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901 June 9,1992 ALAWMAKER'S GUIDETO BALANCdG THE FEDERAL BUDGEI INTRODUCTION Congress soon will vote on a praposeti constitutional amendment requiring the fed mil government to balance its budget. If Congress passes the amendment with a tw o hi& vote in each chamber, and if threequarters ofthe states ratify it within the next RVO years, Congress could be required to pass a balanced budget as early as fiscal year 1997..
While sentiment fm such an amendment is mng, passage is by no means assu red 3ne -on for this is that some lawmakers fear that the only way to achieve a bal mnd federal budget by 1997 would be through huge tax hikes, deep def- cuts, and wbstantial benefit cuts in the major entitlement programs such as Medkaxe, Medicaid imdSoci alSecurity.Thispessimisticview seemedtoreceivesupportinaIeportre leased recently by Representative Leon Panetta, the Califarnia Demouat and chairman d the House Budget Committee.
Yet a balanced budget can be achieved by 1997 with no tax incnases, no me cut s beyond those already piroposed by the Bush Administration and no cuts in major entitlement benefits Panetta report usefully identifies dozens of ways of cutting wasteful spending that wiU inflict no fiscal p
n at all. If Panetta's committee wcrc to suppart these cuts, Congnss would be well on the mad to eliminating the annual federal deficit.
Building on Panetta's Plan. Instead of rejecting betta's plan as too draconian therefa, lawmakers should use parts of it as the cafllQ8tollc for constructing a mor e thorough, imaginative plan for cutting unnecessary federal spending. Heritage Founda tion scholars have &vel /p>
such a comprehensive deficit reduction plan, outlined in the Appendix to this study. Using the Panetta plan as a guidehe, Heritage scholars hav e idenflied &kit duction measures totalling mly $680 billion over five ytars with a $237 billion in savings in the fifth year to meet the balanced budget target date.
These 8n the same targets as in the Panettaplan. But in contrast to Panetta's plan, the Indeed, rather than making a case against the balanced budget amendment, the Heritage plan requires no tax increases, no cuts in major entitlement benefits, and no cuts in defense spending beyond those already planned.by Secretary of Defense Rich ard Chen e y Thus the fear that a balanced budget will quh huge tax hikes or savage cuts in social spending is unfounded and should not stand in the way of the proposed amendments THE PANETTA OPTIONS FOR A BALANCED BUDGET The Panetta-bdaxiced budget plim contiiins.t h ree OptionSfor achieving $630Mlion in deficit reduction by fiscal 1997 Option 1 achieves the goal solely through spending cuts; Option 2 achieves two-thirds of the necessary deficit reduction with spending cuts.and.one.third-with.tax-increases and-Option .3-adopts. spending.cuts.for.one~half of the target, and tax increases for the other half.
According to Panetta, his plan contains the hard choices that lawmakers must be willing to make if they are serious about deficit reduction. In Option 1, these hard choices include cuts in Social Security and other retirement benefits totaling $98 bil lion; taxing the insurance value of Medicare (a $26.8 billion savings military retire ment cuts totalling $6.8 billion; and additional defense cuts totalling $168 billi o n The thought of cutting such politically sensitive programs would, of course, make most lawmakers quake, giving them a strong reason to oppose a balanced budget amendment. Indeed, most observers assume this is Panettas intention. If so, it just is the la t est example of the old Washington Monument Ploy, a favorite trick of law makers and bureaucrats who wish to derail spending cuts. Under this tactic, opponents of a budget reduction propose to eliminate the most politically sensitive programs for example, c losing the Washington Monument-rather than cutting non-essential items. The aim is to so enrage the public that opposition mounts against the proposed cut. In a similar vein, perhaps, Chairman Panetta praposes a massive cut in Social Se curity, but leaves untouched the bloated budgets for congressional staff, as well as lawmakers mailing privileges. His plan also cuts deeply into Medic= spending, but trims only 1 percent out of the overhead expenses of all civilian agencies. The Panetta plan displays hard c hoices-but it carefully ignores what should be easy choices for lawmakers genuinely concerned about reducing the deficit BUILDING ON THE PANETIA PLAN Still Panetta has done taxpayers agreat service; Few lawmakers have been willing to admit that cutting ra m pant federal spending is the key to deficit reduction. But Panetta implies this Wughout his plan. Indeed, two of the plans three options achieve more than half of their deficit savings through spending cuts. And while several of Panettas cuts have little p olitical support, and seem almost designed to trigger opposition, many others have been proposed in the past by congressional research agencies, private re search organizations, and federal agencies. For instance, the plan includes an extensive list of pr o grams for reform or termination, and many of these recommendations have for years been proposed by the Congressional Budget Offke (CBO the Wice of Management and Budget (OMB and the General Accounting Office (GAO 2 Letting Agencies Save Money ral ways. Fo r instance, the proposal recommends that Congress =peal a variety of aws that actually prevent it from reducing the deficit. Example: The 1990 budget rgreement contained enforcement rules that prevent Congress and the Administration hm using funds raised f r om the sale of government assets for deficit reduction. This s like a bank telling a family it must fmclose on their farm because the bank cannot out as a mortgage payment the money the family has just deposited from a stock sale. ind should be sold to th e private sector. Some of these, such as the Naval Petroleum Reserves, the -Power .Mar~ting.Administrations;the~National Helium -Reserves, and he National Fertilizer Development Center are the obsolete legacy of public needs From before World War II, but s t ill would command a good price on the open market n an era when governments from Moscow to Mexico City are transferring govern nent assets to the private sector, it is ironic that the US. Congress has rules that dis ourage the federal government from sell ing assets to reduce the deficit.
Heritage scholars also urge Congress to help reduce the deficit by reversing its cur rent practice of preventing agencies from using certain costcutting techniques. Since 1988, for example, Congress has prohibited the Farm ers Home Administration FmHA) from hiring private debt collection hs to collect delinquent loan payments x selling loans to the private sector. This prohibition farced the FmHA to write off some $8.5 billion in loan losses in the last three years. By cont rast, FmHA raised nearly $4 billion for the Treasury in 1987, the last year in which the agency was al lowed to sell its loans to the private sector.
The government is prohibited from selling a total of some $205 billion worth of out standing hct loans. Th ese loans should be sold to the secondary loan market in much the same manner that a mortgage company sells its loans. Liquidating this portfolio could contribute billions of doh toward deficit reduction The savings proposed by Heritage scholars go beyond the Panetta approach in sev The federal government currently holds billions of dollars worth of assets that could Making Federal Programs More Efficient The federal budget contains much wasteful spending that helps no one, save perhaps the bureaucrats who collect or spend the money and private htemts that deliver ser vices at inflated prices. These programs can be overhauled, and spending cut, without a reduction in services or benefits for the poor Example: Freezing government civilian agency overhead exp e nses for two years can save some $78 billion over five years without lowering the quality of government services Example: Some $7 billion can be saved over five years by consolidating over 60 environmental programs'into a single block grant to the states, and sim plifying the federal rules now hampering state flexibility and creativity.
Such a ref- would eliminate overlapping federal programs and allow each state to stretch funds further in the manner best suited to meeting its en vironmental needs 3 Examp le The federal government-spends about $18 billion each year on hous ing for the poor. But most of this money never reaches the poor. Instead, it ends up in the pockets of high-priced and well-connected contractors, social service groups, and local public housing authorities. The public housing pro gram in particular is grossly mismanaged and wasteful, and supplies often inadequate housing to the poor. Currently, about lo0,OOO of the nations 1.4 million public housing units are vacant. Yet the federal gove rnment dis burses-operating subsidies for-these vacant units-to local housing authorities.
