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Backgrounder #913 on Federal Budget

August 28, 1992

Real Deficit Reduction Demands Real Spending Cuts

By

Cument, may contain errors)

913 a REAL DEFICIT REDUCI'ION DEMANDS REAL SPENDING CUTS INTRODUCTION The federal budget &f~t is expected to mch OW 5340 billion in fiscal 1993, which begins this October

1. By most estimates the deficit will remain well over $uK) billion per yearthioughtheendofthisdecadeunlesswashingtonlawmalters~dramaticac~.

Unfc~tumtcly, most lawmaken offer the taxpayus only two solutions, both unp~casant: ei her accept significmt b enefit rreductions in programs targeted to &e elderly, such as Medi xxe and Social Security, or agree to higher taxes f'axpaye.rs should reject this false dilcmma.The cause ofthe budget deficit is runaway gwernment spending hr nearly all domestic pgrams-l arge and small not just lpeodingan~~be#fitingolderAmericans.ThuDany~~defidtreducoionp netdsto~~attheentirebasketofdomesticspending,beginningwiththemostwaste ful befvrn mwing to the most sensitive.

The chronic federal budget Micit understandably has taxpayi ng voters angry and unable to undesstand why lawmakers cannot put America's fiscal house in order. In this election Some maintain that Americans must accept another tax hike. Others say that rhc only way D avoid a tax increaOe is topla# arbiuary spending caps on the pwth of such social enti tlements as Medicaid Social Security, and welfare programs.

Ovdooked Waste. What the candidates overlook is that that ~IC hundnds ofp grams that should be eliminated from the federal budget because they ~IC wasteful and un nccessruy, outmoded, or simply not federal mpcmsibilih.Tht majoity a these pm grams= unknown tomost taxpayers andlawmakcrs.Trimming these one by one will do Littlt to lower the dcflcit. But significant deficit reduction is possible ifa package of pm g ram cuts is ma& together in an omnibus Mcit reduction plan.

Saangcly, many ofthe lawmakers who claim that tax hikes or drastic entitlement cuts the only way tocut thedeficit have been among the first to add billions of dollars in new wk -1" spending. In fi scal 1993 apprapriatians bills passed recently by the House of Rcpnscntatives, for example, lawmak~ apprwcd 2 million for "intelligent ve hicle highway systems" research in NorthanVirginia 1 1 million for potato research 1 million for an urban foresay pro ject in Chicago 510.00 for soybean-based ink research ycar,candidatesare~~stingvariouswaystocometo~pswithwt~~~l 61 million for bicycle paths in Miami; and $7 million for African elephant conservation.

None of this pork is essential to the national interest, and all of it adds to the deficit prob lem.

Even greater sums will be wasted next fiscal year on programs that may not fit the tradi tional definition of pork barrel spending, but certainly should be considered wasteful or un necessary spending. For example 6 More than $120 million will be spent to continue the Federal Helium Reserves and the Excell helium processing plant Some $35 million will be spent to keep open the National Fertilizer Develop ment Center At least $1 billion will be spent on school lunch subsidies for children from middle- and u pper-income families Some $200 million will be spent to subsidize the foreign advertising budgets of some of the nations wealthiest companies.

Lawmakers need not turn to benefit cuts in sensitive entitlement programs or to tax hikes to achieve major reduct ions in the budget deficit. Tens of billions of taxpayer doh can be saved by eliminating programs that serve only special or localized intemsts. Billions morecan be saved by eliminating programs that have failed, fulfilled their mission, or out lived thei r usefulness. Still more can be saved from eliminating programs that duplicate or even contradict the missions of other programs. A list of such savings is contained in the Appendix of this study ing unchecked. Fedcral domestic spending, adjusted for infla t ion (excluding the savings and loan bailout and net interest on the federal debt will have grown an estimated 70 per cent more in the four fiscal years through fiscal 1993 than it did during the previous twelve years. And spending on nearly every domestic program has grown rapidly, not just spend ing on the largest entitlements. Controlling this spending binge must be a key element in any deficit reduction plan. But before lawmakers slash the most sensitive programs they should fmt sweep the budget clean o f the most egregious and wasteful The deficit is exploding because federal spending, especially domestic spending, is grow HOW CONGRESS HAS IGNORED POTENTIAL SPENDING CUTS While most lawmakers acknowledge that wasteful federal spending does exist, they are reluctant to attack such spending as a means of cutting the budget deficit. Some believe that there is not enough waste to warrant the political cost of the effort. The focus of their efforts, they feel, should be on tackling the big ticket policies that w ill produce the larg est returns. This notion leads politically courageous lawmakers to call for spending caps on entitlement programs and politically timid lawmakers to call for higher taxes 1 Scott A. Hodge, What George Bush Is Not Being Told About Fede ral Spending, Heritage Foundation Buchmrmder No. 8

