The Logical Man

(See Cover)

That table-thumping, hell-raising, commonsensical Republican, Charles Gates Dawes, could have had just about any job in Washington when Warren G. Harding was elected President in 1920. But Dawes, a banker by training and a rebel by instinct, wanted a job that didn't exist. "As much as I would like to see your Administration a success," he told Harding, "nothing could tempt me into public life now, except possibly Director of the Budget, if that office is created--and that

I would take only for a year for the purpose of putting it in running order."

Dawes got the job on his terms, and under the Budget and Accounting Act of 1921 the U.S. got the first semblance of formal balancing of revenue and expenditures in its 132 years. With all his Hell 'n' Maria* fiscal evangelism, Charlie Dawes moved fast to establish the prestige of the Budget Bureau. At his urging, the President called a special Cabinet meeting. Said Dawes to the assemblage: "A Cabinet officer, as I see him, is on the bridge with the President, advising him on the direction in which the ship shall sail. He will not properly serve the captain of the ship or its passengers, the public, if he resents the call of the Director of the Budget from the stokehole, put there by the captain to see that coal is not wasted . . . The way coal is handled and conserved determines how far in a given direction the ship will sail."

By the end of his year, the first Budget Director was so thoroughly in control that he had inspired cuts of $1.7 billion in Government expenses from the preceding fiscal year. Then, with the pattern set (he hoped), he quit as he had said he would, "for I detest this life ... As one who must be used to upset the status quo, I am not the logical man to continue the operation of the Budget Bureau."

Figures Talk. The logical man moved into office 31 years and five Administrations later. He is Rowland Roberts Hughes, 59, President Eisenhower's Director of the Budget. Dawes, dead these five years, would have been delighted to know that Hughes, who is about as far a cry from Hell 'n' Maria as a man can be, loves the job. Rowland Hughes came to Washington in 1953, a political innocent. A conscientious Christian Scientist since boyhood, he has never been known to raise his voice or slap a back--despite the swashbuckling appearance of an eyepatch that covers an eyelid injury.* By nature and by dint of 37 years' unbroken service with New York's National City Bank, he is that increasingly valuable U.S. type, the comptroller--or, as an honorary degree from his alma mater (Brown University) put it last June: "One of those rare individuals to whom figures speak in clear tones."

Even more remarkably, the job has evolved to the point where it is logical for Rowland Hughes. Before Dwight Eisenhower took office in 1953, he and his advisers worked out "The Great Equation" --the important relationship of maximum economic strength to military strength in fighting the cold war. Economic strength meant a drive to end inflation, and that meant an end to deficit financing. Cost-conscious, Ike was the first President to appoint his Budget Director to a permanent seat on the Cabinet and the National Security Council. Cabinet members not only make the trip to see Rowland Hughes in his office in the Old State Building, but most of them are so well-trained by the rigors of business life that they have a healthy respect for the job he is trying to get done.

On the Lid. In a household or a business, the essence of good budget-making is to reduce all assorted debts and dreams to the common denominator of dollars so that the budgetmakers can see how to get the most out of the money on hand or in prospect. Modern government is a collection of fragmented divisions and departments, each sure of its own manifest destiny and naturally inclined to expand without worrying whether total income balances total outgo. It is Rowland Hughes's job to provide the kind of lid for uninhibited government that limited funds impose on a housewife or a businessman--and to hold the lid down with the best of his 250 Ibs.

But this kind of counterpressure, as every corporation executive knows, should be something more than just sweating out pennies and dollars. Ideally, by forcing department heads to translate plans into costs, the budget process teaches them how to get the best combination of plans for the least money. For example, the Air Force's General Curtis LeMay has made his Strategic Air Command cost-conscious right down to squadron level. A squadron commander who performs his missions and keeps his costs down is usually running a superior outfit because he has found ways to cut the number of accidents, keep crews healthy, and reduce the time lost in overhaul. A good budgeteer gets his final test when he looks back over his year's estimates to see what kind of planner he really turned out to be.

Unfortunately for budgetmakers, the Federal Government was not constructed to make economic sense. Until 1921, individual executive departments went to Congress for funds. Time and again, petulant Congresses tried to hobble the President's powers by specifying right down to the last file clerk how the money should be spent. The Treasury Department doled out payments (most 19th century income came from customs duties) on congressional appropriation, and the accounting system was set up to assure that everyone was acting within the law--but not necessarily efficiently.

Because the U.S. was still dizzy from a $24 billion debt piled up in World War I, Warren Harding was the first President to win the right to revise, reduce or increase budget estimates from the departments. (Under the 1921 act, the penalty for the agency head who bypasses the Budget Bureau is a $500 fine and/or one year in jail.) The director was clearly intended to be the President's man, because Congress did not even require Senate confirmation of his appointment.

