Alice Rivlin Made State and Local Governments Better, Too

May 27, 2019 

By Tracy Gordon, External Advisor, GFRC, and Richard C. Auxier, Research Associate, Tax Policy Center

Our Tax Policy Center (TPC) colleague Bill Gale – no slouch when it comes to diagnosing federal budget ills and suggesting remedies – says he had an epiphany early in his tenure at the Brookings Institution. He realized all his work might be derivative of Alice Rivlin’s. We state and local budget geeks feel exactly the same way.

Alice, who passed away last week, was best known as a federal policy trailblazer — inaugural director of the Congressional Budget Office, first female director of the Office of Management and Budget and vice-chair of the Federal Reserve Board. But she also was a champion for federalism—or balanced power among federal, state, and local governments.

A half century before academics, journalists, and politicians became fixated on regional differences in economic prosperity, Alice pioneered (with Selma Mushkin at the now defunct Advisory Commission on Intergovernmental Relations) a method to measure the ability of state and local governments to provide a basic set of goods and services to their residents.

We and others continue to use the same method today.

As CBO director, Alice oversaw the publication of seminal analyses of city fiscal, economic, and social conditions with an assist from Robert Reischauer, who became  CBO director and eventually president of  the Urban Institute. And, in 1992, Alice wrote “Reviving the American Dream” – a favorite of then-governor Bill Clinton. The subtitle – “The Economy, the States, and the Federal Government” – explains why.

Alice argued forcefully for devolving education, housing, infrastructure, and more to states and localities while leaving health care responsibilities to the federal government. The feds would send states big checks (via new federal taxes on energy or consumption), get the federal budget deficit under control to keep interest rates low, and then get out of the way.

Alice didn’t argue for this devolution as a proponent of states’ rights. Far from it. Alice believed in a robust federal government. But, as an economist, she was also a firm believer in specialization and “dividing the job.” Having governments focus on what they did best would also help rebuild public trust, she thought. She was a legendary optimist.

While her federalism agenda wasn’t adopted, Alice’s 1992 guidance and warnings still loom large in today’s domestic policy debates over issues such as Medicaid expansion and federal support for higher education.

But Alice did far more than just design theoretical policy fixes. In the late 1990s, she took on the thankless role of chairing the District of Columbia’s Financial Assistance and Management Authority (known as the Control Board). After years of financial mismanagement and economic decline, the city was deep in debt and had lost its ability to borrow in the bond market. Alice shepherded a plan for the federal government to relieve the District of some of its most burdensome state-like obligations in exchange for the Board taking tough steps to balance the city’s budget. The result: The city regained  sound fiscal footing.

By the way, Alice was not a fan of wresting control from local officials. She believed that “[The Control Board] should act more and more like a board of directors, a policy board, and strengthen the administrative team in the city so that we really have in place, and functioning, a city that can run itself well without a board.” She also argued for statehood for the District of Columbia.

Former DC mayor Tony Williams explained  why Alice was so successful at building consensus on the Control Board and elsewhere. She had, he said, a deep respect for listening and appreciating real people and their concerns. And throughout her Brookings career, she taught, served on community boards, and mentored countless aspiring researchers and policymakers.

Alice was budget policy’s LeBron, and she will be dearly missed.

This article was first published by TaxVox.