Furthermore, studies indicate that it costs about twice as much to provide housing assistance in the public housing pmgram, or by subsidizing new pri vate constructi on for poor families, than by simply giving poor families a Lhousingvoucher-and-letting them use it to help.pay-the rent in an-existing apartment of their choice. Thus transferring funds from new public housing to housing vouchers would save money while h ousing mare families Reducing Entitlement Costs, Not Benefits Entitlement progaps need to be refmed. They are the most rapidly increasing zomponent of the federal budget, and often they are poorly designed to achieve their objective.
Yet while stqdies by Heritage Foun&tion scholars, like studies from other organiza tions, have called for the curbing of many entitlement benefits, it would not be neces sary to reduce these politically sensitive benefits in arder to comply with a balance d budget amendment. Needed instead are steps to reduce the underlying costs of provid ing major entitlement benefits.
Consider health care. Controlling the spiraling growth of government-provided health care programs, principally Medicare and Medicaid, is a central feature of both the Heritage and Panetta plans. The Panetta plan offers two options for achieving sav ings in these programs. The first option is to raise fees and taxes on beneficiaries in ad dition to imposing a variety of price controls and o t her restrictions on providers. The second option simply is labeled health care cost containment, without any indication of what the measures would be. Panetta calculates that each will save $34 billion in fis all997 and $1 14 billion between 1993 and 1997 Needless to say, a proposal for new fees and taxes on Medicare users, or vague talk of unspecified cuts in the programs costs, seems almost calculated to generate strong opposition among the nations elderly to a balanced budget amendment.
The Heritage plan, by contrast, proposes health care savings of $35 billion in fiscal 1997 and some $71 billion between 1993 to 19
97. But these savings would be achieved without a reduction in medical services and benefits and without taxing bene ficiaries. The reason f or this is that the Heritage budget plan calls for the enactment of national health care reform legislation. This is in line with the consensus on Capitol Hill, and among ordinary Americans, that fundamental =form of the health care sys tem is needed. Pro p onents of all the rival reform plans agree that major cost reduction would be achieved by their plans 4 Currently there are three major reform proposals being considered in Congress. In the SingleAPayer, or.~anadian-style.approach;the federal govhent woul d be the sole provider of medical services In the Playa-Pay system, businesses would be re quired either to supply their employees and their dependents with at least basic medi cal coverage or to pay a fee to the government to fmance public coverage for th e ir em ployees. Consumer choice plans, such as that developed by the Heritage Foundation would provide families with a tax credit or voucher to help pay for medical insurance Proponents of-.each.of.these proposalsrcalculate. significant. saais in medical c o sts if their proposal is enacted. Thanks to such reductions in the general cost of medical care, government-funded programs could enjoy savings without reductions in the qual ity or volumes of services available to beneficiaries. Thus the Heritage budget p lan as sumes-reductions -in pmgram-costs;withoutbenefitmxMions; if Congress -enacts .one of the three major health care reform proposals CONCLUSION The failure of Congress and the Bush Administration to get Americas fiscal house in order deepened the rece s sion and has led to a budget deficit this year of nearly $400 billion. The American people understandably now treat Washington with deep disgust and cynicism A constitutional amendment to balance the budget would help restore growth to the economy and con f idence to the consumer and taxpayer No Draconian Cut& Opponents of the amendment, many of whom want no curbs on the ability of lawmakers to vote for popular programs and then pass the tab to the next generation, claim that an amendment would mean draconia n cuts in basic pro grams. But as the Appendix to this study shows, a balanced budget can be achieved without new taxes, major entitlement cuts, or defense cuts deeper than the Administra tion has proposed. The budget can be balanced solely through accepta b le reductions in federal spending. Thus members of Congress who are worried that the budget cannot be balanced without politically unacceptable measures need not fear. And lawmakers who oppose the amendment have to explain why they resist reasonable spend i ng reduc tions in order to eliminate Washingtons red ink Scott A. Hodge Grover M. Hermann Fellow in Federal Budgetary Affairs 5 Appendices This Appendix is divided into three sections. Appendix I compares HouseBudget Committee Chairman-Leon-Panettas-Optio n -1with the Heri tage Foundations deficit reduction plan. Appendix II is a summary of the Heritage recommendations with the fiscal 1993 to fiscal 1997 savings. Ap pendix III explains these recommendations in greater detail and indicates the cost savings t hat would be achieved in the first and fdth years, and the cumulative five-year savings.
In most cases, Heritage analysts drew upon the hundreds of spending cut recommendations already suggested by the Congressional Budget Office the Office of Management and Budget, and the Generdl Accounting Office.
Many recommendations also have been taken from Panenas balanced bud get plan-in some instances, Heritage analysts have expanded upon these recommendations to achieve even greater cost savings.
In nearly every instance, the itemized savings here m taken directly hm the sources cited above. When this was not possible, the savings wen calcu lated by Heritage analysts using Congressional Budget Office or office of Management and Budget baseline estimates.
The pro gram savings m arranged using the official numbers that classify subject areas within the federal budget. Known as budget function numbers these group programs according to their general mission, regardless of the agency administering the program 6 Append i x I Panetta Deficit Reduction Plan: Option 1 vs. The Heritage Deficit Reduction Plan Total Spending Cuts Defense buts Non-Defense Cuts Table 1 Representat~~~on.Flanettas Deficit Reduction Plan: Option 1 37 -65 -102 -153 -203 -560 4 -6 -16 -40 -63 -128 33 - 59 -86 -113 -140 -432 Interest Savinas I -1 -5 -11 -20 -34 -70 Table 2 Heritage Deficit Reduction Plan Note: Figures represent fiscal years. Defense cuts are Feductions from 1990 Budget Summit Agxeement spending levels. L I Interest Savings I -1 -5 -11 -2 0 -37 I -15 Total Spending Cuts -52 -87 -116 -152 -200 -605 Chenev Defense Cuts -5 -4 -5 -5 -8 -27 I Non-Defense Cuts -47 -83 -111 -147 -192 -578 Note: Figures represent fiscal years. Defense cuts are Bush Adminiseation planned reductions from 1990 Budget S ummit Agreement spending levels 7 Appendix II Summary of Heritage BudgetCuts Savings in Millions Budget Function Number Program Change 1993 1994 1995 1996 1997 Total 150 150 150 150 '251 253 253 253 27 1 27 1 271 27 1 27 1 27 1 274 301 301 301 302 302 302 302 302 304 304 304 304 306 306 306 306 35 1 35 1 ReduceExport~fmportBa~ik~dits 30 90 Trim FoIeign Discretionary Assistance 646 1,218 Reduce ESF by 50 Percent 342 683 Cancel the Supercollider '200 410 Cancel Space Station 1,050 1,850 Cancel Planned NASA P r ogws 100 180 Cancel NASA Rocket Motor 250 420 Raise PMA Debt Repayments 399 432 Eliminate Clean Coal Program 0 5 Sell Naval Petroleum Reserves 100 200 phase Out REA Loan Subsidies 30 70 End