOP
unit on a substantive matter with a regulatory agency (FCC),
the Senate (Talmadge) and the executive branch unit in
question (REA/DOA).
The important point is that the basic OTP
position has not changed. However, the Thaler testimony
represented for the first time in the rural telecommunications
issue, the clear use of the terms "Administration" and
"executive branch" in outlining the positions that OTP had
taken.
Part of the explanation for this nuance of
terminology can be found in a memorandum dated February 7,
1977, to the President from Stu Eizenstat and Rick Neustadt,
Deputy Special Assistant to the President, Subject:
155
"Supervision of Office of Telecommunications Policy (OTP) "
Neustadt had been a member of the Carter Transition Team
during which he focused on telecommunications matters.
The brief memorandum read as follows:
"OTP is an agency in the Executive Office of
the President responsible for advising and representing
you on communications policy. Its Director has resigned,
and no new appointment has been recommended because it may
be reorganized. However, OTP's Acting Director is now
seeking guidance and supervision. Since the Domestic
Council supervised OTP in the past, I recommend that we
now supervise it until you decide the reorganization
question.
"
The day-to-day policy responsibility for OTP was
then delegated to Neustadt and it is under this stewardship
arrangement that the rural telecommunications testimony was
prepared. As part of his delegated duties as "de facto
policy steward" of OTP, Neustadt prepared a memorandum for
Eizenstat, through Si Lazarus and Bert Carp, outlining the
communications policy activities in which he felt the
Administration should become involved.
In an introductory paragraph, he clarified the
actual nature of the mode of operation for OTP, that the
White House was to use over the next few months:
"I suggest we launch the following projects. OTP
would do much of the work, at least until its organizational
status is settled. (OTP will remain in existence until at
least July.) I would supervise, working with Si and Steve
Simmons.
"
This memorandum, along with the memorandum to the
President of February 7, indicates that the line-staff rela-
tionship between OTP and the White House was not strictly
adhered to. It appears inappropriate for a White House staff
person to suggest personal supervision of a statutory office
within EOP.
156
Neustadt's comments in the memorandum with regard
to rural communications was:
"Senator Talmadge is about to propose a Federal
demonstration program of social service delivery in rural
areas via telecommunications cable, satellite, and/or
broadcast. This scheme has been developed by the Office
of Technology Assessment and has mounting support on the
Hill. Key issues are how much to spend and what agency
should run it. We should study whether to support
such a program and - if so - how it would work. (The
Secretary of Labor has indicated he wants to be involved
in this. ) Neustadt did not indicate, however, whether
"we" meant Neustadt and Eizenstat, the Domestic Council
or OTP.
On March 18, 1977, Senator Hollings' Subcommittee
on Communications requested by telephone, that the OTP Director
testify. This request was followed by a letter from Senator
Warren Magnuson (D. , Washington), Chairman of the full
Committee. At the same time, OTP began pulling together
material in anticipation of the testimony to be prepared.
March 25, 1977, a draft options paper for the testimony was
given to Neustadt. On Monday, March 28, Neustadt indicated
to Thaler that he generally agreed with the recommended
options. On that same day Neustadt sent a revised two-page
memorandum to Eizenstat which incorporated much of the
reduced Sardella options paper and made the following
recommendations for Eizenstat's approval:
O Press for relaxation of FCC restrictions
affecting rural areas.
O The Administration would create a planning
group which would evaluate whether a Federal program is
needed, how it would work, and whether State or private
funds are available to support research on rural
telecommunications.
Copies of this memorandum were sent to Thaler
with an instruction to begin drafting testimony. Copies
were also sent to Si Lazarus and Steve Simmons of the Domestic
Council staff. It should be emphasized that the recommendations
made in this memorandum are ones that the executive branch had
supposedly been supporting for the past four years.
157
On Tuesday, March 29, Neustadt sent another
memorandum to Thaler with several additional suggestions as
to the shape of the needed telecommunications testimony.
The key suggestions were:
1. Avoid discussion of the Bell bill;
2. Include a quote from the President indicating
his commitment to improving rural life; and
3. Proceed on the assumption that Eizenstat
would approve the Neustadt memorandum of
March 28.
Neustadt further asked that a draft be ready by Friday,
April 1. That same day, Neustadt asked by telephone, that
Thaler coordinate OTP's position with REA and NSF "so that
the Administration's position is consistent." Thaler
responded affirmatively the same day to Magnuson's
invitation to testify, and gave Sardella the responsibility
of drafting the testimony.
On Thursday, March 31, Sardella hand-delivered a
draft of the testimony to Airlie House, where Thaler,
Neustadt, and Gregg Skall, OTP General Counsel, were
attending the Annual Telecommunications Policy Research
Conference. This group went over the draft in detail,
with Neustadt doing the final re-write.
On Friday, April 1, Eizenstat (through Lazarus)
responded to the Neustadt memorandum of March 28 approving
the position, but with an emphasis on not committing to any
spending program. Neustadt relayed this information to
Gregg Skall at OTP. That same day, Skall and Sardella
discussed the testimony with Sam Williams, OMB budget
examiner for OTP. The purpose and result of the discussion
was to make sure that, in no way, did the testimony imply
unauthorized expenditure commitments by the Administration
(or OTP) for the rural telecommunications effort. April 2,
copies of the testimony were delivered to the
Senate Subcommittee staff. On April 6, Thaler gave
the Administration position on rural telecommunications
in testimony to the Senate Communications Subcommittee.
158
April 15, as follow-up to the April 6
testimony, Thaler sent letters to the Secretaries of
Agriculture, HEW, Labor, Commerce, and the Acting
Director of NSF asking for an interagency committee
contact for each Department to be named within two weeks.
3.
ANALYSIS
The following is an analysis of the relevance
of this case study to an examination of the problems and
process of decisionmaking within EOP. This case study is
interesting in that it provides some indication of both
the decisionmkaing process at work and the problems
associated with the way in which the decision was
arrived at, the actors involved, and the questionable
value added of staff undertaking line responsibilities.
a. Unit Coordination
To the extent that coordination among EOP
units was necessary in this case study, there seemed to be
no major problems. OMB was brought in for review of the
testimony at what seemed an appropriate time and again the
Presidential memorandum sign-off virtually assured continued
White House and Domestic Council involvement. However, the
question is: was such coordination within EOP between
Domestic Council staff and OTP in particular necessary at
all? Was this an EOP (and therefore "Presidential") policy
issue? It appears not to have been.
b. Delegation of Authority
The delegation did not necessarily follow the
prescribed lines of authority. The memorandum signed by the
President, giving the Domestic Council virtual control over
OTP, is a partial explanation of this situation. In an
interview, Neustadt indicated that he has tried to intervene
as little as possible in the hierarchical structure of OTP,
but when an issue of importance arose, he had no compunction
about going straight to the person that could best address
the issue.
Again, it seems inappropriate for White House
staff to involve itself so deeply in the administration and
personnel of another unit within EOP.
159
C.
Over-Processing and Filtering
Prior to December 1, 1976, there was
extensive over-processing with OTP's original decision (or
position) not changing for over three years, but with
continued reclarification of this position by, and to
different individuals. Each time the position was
reclarified, it was treated as a new decision or position
of OTP. Thaler's testimony merely reiterated the basic
position of OTP in 1973. As far as filtering goes,
nothing filtered up prior to the involvement of the
White House.
d. Expertise Coverage
Throughout this case study, OTP demonstrated
a somewhat ponderous capability for bringing in the appropriate
expertise on the rural telecommunications issue. This includes
contracting out of relevant research, development of, involve-
ment in, and attendance at the conferences and forums on the
issue, and discussions with key individuals both inside and
outside the government. Furthermore, once the information
came into OTP, a slow but adequate synthesis was made in
translating the material and data into policy relevant
options.
This point raises other questions: should
OTP be in the business of contracting research, sponsoring
conferences, and otherwise synthesizing the opinions of the
telecommunications community at large? Could this have
been done by NSF? The fact that results of
contracted research are often so slow in formulating EOP
policy positions might suggest that such research should
not be contracted by EOP units. Instead, outside entities
like NSF, which are mandated to examine long-range
implications of such issues might better perform the work.
e. Line-Staff Relations
The relationship between a White House member
and the line organization was too close in this case study.
A Presidential memorandum was approved giving oversight
responsibility to the Domestic Council. This delegation
of responsibility was interpreted as supervisory in the
sense that the Acting Director of OTP began reporting
directly to a Deputy Special Assistant in the Domestic
Council. The arrangement was understood as being temporary,
in order to allow OTP to function while awaiting the EOP
Reorganization Study. However, it has probably gone on
160
too long. There seems to be little justification for Domestic
Council staff assuming such line responsibilities, especially
in a matter with such non-Presidential implications.
CONFIDENTIAL
DECISION ANALYSIS REPORT
CASE STUDY: WIRETAP LEGISLATION
97
CONFIDENTIAL
E.
WIRETAP LEGISLATION
1. ABSTRACT
This case study examines the decisionmaking process
leading to the submission by the Department of Justice of a
bill that would "amend Title 18, United States Code, to
authorize applications for a court order approving the use
of electronic surveillance to obtain foreign intelligence
information." If enacted, the proposal would
establish
statutory limitations on the authority of the Executive
Branch with respect to the collection of foreign intelligence
information by means of electronic surveillance when the
surveillance is conducted in the United States. Generally,
it would permit such surveillance only in those areas in
which approval has been obtained from one of seven district
judges designated by the Chief Justice of the Supreme Court.
"The measure would require that an affiant seeking an order
to conduct electronic surveillance would be required to
establish by sufficient facts, probable cause to believe
that the intended target of the surveillance was a foreign
power or an agent of a foreign power." The effect of this
legislation would be that, in that area of electronic
surveillance described above, the judicial branch of govern-
ment would serve as a countervailing force against potential
misuse of surveillance power by entities within the
Executive Branch.
This issue has been a controversial one even prior
to the Carter Administration and there was electronic
surveillance legislation pending in Congress as the current
bill was being drafted. As a result, to identify a precise
date for the beginning of a detailed chronology of events
is difficult. Furthermore, there has been activity, both
of a formal and an informal nature, since President
Carter first took office. Therefore, while we use February 22
as the date on which Presidential Review Memorandum-1l (PRM)
of the National Security Council was introduced, as a start
CONFIDENTIAL GDS (Declassified on December 31, 1983)
Jay 5/9/97
CONFIDENTIAL
98
point in our examination of the decision process, this case
study contains a brief discussion on activities prior to
that date. The end date for the case study is May 18, the
date that the Attorney General officially submitted the
bill to Congress.
2.