Voice of Prophecy. Ironically, the first President to violate the budget process was one who had been a strong advocate of it. As Assistant Secretary of the Navy (1913-21), Franklin Roosevelt campaigned in defense of the budget program. In the 1932 campaign he promised to balance the budget. He appointed Lewis Douglas, a conservative Arizona Democrat, as Budget Director.* But Roosevelt's sudden decision to spend the U.S. out of the depression was too much for the budget and Lew Douglas (who stalked out of his job). Finally, Congress just handed Roosevelt some $8 billion and told him to get it spent.

In 1940 old Charlie Dawes--with no inkling of what World War II's demands were about to do to his cherished budget --roared up out of private life to prophesy: "Some day a President, if he is to save the country from bankruptcy and its people from ruin, must make the old fight all over again, and this time the battle will be waged against desperate disadvantages. Against him will be arrayed the largest, strongest and most formidably entrenched army of interested Government spenders, wasters and patronage-dispensing politicians the world has ever known."

Shameful Brawls. Harry Truman tried hard to make the fight and he tried the only way he knew how. He was bedeviled by billions of new commitments--e.g., veterans' benefits, interest on the tremendous new debt--that he could do nothing about. So he slashed billions from the armed services on the valid theory that they had learned to live extravagantly in the lush days of World War II. A slash, his budget people told him, would teach the services to live efficiently; once they had learned austerity again, perhaps they could have some more money.

With hindsight it is easy to see the flaw in this reasoning. Truman needed first to work out a solid concept of what the armed forces were supposed to do in defense of the U.S., and then cut away the nonessentials. In the absence of this concept, the Budget Bureau was literally running military policy. This in turn provoked shameful interservice brawling like the 1949 "Revolt of the

Admirals" against the Air Force's B-36 program. Moreover, Truman made all of his major nonmilitary spending commitments, such as British loans, the Marshall Plan, the Bretton Woods agreement, without ever consulting the Budget Bureau at all.

Behind the Barricades. The first man Ike sent to Washington, before inauguration, was Detroit Banker Joe Dodge, who was ticketed as the new Budget Director. Dodge looked over the shoulders of the Truman team as they polished up the $78.5 billion budget that Eisenhower would have to live with in fiscal 1954 (July i, 1953 to June 30, 1954). Before the year was over, Ike abandoned what he called "feast or famine" military policy in favor of the "long haul," with its accent on nuclear air power. Dodge, for his part, pruned $10.8 billion from the Truman budget, worked out a $65.5 billion budget for fiscal 1955, then went home to Detroit,* turning the job over to the man who had been his deputy for a year, Rowland Hughes.

Joe Dodge drove the "formidably entrenched army of Government spenders" as far back as he could, and rebuilt the budget barricades. Hughes operates somewhat more snugly behind them. Nonetheless, he is out of bed, in his northwest Washington apartment, at 5:30 a.m. to read for an hour. At 7 o'clock his wife, Dorothy (they met at a Science church in 1918 in Shanghai, where her father, James Cowen, worked for Millard's Weekly and Hughes was working for the National City Bank branch), announces that she is ready with breakfast: orange juice, one egg, two strips of bacon, hot lemonade. (Hughes's other culinary tastes are mostly simple. He likes steaks, roast beef and pudding, but also has a flaring passion for curry--derived from a four-year tour of bank duty in Bombay.) He is usually in his office by 8:45, works until 6:30 p.m.

His job rates a chauffeur-driven Cadillac, but, to set a budgetary example, he turned it down. The Hugheses used to show up at the "must" parties in a hired limousine (at $20 a night), but abandoned that custom after the limousine broke down on the way to pick them up for a White House dinner for Queen Mother Elizabeth; they skinned in just as the band broke into Hail to the Chief. Now they drive everywhere in their Ford Victoria, and some legitimate government expense eats its way into their own stern personal budget. (Hughes took a 75% salary cut to come to Washington for the Budget Director's $17,500.)

Behind the Figures. Hughes began work on the 1957 budget last May, when he sat down with the President, Treasury Secretary Humphrey, a group of economists and other brass to block out the broad policies that would shape the year. At that first meeting they aimed toward a balanced budget, assumed continued prosperity and no hot war. In June the Cabinet approved the basic assumptions. Then Hughes wrote policy letters to each agency head, giving him the broad guide lines, asking for a 5% cut, setting a tentative department budget ceiling, and requesting estimates by Sept. 30.

Many departments were already deep in their planning for fiscal 1957; thanks to the long haul, the Air Force, for example, had been programming fiscal 1957 since Oct. 7, 1954. Through the summer, all departments worked out their tentative figures, with assists from the bureau's corps of 150 specialists. ("They're very good," admits Navy Secretary Charles Thomas.) Most agencies met the Sept. 30 deadline, sending in their appropriation requests on the notorious "green sheets," and their justifications on white "language sheets." Soon afterward, the Budget offices buzzed with final hearings, as the bureau's examiners delved deep into controversial items. For example, in considering the money request from the St. Lawrence Seaway Development Corp., Budgetmen asked to see maps of dam locations, asked why one dam was not located at a narrows. Answer: rock formations made construction more costly at the narrows than elsewhere.