86. March 4,1992 2 Yet this attitude is rather like a household assuming that the only way it can get out of lebt is to sell the family house or pull the kids out of college-while refusing to take a less a rpensive vacation or cancel their premium cable TV channels because they believe this vould do little to ease their debt problem. Until a professional debt counselor shows them he cumulative total of such extraneous expenses in the household budget, the f a mily is un ikely to realize just how much its indebtedness can be reduced by trimming its unneces ary spending Scratching the Surface. Like the family debt counselor, Heritage Foundation scholars we compiled over 120 ways for cutting federal spending-uts t hat could be adopted be Congress attempts to reduce major entitlement benefits or raise taxes. The total value if these cuts, contained in the Appendix, is nearly $800 billion over five years, sufficient o balance the budget by fiscal 1998.These recommend a tions by no means represcnt all of he possible ways of cutting spending; indeed they only scratch the surface. Nor is every ecommendation likely to meet with the approval of every lawmaker or taxpayer. How ver, the majority of these recommendations could form the basis of a politically accept ible deficit reduction plan.

Few of the spending cut recommendations in the Appendix are new. Many have ap peared in studies published by agencies and groups as diverse as the Congressional Budget Dffice (CBO) and the General Accounting Office (GAO both research arms of Congress he Grace Commission, Citizens Against Government Waste, House Budget Committee Chairman Leon betta, and in other Heritage Foundation publications. In fact, the deficit could have been eliminat e d long ago if Congress merely had enacted the xecommendations of its own budget analysts. In February 1981, for instance, the CBO released the first of its annual reports on spending cuts and revenue-raising options for reducing the deficit. Many of the s pending cut recommendations appearing in this Heritage compilation have their mi gins in that first CBO report. The reason that the proposals still valid today is that Con gress has ignored them.

Among the recommendations in the 1981 CBO review that appear in some form in this study 4 Institute private financing of the Strategic Petroleum Reserves 4 Increase inland waterway user fees 4 Reduce funding for Environmental Protection Agency Construction Grants 4 Eliminate farm deficiency payments 4 Reduce fundi n g for AMTRAK 4 Repeal the 1931 Davis-Bacon Act 4 Eliminate maritime industry subsidies 4 Reduce funding for Impact Aid 4 Modify Trade Adjustment Assistance 4 Block grant funding for AFDC and Medicaid administrative costs 4 End the Airpart Grants-in-Aid pr o gram 3 The List Goes On. Not only has Congress ignored the mommendations of its own bud get analysts, but it has also paid little attention to the recommendations of the General Ac counting Office (GAO the government's auditing agency The GAO was establis h ed by the Budget and Accounting Act of 1921 to perform accurate audits and evaluations of fed eral programs, and the agency makes recommendations based on these evaluations. For ex ample the GAO in 1979 recommended the repeal of the 1931 Davis-Bacon Act, w hich mandates high union-scale wages on federal construction projects. The GAO found that the law raises the costs of federal construction projects and makes it more difficult for black Americans and other minorities to obtain jobs in.construction. Congre ss, however, consis tently has refused to take action.

Congress also turned a blind eye to recommendations in the GAO's November 1989 an nual report on the Federal Manager's Financial Integrity Act of 19

82. This act was in tended to control waste in Fede ral Financial Management Systems. The GAO found over 150 billion in waste, fraud, and financial mismanagement. Commenting on this stagger ing sum, GAO Comptroller General Charles A. Bowsher declared on December 5,1989 before the Senate Governmental Affair s Committee The problems that exist are not lim ited to a few agencies or a few programs; rather, all of the major agencies have serious problems."

Congress has yet to make any substantive moves to cOrrect these problems.

Among the other GAO nxommendation s ignored by Congress are the elimination of honey, wool, and mohair subsidies; the repeal of the Service Contract wage-setting law overhaul of the Farmers Home Administration to improve its financial stability; and privatization of the Govemment Printing Office.