BACKGROUND
Under the Ford Administration, Attorney General Levi
submitted a bill which had roughly the same intent as the
current bill, but with some limitation on the court order
requirement. (The current bill would require court review of
proposed electronic surveillance in all cases.) Both the
Senate Judiciary and the Senate Intelligence Committees
approved the Levi bill last year but the measure got no
further in Congress at that time. However, the bill did
have the general support of Kennedy, Bayh, and Inouye,
who are expected to also be the principal supporters of
the current legislation.
Shortly after the Presidential election, the OMB
Legislative Reference Division indicated to both President
Ford and President-elect Carter, the status of legislative
initiatives that were currently pending on the Hill.
Included among the bills was the Levi version of the
foreign intelligence electronic surveillance measures.
Attorney General Bell initiated activity on a new version
of the legislation shortly after he was confirmed. Informal
discussions were being held in the Special Coordination
Committee of the NSC as early as the end of January.
On February 16, Justice held two briefings. The
first was with the intelligence community consisting of
representatives of DOD, CIA, State and NSA. The second
briefing was with staffs from both Houses of Congress
who had a previous interest in the foreign intelligence
electronic surveillance bill. The purpose of these
briefings was to set the stage for a redraft and submission
of legislation in this area by the Carter Administration.
3.
CHRONOLOGY
On February 22, PRM-11 was issued directing the NSC
Special Coordination Committee to review the overall intelligence
structure and mission. As part of this directive, the Attorney
General was asked specifically to look at the electronic
CONFIDENTIAL
CONFIDENTIAL
99
surveillance legislation. On March 4, in a memorandum to
all parties involved, Attorney General Bell created a legal
working group of the NSC Special Coordination Committee
under Acting Assistant Attorney General Harmon, composed of
DOD, CIA, OMB, NSC, and State. Neither the Counsel to the
President, the Domestic Council, nor the Office of Telecom-
munications Policy was involved in the working group set up
by Justice. On March 9, the first meeting of the working
group was held at the Department of Justice. A document
entitled "Proposed Agenda Assignments and Deadlines for
PRM-11 Subcommittee" had been prepared by Justice and was
distributed and discussed at that meeting. March 23 was
cited as the target date for distribution by each
subcommittee member of comments on options in the draft
bill.
During this time, there were two related drafting
efforts going on at Justice. First, the issues and options
surrounding the bill which constituted the working papers
and actual end-products of the NSC Special Coordination
Committee's working group were being prepared. Second,
Justice, as a result of these working papers, began develop-
ing draft legislation.
At a meeting of March 18, Justice presented an
options paper to the NSC Special Coordination Committee
working group for comment. On March 23, at a working
group meeting, OMB and DOD submitted their written comments
on the Justice options paper. Another meeting was set for
March 25, and at that meeting Justice added its written
comments. By this time, Justice had developed a first
draft of the electronic surveillance bill which was
presented at the March 25 meeting. It should be emphasized
that during this period, there were almost daily meetings
of the working group as well as any number of telephone
contacts between the parties.
On March 30, Justice presented the working group
a final draft on the issues and asked for comments by the
following day. Meanwhile, DOD provided written comments on
the draft bill itself that had been received on March 25.
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On April 1, another meeting of the working group
was held to discuss the draft issues paper. CIA and State
written comments were submitted at this time. As a result
of this meeting, Justice agreed to make certain amendments
to the issues paper, and on April 4 these amendments were
distributed to members of the working group with a request
for immediate telephonic approval. On April 8, the OMB
staff members involved in the working group (from the
National Security Division/Intelligence Branch) provided
comments to OMB Associate Director Cutter and Director
Lance as to the status of this issue.
On April 11, Justice distributed a "final" version
of the issues paper along with an executive summary of the
issues. Justice's position on court ordered warrants was
reiterated and the Justice Department began soliciting
support for its position on that issue. In fact, positions
began to solidify around the issues at this point with Justice
and DOD coming out on different sides in a number of
substantial areas,
particularly, the geographic scope
of the legislation and the inclusion of NSA domestic
surveillance operations.
Justice began seeking support from within the
Administration (notably OMB's Cutter and the Vice President's
Office). The following day (April 12), Justice distributed
its latest draft of the legislation to members of the working
group. Again, one of the major areas of contention in both
the issues paper and the subsequent legislative draft pre-
pared by Justice was the geographic scope of surveillance to
be covered under the bill. Thus, on April 13, Justice sub-
mitted a memorandum to working group members indicating that
the proposed legislation did not cover electronic surveil-
lance abroad. The next day (April 14), DOD sent a memorandum
to Justice outlining current NSA surveillance activities
and the implication of the proposed legislation of these
activities.
Also on April 14, the full NSC Special Coordination
Committee met to consider the Department of Justice's issues
and options paper and the draft legislation. OMB's repre-
sentative did not attend this meeting. However, OMB Associate
Director Cutter personally phoned key NSC staff in support of
the Justice Department's position on court order warrants and
their geographic scope. The Vice President attended this
meeting.
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At this NSC/SCC meeting, the Committee gave approval
of the working group's recommendation that the bill be confined
to electronic surveillance within the United States. The
Vice President agreed to this, provided separate legislation
was developed covering electronic surveillance operations
overseas. On that same day, the Vice President sent a
memorandum to the President expressing concern and interest
in the electronic surveillance legislation and basically
supported the Attorney General, suggesting that legislation
on overseas surveillance should be prepared but should be
separate from the present legislation.
It was around this time that direct Presidential
involvement became evident. Between April 15 and April 19,
there was a series of correspondence and contact between
the President, the Vice President, NSC, DOD, and Department
of Justice, which apparently resulted in some, at least
temporary, consensus as to Administration position on
electronic surveillance legislation.
On April 15, Justice presented another draft of the
legislation and forwarded to Brzezinski a memorandum on the
issue of whether warrants should be required for domestic NSA
operations. Justice came down in favor of such warrants
while DOD wanted such authority limited. Again, Justice and
DOD disagreed on a matter of substantive importance to the
legislation, and the Attorney General indicated to DOD that
it could make its own opinion known to the President. In
fact, the President had already requested to hear the DOD
side, for he had made a margin notation on the April 14
memorandum asking Brzezinski to "get Harold's (Secretary
of Defense Brown) position."
On April 15, both the Deputy Secretary of Defense
and the Attorney General wrote the President on the subjects
of judicial control of electronic surveillance and the
Justice options paper, respectively.
The Secretary of Defense followed on April 16
with a memorandum, in direct response to a request from the
President the previous evening, outlining the DOD position.
The April 16 memorandum for the President from the Secretary
of Defense was returned to the Secretary by Brzezinski's
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memorandum of April 20, with the following notation by the
President: If (a) warrant for United States citizens overseas,
(b) no reason for warrant for foreigners if incidental
information on U.S. citizens constrained by 'minimization'.
On April 19, Justice sent to DOD a "final" version
of the draft bill for comments. Three days later, on
April 22, Assistant Attorney General Harmon distributed to
the working group the revised draft bill "reflecting the
President's decisions" on the key issues. On April 25,
Brzezinski sent out a confidential memorandum to DOD,
State, CIA, Justice and the Vice President. Its intent
was to clarify Carter Administration policy vis-a-vis
foreign intelligence electronic surveillance. This
memorandum reported, in part, that the President had
decided that warrants will be required "for all electronic
surveillance within the United States, including foreign
powers."
On that same day (April 25), Acting Assistant
Attorney General Harmon telephoned OMB requesting quick
clearance of the final version of the bill. The next day
(April 26), both OMB and the working group received the
draft bill from Justice for final comments. These comments
were obtained and incorporated in the version of the bill
that was sent to OMB, NSC/SCC working group, Treasury and
Lipshutz's office on April 27.
Also on April 27, the President sent a handwritten
note to the Cabinet and other officers expressing concern
over "the confusion that exists in identifying a single
spokesman in the Administration for major issues. (This
note was to be the basis for a more formal memorandum from
the President on May 4.)
On April 29, DOD submitted 25 pages of objections
to Justice with copies going to OMB and NSC. After the DOD
comments were received, there was a telephone conference
bewteen DOD General Counsel Deanne Siemer, Assistant Attorney
General John Harmon, Special Assistant to the Attorney General
Frederick Baron and other Justice staff members. Justice
accepted DOD proposed changes in a number of areas and
agreed to provide a written response with respect to the
issues remaining outstanding. Several of these matters
were issues only because Justice perceived the DOD
proposals to be unacceptable to Senator Kennedy. The DOD
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General Counsel sought and received concurrence of the Justice
representatives for a personal contact between the Secretary
of Defense and Senator Kennedy to find out whether there
remained any room for compromise. On April 30, Justice
responded with its own 12-page "comments on comments" to the
Department of Defense General Counsel. During this period,
Justice was having daily sessions with Hill staffers on
the details of the legislation and the strategies for early
passage--a step that is not usually taken in submitting
Administration legislation. This Congressional contact was
made known by Justice to all parties involved early in the
working group sessions. The issues raised by DOD and
Justice ranged from disagreement on broad policy questions
to substantive disagreement on word usage.
Once it received the Justice response to its comments,
DOD initiated a series of telephone communications with Justice
regarding specifics of the draft bill. On April 30, and again
on May 3, the Secretary of Defense and the Attorney General
discussed the proposed legislation. No accommodation was
reached. On May 2, Secretary of Defense Brown forwarded a
letter to the President stating DOD objections. With the
concurrence of DOD, this letter was held by the NSC staff
for a short time to explore, once again, the possibility of
compromise. On May 3, Secretary Brown telephoned Senator
Kennedy and discussed the remaining problems with the bill.
On the morning of May 4, Secretary of Defense Brown forwarded
a letter to Senator Kennedy stating DOD objections to the bill
as presently drafted. Copies of this letter were sent to
Justice, the Vice President, State, and the CIA. Later that
morning, a NSC/SCC working group meeting was held, at which
time, a number of the DOD objections, as stated in their
April 29 memorandum, were resolved.
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As a result of this flurry of activity Brzezinski
drafted, for the President, another clarification of who would
be the lead in this legislative initiative and who would be
the key point of contact with the Congress. This Presidential
memorandum, dated May 4, was addressed to the Vice President,
the Secretaries of State and Defense, the Attorney General,
and the Director of the Central Intelligence Agency.
Signed personally by the President, the memorandum
stated:
"I am concerned that as we enter into negotiations
with the Congress on our proposed wiretap legislation, this
Administration speaks with one voice. Accordingly, I am
designating the Attorney General as the official responsible
for conducting negotiations with the Congress on this
legislation. All communications to the Congress on this
subject should go through him.
"If there are differences of view on issues that
may arise in the course of these deliberations with the
Congress, they should be addressed in the Special Coordination
Committee of the National Security Council and, if they cannot
be resolved, they should be submitted to me for my decision."