Energy R&D Funding 290 615 Hike Uranium Enrichment Fees 183 183 C u rb Additional SPR Funding 70 160 Inland Waterway User Fees 350 360 Eliminate Water Subsidies 100 191 Merge Overseas Broadcasting 100 200 Change Revenue Sharing Formula 190 200 Raise Hardrock Mining Work RequiEment 0 60 Raise Recreation Fees 170 180 5-Year Land Purchase Moratorium 330 340 Eliminate Below-Cost Timber Sales 20 30 Eliminate CRP Payments 365 738 Merge 60 Environment Programs 200 400 Eliminate Wastewater Grants 90 530 Refom Superfund Program 160 380 Private Superfund Financing 75 190 Eliminate N C ZM, Sea College Grants 50 50 Close Federal Helium Reserves 128 133 Privatize NOAA Fleet 50 50 Reduce Local NOAA Projects 44 45 Lower Target prices 3 Percent Per Year 440 1,550 End Crop Insurance Program 270 620 9 130 1,875 1,040 3 SO 520 2,200 200 480 453 60 300 130 953 183 160 380 289 210 60 190 345 45 1,136 1 ,Ooo 1,250 600 310 50 138 50 47 2,150 640 170 2,687 1,433 320 540 2,250 200 510 458 90 600 200 1,644 183 210 390 544 210 60 200 356 60 1568 1 ,900 1,850 660 270 50 143 50 49 3200 650 200 3,718 1,833 310 550 2,350 210 530 454 120 1,200 244 3,400 183 220 410 1,100 220 60 210 364 75 1,905 2500 2,150 740 280 50 150 50 51 5,950 660 620 8,454 5,331 1,040 2300 9,700 890 2200 2,196 270 2.40 674 6,902 915 820 1,890 2,224 1,050 240 950 1,740 230 5,740 6,000 5, 9 00 2550 1,100 250 692 250 236 13,290 2,850 No. Program Change 1993 1994 1995 1996 1997 Total 35 1 35 1 352 352 352 352 352 37 1 37 1 End Honey, Wool, Mohair Subsidies 20 End Dairy Subsidies 42 1 End Export.Enhancement Program 310 End Market Promotion 100 L imit Foreign Loan Guarantees 45 Reduce ACIF Lending 101 Merge USDA.Extension/Field Offices 575 Reduce FHA Losses Phase Out GNMA 971.4mpmve FHA Debt Collection 371 37 1 376 376 401 401 401 401 401 401 402 402 403 403 45 1 452 452 452 452 501 501 501 501 50 2 502 502 502 503 503 504 Stop FmHA 502 Loans Stop FmHA 515 Loans End Small Business Administration Loans Eliminate the ITA Eliminate the ICC End Highway Demonstration Projects Cut Mass Transit Funding 50 Percent Limit Federal Highway Spending End AMTRAK S u bsidies Make FAA Self-Funding End Essential Air Service Subsidies Eliminate Airport Grants-in-Aid Raise Coast Guard Fees End Maritime Subsidies Reduce CDBG Funding by 50 Percent Devolve Rural Development Funding End Federal TVA Funding Transfer ARC Functi o ns to States Eliminate EDA End Untaqgeted'Vocational Funding End Student Incentive Grants Eliminate Impact Aid Cut Outmoded Education Programs End Work Study Program Tighten Pell Standards End SEOG Program Reduce Stafford Defaults Eliminate NEA NEH Cut Fu n ding for CPB Merge 12 Educatioflraining Prpgrams 200 100 L20 500 40 450 110 20 295 470 320 450 3,550 39 315 700 284 325 20 40 10 50 145 35 630 5 140 70 135 900 780 64 480 200 300 I 20 660 280 600 170 25 1,160 940 1,350 500 4,670 39 755 700 278 685 120 120 60 130 304 75 780 25 1,350 340 27 1 1,350 990 110 980 200 300 20 730 355 620 180 25 1,456 1,375 1,950 525 5,310 39 1,624 750 278 1,065 265 140 120 210 472 80 840 40 1,450 360 416 1,400 1,100 170 1520 210 190 366 354 740 .670 200 200 410 420 119 139 L .965 1,020 10 200 320 640 200 450 161 1,090 200 600 40 800 410 650 180 25 1,518 1,777 2,300 550 5,770 39 1,874 750 267 1,467 400 150 160 260 650 80 870 40 1500 380 567 1,450 1,150 235 2,090 200 348 610 200 400 184 1,090 200 700 PO 870 445 670 190 30 1575 3,500 2,650 595 6,2 15 39 2,050 800 237 1,896 500 1 60 190 280 840 85 900 40 1550 390 726 1500 1200 304 2.695 830 1,810 2,950 90 1,650 704 4,740 1 ,000 2,000 100 3560 1530 3,000 860 125 6,005 8,065 8,550 2,620 25510 195 6550 3,700 1,344 5,438 1,310 610 540 930 1 ,940 355 4,020 150 5,990 1550 2,115 6,600 5,220 885 7,764 No. Program Change 1993 1994 1995 1996 1997 Total 506 Cansolidate Social Service Programs 0 506 Trim SSBG Funding by 50 Percent 280 550 Reduce NIH Research Funds 15 Percent 400 550 AFDC/Medicaid/Fo o d Stamp Admin. 470 553 Cut Health Education Subsidies 120 570 Medicare Secondary Payers 500 570 DirectMedicarePayments 160 570 Indinxt Funding to 3 Percent 1550 570 Medicare Safeguard Funding 1,100 570 Charge SMI Electronic Fee 230 570 -National Health Ca r e Reform 0 600 Two-Week Wait on UI 0 602 End Lump Sum Payments 0 602 Federal Pension Reforms 330 603 End Trade Adjustment Assistance 220 604 Tighten Public Housing Standards 50 604 Use Housing Vouchers 2 604 Use Elderly Housing Vouchers 0 604 End HUD Util i ty Payments 25 604 Eliminate HUD Earmarks 0 604 RefomHUDCIAP 300 604 Turn Prepayments into Vouchers 320 604 Freeze Housing Slots at 4.6 million 70 604 Include Food Stamp Value in Income 1,080 605 State Food Stamp Reimbursement 500 605 Restrict School Lunc h Subsidies 1 so00 605 Workfare for Food Stamps 50 609 TrimLIHEAP 730 609 Limit AFDC Allowance 500 609 Cap Foster Care Administration Costs 65 700 Close Underused V.A. Hospitals 65 604 Section 8 Housing Reforms 610 700 Improve V.A. Care 700 Raise V.A. Loan Fee 700 Extend IRS Pension Law 700 Extend V.A. Insurance Law 752 End LSC Funding 800 Cut Congressional Perks 900 Freeze Civilian Pay 1 Year 920 Expand Loan Sales 0 260 25 0 320 205 4,460 2,000 220 560 934 800 187 600 1,800 1,120 260 3,000 1 ,ooo 0 460 220 765 150 15 60 1.80 25 55 350 380 250 1,180 1 ,000 1 ,m 75 800 500 150 140 170 270 55 170 370 330 4,650 4,000 270 840 1,160 1,130 219 700 190 2,100 1,140 220 10,Ooo 1 ,Ooo 0 610 210 930 260 140 5 30 120 400 450 490 1200 1 ,000 125 830 500 240 230 380 280 7 0 210 380 450 4,840 6,000 im 270 1,120 1,300 1,510 226 800 200 225d 1,160 170 23,000 1,200 2,063 770 200 1,320 390 310 70 30 130 450 550 810 1,300 1,300 1200 150 850 700 350 320 610 290 80 240 400 480 5,04d 8,000 280 1,400 1556 1,940 234 900 200 2,450 1200 100 35,000 1,400 2,794 990 200 1,710 520 440 260 35 130 500 650 1,850 1,350 1,600 1,500 200 880 800 480 340 870 300 110 250 410 500 5240 10,000 1,040 4200 5,350 5,850 990 3500 930 1030 5,720 980 71,000 4,600 4,857 3,130 1,050 5,335 1,350 907 270 145 435 2 , OOo 2,350 3,450 6,150 5,600 5,700 600 4,100 3,000 1285 1,100 2,050 1,400 340 870 1 900 1,965 24230 30,000 11 No. Program Change 1993 1994 1995 1996 1997 Total 920 920 950 999 999 999 999 999 999 Terminate Commissions Refom Blue Collar Pay Auction FCC Spec t rum Disallow Pension Interest Cut Research Ovexbead Costs 15 Percent Travel Costs Cut Freeze Overhead.2.Yem Repeal Service Contract Act Repeal Davis-Bacon Act 142 24 1 500 -600 0 2,000 820 1,025 330 660 90 270 6,800 12,300 500 500 312 882 251 26 1 4,000 4 , 000 1,280 1,600 760 800 450 630 15,500 19,600 500 500 1,218 1,394 700 '800 272 r,m 10,000 2,000 830 840 24,000 500 1,523 645 3,000 20,000 6,725 3,400 2,280 78,280 2500 5,329 I NON-DEFENSE TOTAL $47,287 $82,719 $11 1.510 147,1.39 192,055 -$577,647 cheney D e fense Savings 5,200. 4,100 4,600 5,200 7,700 27,400 SUBTOTAL SAVINGS $52,487 $86,819 $1 16.1 10 $152,339 $199,755 $605,047 Interest Savings 1 ,m 5,000 11,000 20,000 37547 74547 TOTAL SAVINGS 53,487 $91,819 $127,110 $172,339 $237,302 $679,594 Note: This pl a n assumes that some of the policies indicated above will be phased in, reducing savings in 1993 through 1996 12 Appendix 111 Heritage Options for Domestic Spending Cuts Savings in Millions Budget 1st Year 5th Year +Year Function Recommended Program Change s Savings Savings Total Number 150 150 150 150 251 253 253 253 Reduce Export-Import bank adits. These credits are export subsidies for American businesses. Many are iarge carparations that could finance their own exports Reduce other-discretionary foreign assistancespending. Savings here are realized by cutting funds for multilateral banks and by returning American food assistance under the P.L.40 program now a subsidy to American farmers, to its original purpose of helping countries in times of emergency.