Because of this resistance by Congress to cuts in the most wasteful spending, even the Reagan Administration was unable to eliminate many programs, despite its reputation far draconian cuts. According to a Congressional Research Service repmt, 94 programs were recammended for tenninauciii during the two Reagan terms. Of these (many of which ap peared repeatedly in the eight Reagan budgets only twelve were eliminated. And al but one, Urban Development Action Grants WAGS), were terminated in the fir s t term. 4 HOW TO CUT SPENDING Heritage Foundation scholars chose the recommended cuts in the Appendix very care fully to avoid imposing hardship on the poor or needy. But beyond that basic selection cri terion, scholars used a series of principles to gaug e whether cuts or the elimination of a pre gram would be appropriate. Among the principles employed 1) Federal prograb that serve only localized or special interests rather than the na tion as a whole should be eliminated. Example: Spending $380,000 on a b icycle 2 Judith Havemann OMB's 'High Risk List' Details Vulnerable Programs The WaFhinglon Posr, December 6,19

89. Se also,'lhe General Accounting office, "Financia! Integrity Act Inadequate Controls Result in Ineffective Federal Programs and Billions in Losses GAO/AFMD-90-10 November 1989.

James V. Saauno Program Terminations Reposed by the Reagan Administration The Congmssional Research Service Decemba 19,1989 3 4 transpartation demonstration proj ect in Macomb County, Michigan is not a proper function of the fed eral government.

Programs that have failed, fulfilled their mission, outlived their use fulness, or simply become irrele vant should be eliminated. Exam ple: The clean coal technology pro gram has become helevant since the passage of the Clean A ir Act which supersedes its regulations and prescriptions. Yet the program still will cost taxpayers nearly 300 million.

Programs that duplicate or contra dict the missions of other pro grams should be streamlined or merged. Example: There axe over sixty different federally funded en vironmental programs and some 37 fisheries management pm grams.

If the program or service has iden1 tifiable users, then these users not taxpayers-should pay for the service or goods they receive.

Example: The Army Coqs cf Engi neers spends over $400 million per year operating and maintaining in land waterways and canal locks.

Taxpayers, not users, currently pick up most of this expense.

The federal government should adopt the commonsense mea- sures routinely used by business owners to reduce cots& Example During the recent recession, most businesses were farced to cut over head expenses such as travel, rent utilities, mailing, and shipping costs. The federal government has increased spending on these4 items during the past three yeas 5 REDUCING ENTITLEMENT COSTS, NOT BENEFITS While these simple principles can ielp lawmakers identify many wast e ul spending items, much water hought is needed to control the costs If more sensitive entitlement pro ps. Entitlement programs do need o be ref0rmed.They-m the most rap dly increasing component of the fed ral budget, and often they are poorly lesigned to achieve their objective Yet while studies by Heritage Founda ion scholars, like studies from other rganizations, have called for curbing r reforming many entitlement bene its, it is not in fact necessary to cut hese politically sensitive benefits in der t o balance the federal budget.

Veeded instead are policies to Educe he underlying costs of entitlement mgrams without cutting the value of mefits.

Consider health cam. Conmlling he spiraling growth of government provided health cam programs, princi pally M edicare and Medicaid, is and hould be a central featme of nearly dl deficit reduction plans. Some plans propose to reduce costs, how ever, by raising fees and taxes on ben eficiaries and imposing price controls and other restrictions on providers the effe c t of which will be to deny benefits to patients. Other plans sim ply call for placing a fixed spending cap on the growth of these programs without any indication of what mea sures would be needed to bring costs below such a cap by contrast, proposes $7 1 b illion in health care savings over five years but these savings would be achieved without a reduction in medical ser vices and benefits and without tpxing beneficiaries. The mason for this is The Heritage deficit duction plan 6 hat the Heritage plan calls for the en mnent of national health care reform egislation This is in line with the con ensus on Capitol Hill, and among ordi rary Americans, that fundamental re m of the health care system is reeded. Proponents of all rival national iealth refm plans agr ee that govern nent-funded healthcareqrogrms will rap major cost reductions as a result if the enactment of their plans.

Currently the= are three major re hm proposals being considered in Congress. In the Single-Payer or Ca nadian-style approach, the feder al gov ment would be the sole provider of medical services. In the Play-or-Pay system, businesses would be required either to supply employees and their dependents with at least basic medical coverage or to pay a fee to the govern ment to finance public c overage for their employees. Consumer Choice plans, such as that developed by the Heritage Foundation, would refm the tax treatment of health care spending to ensure that all families had suffi cien means to pay for medical cover age.