This memorandum was presented May 5 to representatives
of individuals listed on the memorandum at the NSC/SCC working
group session devoted to revising the draft bill. Substantial
agreement was reached between Justice and DOD on the key
issues that had played back and forth for the previous
several weeks. In almost daily meetings and/or telephone
conversations from May 5 through May 13, final drafts,
comments and revisions were made on the bill by Justice, DOD,
OMB, and others. As early as. May 6, all parties had substantial
agreement on the bill with the exception of surveillance of
foreign visitors. On May 9, agreement on the bill came to
Justice from CIA and State. On May 10, the General Counsel of
DOD gave clearance and on May 12, the FBI concern was ironed
out with Justice and the Kennedy staff. At 11:30 a.m. on
Friday, May 13, Justice reported to the parties involved,
final agreement on the bill between Justice and Kennedy
staff and the bill was forwarded to OMB for legislative
referral and clearance.
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4.
ANALYSIS
This foreign intelligence electronic surveillance
legislation case study touches significantly on many
decisionmaking patterns. Following is a brief analysis of
the case study in light of specific decisionmaking patterns.
a.
Unit Coordination
In this instance, there was a need for immediate
coordination of the disparate elements within the Administration.
This was particularly true of coordination outside EOP.
However, there seemed to be little awareness of an already
existing coordinative mechanism - OMB. Through its Legislative
Reference Division--and specifically through Circular A-19--OMB
clearly spells out the procedures for arbitrating a piece of
Administration legislation to the point of consensus. OMB
Circular A-19 also indicates the appropriate manner for
dealing with Congress prior to and after submission of
legislation. OMB, while a part of the working group all
along, was not utilized as a consensus coordinator until late
in the game. The lead role given the Department of Justice,
however, in the PRM-11 document, tended to short-circuit OMB's
normal coordination role. A further explanation of this lack
of OMB coordination may have been unawareness on the part of
the principals involved of OMB's traditional role in the
coordination of legislative initiatives. Suffice it to say
that coordination, though intense, could have been more
productive. EOP units that one would think should be involved
in deliberations on this issue (e.g., Domestic Council, Lipshutz,
OTP) had little or no input. Thus, there seemed to be a lack of
coordination in determining initial entrants in the issue which,
in turn, precipitated a need for greater coordination at a
later point in time.
Another coordination factor which had an
exceedingly influential role in the decisionmaking process
was the involvement of the Senate Judiciary Committee members
and their aides in the day-to-day development of the legislation.
The decision to coordinate the terms of the bill with them,
line-by-line and word-by-word, considerably slowed the
development of an Executive Branch position. It also
affected the extent and frequency with which DOD was
required to submit its views to Justice and the White
House.
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b.
Delegation of Authority
In this instance, delegation was both the
problem and the solution.
This case study may have been somewhat unique
in that it involved principals on a consistent day-to-day
basis at the very highest levels of government. Moreover,
at least one memorandum was addressed to the President for
resolution of matters such as word usage. The ultimate
delegation of authority finally had to be made by the
President himself (in the May 4 memorandum) in his
designation of the Attorney General and the Justice
Department as the lead individual and agency for this
piece of legislation. This memorandum is interesting
both from the point of view of its having to be written
at all and from the point of view of its content. It
resulted in cooperation and coordination among the
principals which produced a much faster and comprehensive
resolution of the issue.
Day-to-day review of activities in this case
study seemed to have been done extensively from at least
three different quarters - OMB, Justice, and DOD. To the
extent that there was filtering process, it seemed to have
been performed by Brzezinski and the NSC. An example of
possible filtering was the decision made within the NSC not
to send the May 2 DOD memorandum to the President but to
draft a response in NSC for the President to send out (i
the May 4 Presidential memorandum).
C.
Expertise Coverage
The issues that arise from this case study are
actually issues of disagreement by experts. The Justice
Department (and the intent of the legislation itself) is
concerned with the constitutionality of electronic
surveillance and appropriate protection of U.S. citizens
and foreign individuals residing within the United States.
On the other hand, the very real need for accurate and
adequate foreign intelligence within the U.S. is a primary
concern of the Department of Defense and the intelligence
community, and their expertise is necessarily focused upon
obtaining this information. The problem then was not really
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one of lack of expertise coverage, but of sides being drawn
along expertise lines. In other words, there was expertise
coverage, but not a true integration of this expertise until
late in the process, after Presidential intervention.
d.
Focus of Administration Initiatives
Focus of Administration initiative was clearly
a problem in this case study. The Administration initiative
was initially delegated in PRM-11 to the Attorney General.
Why then, was it necessary to reiterate this delegation of
initiative more than two months later in the Brzezinski
memorandum of April 25, and the Presidential memorandum of
May 4? One possible answer is that PRM-11 itself created
the confusion in focus in that, unlike the usual PRM process,
it covered the gamut of electronic surveillance, assigning
a number of working groups in several areas--the foreign
intelligence surveillance bill being on one such initiative.
Outside of the Attorney General, the Director of Central
Intelligence also had a mandate for heading a working group
under PRM-11. The President himself may have recognized
this potential confusion, for he appended to the typed PRM
the following handwritten note:
"Interrelationships among the various
intelligence (units) will be assessed and recommendations
made to me by the SCC as a whole." (The SCC, remember, is
chaired by even a third principal, Brzezinski.)
e.
Organizational Interest
This case study is a prime example of positions
being taken out of organizational interest and fulfillment of
organizational missions. DOD and the intelligence community
were attempting to retain what they considered a critical
level of capability in obtaining foreign intelligence, while
Justice was interested in submitting a piece of legislation
that would once and for all clear up the dispute over
warrantless electronic surveillance in foreign intelligence
cases.
Perhaps, the PRM-11 process should not have been
structured so as to circumvent OMB as the traditional objective
intercessor in the Administration's legislative process. In
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fact, it was the OMB Legislative Reference Division which
first indicated to the Carter Administration that an
electronic surveillance bill was pending in Congress and
that there was a need to examine the possible introduction
of new legislation in this area.
However, the main point to be made here in
this case is the role of the Attorney General and the
Secretary of Defense in the development of legislation,
and the involvement of the President in the decisionmaking
process. The Attorney General, as the chief legal officer
of the Government, is required to satisfy himself as to
the constitutionality of any legislative measures that
might be introduced. The Secretary of Defense, as the
head of the military intelligence agencies, is properly
concerned over retaining a foreign intelligence
collection capability. In the early stages of the
legislative process, the interplay of these interests
worked relatively well; however, once the Attorney General
was required to take on an additional role as chief
negotiator with the Congress, a different set of
interests came into play.
The Attorney General felt that certain
accommodations should be made to the Congress, while the
Secretary of Defense felt that such concessions were
contrary to the interest of national security and would
adversely affect foreign intelligence collection
capability. It was at this critical point that the
Attorney General and the Secretary of Defense escalated
the issues to the point of direct Presidential involvement.
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DECISION ANALYSIS REPORT
CASE STUDY: BREEDER REACTOR PROGRAM
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110
F.
BREEDER REACTOR PROGRAM
1. ABSTRACT
The decision on the breeder reactor program
occurred early in the Administration and a number of pro-
cedural problems that it raised have already been dealt
with. At a more fundamental level, however, the evidence
of what happened raises serious and enduring questions about
the staging of decision processes; the relationship between
foreign and domestic policy review on issues where the two
come together; the interpretability and implementation of
the President's decisions; and the behavior of policy staff
in crisis situations.
The sequence of events was driven by two pressures.
One was from the NSC side to produce a rapid response to
European and Japanese challenges on the proliferation question.
The other was the pressure to create a broad domestic energy
policy with a minimum of early disclosure by April 20. The
first pressure reduced the time to act; the second pressure
reduced the number of actors in the policy process. The
combination of the two sharply limited the extent of policy
analysis that was brought to bear in the assessment of the
LFMBR.
What the President gained in security on the
sensitive issues, he may well have lost in the widespread
misinterpretation that followed each decision that was made.
This in turn adversely affected the credibility of the
decision process and encouraged both EOP staff and outside
interests to seek new decisions or reruns of old ones.
This wasted everybody's time.
In this sense, the effort to limit the number of
active participants not only failed to work as planned, it
had two further unanticipated effects. One was to permit the
President to be unaware of the full range of options avail-
able. Another was to encourage the President to make
decisions one at a time without his attention being drawn
to the potential for inconsistency implicit in such a step-
wise progression.
What went wrong in reorganization terms might be
roughly termed a coordination problem, whose solution lies
in better decisionmaking routines, greater consultation,
Jer stalan
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111
and better management of scheduling to avoid bottlenecks
and paper flow problems. What is missing from the organi-
zational performance that cannot be so simply and economi-
cally improved is the absence of reliable follow-up of the
President's decisions. No one has the responsibility of
ensuring that once made, his decisions are interpreted
correctly by the agencies and implemented as he means them
to be.
2.
BACKGROUND
In this section day-by-day events are chronicled
in such a way as to identify the important issues and key
players as these emerged.
O See Attachment A for summary data on Presidential
and Cabinet attention to the issue, and the key
players involved.
O Key players or active participants in the decision
process are identified as those individuals who
interact on the issues outside their EOP unit or
agency, and do SO more than once. Attendance
at an interagency meeting is treated as multiple
interaction for this purpose. For full list,
see
3.
CHRONOLOGY
January
21
PRM-15 is issued for the development of nuclear
proliferation policy options. Participants in
the working groups include NSC (Tuchman), Energy
Policy and Planning Group (EPPG) (Ahearne), OMB
(Taft, Kearney, Weiher, Donahue) , State (Nye),
Council on Environmental Quality (Speth, Brubaker),
Arms Control and Disarmament Agency (ACDA) (Spier)
Nuclear Regulatory Commission, DOD, CIA, Energy
Resources and Development Agency (ERDA).
26
NSC memorandum to Joint Chiefs of Staff on
PRM-15. JCS added to list of units receiving
documents.
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February
112
4
Schlesinger sends budget recommendations
covering the LMFBR to OMB Director Lance.
A copy goes to Schirmer of the Domestic
Council (DC) who is concerned about the level
of spending in relation to Presidential cam-
paign commitments to cut the program.
5
OMB briefing on 1978 Budget amendments.
There are a number of briefing discussions
involving the nuclear energy budget. Par-
ticipants include Kearney (OMB) Freeman
(EPPG), Fri (ERDA), Tuchman (NSC), Brubaker
(CEQ), Harrison (Vice President's Office),
Schirmer (DC), Spier (ACDA). ACDA
recommends a shift in funding priorities
to reflect the relatively greater security
to be gained from alternative nuclear fuel
cycle technologies such as thorium.
7
Article appears in New York Times stating
that the "President urged cuts in nuclear
breeder device, but his aides now propose an
increase." Criticism of what is described
as a contrast to the President's campaign com-
mitment is attributed to Russell Train,
former Chairman of CEQ.
O Christopher (State) writes Lance expressing
reservations about the implications of the
breeder reactor budget.