Reduce the Economic Support Fund (ESF by 50 percent over five years. The ESF provides "fiendship" money to Israel, Egypt and a number of other countries deemed to be important for America's security. With the Cold War over, the need to provide such assist ance is correspondingly reduced.
Combine the operations of Radio F~ee Europe RFE Radio Liberty RL and Voice of America (VOA These broadcasting facilities were intended to provide freedom of infomation into communist and other highly government-conmlled cou ntries. With the demise of the Soviet bloc they no longer Serve their intended primary purpose, and keeping separate facilities increases operating costs.
Cancel the Super Conducting Supercollider. The cost of this project, which the Department of Energy has consistently under estimated, is now expected to be over $12 billion.This will make it one of the world's most expensive public works projects.
Cancel the Space Station. The 30 billion to $40 billion price tag of the Space Station will likely exceed the expected benefits.
Private suppliers can provide this service at a fraction of the cost.
Cancel funding for one of the following new NASA projects The Advanced X-Ray Astrophysics Facility, the Comet Rendez vous Asteroid Flyby/Cassini mission or the Earth Observation System. These projects are scientific luxuries in the current budget climate. Canceling funding for one of these projects could avoid cut-backs for on-going research.
Cancel NASA's development program for the Advanced Solid Rocket Motor, which is intended to someday replace the current space shuttle launch motors.The Congressional Budget office reports that design and production problems may increase the project's costs and delay its availability 30 $200 $620 646 $3,718 $8,454 342 1,833 $ 5,331 lo0 $310 $1,040 200 $550 $2,200 1,050 $2,350 $9,700 100 $210 $890 250 $530 $2,200 13 Budget 1st Year 5th Year CYear Function Recommended Program Changes Savings Savings Total Number (in Millions 27 1 27 1 271 271 27 1 271 274 301 Raise the level and schedule of the Power Marketing Admini strations debt repayments to the f&d government. About 75 percent of the $16 billion investment in these government utilities has not been repaid even though the PMAs pay only 3 percent interest on the taxpayer-subsi dized loans they receive.
After 60 years on the public dole, it is time to wean the PMAs from taxpayer support 399 Eliminate further funding for the clean coal technology program since the passage of the Clean Air Act Federal support for this .technology i s virtually irrelevant now Sell the Naval Petroleum Reserves (NPR) to the private sector.
The Strategic Petroleum Reserves make the 80-year old NPR irrelevant.
Phase out Rural Electrification Administration subsidies and direct loans. The REA has complet ed its mission. Nearly 100 percent of rural America has electric service and nearly 98 percent has telephone senrice Phase out all federal funding for energy supply research and development activities. Since the Carter Administration, the federal governme nt has spent over $2 billion per year on re search projects intended to develop new energy technologies such as solar and wind power, geothermal, and nuclear. Tax payers have received few tangible benefits from this research.
If this research has commercial benefits, then private compa nies should contribute to its cost.
Raise the fees charged to utilities for uranium enrichment ser vices provided by the governments two uranium enrichment facilities.These two plants sell uranium to the Defense Depart ment, the countrys 108 commerical nuclear power plants, and nuclear plants abroad. The costs of operating these plants, how ever, greatly exceed current receipts.
Appropriate no new funds to purchase oil for filling the Strategic Petroleum Reserves. Additional reserves should be funded out of the some $800 million the Department of Energy has set aside for this purpose.
Recover in full, through user fees, the Axmy Corps of Engineers costs of operations and maintenance of inland waterway systems.
The Army Corps of Engineers spends $400 million per year operating and maintaining inland waterways and canal locks.
Taxpayers, not users, currently pick up this expense 0 100 30 290 $183 70 350 454 120 1200 244 3,400 183 220 410 2;196 270 2,400 674 6,902 915 820 1,89 0 14 Budget 1st Year 5th Year 5-Year Function Recommended Program Changes Savings Savings Total Number (in Millions 301 302 302 302 302 302 302 End all new Bureau of Reclamation water projects and investiga tions of future projects. Begin to shift operati o ns and maintenance of existing projects to the private sector. Eliminate federal water subsidies. These projects are expensive and often cause enormous environmental distruption. Water subsidies, moreover, benefit a very few individuals at the pat expense of all taxpayers.
Change the revenue-sharing formula from a gross to a net receipt basis for commercial activity on federal lands. The current federal receipts. Federal administrative costs should be deducted befm 100 rent and fee-sharing arrangement with the states is based upon gross these receipts are shmd with the states 190 Increase the diligence requirement from $100 to $1,0oO for hardrock mining claims. The requirement that $100 worth of work be per formed to keep a claim on land active was set in 18
72. It should be Raise National Forest Service, National Park Service, and Army Corps of Engineers fees and concession rents to cover 100 percent of recreation facilities' costs. The Park Service ems only $56 mil lion through fees, though it spends $190 million on visitor services.
The GAO has found that direct costs to the Park Service per visitor are 44 cents, yet the Park Service collects only 10 cents. This encourages an overuse of the national treasures that public ownersh ip was intended to preserve raised to reflect modern prices 0 170 1,100 220 60 210 2224 1,050 240 950 Place a 5-year moratorium on new Department of Interior and Forest Service land acquisitions. The federal government holds 760 millionacres of land, more than one-third of the country's land mass. During the next five years, the government plans to spend another $1.7 billion to purchase land for recreational purposes. These purchases should be postponed 330 $364 $1,740 Eliminate below-cost timber sales fro m national forests. For many years, according to the Congressional Budget Office, the annual cash receipts from federal timber sales have failed to cover the Forest Service costs in seven of the nine Service regions On average over the past decade, cash ex p enditures in these regions have exceeded cash receipts by a ratio of 3 to 1 20 Eliminate the $1.6 billion per year Conservation Reserve Program that pays farmers not to plant crops. The CRP has already paid fanners to set aside 35 million acres of land, t h ree-quarters the size of Illinois. By 1995, the program will enroll an additional 4.5 million acres, three-quarters the size of New Jersey. Over the life of the program, taxpayers will pay farmers over $20 billion to let this land lie fallow 75 $230 365 $ 1 ,905 $5,740 15 Budget 1st Year 5th Year Year Number (In Millions Function Recommended Program Changes Savings Savings Total I 304 304 304 304 306 306 306 Consolidate over 60 environmental programs into a single block grant to the states and reduce total f u nding by 50 percent. While this is being done, Congress should remove the endless federal requirements and other restrictions placed on states' use of these funds. Not only will this reform eliminate duplicate federal pro grams, but it will allow each sta t e to use the funds in a manner best suited to'its own environmenttil nds 2(30 2;500 Eliminate EPA wastewater construction grants. This twenty-year old program originally was to be temporary. According to the Congressional Budget Office, ending all new fun ding after 1992 would .have little-effect .omwater pollution-because the-grants have done little to stimulate spending on wastewater treatment.