Proponents of each of these propos als calculate significant savings in med ical costs if their proposal is enacted.

Mareover, thanks to such reductions in the general cost of medical cue achieved by the proposals, government funded programs could enjoy savings without reduct ions in the quality or vol umes of services available to benefici aries. Thus the Heritage deficit reduc tion plan assumes reductions in pro gram costs, without benefit reductions if Congress enacts one of the three major health cue refm proposals 4 Stuar t M. Butler, A Policy Makers Guide to the Health Care Crisis. Part 11: The Heritage Consumer Choice Health Plan Heritage Foundation Tulkng foinu. March 5,1992 7 CONCLUSION Taxpayers should not be steamrolled into paying higher taxes or cutting benefits to older Americans in order to balance the budget. Instead they should farce their members of Con gress to clean house by eliminating billions of dollars of unnecessary federal spending.

Those lawmakers who claim that there is not enough waste in the federal budget to make a significant dent in the deficit simply are wrong. As the Appendix to this study shows, there m hundreds of different ways to cut spending that will not bring serious hardships to the needy ars~ thewerage working family in order. The detai l s will differ. And it is easy to offer a proposal if political reality is ig nored. But unless a deficit reduction plan focuses on wasteful and unnecessary spending and reduces the underlying costs of entitlement programs rather than cutting benefits, it i s unlikely to be a serious plan Lawmakers and candidates this yeat will offer many ways to put Americas fiscal house Scott A. Hodge Grover M. Hermann Fellow in Federal Budgetary Affairs Appendices Total Spend6 Cuts Bush Defense Cuts Non-Defense Cuts This Appendix isdivided into three sections. Appendix I summariZes the savings and deficits that would be achieved by the Heritage Foundations deficit reduction plan if it took effect in fiscal 1994, which begins on October 1,19

93. This fucall994 budget is wha t the new Congress will being working on starting January of next year. Appendix 11 is a summary of the Heritage recommendations with the fiscal 1994 to fiscal 1998 sav ings. Appcndix III explains thcse.ncommendations in greater detail and indicates the c o st savings that would be achieved in the first- and fifth years,.and the cumulative five year savings In most cases, Heritage analysts drew upon the hundreds of spending cut recommenda tions already suggested by the Congressional Budget Office, the Office of Management and Budget, and the General Accounting Office. Many recommendations also have been taken from a recent deficit reduction plan promoted by House Budget Committee Chair man Leon Panetta. In some instances, Heritage analysts have expanded upon these nx ommendations to achieve even gxeater cost savings.

In nearly every instance, the itemized savings here are taken directly from the sows cited above When this was not possible, the savings were calculated by Heritage ana lysts using Congressional B udget Wice or Wice of Management and Budget baseline estimates.