O Tuchman calls a meeting of several key par-
ticipants in the budget revision process
for the breeder reactor and the PRM-15 work-
ing group on proliferation; included are
Schirmer (DC), Loweth, Cutter, Nix, and
Kearney (OMB), Freeman (EPPG), Nye (State)
and Fri (ERDA). The meeting attempts to
clarify the level of budgetary support for
the breeder reactor program. Three options
are tabled: (a) to cut budget below the
1977 level; (b) to remain at the 1977 level;
and (c) to increase level of spending (the
ERDA option).
O After the meeting, Kearney (OMB staff) pre-
pares a detailed budget review book on the
program. He also prepares an issue paper
for the President, incorporating suggestions
from Schirmer that strengthened the cut option.
This paper appears not to have reached the
President. Instead, Cutter, Schlesinger, and
Brzezinski discuss it among themselves.
CONCINENTIAN
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February
113
8
Tuchman writes memo for the President
through Brzezinski. She assumes that the
President will read it but in fact it is
delayed in channels. What she recommends
is a budgetary cut for the LFMBR.
O A group of Princeton scientists write the
President urging, inter alia, that he consider
alternative nuclear fuel cycles that do not
have the proliferation problems of the
plutonium cycle. The letter refers specifically
to "the possibility of a fuel cycle based on
thorium, using denatured uranium-233 as fuel."
There is no evidence in the log that the President
received this letter, read it or referred it to
his staff.
17
Tuchman sends a brief summary paper to the
President reiterating the recommended budget cut
but omitting the supporting discussion.
The President indicates in the margins that
the issue is not related to national
security. However, the President then
receives the longer memo of the previous
day and reconsiders his earlier comment.
He accepts the national security implications
and decides in favor of the recommended cut.
This is the option that Cutter, Schlesinger
and Brzezinski have already agreed on - a
reduction of $30 million in budgetary
authority for the program. All are in agree-
ment that the budget decision is a temporary
one pending completion of the PRM-15 (pro-
liferation) and LMFBR policy reviews. What
is not communicated to the junior staff level
is when the final decision will be reached
or what its implications are likely to be.
22
The breeder reactor review panel is estab-
lished on the instructions of Schlesinger.
25
Tuchman requests that Brzezinski extend the
PRM-15 deadline to March 9; he assents.
March
4
The President writes in reply to a query
from Congressman Harkin (Dem., Iowa, House
Subcommittee on Energy Research, Development
and Demonstration) stating that the breeder
reactor is a national security risk.
9
PRM-15 is completed and circulated for com-
ments to relevant agency and unit heads.
Comments are received over the next ten days
in the NSC files from Warren (CEQ) Christopher
(ACDA).
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114
March
16
Policy Review Committee meeting is
held to discuss PRM-15. Speth (CEQ) is
not permitted to participate in the review
discussion.
21
President meets with Prime Minister Fukuda;
he is also introduced to the Ford Foundation
Panel on nuclear power by Science Adviser,
Frank Press. The President recommends the
Panel report to the Prime Minister (the
implication being that the President agrees
with the Panel's argument against plutonium-
cycle energy production).
He also tells
the Prime Minister that there will be time
for the Japanese Government to consider its
own policies in this area as no major policy
decision will be announced by the U.S. until
the entire energy program is finalized (due
April 20).
22
Aaron (NSC) tells Tuchman that a statement
on proliferation policy should be delivered
by the President at his press conference on
the 24th. Tuchman is drafting the text of
Presidential Directive 8 (PD-8) implementing
the Committee review of PRM-15. The issue
of timing an announcement on proliferation
is raised by the NSC with State, and a delay
is sought to give U.S. embassies time to inform
and consult with foreign governments, particu-
larly the Japanese. PD-8 is sent to the
President for approval with the recommendation
of a delay in announcements. The President
signs approval, and after a discussion with
Brzezinski, accepts the case for delay.
O Barbara Blum, Deputy Director of EPA, writes
NSC complaining that her agency has been
excluded from the PRM-15 process; CEQ does the same.
26
State Department and NSC exchange drafts of
cables dealing with PD-8. These are approved
by the President and sent out to embassies
on the next day.
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115
April
1
Following up PD-8, and at the President's
request, Ahearne draftsa statement of policy
on the domestic breeder program for Schlesinger
and Brzezinski to comment on. Ahearne is assisted
by Sievering (ERDA), and Elliott from the
Science Adviser's office. The document is
not circulated at this stage to other EOP
staff who had previously been involved in
review of the breeder reactor program.
2
Christopher (State), testifying before the
Senate Subcommittee on Nuclear Proliferation,
tells Senator Glenn, the subcommittee chairman,
that within a week the President would issue
"a major statement on nuclear energy" that
"will go a long way towards clearing the air
with respect to domestic policy." Senator
Glenn repeatedly requests details of the
Administration's likely plan.
4
Department of State sees a copy of the Ahearne
draft of the President's statement.
5
The West German government notifies the U.S.
that it is approving export licenses for blue-
prints of uranium and plutonium production
facilities for export to Brazil. The U.S.
had sought to persuade the Germans against
this step towards what it characterized as
nuclear proliferation.
6
Kearney (OMB) sees a copy of the Ahearne
draft. Although uninvited, comments and
small changes in phraseology are submitted
at the last minute by OMB to Schlesinger.
These relate to the Administration's position
on the private fuel-enrichmént plant being
built at Barnwell, S.C. Brzezinski probably
sees the draft statement before it is
transmitted to the President.
7
The President meets at 11:05 a.m. with Powell,
Tuchman and Schechter (NSC) to discuss the
press briefing to follow on nuclear energy.
Eizenstat joined the meeting for ten minutes.
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116
April
7
The President then releases a statement on
con'td
the domestic implications of his nuclear
proliferation policy. The Clinch River
breeder reactor is slated to be cut back
to an "experimental basis." This termin-
ology is confusing and in the question-and-
answer session that followed the statement
the President said that it did not mean
termination of the Clinch River plan. In the
private staff meeting, the President also
refers to the problem of what to do with
the Clinch River breeder reactor. He has
heard from both Senators Glenn and Sasser,
each anxious about their own state's role
in the LMFBR program. The President sug-
gests that perhaps the enrichment facility
intended for addition to the Portsmouth,
Ohio, gaseous diffusion plant might be con-
structed at Clinch River. Tuchman tells the
President that this is technically impossible.
O Subsequently on that day Senator Baker (Tenn.)
tells The Times that he understood that work
at the Clinch River Plant would be stopped.
Senator Sasser, first-term Democrat and close
political associate of the President, says
that the understanding he had received was
that "no more than a reassessment of the
Clinch River project" was contemplated.
8
Concerned with what he saw as substantial
ambiguity in the President's press conference,
Speth (CEQ) instructs Brubaker to begin
drafting a CEQ memo for the President. This
seeks to sharpen the policy on the LMFBR pro-
gram, and by adding specificity in the language,
to reduce the misinterpretation that CEQ
believes the Presidential statement could give
rise to.
O Schirmer (DC), who had not been consulted
before release of the statement, asks for
clarification of its meaning from Freeman.
She is told that the statement is essentially
a holding action, designed to placate the
needs of NSC, Department of State and foreign
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117
April
8
governments concerned about U.S. intentions
cont'd
for the domestic and international uses of
plutonium.
O Fri, Acting Administrator of ERDA, testifies
to the Glenn Subcommittee that the President's
statement of the previous day would "increase
the problem and also increase the need for
more technical data" on storing spent fuel,
which would otherwise be used in the breeder
reactor program. This statement is inter-
preted by other players as potentially under-
cutting the Presidential commitment.
The Washington Post reports from Japan that
government officials there are uncertain
about the implications of the statement for
their own breeder program and for the imported
reprocessed uranium they require from the U.S.
to fuel their plant at Tokai Mura.
9
The report of the breeder reactor review
panel is delivered to Fri who sends a summary
to Schlesinger, together with the draft of a
memorandum for the President.
10
Schlesinger delivers a memo to the President
recommending a range of actions to be taken
on the future of the LMFBR. This does not
argue options, pro or con, nor the consequences
of alternative decisions relating to the LMFBR.
OMB and the DC do not see this document until
after the President signs off. What the
President appears to have accepted was a pro-
posal for deferment of construction at Clinch
River with extended research and testing, in
conjunction with advisory recommendations from
the Nuclear Regulatory Commission (the licens-
ing authority) as to the "licensing status"
of the project. In short, this represented
an advancement of the project through an
informal licensing procedure as a preliminary
to the formal licensing agreement necessary
for construction. It was unclear to many of
the players whether this meant that the program
was to be continued or stopped.
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April
14
Warren and Speth (CEQ) send a memo to the
President. It is staffed out to the follow-
ing people before going to the President:
the Vice President, Brzezinski, Schlesinger,
Eizenstat, and Watson. Copies are also
relayed to Tuchman and Schirmer. The memo
argues for clarification of the President's
position on LMFBR. Specifically, it recom-
mends not proceeding with any form of licensing or
construction. The President assents to this. Brubaker
then checks with Ahearne to ensure that in
preparation of press releases, ERDA's language
reflects the position embodied in the CEQ
memo rather than the one in the Schlesinger
memo of the 10th that was much closer to the
agency's wishes.
16
A general meeting is held with the President
in the Cabinet Room to resolve issues in the
energy program. Attending (inter alia) are
Schlesinger, Alm (EPPG), Schirmer, Cutter,
Lance, Tuchman, Schultze and Blumenthal.
Approximately five minutes are given to the
LMFBR program. The issue as it is presented
for decision is whether the Clinch River
project should be advanced through to a licens-
ing process or not. The President indicates
not.
O At this time also, Press, the Science Adviser,
recommends to the President that he consider
adapting the Clinch River reactor design for
development of the thorium cycle. This he
argues would keep Clinch River operating but
avoid the serious proliferation problems
inherent in the plutonium cycle intended by
ERDA. The President responds by indicating
that this option had not been presented to
him before.
19
A long evening meeting is held to finalize
the draft energy statement due to be released
in the morning. Schirmer confirms that the
draft indicates the determination not to pro-
ceed to any form of licensing.
20
The President announces his energy policy.
The words chosen to describe the LMFBR include
the "deferment" of commercial reprocessing
and recycling of plutonium; the "cancellation
of construction of the Clinch River Reactor
Demonstration Project and all component con-
struction, licensing and commercialization
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119
25
OMB refers an advance copy of Fri's testimony
before the House Subcommittee on Energy and
Environment to Tuchman.
O Tuchman rings Fri's office and states that
the testimony will not be cleared unless the
wording is changed to conform more precisely
to the Presidential policy. Speth expresses
the same objections.
This does not mark the end of the decision process.