Reform the Superfund enforcement program by de-emphasizing permanent mament technologies in favor of an emphasis on land use controls and containment methods. This measure would greatly reduce the expected $25.5 billion cost of cleaning up Superfund sites without putting the public at risk.
Substitute private financing for federal financing of the Super fund program to the maximum extent possible. This propokal simply extends the "polluter pays" principle that guides most environmental law.
Eliminate National Coastal Zone Management Grants and the Sea Grant College program. The objectives of both of these programs have been achieved. bntly 29 of the 30 coastal states have federally approved management plans, covering 94 percent of the nation's coastline. Also, over 135 institutions have strengthened their academic programs, ending the need for expanded research cap acity.
Close the National Helium Reserves or sell it to a joint venture comprised of current employees hnd other private investom This program, which was started in 1929 to insure a constant supply of helium for blimps, will lose over $121 million in fisca l 1992 and has lost over $225 million in the past two years.
Privatize the National Oceanic and Atmospheric Administration NOAA) research fleet. The GAO has recommended that the fleet be phased out and privatized over a five year period. GAO has criticize d the government-operated fleet for being too ex pensive to maintain and operate 90 160 75 50 128 2,150 740 280 50 150 I 6,000 I 5,900 $2,550 $1,100 250 692 50 $50 $250 16 Budget Function Recommended Program Changes Number 1st Year 5th Year Year Savings S a vings Total In Millions 306 35 1 35 1 351 35 1 351 352 Reduce expenditures for NOAA programs that are state or local concerns, or benefit only small, specific groups. Many NOAA programs concern specific state and local government issues or directly benefi t special interest groups. Such projects include Alaskan groundfish surveys, Bering Sea Pollack research, North Carolina Marlboro Island research, South Carolina Geodetic surveys, and many i3hers Lower the congressionally mandated target prices for subsidi zed crops by 3 percent annually. This measure will encourage fanners to produce according to market forces rather than political dictates.
Also, this measure will lower the-cost-of food toconsumen, who now pay more than $10 billion annually in higher food prices be cause of federal farm subsidies.
Terminate the Federal Crop Insurance Program and replace it with standing authority for disaster assistance. This change will codify current congressional behavior which has made crop insurance irrelevant. Congre ss rushes to bail out farmers when disaster strikes, whether they have crop insurance or not. Thus farmers have no incentive to purchase insurance, and as a conse quence the program is not actuarially sound.
Eliminate honey, wool and mohair subsidies. The GAO calls these programs the "dinosaurs" of agriculture programs because they have long outlived their mission and usefulness.
Eliminate the dairy subsidy program. As a result of the market distortions produced by this program, the government has spent o ver $17 billion purchasing surplus dairy products since 1980, while consumers have had to pay over $40 billion in higher prices for dairy products. One senseless policy of this program was the Depahment of Agriculture's attempt during the 1980s to lower d airy production by paying farmers to slaughter over 1.6 million cows.
Eliminate the Export Enhancement agriculture subsidy program.
The primary foreign beneficiaries of this program have been the former Soviet Union and the People's Republic of China. A number of government studies question the effectiveness and prudence of this program.
Eliminate the Market Promotion Program that subsidizes foreign advertising for wealthy U.S. businesses such as McDonald's Corporation, Pillsbury Company, and Ernest and J ulio Gallo Winery, Inc 44 440 270 20 421 5,950 $13,250 660 $2,850 200 $830 348 $1,810 310 610 $2,950 100 $200 $900 17 Budget 1st Year 5th Year 5Year Function Recommended Program Changes Savings Savings Total Number (in Millions 352 352 352 37 1 371 37 1 L imit the foreign loan guarantees made annually to foreign purchasers under the Department of Agriculture's Export Credit Programs to $4.5 billion (down from $5.5 billion).
Also eliminate loans to risky foreign borrowers.
Elimin ate the Agricultural Credit Insurance Fund (ACIF) fann loan prop-ms. The loaiiilosses-from these program's have grown so large in the past decade 4.5 billion in direct loans written off in the last two years that this fund no longer resembles a lending or ganization. Instead it has become a multi-billion dollar per year grant to farmers who are bad businessmen.
Merge the Agricultural Research Service, the Cooperative State Research Service, and the Agriculture Extension Service, then reduce total funding by 50 percent. The Department of Agri culture has some 1 1,000 field offices in 94 percent of the coun ties in America even though only 13 percent of the nation's counties are considered agricultural. Moreover, these programs fund most of the "pork barrel" research projects that many taxpayers find objectionable.
Reduce FHA program losses through improved underwriting monitoring, and enforcement efforts to increase recoveries from corrupt "D contractors in the multi-family and single family housing programs. Allow increased sales of defaulted property. This program lost nearly $9 billion between 1988 and 19
90. Losses continue even though some reforms recently have been instituted Phase out over five years the Government National Mortgage Association (GNMA l etting the private sector assume mort gage insurance needs. Investors and banks, rather than the poor benefit from Ginnie Mae through a gimmick known as "churning."
That is, by repeatedly refinancing loans and selling them qpickly investors are making off with $700 million in taxpayers' money annually.
Improve the Federal Housing Administration's "Title 1" debt collection system. HUD's own Inspector General's Office reports that the FHA debt collection system is disorganized and poor. For example, a 1990 audit revealed that the Seattle Office improperly forgave some $42 million in debt, and incorrectly transferred to another agency or simply forgave another $23 million. All told, some $175 million in poten tial collections were lost in a six-month period 4 5 io1 575 200 100 400 184 1,090 200 700 1,650 704 4,740 1,000 2,000 20 $20 $100 18 Budget 1st Year 5th Year SYear Function Recommended Program Changes Savings Savings Total Number (in Millions 371 371 376 376 401 401 401 401 401 Eliminate FmHA's Section 5 02 Home Loan Program. This low-income lending program is far more generous than similar HUD programs. These recipients will still be able to apply for FHA loans.
Stop the expansion of the Rural Rental Housing (Section 515 program and increase developers' m inimum intemt ramto 5 percent. Recent General Accounting Office studies show that this program has been a bonanza to developers, in some cases allowing them rems on investment as high as 970 percent.
End all Small Business Administration direct loans and loan guarantees. With 20 percent of all SBA loans ending in default losses in this program are too high to continue it. According to OMB, nearly $4 billion of SBA's outstanding loans are expected to default A Eliminate the activities of the International Trade Administration.
This program assists private fms in promoting and marketing exports. These are activities better suited for private organiza tions such as the Chamber of Commerce.
Eliminate the remaining regulations on the trucking industry and abolish the Interstate Commerce Commission. After 105 years of regulating commerce, the now obsolete ICC should be retired.
Terminate all highway demonstration projects. Congressmen often try to disguise the essentially local nature of federally funded highwa y projects by calling them "demonstration projects These projects are little more than political pork Eliminate federal operating assistance funding for mass transit and reduce federal spending on local mass transit capital projects by 50 percent over fiv e years. Over the past 25 years over $100 billion in taxpayer subsidies have gone to urban mass transit systems, the bulk of this from the federal government.
Yet mass transit ridership is roughly 10 percent lower than it was in 1963, the year before the federal government began funding local qrojec ts.
Limit federal highway spending to the amount brought in by motor vehicle fuel taxes. Allow state and local governments to impose tolls to cover the cost of maintaining, repairing improving, and extending roads, even on roads that have been built mainly or entirely with federal funds.
End federal subsidies to AMTRAK. Since 197 1, AMTRAK has received about $15 billion in taxpayer subsidies even though the rail carrier accounts for less than 1 percent of total intercity mileage nationally 500 40 450 $1 10 20 295 $470 320 $450 87.0 3,560 445 $1,530 670 $3,000 190 $860 30 $125 1,575 $6,005 3,500 $8,065 2,650 $8,550 595 $2,620 19 Budget Function Recommended Program Changes Number 1stYear 5thYear 5Year Savings Savings Total in Millions 401 402 402 403 403 45 1 45 2 452 Make the FAA self-funding. The total cost in 1991 of oper ating, maintaining, and upgrading the air traffic control system was about $4.7 billion, half of which was covered by taxpayers.Since the FAA has clearly identifable users there is no reason t axpayers should subsidize this service.