The pmgram savings are arranged using the oficial numbers that classify subject areas within the federal budget. Known as budget function numbers, these group programs ac cording to their general mission, regardless of the agency administering the program 9 -53 -1 1 -693 4 -4 -5 -7 -1 0 -30 49 -97 -131 -168 -220 -663 Appendix I The Heritage Deficit Reduction Plan linterest Savings I 4 -7 -1 7 -28 431 -95 I Note: Fgures represent fiscal years and may not add due to rounding. Defense cuts are Bush Administra t ion planned reductions from 1990 Budget Summit Agreement spending level. Fiscal 1998 baseline spending projections are not yet available. Therefore saviryls for this Year are best estimates 9 Appendix II Summary of Heritage Budget Cuts Savings in Millions Budget Function Number Program Change 1994 1 995 1996 1997 1998 Total 150 150 150 150 251 253 253 253 271 27 1 271 27 1 271 271 274 301 301 301 302 302 302 302 302 304 304 304 304 306 306 306 306 35 1 35 1 Phase Out Export-Import BankMits Trim Foreign Dis c ~onary Assistance Phase Out ESF Merge Overseas Broadcasting Cancel the Supercollider Cancel Space Station Cancel Planned NASA Programs Cancel NASA Rocket Motor Raise PMA Debt Repayments ElimiicleancoalProgram SellNaval petroleum Resewes Phase Out REA Loan subsidies EndEnergyRBtDFunding Hike Uranium Enrichment Fees Curb Additid SPR Funding Inland Waterway UserFees Eliminate Water Subsidies Change Revenue Sharing Formula RaiseHdmckMining WolkRequiment RaiseRecreationFees 5-Year Land purchase Moratorium Elimi n ate Below-Cost Timber Sales Merge 60 Envhnment Programs Eliminate Westewater Grants Private Superfund Fmancing Eliminate NCZM, Sea College Grants Qose Federal Helium Reserves Privatize NOM Fleet Reduce Local NOM Projects Lower Target Prices 3 Percent Per Y ear ElimiitecRPPapents Reform SuperfUndProgram End crop Insurance Program 60 $186 646 1218 690 1,375 100 200 200 410 1,050 1,850 100 180 250 420 399 432 0 5 100 200 30 70 290 615 183 183 70 160 350 360 100 191 190 200 0 60 170 180 330 340 20 30 365 738 20 0 400 90 530 160 380 75 190 50 50 128 133 50 50 44 45 440 1550 270 620 364 1,875 2,095 310 520 2200 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 2,150 640 560 2,687 2,890 320 540 2350 200 510 458 90 6 0 0 200 1,644 183 210 390 544 210 60 200 356 60 1,568 1,900 1,850 660 270 50 143 50 49 3200 650 725 3,718 3,700 310 550 2,350 2 10 530 454 120 1200 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 1,895 8,454 10, 7 50 1,040 2200 9,700 890 2200 2.1 270 2,400 674 6,902 915 820 1,890 2224 1,050 240 950 1,740 230 5,740 6,000 5,900 2,550 1,100 250 692 250 236 13290 2,850 10 No. Program Change 1994 1 995 1996 1997 1998 351 End Honey, Wool, Mohair Subsidies 351 End Dairy S u bsidies 352 End Export Enhancement Program 352 End Ma Promotion 352 LimitForeignLoanGuarantees 352 Reduce ACIFbnding 352 Merge USDA EXtensioslField Offices 371 ReduceFHALosses 371 PhaseOutGNMA 371 Impve FHA Debt Collection 371 StopFmHA502Loans 371 Stop Fm H A 515 Loans 376 End Small Business Administration Loans 376 EliminatethelTA 401 EliminatetheIcc 401 End Highway DemonstrationProjects 401 Cut Mass "hnsit Fundii 50 Percent 401 Limit Federal Highway Spending 401 EndAMTRAKSubsidies 401 MakeFAASelf-Funding 4 0 2 End Esmtial Air Sewice Subsidies 403 FCaiseCoastGuardFees 403 EndMaritimeSubsidies 451 Reduce CDBG Funding by 50 Percent 452 Devolve Rural Development Funding 452 End Federal TVA Funding 452 Transfer ARC FunctionS to States 452 ElimiEDA 501 End Untarget e d Vocational Funding 501 End Student Incentive Grants 501 EliminateImpactAid 501 cut outmoded Education Programs 502 End Work Study Program 502 TightenPell Standards 502 EndSEOGProgram 502 Reduce Stafford Defaults 503 EliminateNEABrNEH 503 CutFundihgforCP B 504 Merge 12 Educatioflraining hgrams 402 Eliminate Airport Gm-h-Aid 20 210 42 1 3iO 100 45 101 575 200 100 20 500 40 450 110 20 295 470 320 450 3550 39 315 700 284 325 20 40 10 50 145 35 630 5 140 70 135 900 780 64 480 366 740 200 410 119 965 200 300 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 1,350 990 110 980 190 354 670 200 420 139 1,020 200 300 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 47 2 80 840 40 1,450 360 416 1,400 1,100 170 1,520 200 320 640 200 450 161 1,090 200 600 20 800 410 650 180 25 1518 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 Mi 610 200 400 184 1,090 200 7 00 20 870 445 670 190 30 1575 3500 2,650 595 6.215 39 2,050 800 237 1.8 500 160 190 280 840 85 900 40 1550 390 726 1500 1,200 304 2.695 Total 830 1,810 2,950 900 1,650 704 4,740 Lo00 2.m 100 3560 1530 3,000 860 125 6,005 8,065 8550 2,620 25510 1 95 6550 3 ,700 1,344 5,438 1,310 610 540 930 1,940 355 4,020 150 5,990 1550 2,115 6.m 5,220 885 7,764 I 11 No. Program Change 1994 1995 1996 1997 19