Several of the players express concern through the next five
weeks that ERDA testimony before Congress undercuts the
President's April 20 decision. This in turn fuels
congressional action to overturn the decision or have
the President clarify it in a way that would favor special
State and breeder reactor interests. This additional
stage of decisionmaking is described below (p. 15).
4.
ANALYSIS
A.
The Decision Process
(1) The Complexity of the Issues
In an economy whose demand for elec-
tricity will outstrip the supply of fossil fuels needed
to produce it by the end of this century, alternative
sources of energy must be found and quickly put in develop-
ment. It stands to reason that an energy-generating
technology like the LMFBR would provide a substantial
energy benefit, even at fairly high levels of capital
investment and operating cost. That is supposing the
technology is safe from accident or sabotage; that its
waste can be put out of harm's way for half a million
years; that the costs of alternative energy sources make
them less economical; that the economy will need as much
electricity as is now thought; and that a world energized
by thousands of plutonium reactors is as comfortable as
the world of oil and coal-fired stations we are still
enjoying. At bottom, these suppositions contribute to the
decision problem for the LMFBR.
But these are not the only issues. In
fact, the LMFBR either directly or indirectly involves more
elements of decision, and conceivably more jurisdictions
and decision makers, than any other current problem that
has faced the Administration.
The program is complex in several
ways:
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a.
Technical Disputes. Every-
one of the above suppositions is disputed by groups of
professional scientists, engineers, and environmental
planners. On the economic cost-benefit side, there are
several detailed analyses from ERDA, two from GAO, two
from the Joint Economic Committee of Congress, one from
the Congressional Budget Office and numerous private and
institutional studies. These don't agree.
b.
Regionalism. The component
technology on which the LMFBR depends is in varying stages
of evolution, depending on the components. These are being
researched, demonstrated and tested in twenty-two facilities
scattered over sixteen States. The cost of this part of the
program is over $1 billion. Any decision affecting the
breeder reactor will thus have ramifications affecting
employment and investment around the country.
C.
Problems of Research and
Demonstration. The program was originally designed in a
series of steps leading from basic components and process
research, through the construction of a sequence of demon-
stration plants (each larger than the one before), to the
full implementation of a commercial breeder system, begin-
ning with one in 1987 and numbering 1,178 by the year 2011.
The distinction between what is research, what demonstration
and what phased commercial development is very difficult to
draw. The average annual cost at current levels is $600
million (with a total cost to 1987 of at least $10 billion).
Each new outlay has the effect of tying the project to
a direction that limits the resources available to alter-
native paths, to alternative energy technologies, and to
alternative goals. At present the LMFBR program is the
single largest commitment in the energy R&D budget (40 per-
cent 1971; 26 percent 1976) which in turn absorbs nearly
10 percent of all Federal R&D. Decisions affecting LMFBR
thus structure the entire range of R&D options available to
the Federal Government.
d. Private Investment Impact.
Both Federal Government and private sector funds and manage-
ment are involved, the private sector significantly less
than was originally planned for. Decisions on LMFBR affect
long-term investment plans throughout the nuclear industry,
which actively resists the non-plutonium options.
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e. Environmental Issues. Environ-
mental impacts are very difficult to assess. Early impact
statements for the first LMFBR (Clinch River, Tennessee)
have been disputed, and EPA's judgment is that the com-
mercialization of LMFBR cannot be assessed reliably at
this stage. ERDA program managers have asserted in
response that at this stage the project status is strictly
R&D and that no decision regarding commercial implementation
will be made for another decade. However, the level of
spending is so great as to preclude the development of
alternative energy sources, thus locking the Administration
into a 1987 decision whatever the environmental assessment.
f. Foreign Policy Priorities.
No decision on LMFBR can be reached without wide-ranging
foreign effects. The Soviet Union, France, England, West
Germany, Japan and several European consortia are actively
developing domestic breeder reactor systems, and in some
cases (France and West Germany) an export industry in the
same technology. There are many interested importers (Brazil,
India, Israel, etc.). The possibility of proliferation of
plutonium plants, of nuclear weapons manufacture, of theft
of nuclear explosives for political purposes, and of shifts
in the pattern of limited nuclear monopoly and the strategy
of deterrence on which it depends, are some of the issues
involved.
(2) The Dynamics of the Process
a. Timing and Staging. There are
three or perhaps four stages in the process depending on
how the decision of April 20 is interpreted. What drives
the staging of the process is this: each decision reached
is vague enough to be interpreted quite differently by major
participants. This then requires a further policy review
to resolve the issue on each occasion. Staff work does not
significantly reduce the issues or options for Presidential
decision at each stage, so that the President is confronted
by roughly the same set of problems on each occasion.
These issues came up as a result
of quite separate though parallel policy review processes
(i.e., the foreign policy-PRM process, the Schlesinger
EPPG process, and a broad domestic policy review process).
Neither the schedules nor the outputs of these processes
were coordinated with one another; consequently it was
inevitable that the President would be required to respond
to each in turn, and that each of his responses would be
misunderstood by the participants on the other tracks.
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The gloss put on these misunder-
standings was that until the April 20 decision there had
been a series of temporary decisions - holding actions
pending a more detailed and coordinated review of the
issues.
b.
Holding Action No. 1. The first
stage reflects the negotiations on the 1978 budget levels
for the LMFBR program. The timing was dictated by the
February deadline, but neither the proliferation policy nor
the energy policy could have been ready by then. On the
other hand, the President was clearly on record as being
opposed to the breeder reactor in one form or another.
Campaign promises left a fairly
wide margin for defining policy and program recommendations,
which might have become the focus of the February discussions.
The fact that they did not appears to have been the result
of Schlesinger's ambivalence about detailing the future
of the program, and his unwillingness at that stage to
engage the other participants in analysis of the options
and contingent funding levels. His position in turn de-
pended on the President's desire to limit internal debate
on elements of the energy plan.
The NSC position and the DC position
were in accord, insofar as both sought a budget option that
would demonstrably reinforce the campaign commitment, and
indicate to foreign governments the Administration's
determination not to proceed with the plutonium cycle in
commercial energy production.
Again, the pressure of the clock
appears to have driven the players away from detailed options
analysis. The impending West German and Japanese decisions,
and related problems scheduled for international meetings
in London, Persepolis and Salzburg, encouraged Brzezinski
to press the President for statements that could then be
taken into proliferation negotiations abroad. Without
detailed planning of the LMFBR options however, whatever
statements the President might have been induced to issue,
ran the risk of leaving the options for the domestic program
too open and appearing vague, if not intentionally
deceptive, to the foreign powers.
Alternatively, if the President
sought to be the clear opponent of plutonium proliferation
in the foreign arena, he ran an uncharted and untested
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course in Congress on the domestic issues. These problems
were compounded by the unilateral tactics pursued in
this early stage by both Brzezinski and Schlesinger, whose
regular access to the President enabled each to act on
his own priorities without informing or consulting the
other.
C. Holding Action No. 2. The second
stage ran from late February to April 7. In this period,
the President made the decision to release a statement
"to stop breeder reactors" (Washington Post, April 8).
This decision did not in fact stop the LMFBR program.
The decision was reached by two or
three paths, depending on how you count. One was a review
team picked largely by Freeman (EPPG) and Thorne (ERDA).
Composed of non-government experts and public interest
representatives, it was heavily weighted on the pro-breeder
side, so much so that at least one of the anti-breeder side
threatened to resign. It was, as one observer called it,
"a charade which all the real policy makers waited to con-
clude."
The other perspective was that the
panel was the last chance the breeder proponents would
have to make their case before the axe fell. The situation
was quite unclear -- the panel was stacked to be sure, but
which side of the policy fight would get the coup de grace
no one knew for sure.
The timing of the second stage was
in fact determined by the NSC, the completion of the PRM-15
deliberations and the President's assent to PD-8. The
visit of Fukuda, the German-Brazilian deal, last minute
negotiations with Japanese officials and State's preparations
for the London conference of nuclear suppliers (the last two
on the weekend of April 2-3) - these were the immediate
pressures which drove longer-term policy planning out of
channels for Presidential review. Time and access
pressures, further stimulated by demands from Congress for
a policy statement from the Administration, so clogged the
channels that, as noted on February 17, the President signed
off on one recommendation without reading the policy analysis
supporting it; this had been logged in but not read the day
before.
However accidental this incident
may have been, it is symptomatic of a common effect of
uncontrolled timing on policy review -- in a crisis situation
the need to act absorbs whatever resources are available to
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consider the options. Thus in crisis at the executive
level, policy review as such stops. (This is the
stampede phenomenon.)
The PRM process is designed to
avoid this. It should predict in advance what executive
decision needs will be, and schedule staffing to meet those
needs with time to spare in case of interagency conflicts
or unpredictable external events that demand rapid response.
Also, it should integrate domestic policy concerns into the
final analysis of options. Neither objective was achieved
by PRM-15 in this case.
The April 7 statement produced a
rush of misinterpretation and confusion. Congressional
doubts created demands for clear delineation of Adminis-
tration intentions but the terminology in which the options
were publicly cast did not resolve underlying ambiguities
about the research status of the Clinch River breeder
reactor, the level of funding of the component program sup-
porting the reactor, the regional implications of both
these things (especially for Ohio and Tennessee) and the
alternative development paths into the future for nuclear
energy research.
d. The Final Stage of Decision. Stage 3
ran from April 7 to April 20 and reflects the process by which
the President accepted a range of options on what to do about
the LMFBR, the plutonium cycle in general, and the Tennessee
facility in particular. Deliberation on the options con-
tinued right up to the morning of the Presidential speech on
energy. But even at this point the participants remained
unclear on the concrete implementation of the options.
Additionally a number of important policy considerations
omitted in the earlier process now reemerged.
These involved players who had not
participated at all in the earlier stages -- specifically
Hamilton Jordan and Mark Siegel who enter at this point to
negotiate with state officials and Congressmen from Tennessee
and Ohio, the two states most immediately affected by the
decision.
These negotiations lasted for
more than a month (May 25) before the President issued a
clarification of the budgetary implications of the April 20
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decision for Portsmouth, Ohio, and Clinch River and
Oak Ridge, Tennessee, the principal locations of ERDA's
reactor research effort. During this period too, there
was intense Congressional activity, with one House committee
voting to restore the breeder reactor funds and a second
committee of the House voting to sustain the President's cut.
Opposition was vocal in the Senate also (reflecting in part
Senator Jackson's home State interest in another component of the
research program) but this had not resulted in a vote by the
end of May. Six weeks after the final decision had been
made on the LMFBR progran, the President was still compelled
to reiterate and refine the terms of that decision for those
who felt he might still be shifted.
e. Stampede Tactics. There was an important
relationship between timing and staging. Without clearly
marked stages of decision, deadlines and finality to the
decision itself, the timing of the process was both infinite
as the stages were reiterated, and subject to sudden crisis.