By mid-November most arguments were threshed out, and the bureau examiners went upstairs to defend their figures before the Director's Review, presided over by Hughes's deputy, Percival Brundage (ex-senior partner of the Price Waterhouse accounting firm). Some half-dozen times Hughes snapped the latest batch of approved budgets into a notebook, and took them to Gettysburg for presidential approval. When the President would give "his O.K., Hughes would write the agency head what is called an "allowance letter," stating the presidential-approved figure. Only six budgetary points went over his head to the President, and these included the controversial programs for foreign aid, agriculture relief and defense (which Ike always decides personally anyway).

Caught by Cotter Pins. Washington has been something of a jolt for the man who has spent a lifetime in the symmetrical, sense-making world of banking. In auditing Defense Department expenses, for example, he learned that a few expensive, unnecessary items had to stay in the budget because they affected the home folks of Congressmen or Senators with critical votes to cast on the whole budget. He had to learn to jump at a growl from the members of the House Appropriations Committee. Only last week, while his head was swimming with the billions of the new budget, old John Taber, ranking Republican on the committee, confronted him with a packet of individually wrapped cotter pins and washers and demanded an explanation for such flagrant waste.

Part of the Budget Bureau's job is to clear all proposed legislation before the executive agencies submit it to Congress; this not only allows the bureau to shortstop any requests for new spending, but ensures the President that nobody is proposing legislation contrary to his announced policies. (The Budget Bureau keeps a card file of presidential opinion on all subjects, even compiled one on Adlai Stevenson in 1952 for use had he won.)

In 1953 Joe Dodge flagged the President that TVA was asking for money for a new steam plant at Fulton, Tenn. This was a fresh challenge to Eisenhower's resolve to keep government out of business if private industry could do the job as well. Dodge hired Adolphe H. Wenzell, vice president of the First Boston Corp. (investment bankers), to suggest ways of getting the plant built without tapping the budget. The now celebrated Dixon-Yates contract (TIME, Aug. 2, 1954 et seq.) was the result.

Last February Alabama's Lister Hill charged in the Senate that Wenzell's firm, the First Boston Corp., stood to make a profit from handling Dixon-Yates financing. The Kefauver committee dredged up the fact that Wenzell had asked Rowland Hughes if his Budget Bureau work presented a conflict of interest. When Hughes was summoned, he replied vaguely that he had told Wenzell to check with First Boston and Joe Dodge. Non-politician Hughes was jolted to his eyeteeth to discover that he was suddenly a major target in the all-out Democratic attack on the Dixon-Yates contract. Rattled by the committee's questions, he suffered lapses of memory on vital points, and left a bad impression. He was at his most lucid when he said: "We may have made mistakes, the Lord knows, but there was nothing phony or dishonest or any conspiracy with anybody as far as any dealings that we had . . . Now today, with all that I know now, I certainly would have done differently."

Calculated Confusion. The forces of politics, and the planned inefficiency of a system of checks and balances, will always partially sabotage any U.S. budget program. To these old problems, modern government has added a new and perhaps greater trouble for the top budgetmakers: the experts in the bureaus know so much more about the technical details than any Budget Director or President or Congressman can ever hope to know that the discussion of specific appropriations is always loaded in favor of the bureaucrats. Honestly and inevitably, each bureaucrat, convinced of the importance of his own work, tends to maximize his estimates. The advocacy representing the Government's parts is more powerful than that which speaks for the whole. That is one reason why many Government functions continue to grow and others hold their own even in an administration whose top leaders believe that Government should shrink.

Joe Dodge and Rowland Hughes probably have come as close as is presently possible to fusing business efficiency with the myriad and disparate bureaus and functions of the U.S. Government. Again it was Charlie Dawes, the man with the first word on the budget, who also had the last word on the paradoxes that might arise when a department of orderliness tries to operate in a government of calculated confusion. "Much as we love the President," he adjured his fellow budgeteers, "if Congress, in its omnipotence over appropriations, passed a law that garbage should be put on the White House steps, it would be our regrettable duty, as a bureau, in an impartial, non-political and nonpartisan way, to advise the Executive and Congress on how the largest amount of garbage could be spread in the most inexpensive and economical manner.

*Dawes, General Pershing's chief purchasing agent in World War I, earned his nickname when a 1921 congressional committee was investigating war expenditures. Asked Indiana's Representative Bland: "Is it not true that excessive prices were paid for mules?" Roared Dawes: "Hell 'n' Maria! I would have paid horse prices for sheep if the sheep could have pulled artillery to the front!" * Hughes wore no eyepatch until about five years ago (see cut), is reluctant to discuss it because of Christian Science attitudes toward injury and disease. He credits Christian Science with curing an illness that kept him bedridden in childhood, has said that he will not be wearing the patch forever. *By unhappy coincidence, ex-Budget Director Douglas also wears an eyepatch. In 1949, while U.S. Ambassador to Britain, he was casting for salmon in West Hampshire, snagged a fishhook in his left eye. He adopted the patch to avoid double vision--incidentally inspiring the advertising campaign of the Man in the Hathaway Shirt. * To return to Washington in December, 1954 as Ike's special assistant on foreign economic policy.

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