98. Total 506 Consolidate Social Service Programs 506 Trim'SSBG Fundi by 50 Percent 550 Reduce NIH Research Funds 15 Percent 550 AFDc/Medicaid/FoodStampAdmh 553 Cut Health Education Subsidies 570 Medicare Secondary Payers 570 DimMedicaIePayments 570 IndimtFFundingto3Percent 570 Medicare SafeguardFunding 570 Charge SMI Electronic Fee 570 National Health Care Reform 600 T w o-Week Wait on UI 602 End Lump Sum Payments 602 Federal Pension Refons 603 End Trade Adjusrment Assistance 604 Section 8 Housing Reforms 604 TightenPublic Housing Standards 604 Use Housing Vouchers 604 Use Elderly Housing Vouchers 604 EndHuDutilityPayment s 604 EliminateHuDEarmarks 604 ReformHuDcIAp 604 TUmRepayments into vouchers 604 Freeze Housing Slots at 4.6 million 604 Include Food Stamp Value in Income 605 stateFoodstampReimbsrrsement 605 Restrict School Lunch Subsidies 605 Workfa for Food Stamps 609 T rimLIHEAP 609 LimitAFDcAllowance 609 CapFoster Care Administmion Costs 700 Close Undenrsed V.A. Hospitals 700 ImpmveV.A.Care 700 Raise V.A. Loan Fee 700 Extend IRS Pension Law 700 Extend V.A. Insurance Law 752 EndLSCFunding 800 CutcongreSsionalPerk 900 Fr e eze Civilian Pay 1 Year 920 ExpandLoansales 0 220 280 560 400 934 170 800 120 187 500 600 160 180 1550 1,800 1,100 1,120 230 260 0 3,000 0 1 ,000 0 0 330 460 220 220 610 765 50 150 2 1s 0 -60 25 25 0 55 300 350 320 380 70 250 1,180 500 1 so00 1 ,000 1 ,00 0 50 75 730 800 500 500 65 150 65 140 170 380 260 270 25 55 170 210 320 370 205 330 2,800 8,300 2m 4,000 270 840 1,160 1,130 219 700 190 2,100 1,140 220 10,000 1 ,000 2,063 610 210 930 260 140 5 30 120 40 450 490 1240 1200 1 ,000 125 830 500 240 230 610 28 0 70 240 380 450 8,700 6,000 270 1,120 1300 1510 226 800 200 2250 1,160 170 23,000 1m 2,794 770 200 1,320 390 310 70 30 130 450 550 8 10 1,300 1,300 1m 150 850 700 350 320 870 290 80 250 400 480 9,100 8,000 280 1,400 1556 1,940 234 900 200 2,450 19200 100 3 5,000 1 Po0 3,772 990 200 1,710 520 440 260 35 130 500 650 1,850 1,350 1,600 1500 200 880 800 480 340 1,390 300 110 270 410 500 9500 10,000 1,040 4200 5350 5,850 990 3500 930 10250 5,720 980 71,000 4,600 8,629 3,130 1,050 5,335 1,350 907 270 145 435 2,000 2,350 3,450 6,150 5,600 5,700 600 4,100 3,000 1285 1,100 3,420 1,400 340 1,140 1,900 1,965 38500 30,000 12 No. Program Change 1994 1995 1996 1997 1998 Total 920 Terminatecommissions 920 Refolai Blue Collar Pay 950 Auction FCC Spectrum 999 Disallow Pension Interest 999 CutResemhOverheadCosts 999 15PercentTravelCostsCut 999 FreezeOv~ad2Years 999 Repeal Service Contract Act 999 Repeal Davis-Bacon Act 142 500 0 820 333 90 9,860 500 312 24 1 600 2,000 1,ms 660 270 2 1,980 500 882 25 1 26 1 700 800 4,000 4,000 1 , 280 1.60 760 800 450 630 27,700 33,340 500 500 1,218 1,394 272 1 6000 10,000 2,000 830 840 43,777 500 1523 645 3,000 20,m 6,725 3,400 2,280 136,666 2500 5,329 NON-DEFENSE TOTAL $49,406 $97,112 $131,282 $167,937 $220,252 $662,934 BushDefense Savings 3,700 4 ,300 4,900 7,300 l0,OOO 30,200 SUBTOTAL SAVINGS $53,105 $101,412 $136,182 $175,237 $230,252 $693,134 Inmest Savings 400 7,493 16,625 28,234 42515 95319 Note: This plan assumes that some of the policies indicated above will be phased in, reducing savings i n 1994 through 19

97. Fiscal 1998 baseline spending projections are not yet available. Therefore, the savings listed above are best esti mates 13 Appendix 111 Heritage Options for Domestic Spending Cuts Savings in Millions Budget 1st Year 5th Year 5Year Fu nction Recommended Program Changes Savings Savings Total Number 150 150 150 150 251 253 253 253 Phase out Export-Import bank credits. These credits ~IE export subsidies for American businesses. Many a~ large corporations that could finance their own expor t s 60 Reduce other discretionary foreign assistance spending. Savings here are xealhed by cutting funds for multilateral banks and by returning American food assistance under the P.L.480 program now a subsidy to American fanners, to its ariginal purpose of helping countries in times of emergency 646 Phase out the Economic Support Fund (ESF) over five years.