Insofar as all decisions appeared temporary and the time
limits extendable, those players dissatisfied with the out-
comes at one stage could aim to recover their initiative
by launching a new round. Fostering a crisis atmosphere was,
in this context, one tactic for out-maneuvering other players
in the ongoing policy debate. Of course, the advantages SO
gained can only be temporary before the process begins all
over again.
f. Analysis of the Domestic Options.
The President's statements during the campaign created an
unusual situation in this case -- one option, that of moving
to commercial development of the breeder reactor, had been
ruled out. Still, the campaign statements were compatible
with the continuation of Clinch River as a research and
demonstration project, and indeed that was what Clinch River had
always been. The Ford Administration and ERDA, committed as they
were to full-scale application of the plutonium fuel cycle, did
not regard Clinch River as anything more than a demonstration
project. It was an expensive one to be sure, with investments
that tended to carry the commitment to commercial implementation
at some time in the 1980's. Thus, even before taking office, the
termination option became the symbol of Mr. Carter's campaign
promise.
Between immediate termination and
continued acceleration of program outlays, as ERDA had
proposed in the Ford Budget for 1978, there was a spread of
$736 million. What were the options for spending?
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Mr. Schlesinger's group had the
lead in developing these, but the recommendations of early
February raised the concern of many of the participants
that EPPG was doing little more than fronting for ERDA.
On the other hand, given the size
of the group's task in formulating a comprehensive energy
policy and the shortness of time in which to do it,
Schlesinger had little alternative but to rely on ERDA
for detailed technical work on the nuclear energy proposals.
Whether EPPG was acting as ERDA's advocate on behalf of
the program or not, there was a widespread perception among
the other players that the former was the case.
This perception provoked the leak
to the New York Times and the February 7 meeting which fol-
lowed publication. From this point on, the lead seems to
have been taken by the NSC, which was committed less to
working out the details of the domestic program than to
making a credible cut in the LMFBR budget to signal the new
policy abroad. OMB was in a position to assess detailed
program options, and did, but this was not the direction that
the decision process took. Instead, three very broad options
were discussed (see page 112) with a cut of $199 million in
budget authority recommended to the President.
As a signal this was ambiguous.
ERDA knew that reevaluation of the program would continue
but the February cut was certainly not something that
threatened the future of their program. When they had costed
the 1978 Carter Budget out, they were able to plan outlays
at $651 million, less than the Ford level for that year but
still over 10 percent greater than the 1977 total. After
cutting out construction of an additional large demonstra-
tion plant, ERDA was able to increase outlays on all line
items of the program (over 1977 levels), including a 22 per-
cent rise in spending at Clinch River. As ERDA understood
the situation in February, their R&D project was still very
much in business.
One view is that the NSC did not
care about these details; their priority was the PRM process
and the negotiation of an effective limit to plutonium use
abroad. Schlesinger, meantime, sought to delegate his own
initiative to ERDA and to the independent review panel.
The other domestic policy players were more or less excluded
from both processes.
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In the sequence of events culminating
in the April 7 statement, there was no analysis of domestic
programs at all. OMB had the capacity to contribute but
was excluded, the Domestic Council staff likewise. The
pressure of the foreign policy contingencies -- the crisis
stemming from uncontrollable actions by the German and
Japanese governments, and the volume of paper flowing to the
President associated with PRM-15 and PD-8 -- effectively
drove domestic policy out of consideration.
After April 7 attention could be
focused on the domestic future of the LMFBR. The strategy
Schlesinger pursued was to avoid detailed review of alter-
natives in his own memorandum to the President (April 10),
and to exclude other domestic policy reviewers from the
process. When the President consented to his recommendation,
no one but the President and Schlesinger knew what the
decision actually implied. The details appear to have
remained ERDA's responsibility to outline and implement.
The CEQ memo was the first detailed
assessment of what cutting the program might actually
mean. Circulated both before and after the President saw
it, it brought several of the program options into
the open. These included a testing program and proceeding
to a form of licensing, preliminary to undertaking construc-
tion (ERDA's preference), a modified design and review pro-
gram done in conjunction with the NRC (Schlesinger's pref-
erence), and abandoning all licensing efforts and cancelling
all construction at Clinch River.
CEQ, OMB and DC all agreed that
the LMFBR program had to be reduced to a level of design
completion. They argued against further testing, licens-
ing or construction. In their view, the project should
terminate within two years as the design programs came to
an end. Schlesinger's April 10 memo provided no details
of out-year expenditures and no consideration of the public
impact of continuation at whatever level the quasi-licensing
process required. OMB staff work added the option costs and
stated that the likely public response to the EPPG plan
would be hostile.
The meeting with the President
on April 16 spent little time on the LMFBR. For one thing,
the President may not have been aware of the extent to which
there were different views in the EOP and ERDA on his policy.
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He had clearly signalled his intention to abandon licensing
in his response to the Warren memo. He may have thought
this had been equally clear in the acceptance of the
Schlesinger recommendation the week before. That it was
not clear appears very much to have been the result of
the inadequate staff work that supported the earlier sub-
missions. The circulation of documents to achieve clarifi-
cation and consensus on the implementation of the decision
was also inadequate.
g. The Option That Never Was
The chronology shows that as early as
February 8, when a number of Princeton scientists wrote
the President, the option existed for the President to
terminate the plutonium LMFBR program but continue Clinch
River, modified to test and develop the thorium cycle.
Active canvassing of a range of alternative
nuclear fission options had been encouraged by the Bureau
of Proliferation at the Arms Control Agency (ACDA). The
alternative fuel cycle approach had also been touched on
in a report issued by the congressional Office of Technology
Assessment. The ACDA view surfaced during the February
budget review of ERDA programs. The Princeton group argued
its case on the breeder review panel during March and in
April issued a special report on the option through
the Council on Foreign Relations.
There is no evidence, however, that the
President was ever given a detailed briefing or memorandum
on the thorium fuel cycle as an alternative application of
the Clinch River program. There are two explanations for
this. One is that ERDA, which had been considering the
option internally, chose not to raise it openly so long as
the chance remained that the President might opt for the
plutonium program. If this is the case, then ERDA
wittingly or unwittingly reduced the President's range of
choice for the narrowest of partisan advantages. The effect
was that by the time the Science Adviser raised the issue
directly though briefly with Mr. Carter, there was little
room for him to maneuver.
An alternative view is that the internal review
of the thorium option which the ERDA staff had conducted had
led to their judgment that it was not viable as a method of
prolonging the life of Clinch River. ERDA representatives
had argued the case on this with the Schlesinger staff, who
concluded for themselves that the modifications that would
be involved in the Clinch River reactor were more expensive
than the program's survival was worth. This was a considered
technical judgment, and no doubt a reasonable one. Still, it
was never surfaced for the President himself to weigh.
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129
5.
SUMMARY FINDINGS
A.
Coordination
These were early days in the Administration,
and some of the difficulties reflected in the analysis were
acknowledged at the time they occurred. Brzezinski and
Schlesinger agreed that coordination and improved definition
of roles were necessary after the February decision;
Brzezinski and Eizenstat agreed on improved consultation
after the April 7 statement was issued.
Coordination and consultation should have
been better by April 10, notwithstanding the fact that
Schlesinger had a mandate from the President to develop
energy policy without wide review by EOP staff. This was
a reasonable precaution against premature release, but a
premium was paid in that the President's decisions were not
clear to either EOP or agency (ERDA) staff. To the extent
that they remained so, the process of decisionmaking was
unnecessarily prolonged. The President's credibility on
the issue also suffered some damage as conflicting state-
ments and interpretations filtered into the press. This
was especially damaging in the eyes of the Germans and
Japanese, not to mention the people of Ohio and Tennessee.
B.
Priorities
The case suggests that to the extent that
foreign policy problems are brought into the executive
decisionmaking process with short lead times (typically
involving large numbers of options and separate decisions
which the President is required to address), they can capture
a higher priority in the President's time and attention than
can domestic policy issues. Here it seems not only that
the NSC took the lead in the budget and April 7 stages, but
that the PRM decision entirely blocked for a time review
of the detailed domestic options and the factors which were
relevant to their assessment.
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If the President had more than 24 hours
in a day, then he could compensate for this tendency.
Alternatively, he could require that a sharing or queuing
procedure be employed to distribute the inflow to the
decision box between types of issues, just as he currently
allocates meeting time on a fair-share basis.
If there is no "fair sharing" or allocation
principle in use, then the dynamics of the decisionmaking
process and the tactics which units develop to improve
their access (stimulation of decision pressures or stampede
tactics) will produce the effects that have been noted.
C.
Crisis Response
There is some evidence to suggest that
current decisionmaking routines are too inflexible and
too uncoordinated to provide rapid policy response, cover-
ing all relevant issues, in crisis situations of either
domestic or foreign origin.
D.
Expertise Coverage
There was little expert input from the
economics side, from environmental impact assessment or
from the budget examiners' review. What was available was
perceived as special pleading from ERDA on the pro breeder
side. In the context of the broader nuclear proliferation
issues on the foreign side, and the multi-faceted energy
package on the domestic side, decisions on the LMFBR were
made with relatively little time, space or resources spent
for detailed examination. The regional effects of changes
in the component programs did not surface until very late
and Congressional reaction was scarcely explored at all in
advance. Thus, those responsible for dealing with the Con-
gressional and regional response after April 20 (Jordan and
Siegel) were unbriefed on the decision and its budgetary
implications, and unprepared to defend what had been done.
Worse, EOP participants differed in the detailed interpre-
tation they could provide of what in fact had happened.
This is linked to a final key finding:
E.
Monitoring Compliance and Implementation.
It took ERDA nearly a month to issue orders
to destroy booklets the agency had prepared on energy policy
which gave a positive impression of the breeder reactor pro-
gram. It was quite fortuitous that Fri's testimony for
TRENTIAL
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April 25 was seen in time by EOP staff to conflict with
the April 20 decision. This shouldn't be taken to imply
bad faith on the agency's part. What is clear, however, is
that in this case the Presidential decisions were not easy
to interpret, and that no mechanism exists that can reliably
be counted on to follow up such decisions, to see that the
interpretations which are given of them are ones the Presi-
dent himself intended. The latitude for misinterpretation
and the arbitrariness of compliance procedures in the
Executive Branch are serious problems which this case has
identified.
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6. ATTACHMENT
132
Background Data
Events
1. Presidential attention: The President read four
memoranda (approximately) and PRM-15; 20 minute meeting of
April 7; 5 minutes at meeting of April 16.
2. Cabinet attention: Issue referred to in Minutes
of March 7 and 28.