Eliminate the Essential AirServiceSubsidy program that pays commercial airlines to fly to 125 small cities, 33 of which are in Alaska.
Eliminate airport grants-in-aid. Federal airport money repre sents only a small portion of the total amount spent by all airports for construction and improvements. Most of the 100 largest airports, that service over 90 percent of all air travelers, are primarily self financing and will not be harmed by the loss of federal funds Reco v er 100 percent of the costs for Coast Guard services provided to commercial and pleasure boats. Studies have found that 80 percent of the Coast Guards total search and rescue operations are non-emergency, with 72 percent invol ving recreational boats with in 3 miles of share. Most of these services are paid for by taxpayers, not boat owners.
Eliminate the Maritime Administrations Operating Differ ential Subsidy Program and the Ocean Freight Differential Pmgram, which protect U.S. shippers from fareign competition.
Phase in a 50 percent reduction in Community Development Block Grant funding over five years. By some estimates over half of this programs funds go to non-distressed communities, some of which are very wealthy. Enterprise zones are a much mare eff i cient way of generating economic growth in poor areas.
Transfer all Farmers Home Administration (FmHA) rural development activities to the states and use a portion of these savings to fund increased f&ral enterprise zone tax abatement.
Recent studies s how that the water and waste disposal program and the business and industry program are not well targeted to low-income areas. Moreover, these programs do not seem to create economic development as much as they lure businesses away from other communities.
Transfer funding for Tennessee Valley Authoxity (TVA) economic development activities to the states and eliminate commercial research programs. Taxpayers should not have to foot the bill for such TVA projects as the sixty-year-old National Fertilizer Deve lopment Center or the environmental research center. These projects benefit specific industries who can afford to pay the direct costs 3,550 $6,215 $25510 39 $39 $195 315 $2,050 $6,550 700 $284 325 800 237 1,896 3,700 1,344 $5,438 20 $500 $1,310 40 $610 2 0 Budget 1st Year 5th Year 5-Year Functlon Recommended Program Changes Savings Savings Total Number (In Millions 452 452 501 501 501 501 502 502 Transfer the functions of the Appalachian Regional Commission ARC) to the states. This $200 million per year pr o gram has had little or no impact on the Appalachian region. Most of the roughly $7 billion in federal funds spent on this region since the ARC'S creation in 1965 has been spent on roads, result ing in few measureable ~sults Eliminate the Economic Developm ent Administration (EDA).
Political power, not economic deprivation, determines where the nearly $260 million in EDA grant monies flow. EDA is simply a source for congressional park barrel dollars.
Eliminate the untargeted portion of vocational education funding.
This includes consumer and homemaking education pgrams as well as programs not targeted to specific at-risk groups.
Eliminate State Student Incentive matching grants, which have accomplished the goal of encouraging the states to provide more stu dent aid. Since this program was enacted in 1972, state student aid has doubled in inflation-adjusted terms to $1.6 billion annually.
Eliminate Impact Aid, which is directed toward school districts near federal military instilations. This program is based on the false premise that military bases are a "cost" for local communi ties. The benefits to the communities of these installations make this program unn ecessary Eliminate various education progams that have achieved their purpose such as the Law-Related Education and Law School Clinical Experience programs Eliminate federal funding for the College Work Study Program.
Under the guise of aiding students, th is program indhtly subsidizes university labor costs in food seMce, administrative offices, etc. Most recipient students already receive student aid from other sources. This ref= will not prevent students from getting private sector jobs 10 $50 145 35 630 5 190 280 $840 540 930 1,940 85 $355 900 40 w,ozo 150 140 $1,550 $5,990 Reduce Pell Grant funding by tightening the definition of independent students. Many students whose parents have sufficient financial resources to contribute to their college educatio n have declared themselves 'Wependent" in order to receive greater government aid. This loophole should be closed. These students would still be eligible for student loans 70 $390 $1350 21 Budget 1st Year 5th Year SYear Functlon Recommended Program Changes Savings Savlngs Total Number (In Millions 502 Eliminate the Supplemental Educational OpPartuNty Grant program. The grant money is given to post-secondary institu tions and awarded to students at the discretion of those institu tions on the basis of need. However, this program serves the same purpose and benefits the same group of students as the Pell Grant program. In fact, a student could double-dip by receiving both a'kll Grant and 'sin SEW.
Reduce defaults and losses in the Stafford Student Loan Program . Such measures include: Eliminating all federal interest rate subsidies extended to students after they leave school; reducing subsidies to lenden by 1 percentage point and requiring institutions to share the risk of loan defaults.
Defaults in this progr am total nearly 30 percent of the annual cost of the program, or $1 billion. If the govemment is to con tinue to support postsecondary educational opportunities, it cannot allow this program to become little mare than a grant program for college graduates 502 503 503 504 506 Phase out funding for the National Endowment for the Arts NEA) and the National Endowment for the Humanities (NEH).
These agencies engage in few activities that are not already being done by the multi-billion dollar television, film, a nd radio indus tries, in addition to private philanthropy and state and local governments. Many of the programs' benefits, moreover, go to upper-income audiences.
Discontinue f&ral funding for the Corporation for Public Broad casting. The competitive cabl e television and radio industries have made this program obsolete. Since public radio and television stations receive the bulk of their money from private contributions they will survive without federal funding.
Consolidate 12 employment and training prog rams into a single block grant and phase in a 50 percent reduction in total funding over five years. This measure must be accompanied by the removal of federal restrictions on these funds to allow the freedom to tailor training states programs to local ne eds.
Consolidate more than a halfdozen social service programs into a unified program and reduce funding in proportion to the overhead and administrative cost savings. This measure would eliminate duplicate services and provide local governments more flexi bility to design programs relevant to local needs 135 $726 $2,115 900 780 64 480 1200 $59220 304 $885 2,695 $7,764 0 $280 $1,040 22 Budget Functlon Recommended Program Changes Number 1st Year 5th Year $Year Savlngs Savings Total in Millions 506 550 550 55 3 570 570 Cut by 50 percent funding for the Social Services Block Grant program. Most of the $3.4 billion spent annually on this program is directed to intermediary organizations and providers, not recipients. Cutting out these middle-men by replacing thes e grants with vouchers for example, child care services would give poor families greater flexibility and choice 280 $1,400 $4,200 Reduce National Institutes of Health (NIH) research funding by 15 percent overall, aiming in particular to cut overhead costs b y 50 percent. At the current level of $7.5 billion, NIH funding has grown by 84 percent after adjusting for inflation in the past 10 years. Both GAO and CBO repeatedly have found a growing share of NIH grant funds are spent by recipients on "indkct costs" such as maintenance, administration, and depreciation.
High priority research would not be affected by this change.
Consolidate the federal administrative cost-sharing programs of AFDC, Medicaid, and Food Stamps into a single remiburse ment system and im prove controls over administrative cost increases. There is considerable overlap between the AFDC Food Stamp, and Medicaid programs. This measure would encourage states to simplify administration of the programs and reduce bureaucratic costs without reduc i ng benefits. Welfare recipients would find it less confusing to deal with this unified system 470 $1,940 $5,850 400 $1,556 $5,350 Eliminate health professionals education subsidies except for dis advantaged and minority students. Convert the remaining mon i es into a scholarship fund. In some respects, this program has been too successful, as some experts conclude that the U.S. will soon have a surplus of doctors. In 1965 there were 148 doctors for every 100,OOO Americans. But by 1988, this number was 233 a 5 7 percent increase 120 $234 $990 Identify and recover Medicare secondary payer claims. Medicare is a secondary payer to a variety of private insurance and compensa tion plans. Because of inaccurate records on these primary payers Medicare too often ends u p paying for services when these costs are the responsibility of the private insm. The Inspector General of HHS has estimated that more accurate and timely information on primary payers would save as much as $900 million annually 500 $900 $3,500 Reduce Med i care's payments to hospitals fur their direct costs of pro viding graduate medical education that is, residents' salaries and benefits, teaching costs, and administrative and overhead costs. This system tends to overpay hospitals, especially inefficient h ospitals with excessive overhead costs. In effect, this rewards hospital inefficiency.