The ESF provides "friendship" money to Israel, Egypt, and a number of other countries deemed to be important for America's security. With the Cold War o ver, the need to provide such assistance is cormpondingly reduced 690 Combine the operations of Radio Fm Europe (RFE Radio Liberty RL and Voice of America (VOA These broadcasting facilities were intended to provide freedam of information into communist an d other highly govcrnment-conmllcd countries. With the demise of the Soviet bloc they no longer scwt t5eir intended primary purpose, and keeping separate facilities inneases operating costs Cancel the Super Conducting Supercollider. The cost of this projec t, 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 Advancexi X-Ray Astrophysics Facility, the Comet Rendez vous Aster oid Flyby/Cassini mission, or the Earth Observation System. These projects 8te scientific luxuries in the current budget climate. Canceling funding for one of these projects could avoid cut-backs for on-going rp.se:Jlch Cancel NASA's development prow for t he 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 100 200 1, 0 50 100 250 725 3,718 3,700 310 550 2,350 210 530 1,895 8,454 10,750 1,040 9,700 890 2200 14 Budget Functlon Recommended Program Changes Number 1st Year 5th Year SYear Savings Savings Total in Mllllons 271 27 1 271 27 1 27 1 27 1 274 301 Raise the level an d schedule of the Power Mirlceting Admini strations debt repayments to the federal 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 -subsidized 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.

Federal support for this technology is virtually irrelevant now Sell the Naval Petroleum Reserves (NPR) to the private sector.

The Strategic Petroleum Reserves make the 80-year old NPR irrelevant 100 since the passage of the Clean Air Act 0 Phase out Rural Electrification Administration subsidies and direct loans. The REA has completed its mission. Nearly 100 percent of rural America has electric service and nearly 98 percent has telephone service Phase out all federal funding for energy supply research and development activities. Since the Carter Administration, the feder al government 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 ha s commmial 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 Depa rt 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 Army 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 454 $120 1200 2,196 270 2,400 30 $244 $674 290 $3,400 $6,902 183 $183 $915 70 $220 $8 20 350 $410 $1,890 15 Budget Functlon Recommended Program Changes Number 1st Year 5th Year $Year Savings Savlngs Total in Millions 301 302 302 302 302 302 302 End all new Bmau of Reclamation water projects and investiga tions of future projects. Begin to s hift operations 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, mmover, benefit a very tew individuals at the g reat expense of all taxpayers 100 Change the =venue-sharing formula from a gross to a net receipt basis for commercial activity on federal lands. The current federal rent and fee-sharing arrangement with the states is based upon gross mxipts. Federal admi n istrative costs should be deducted befm these receipts are shared with the states Increase the diligence requirement from $100 to $1,OOO for hardrock mining claims. The requirement that $100 worth of work be per formed to keep a claim on land active was s et in 18

72. It should be 190 raised to reflect modern prices 0 Raise National Fmst Service, National Park Service, and Army Carps of Engineers fees and concession rents to cover 100 percent of recreation facilities' costs. The Park Service earns only $60 mil lion through fees, though it spends $220 million on visitor services.