*
List of Active Participants in the Decision Process
The President
James Schlesinger (Energy Planning and Policy Group)
John Ahearne (EPPG)
David Freeman (EPPG)
Stuart Eizenstat, Assistant to the President for Domestic
and Policy
Kitty Schirmer, Associate Director, Domestic Council (DC)
Zbigniew Brzezinski, Assistant to the President for National
Security Affairs
David Aaron, Deputy Assistant (NSC)
Jessica Tuchman (NSC)
Charles Warren, Chairman Council of Environmental Quality (CEQ)
Gus Speth, Member, CEQ
Gerald Brubaker (CEQ)
Bo Cutter, Executive Associate Director, OMB
Joe Kearney (OMB)
Rod Weiher (OMB)
Dan Taft (OMB)
Arnold Donahue (OMB)
Hugh Loweth (OMB)
Jim Nix (OMB)
Frank Press, Director, Office of Science and Technology Policy
David Elliott (formerly consultant to OSTP)
Cyrus Vance, Secretary of State
Joe Nye, Under Secretary of State for Security Assistance
Richard Holbrooke (State)
Warren Christopher (State)
*Defined as a player who interacts on the issue outside
his/her agency or EOP unit more than once.
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133
Robert Fri, Acting Administrator (ERDA)
Robert Thorne (ERDA)
Nelson Sievering (ERDA)
Barbara Blum, Deputy Administrator, Environmental Protection
Administration
Paul Warnke, Director, Arms Control and Disarmament Agency (ACDA)
Richard Spier (ACDA)
Senator John Glenn, Chairman Senate Subcommittee on East Asian
and Pacific Affairs
Senator Sasser (Tenn.)
Senator Baker (Tenn.)
Hamilton Jordan (WHO), Assistant to the President
Mark Siegel (WHO)
Victor Gilinsky, Commissioner, Nuclear Regulatory Commission
Edson Case (NRC)
The Vice President
Gail Harrison (VPO)
Total 40
COMMENTIAL
CONFIDENTIAL
DECISION ANALYSIS REPORT
CASE STUDY: CONVENTIONAL ARMS TRANSFER
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135
G.
CONVENTIONAL ARMS TRANSFER
(In order to avoid disclosure of classified or
otherwise sensitive information, this report will be limited
strictly to a discussion of the process and the players.
Decision options and recommendations have been omitted.)
1.
ABSTRACT
The case study reviews the development of policy
on conventional arms transfers to foreign countries by the
U.S. Government and U.S. commercial firms. Specifically,
the paper describes activities in response to (1) Presidential
Review Memorandum/NSC 12, Arms Transfer Policy Review (PRM 12),
and (2) the reporting requirements of the International
Security Assistance and Arms Export Control Act of 1976
(AECA 76).
The PRM activities focus on the Policy
Review Committee (PRC) structure established by Presidential
Directive/NSC 2, the National Security Council System. The
AECA 76 activities focus on the preparation of (1) the
President's response to Section 202, and (2) the Secretary
of State's response to Section 218 of the AECA 76.
Presidential Review Memorandum No. 12 calls for a
thorough review of U.S. policy on international transfer of
conventional arms. The PRM effort is under the chairmanship
of the Department of State. Section 202 of the AECA 76 requires
the President to submit to the Congress by June 29, 1977, a
report on (1) arms sales policies and practices of the United
States Government; (2) the effects of such policies and
practices on world peace, foreign governments, and the
economic and social development of foreign countries; (3) U.S.
efforts at arms sales limitations during the past five years;
and (4) current efforts to initiate and encourage arms sales
limitations. Section 218 requires the Secretary of State, in
consultation with the Secretary of Defense, to submit to the
Congress by June 29, 1977, a report on the effects of the
enactment of the AECA 76 on (1) U.S. foreign policy; (2) the
CONNIDENTIAL-GDS (Declassified on December 31, 1983)
Jr 5/9/97
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136
U.S. balance of payments; (3) unemployment in the U.S.; and
(4) weapons procurement by the Department of Defense. State
has taken the lead in preparing both the President's responses
to Section 202 and State's response to Section 218.
The decision process pertaining to PRM 12 and
Sections 202 and 218 of the AECA 76 covers the period from
June 1976 to May 1977. During that time, a draft Presidential
Directive was prepared in response to PRM 12. The responses
to Sections 202 and 218 are still being developed.
In the same ten months since the enactment of
the AECA 76, a large number of executive branch agencies
have been involved in studying and formulating conventional
arms transfer policy. In order to facilitate understanding
of the process, a flow chart has been developed showing the
key players and their relationships, key documents, and
the general timing of events. (Figure 1 - next page)
2.
CHRONOLOGY
The Decision Process
As can be seen in the chart, the impetus for policy
review and formulation came from two sources: the President
and the Congress. On June 30, 1976, President Ford signed
into law, the AECA 76. During the transition period, the
President-elect and his advisers decided to begin a review
of international arms transfers immediately after the
Inauguration. Thus, PRM 12 was issued on January 26, 1977.
The PRM, which describes the policy area to be
studied and the praticipants, was prepared by the NSC staff
with some coordination with State and Defense. The PRC
membership for PRM 12 is as shown on the chart. Upon receipt
of the PRM, State named Les Gelb as its key staff member for
the interagency process. On February 9, 1977, Gelb called a
meeting of representatives from all the PRC organizations
and the Department of Labor, the Agency for International
Development, and the NSC. The EPG requested to participate
and was represented by Treasury at this first meeting of the
Working Group.
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Figure 1
CONVENTIONAL ARMS TRANSFER
137
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138
At the meeting, Gelb proposed that the Working
Group address not only PRM 12, but also the upcoming responses
to Section 202 and 218 of the AECA 76. This proposal was
accepted and specific tasks were assigned to the organizations
indicated for ACTION on the chart. They were to be assisted
by various combinations of the organizations indicated by
SUPP (support) on the chart. The organizations indicated
as COOR (coordination) were not assigned specific tasks,
but reviewed the work of the other organizations. The
involvement of the EPG, however, differed from that of the
other agencies. The EPG served as a review mechanism for
the economic aspects of the Working Group report. The EPG
re-assigned its task of studying the "impact of options on
U.S. economy" to Treasury. Treasury had already received,
as a direct task in the Working Group, the responsibility
for studying the "impact of arms export control legislation
on the U.S. balance of payments, trade with foreign countries,
and unemployment." The Working Group report on PRM 12,
including the Treasury section, was forwarded to the PRC
on April 7, 1977.
On or about April 4, the EPG Working Group
representatives requested that Treasury prepare a separate
report consolidating all of the economic aspects of the
PRM 12 study into a single document for review by the EPG
and submittal to the PRC. The report was written by
Treasury, edited by the EPG, and sent to the PRC members
on April 9, 1977.
On April 12, 28 days after the original PRM 12
deadline, the PRC met and reviewed the efforts of the
Working Group and the EPG report. As a result of that
meeting the NSC staff members, Jessica Tuchman and Robert
Kimmitt, prepared the minutes of the PRC meeting and a
decision memorandum which were submitted to the President
through Brzezinski on April 13, 1977. The President
responded on April 15. Based on the President's reaction
to the decision memorandum, the NSC prepared the first draft
of the Presidential Directive (PD) which was submitted to
the President the same day. The President then directed
Brzezinski to discuss the draft PD with Secretary of State
Vance and Secretary of Defense Brown. Based on those
discussions, the PD was redrafted by Brzezinski and forwarded
through the President to Vance on April 25, 1977, for
discussions with the Congress. Vance met with the members
of the House International Relations Committee and the Senate
Foreign Relations Committee on April 26 and 28, respectively.
These discussions led to a redrafting of the PD which the
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139
President intended to use as a talking paper at the Economic
Summit, his meetings with NATO leaders, and others. State
began to reshape the efforts of the Working Group to satisfy
the requirements for Sections 202 and 218 of the AECA 76.
During the same period, Treasury continued work
on rewriting its economic report for inclusion in the Section
202 and 218 reports. The EPG has decided to review the
Treasury report before it is submitted to State for the
Section 202 and 218 responses. The Treasury reports were
distributed for review by the members of the EPG Executive
Committee on May 4, 1977; that review is still in progress.
As of the writing of this report, mid-May 1977,
the President has not yet issued the Presidential Directive
on PRM 12, nor has State completed the Sections 202 and 218
responses. The issuance of the Presidential Directive on
Conventional Arms Transfer Policy awaits the President's
deliberations with foreign leaders. The events as shown on
the flow chart, beyond the submittals of the PRC report
and draft Presidential directive to the President, and the
Treasury 202 and 218 report to the EPG, represent the
expected future course of events.
3.
COMPLICATING FACTORS
Having described the process to date, this report
will now focus on a few of the events which served to complicate
the process and forced the 28-day delay in the completion of
the PRM 12 study.
a. From the time PRM 12 was issued on January 26,
until the meeting of the PRC on April 12, State called upon
the President to make a very large number of separate
decisions on arms transfers. The decisions involved case-
by-case, country-by-country reviews regarding which arms
transfer cases had to be released to the Congress as part
of the Budget process. While these 49 decisions did not
directly influence the efforts of the Working Group,
Group members felt that these Presiential decisions,
coupled with the concurrent activities on SALT (particularly
Vance's trip to Moscow), the Economic Summit, and others,
relieved the pressure on the Group to meet the March 15
deadline.
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140
b. PRM 12 represents one of the earliest uses
of the PRC process and, as such, a number of procedural
problems emerged which might be considered inherent in the
use of any new process.
C. It was approximately late March before a
full-time EPG staff member was available to participate in
the Working Group although Treasury did represent EPG in
the early going.
d. In submitting his FY 1978 Security Assistance
budget to the Congress on March 28, 1977, the President
promised to consult with the Congress before making a final
decision on arms transfer policy, and thus added another
dimension to the process. The staffs, in essence, had to
prepare two separate reports: one for the President, and
one for the President to use in discussions with Congress.
Additionally, since none of the Working Group members
were involved in these discussions, communication problems
increased.
e. Still another dimension was added when the
President decided to confer with a number of foreign
governments before deciding on any changes in U.S. arms
transfer policy. Again, the staffs had to prepare
another report, and again the potential for communication
failures increased.
4.
ANALYSIS
In general, the conventional arms transfer policy
decision process has worked reasonably well. While there is
still disagreement over some of the options and recommendations
presented to the President, most participants feel that the
process allowed a full and open discussion of the issues.
However, consensus was not reached in all areas. The major
areas of disagreement appear to be over the expected
effectiveness of the Arms Export Control Board (AECB) and
the extent to which the NSC staff condenses the efforts of
the Working Group. In the first instance, a number of
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141
Working Group members do not believe that the AECB can
effectively oversee the implementation of arms transfer
policy. Secondly, a number of participants feel that the
use of the PRC minutes and the Decision Memorandum in
place of the PRM study report reduces to an unnecessary
degree the information provided to the President. On the
other hand, the need for information must be balanced
with other demands on the President's time. Often, a
condensed version of a report is the only efficient means
of communicating. Most participants found the NSC staff
to be very helpful in interpreting both the PRM and the
issues covered from a Presidential perspective.