A better system would be to reimburse each hospital the same amount for the same type of resident according to a national average 160 $200 $930 23 Budget 1st Year 5th Ye ar 5Year Function Recommended Program Changes Savings Savings Total Number (in Millions 570 Reduce to 3 percent Medicare's payments to hospitals for the inkt costs of patient care that are related to a hospital's teaching program. Reviews by the Departmen t of Health and Human Services indicate that current payments are too generous compensating for mare than the actual costs of education.
These reviews suggest that this additional payment rate should be lowered to better align payments with the actual cost s incurred by teaching hospitals 1,550 $2,450 $10,250 570 570 570 600 602 602 Increase Medicare oversight, or "safeguard funding to the 82 companies that process Medicare claims. GAO finds that every $1 expended on safeguard funding produces $1 1 in savin gs or refunds on inappropriate claim payments. Thus the following savings are net savings.
Penalize providers for claims that are not billed electronically to Medicare's Supplementary Medical Insurance (SMI This recommendation will cut Medicare's administr ative and data entry costs, and it will reduce the incidence of errors 230 $100 $980 Slow the growth in Medicare and Medicaid spending by enact ing comprehensive health care ref There axe several ref proposals now on Capitol Hill. Some would cut costs by r egula tion and setting national health care spending limits. Altema tively, consumer-based pposals would create powerful new incentives to hold down costs. Whichever reform plan is adopted Medicare and federal Medicaid contributions can be expected to ben efit significantly from any reduction in the growth of overall health spending 0 $35,000 $71,000 Standardize the Federal-State Unemployment Insurance by requiring a two-week waiting period for unemployment benefits.
About threequarters of the states require a one-week waiting period for UI benefits, and the remainder have little or no waiting period.
Requiring a two-week waiting period would create uniformity in the pgrams system and encourage recipients to look for other work faster 0 $1,400 $4,600 Extend the prohibition on federal employees taking their xetirement benefits in a lump sum. This phibition was enacted in the 1990 budget agreement and is scheduled to expire in fiscal 1995 0 $2,794 $4,857 Take steps to c onfoxm federal retirement to private sector policies.
Such measures include: increase from three years to four years the average of the employee's high salary base used to calculate initial pension benefits; and restrict an agency's matching contribution t o employee thrift plans to 50 percent. These measures will still give federal employees slightly better pensions than comparable private workers 330 $990 $3,130 24 Budget 1st Year 5th Year +Year Function Recommended Program Changes Savings Savings Total N u mber (in Millions 603 End Trade Adjustment Assistance. This program is intended to give tempomy assistance to U.S. workers whose jobs have been lost due to import competition. There is no reason why workers who lose their jobs as a result of foreign compe t ition if indeed this can be proven should receive government benefits far exceeding the assistance available to those laid off due to domestic competition 220 200 $1,050 604 Switch to a Random Digit Dialing System in calculating fair market rents for the S ection 8 rental assistance program and modify the administrative cost fee smcm for local and state agencies that administer the program. Also, eliminate funding for rental vouchers on dwellings not meeting "D's Housing Quality Standards. HUD is currently c alculating fair market rents in an antiquated manner which leads to significant over payments to many landlords. Using modem market survey techniques will reduce costs without hurting any tenants. HUD is also overpaying local housing authorities to manage the Section 8 program. These administrative payments should be reduced 610 $1,710 $5,335 604 Tighten occupancy standards under the Performance Funding System for federal operating and administrative subsidies to local public housing authorities. These adm i nistrative and operating subsidies should then be reduced. Currently, about 100,OOO of the nation's 1.4 million public housing units are vacant. Yet the federal government makes operating subsidy payments for these units to local housing authorities. On a verage, HUD pays local authorities about $3,700 per year per unit in total rent and operating subsidies 50 $520 $1,350 604 Partially replace new public housing construction with vouchers.
New construction of public housing is the most inefficient way of pr oviding housing assistance to the poor. Many studies have found it costs at least twice the amount of money to house a fahily through new construction than through vouchers 2 $440 $907 604 Partially replace new construction for the elderly (Section 202 wi t h vouchers. As with housing assistance for the poor, the bricks and mortar" approach to providing housing is very expensive and inefficient. Vouchers cut these costs in half and allow recipients the flexibility to live where they choose 0 $260 $270 25 Bud g et. 1stYear 5thYear +Year Function Recommended Program Changes Savlngs Savings Total Number (In Mllllons 604 604 604 604 604 604 Eliminate the HUD Utility Adjustment Payment program that deftays a tenants qlectiic and other utility expenses. Because of th e inequity in this program, many tenants in public housing not only pay no rent but actually receive a check from the government for utility payments. Indeed, many tenants mive state and local utility assistance in addition to federal assistance.
One public housing project in Ohio received $2,500 per year per household in federal utility assistance.
Eliminate from the HUD budget pork barrel projects that serve only state or local interests. Such projects include 500,000 for a population and marketing analy sis center in Towanda, Pennsylvania 400,000 for the State of Hawaii Real Estate Commission; and 667,000 for the Marshway Project in Chicago.
Require competitive bidding in all of HUDs Comprehensive Improvement Assistance Program (CIAP) procurements and cr eate performance-based rather than a needs-based criteria for further CIAP awards. HUDs Inspector General has found extensive non-compliance with contract administration require ments in this program. Local housing autharities are known to issue exclusive contracts to favd companies, purchase the highest-cost supplies, and just send the bill to HUD Convert $300 million of the Section 221(d)(3) and Section 236 prepayments (under the Low-Income Housing Preservation Act into portable vouchers for tenants. HUD is open to substantial loan defaults by developers who are often over-mortgaged and cannot charge market rates for their units. Allowing developers to prepay these loans can prevent sizeable taxpayer losses. Turning half of the current $618 million in con struction subsidies into tenant vouchers would give low-income mters greater choice in housing if the owners choose to prepay.
Maintain the current number of housing assistance commitments.
In fiscal 1991, about $4.6 million low-income individuals mived h ousing assistance at an annual cost of $17 billion. Fmzing for five years the number of housing assistance slots at $4.6 million would not harm current nxipients. The natural turnover process would still allow this program to assist newly eligible househo l ds 25 $35 $145 0 $130 $430 300 $320 70 Include the value of food stamps when calculating income eligibil- ity for Section 8 and other public housing benefits. Recipients are expected to pay rent equal to 30 percent of their income. How ever, non-cash bene fits are excluded from the accounting of income.
Rental payments should be based upon an accurate accounting of cash and non-cash income. Most public housing residents have income above the poverty level when non-cash benefits are included in the calculati on of their income 1,080 500 $650 1,850 1,350 2,000 2,350 3,450 6,150 26 Budget 1st Year 5th Year 5Year Functlon Recommended Program Changes Savlngs Savings Total Number (in Millions 605 605 605 609 609 609 Require states to reimburse the federal governme n t far all over payment em caused by state administrators in the food stamp program. In fiscal 1988, the national overpayment em rate for food stamps was 7.4 percent, resulting in erroneous overpayments by Washington of nearly $900 million. States currentl y have no incentive to control errors since all the programs benefits and half of the administrative costs rn paid by the federal government.
