OMB Nominee Tied to Furor Over Ketchup

James C. Miller III, President Reagan’s nominee for budget director, approved a 1981 Administration cost-cutting plan that would have counted ketchup as a vegetable in school lunches, it was reported Sunday.

Miller now heads the Federal Trade Commission. He was chief of the regulation department at the Office of Management and Budget in 1981.

The proposed school lunch rules, which were withdrawn because of strong opposition, would have allowed the nutritional value of condiments such as pickle relish and ketchup to be counted in fulfilling the requirements of a government-subsidized school lunch.

The Agriculture Department’s Food and Nutrition Service wrote the proposal, but papers obtained by United Press International show that Miller, as the OMB administrator for information and regulatory affairs, gave his personal approval to the plan.

“On the basis of that, we went ahead,” said William Hoagland, who was administrator of the Food and Nutrition Service at the time.

Miller, 43, faces confirmation hearings before the Senate Governmental Affairs Committee on Tuesday. He refused to comment on his role in the ketchup issue.

Misunderstanding Claimed

One of his aides confirmed Sunday, however, that Miller received notice of the proposed school lunch regulations, but said that his acknowledgement of the notice was misinterpreted by the Agriculture Department as permission to go ahead with the plan.

“They mistook that for a sign-off,” said the aide, who requested anonymity. “Jim did not intend to be signing off on it.”

The Miller aide said the approval process was just getting started at the OMB when the school lunch proposals were made. Although Miller referred the matter to a lower-ranking officer, the aide added, “this one was never reviewed by the executive process.”

Of the school-lunch regulations, OMB spokesman Ed Dale said that any new proposals were “all cleared by OMB before they could be published in the Federal Register (as the first step toward enactment).”