As with any new process, however, a number of
procedural problems arose: organizational responsibilities
were confused and sometimes duplicative; participants felt
overly pressured by deadlines, etc. These and other
problems are examined in the following discussion.
a. No explicit statement clearly identifying
the issues involved in the arms transfer area was ever
provided to the Working Group. The State Department acted
on its own initiative in broadening the PRM 12 study to
include Sections 202 and 218 of the AECA 76. The shortcomings
in the identification of the issues may have been caused by
the relatively short time between the Inauguration and the
issuance of the PRM on January 26. On the other hand, State
and Defense were the only agencies consulted before the
PRM was issued. The failure to include other agencies,
such as Treasury, OMB and CEA, clearly limited the perspective
of the PRM drafters. While time can be cited as the reason
for excluding other agencies in developing PRM 12, there is
no indication that agencies such as OMB and CEA have been
involved in developing subsequent PRMs. It can be argued,
however, that since the PRM only directs a study to be
performed and is not a study itself, fuller coordination
is not required.
b. No explicit process was defined for conducting
the PRM 12 study; neither has a general process been defined
for conducting a PRM-directed study. It should be
noted, however, that some agencies such as State have
developed a general system for handling PRM-directed
studies. The lead organization either unilaterally decides
on a study approach, as State did for PRM 12, or negotiates
one with the NSC staff or other PRC members. In either case,
a significant amount of time can be spent attempting to
properly organize the study effort. The discussions on
issue identification and process definition consumed nearly
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142
30 percent of the time originally allocated for the PRM 12
study. Additionally, continued confusion over the issues
and the process resulted in two major changes in approach --
issue coverage and policy options -- before the report was
finally submitted to the PRC on April 12, 28 days after
the original deadline of March 15, 1977. The late submittal
prevented the President from meeting a request from the
Senate Foreign Relations Committee to submit the Section
202 and 218 reports by April 15, 1977.
C. As with all PRM-directed studies, primary
responsibility for the effort changed hands twice during
the overall process. The NSC staff was responsible for the
PRM until it was approved by the President. Once the PRM
was issued, responsibility for conducting the study
passed to the lead agency as designated by the President.
After the report was submitted to the PRC, responsibility
was again placed on the NSC staff. The NSC staff then
prepared a report of the PRC proceedings and a decision
memorandum for the President.
Problems did and probably will continue to
occur as a result of both exchanges. If the agency designated
to lead the study was not adequately consulted or informed
prior to issuance of the PRM, then confusion over the issues,
such as occurred with PRM 12, is likely. Conversely, if
the lead agency's approach is contrary to that envisioned
by the NSC staff in developing the PRM, the NSC staff is
put in the difficult position of trying to influence the
lead agency without preempting that agency's authority.
Although this difficulty did not occur during the PRM 12
study, both NSC and agency staff members have indicated
the existence of this type of problem on other PRM-directed
studies.
At the other end of the process, the non-NSC
participants felt that the NSC staff took on too much in
attempting to prepare the PRC report and decision memorandum
on their own. The NSC argument is that line agencies and
departments must be excluded from this portion of the
process in order to ensure that the final report to the
President is uncolored by organizational biases. This
argument, however, does not appear to justify the total
exclusion of other White House or EOP units which share
with the NSC the task of assuring the objectivity of
information provided to the President. It is recognized
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143
that in some instances participation would of necessity need
to be limited, e.g., extremely sensitive or highly classified
projects. During either exchange, vertical communication
problems such as those mentioned in e. following, can occur.
In some instances, these Principal-Subordinate communication
problems overshadow the problems caused by changing lead
agency responsibilities. Several participants claim that
this was the real source of any confusion which developed
during the PRM 12 study.
d. The NSC system, in general, is an interagency
process with the flexibility to involve any or all executive
branch agencies. Nine different agencies were PRM 12
addressees and 12 different agencies were represented on
the Working Group.
This comprehensive involvement (see Attachment 1)
was not without cost, however. The time consumed in coordina-
tion probably increased with the number of agencies. While
there is nothing inherently wrong with an increase in
coordination time, the increase should not result from
needless duplication. The EPG involvement in PRM 12 appears
to represent just such a duplication. The primary contribution
which EPG made was the editing of the Treasury portion of the
PRM 12 and AECA 76 responses before submittal to State. Both
of the tasks assigned to the EPG were originally assigned to
Treasury, but were reassigned at EPG's request. EPG was
attempting to serve as an interagency coordinating body
for the economic aspects of the study. However, EPG's
function of interagency coordination clearly duplicated that
of the PRC. Other than involving Commerce, no addition was
made to the players already involved in the process.
Additionally, there is no evidence that Commerce's involvement
had any affect on the process. The direct participation of
CEA, OMB, Treasury, Labor, and AID in the Working Group would
appear to have insured proper consideration of the economic
aspects of arms transfer policy. In fact, the Treasury
treatment of the problem, covered more aspects of the
problem than were requested by either State or the EPG.
e. Whenever a very large number of organizations are
involved in a project, as in the PRM 12 study, precise role
definition and effective communication are essential to
efficient operation. The involvement of EPG over-complicated
the PRM 12 effort. For example, the OMB participants in the
Working Group, OMB/IA, did not know that the EPG was using a
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144
different OMB unit to handle the EPG review process. The EPG
staff used the OMB/EP because it was their normal point of
contact even though they knew who the OMB key staff member
was from their participation in the Working Group.
The other major problem in communication
involves the failure of principals to adequately inform
their Working Group members of decisions made at senior
level meetings, such as the PRC meeting. Several Working
Group members indicated that their only access to such
information during the course of the PRM 12 study was from
other Working Group members whose supervisors had kept
them informed.
f. The relatively short period originally allotted
for the PRM 12 study severely complicated the use of an
interagency approach to writing the report. The admittedly
unsatisfactory first draft was circulated by State in an
attempt to expedite the receipt of comments from other
Working Group members. As the deadline for submitting the
report neared, however, the process changed. The press
of time "forced" State to ignore any changes between the
third draft and the final report other than line-in/line-out
changes. Substantial efforts of agencies such as AID and
ACDA were, therefore, largely ignored because their ideas
on issue and option presentation would have required a
complete rewrite of the report.
The 28-day slip in the due date did not
substantially alter the quality of the inputs from Working
Group members. It was largely consumed by State in an
attempt either to consolidate the various inputs into an
overall report or to accommodate the two major changes in
approach mentioned earlier.
Time also affected the process in, perhaps, one
further way. A number of participants in the PRM 12 Working
Group and in other groups have expressed the feeling that
schedules appear to be as important as quality, if not
more important. In such an atmosphere, quality is bound to
suffer. While this generalization can be applied to nearly
anything, it is noted here because of the large number of
study participants who specifically mentioned it.
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145
g. There is no system for assessing compliance
with the PD which will result from the PRM 12 study.
Generally speaking, follow-up on any PD is left to the
initiative of the NSC staff member who participated in the
respective Working Group. While recognizing this shortcoming,
the NSC has not established as a firm goal the development
of a more formal monitoring process. It has been suggested
that in this situation the AECB will perform the monitor
role. A formal follow-up process is particularly important
in the conventional arms transfer policy area. Without such
a process, the benefits of policy formulation will be lost.
The President might again be called upon to make country-by-
country, weapon-by-weapon decisions on arms transfers. To
be meaningful, the policy should clearly distinguish the
specific cases which require Presidential attention.
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ATTACHMENT 1
CONFIDENTIAL
PRM 12 TASKS AND TIMETABLE
146
1. TASKING MEMORANDUM FOR PRM 12
Office Responsible
Intro-
for First Draft
Assisted By
duction
Subject
Introduction.
Defense ISA
ACDA, CIA,
Description of Problem, i.e,
State PM
who sells what to whom.
Trend in volume and compositio
of arms transfers. Trends in
release of advanced technology
Changes in recipients.
State PM
State S/P,
I.
Role of transfers in U.S.
Defense ISA
foreign policy and relationshi
to U.S. political, economic
and military interests.
ACDA
State S/P
I (a)
The feasibility and desirabili
of various unilateral and
multilateral initiatives to
restrict arms transfers on a
national, regional, and
global basis.
State PM
State D/HA,
I (b)
Consideration of such factors
Defense ACDA
as: the type of weapon,
equipment, or service being
transferred; the role and
activities abroad of commercia
arms suppliers; third country
transfers; transfer of high
technology and sensitive
items; coproduction; employme
of U.S. citizens on defense
contracts abroad; and
international standards of
human rights.
State PM
DOD
I (c)
The feasibility and desir-
ability of restricting all
U.S. arms transfers to
government-to-government
transactions.
State S/P
State PM
I (d)
Issues for decision.
II (a)
Identification and analysis
of basic policy options.
YOUR
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147
Office Responsible
Intro
for First Draft
Assisted By
duction
Subject
EPG
State EB,
II (b)
Impact of options on
Treasury,
U.S. economy.
Labor
Defense ISA
ACDA
II (c)
Impact on defense readines:
and procurement.
State PM
State S/P
II (d)
Impact on U.S. relationship
both recipient and supplie
States.
III
Current organizational
structure for departmental
and interagency considera-
tion of arms transfer
requests, and options for
mechanisms and procedures
to provide systematic poli
guidance in the future.
State H
State PM,
IV
Current relationship
Defense,
between executive and
NSC
legislative branches in
this area, and guidelines
and changes necessary for
an optimum relationship.
TABS (Unclassified)
ACDA
Defense,
I.
The risks to world peace
State PM & SP
from arms sales. (202)
AID
State EB
II.
An evaluation of the impa
of U.S. arms sales polici
on the economic and social
development of foreign
countries and considerati
of steps which might be
taken by the U.S. to
encourage the maximum use
of the resources of devel
ing countries for economi
and social development
purposes. (202)
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148
Office Responsible
Intro-
for First Draft
Assisted By
duction
Subject
TABS (Unclassified cont'd)
ACDA
Defense
III.
The efforts made by the
U.S. during the past
five years to initiate
and encourage arms sales
limitations. (202)
EPG
State EB,
IV.
The impact of arms export
Treasury
control legislation on th
U.S. balance of payments,
trade with foreign
countries, and unemployme
(218)
Defense
ACDA
V.
The impact of weapons
procurement by DOD. (218)
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149
2. PROPOSED TIMETABLE FOR PRM 12
February 15
Initial drafts due from agencies
February 17
Initial drafts due from Working Groups
February 18
Draft response to PRM 12 circulated for comment
February 24
Comments on first draft due
February 28
Revised draft with Executive Summary
circulated for comment
March 4
Comments due (meeting optional)
March 7
Final draft ready for presentation to
princiapls
March 10
Final submission of agency views (meeting)
March 15
Paper to NSC
FIDENTIAL