Penalizing states for these errors will give them greater incentives to oversee the program Restrict subsidies und er the child nutrition and school lunch programs to families below 185 percent of the poverty threshold These nutrition pbgrams do help the poor, but typify the middle and upper-middle income entitlement programs that add substan tially to the federal def icit. The poor actually could be better served if the program were spediically targeted to them and not the middle class.
Require all non-elderly able-bodied food stamp fecipients to engage in a workfare or job search effort for at least 25 hours per week. This requirement would have the dual effect of encouraging households to become independent and also reduce program costs.
Restrict the eligibility of low-income home energy assistancx LMEAP) to those with incomes below 130 percent of the poverty thresho ld, and reduce funding by 25 percent. This program duplicates other federal utility assistance in addition to state and local utility assistance propuns Limit the housing allowance far AFDC families who live in subsidized public housing. Nearly one quarte r of the 4 million AFDC families live in subsidized housing. A share of the normal AFDC benefit is intended to cover housing costs. Yet families in this housing receive the same AFDC benefits as those not in sub sidized housing.That should be corrected, as . this mates a large inequity in benefits 500 $1,600 $5,600 l,OOO $1,500 $5,700 50 $200 $a00 730 $880 $4,100 500 $800 $3,000 Limit to 10 percent per annum the growth of administrative costs in the Foster Care program. The administrative costs of this progra m are projected to grow at 19 percent per year nationwide far the next several years, after increasing from about $50 million in 1981 to more than $450 million in 19
89. These costs can be controlled without curbing sexvices to foster care families 65 $480 $1,285 27 Budget Function Recommended Program Changes Number 1st Year 5th Year &Year Savings Savings Total in Millions 700 Close inefficient or underused facilities in veterans hospitals.
According to the CBO this measure would cut the number of expensive veterans medical facilities with low caseloads or occupancy rates. Closing these facilities would not eliminate VA care for veterans, but needed care would be provi ded more economically 700 Promote more efficient management and delivery of health care far veterans. Veterans hospitals have a long history of inefficiency and high cost. These costs can be controlled through a funding mechanism similar to Medicares pros p ective payment system which sets fixed payents for services. Greater efficiency can be achieved by allowing the VA more flexibility in altering facility and staffneeds 700 700 700 752 Raise the loan-origination fee charged for housing loans guaran teed by the Department of Veterans Affairs (VA The cmnt loan-origination fees are far below those found in the private mortgage lending market. Raising these fees would institute sound business practices in this program and lessen future losses and defaults Exten d the current law (due to expire on September 30,1992 that requires the Internal Revenue Service to verify incomes reported by veterans in order to more accurately determine pension and benefit eligibility.
Extend the current law (due to expire on October 1,1993 that requires the Veterans Administration to recover some veterans medical care costs from the patients private insurer.
End funding for the Legal Services Corporation (LSC) which in part, is intended to provide legal assistance to the poor. Howeve r many of the legal issues handled by LSC attorneys relate to state and local laws concerned with divorce and landlord-tenant disputes.
As such these services should be funded by local governments.
LSC lawyers also engage in legal activism and political activities such as lobbying legislatures and local ballot initiatives. Taxpayers should not have th& tax dollars go to lawyers who turn around and sue the government 65 $340 $1,100 0 $870 $2,050 260 $300 $1,400 25 $1 10 $340 0 $250 $870 320 28 Budget 1st Year 5th Year $Year Function Recommended Program Changes Savings Savings Total Number (In Mllllons 800 900 920 920 920 950 999 Cut by halfcongr
ssional staff, eliminate the franking privilege and privatize the Government Printing OfTice. The size of person al and committee staffs stands at 17,000, triple the number in 19
60. This averages out to 60 staffers for each Senator and 26 for each House member. Members free mailing privileges cost taxpayers about $85 million annually. The bulk of this mail is unso licited, and is used for reelection purposes;The %A0 has found that the Government printing Office is twice as expensive as commercial printers 205 Freeze for one year the total level of federal civilian employee compensation. Total compensation (excludin g benefits) for full-time and part-time civilian employees is nearly $1 10 billion annually 4,460 Sell gradually increasing portions of the governments loan port folio to the private sector. The federal government currently holds 205 billion worth of direc t loans outstanding. According to OMB 1.9 percent of these direct loans are in default this year. These assets should raise a minimum of $2 billion the fvst year, climbing $2 billion every year thereafter, reaching $10 billion by 1997 2,000 Terminate most f ederal commissions. These texminations should include: The American Battle Monuments Commission; the Commission for the Preservation of Americas Heritage Abroad the Christopher Columbus Quincentenary Jubilee Commission the Delaware River Basin Commission; and the Franklin Delano Roosevelt Memorial Commission.
Reform the federal blue collar employee salary structure. Reevaluate the pay rates for non-key jobs and reform the step classification sys tem within each occupational grade level to bring federal pay into line with private sector pay rates. The federal government spends over $140 billion per year, equal to 2.4 percent of gross domestic product, on civilian employee salaries and benefits. Many of these pay scales are far above comparable private secto r rates.
Auction to the private sector the Federal Communications Com missions (FCC) electromagnetic spectrum. This should include all the frequencies reserved for new technologies such as next generation cellular mobile phones, also known as Personal Comm unications Services (PCS An auction system would insure that these frequencies were alloted in a competitive manner with the benefits captured by the taxpayer.
Reduce the amount of overhead and administrative costs covered by federal research grants to un iversities. The lions share of federal research grants should fund research, not extraneous expenses such as maintenance and student services 29 142 500 0 500 530 10,000 272 1,000 0,000 1,965 24,230 $30,000 645 3,000 20,000 330 $830 $3,400 Budget 1st Year 5th Year 5-Year Functlon Recommended Program Changes Savlngs Savlngs Total Number (in Millions1 999 Disallow from federal grants the interest charges on unfunded actuarial liabilities of local government pension plans. According to the HHS Inspector Gener a l, the interest associated with unfunded actuarial liabilities of state and local government pension plans is incurred as a cost of federally funded programs. The Inspector General estimates the gross federal share of local government pension interest exp enses at between3.3 billion and $2 billion annually 820 $2,000 $6,725 999 Lower by 15 percent the travel budgets of non-postal civilian agencies, then cap the future growth at the inflation rate.
Agency travel costs have risen sharply in the.past ten years outpacing the inflation rate. In 1987, civilian travel expenses cost the government roughly $1,500 per employee. By fiscal 1991, this had climbed to roughly $2,0
00. These costs can be cut without affecting the agency's duties 90 $840 $2,280 999 FEeze fo r two years at ament levels the overhead costs of non postal civilian agencies (such as transpartation and rental costs phone and utility costs, printing, supplies, and equipment excluding employee travel. After two years, allow growth only at the inflait o n rate. Nearly 13 cents of every tax dollar spent on dom estic programs or about $1 10 billion -pays for the overhead expenses of federal civilian agencies. These costs are in addition to the more than $100 billion per year spent on civilian employee wage s and benefits and the nearly $1 10 billion spent on contracted seMces. In total, these three spending categories consume nearly 40 cents of every federal tax dollar spent on domestic programs.
Cutting overhead costs thus will not hurt the ability of agencies to perform their duties 6,800 $24,000 $78,280 999 Repeal the Service Contract Act, which requires contfactors to pay prevailing wages" on federally funded service contracts. This law artifi c ially inflates the cost of federal service contracts by as much as $500 million annually and creates an unfair barrier for many entry-level workers, who tend to be the poor and minorities 500 $500 $2,000 999 Repeal the 1931 Davis-Bacon Act. This law force s contractors to pay the "prevailing wage" on all federally funded construction contracts. In practice this means the union rate must be paid When the legislation was enacted, the general purpose was to keep black workers off federal construction sites. Th a t is precisely what it has done in large part during the last sixty years. The reason is that artificially high wage rates for federal projects make it uneconomical to recruit lower-skilled local workers, who are disproportionately minority Americans 312 $1,523 $5,329 Non-Defense Total Savings $47,287 $192,055 $577,647