The GAO has found that direct costs to the Park Service per visitor rn 44 cents, yet the Park Service collects only 10 cents. This encourages an overuse of the national tnasures tha t public ownership was inended to presewe Place a 5-year moratorium on new Department of Interior and Fanst Service land acquisitions. The federal government holds 760 million acres of land, mm than one-third of the country's land mass. During the next fi v e years, the government plans to spend another $1.7 billion to purchase land for recreational purposes. These purchases should be postponed 170 330 Eliminate below-cost timber sales from national fasts. For many years, accarding to the Congressional Budge t 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 dccade, cash expenditures in these regions have exceeded cash receipts by a ratio of 3 t o 1 20 Eliminate the $1.6 billion per year Conservation Reserve Program that pays fanners not to plant crops. The CRP has already paid fanners to set aside 35 million acres of lend, three-quarters the size of Illinois. By 1995, the program will enroll an a dditional 4.5 million acres, three-quarters the size of New Jersey. Over the life of the program, taxpayers will pay fanners over $20 billion to let this land lie fallow 365 1,100 $2224 220 $1,050 60 $240 210 $950 364 $1,740 75 $230 1,905 $5,740 16 Budget Functlon Recommended Program Changes Number 1st Year 5th Year $Year Savlngs Savings Total In Mllllons 304 304 304 304 306 306 306 Consolidate over 60 environmental programs into a single block grant to the states and reduce total funding by 50 percent. Wh i le this is being done, Congress should rexilove the endless federal requirements and other restrictions placed on states' use of these funds. Not only will this xefm eliminate duplicate federal pm grams, but it will allow each state to use the funds in a m anner best suited to its own environmental needs uK 2500 $6,000 Eliminate EPA wastewater construction grants. This twenty-year old program originally was to be temporary. Accarding to the Congressional Budget office, ending all new funding after 1992 woul d have little effect on water pollution because the grants have done little to stimulate spending on wastewater treatment 90 $2,150 $5,900 Reform the Superfund enfarcement program by de-emphasizing permanent mament technologies in favor of an emphasis on l a nd use controls and containment methods. This measure would greatly reduce the expected $25.5 billion wst of cleaning up Superfund sites without putting the public at risk Substitute private fmancing for federal financing of the Super fund program to the m aximum extent possible. This proposal simply extends the "polluter pays" principle that guides most environmental law Eliminate National Coastal Zone Management Grants and the Sea Grant Collegepgram. The objectives of both of these programs have been achi e ved. Cumntly 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 remh capacity 160 $740 $2 ,550 75 $280 $1,100 50 $50 $250 Close the National Helium Reserves or sell it to a joint venture wmprised of current employees and other private investors.

This program, which was started in 1929 to insure a constant supply of helium for blimps, will lose nearly $130 million in fiscal 1993 and has lost over $225 million in the past two years 128 $150 $692 Privatize the National Oceanic and Atmospheric Administration NOM) mearch fleet. The GAO has recommended that the fleet be phased out and privatized over a five year period. GAO has criticized the government-operated fleet for being too ex pensive to maintain and operate 50 $50 $250 17 Budget Function Recommended Program Changes Number 1st Year 5th Year Year Savings Savlngs Total In Millions 306 351 351 35 1 35 1 35 1 352 Reduce expenditures for NOAA pgrams that are state or local concerns, or benefit only small, specific pups. Many NOAA programs concern specific state and local government issues or directly benefit special interest groups. Such projects inc l ude Alaskan groundfish surveys, Bering Sea Pollack research, North Carolina Marlh Island research, South Carolina Geodetic surveys, and many others Lower the congressionally mandated target prices for subsidized crops by 3 pent annually. This meaSute will encourage farmers to produce accarding to market fms rather than political dictates.

Also, this measure will lower the cost of food to consumers, who now pay more than $10 billion annually in higher food prices be cause of federal fann subsidies Terminate the Federal Crop Insurance Program and replace it with standing authority for disaster assistance. This change will codify mnt congressional behavior which has made crop insurance irrelevant. Congress rushes to bail out farmers when disaster strikes, whe t her 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 p rograms because they have long outlived their mission and usefulness.

Eliminate the daiq subsidy program. As a result of the market distortions produced by this program, th~ government has spent over $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 Department of Agriculture's attempt during the 1980s to lower dairy production by paying farmers to slaughter over 1.6 mill ion cows Eliminate the Export Enhancement agriculm subsidy program.

The primary foreign beneficiaries of this program have been the fanner Soviet Union and the People's Republic of China. A number of government studies question the effectiveness and pruden ce of this program 44 440 270 20 421 $310 5 1 5,950 660 200 348 $610 Eliminate the Market Promotion Program that subsidizes foreign advertising for wealthy U.S. businesses such as McDonald's Corporation, Pillsbury Company, and Ernest and Julio Gallo Winer y . Inc 236 13350 2.850 830 1,810 2,950 100 $200 900 18 Budget Function Recommended Program Changes Number 1st Year 5th Year 6Year Savings Savlngs Total In Millions 352 Limit the .fareign loan guarantees made annually to foreign purchasers under the Departm e nt of Agriculture's Export dit Programs to $4.5 billion (down from $5.5 billion Also eliminate loans to risky foreign borrowers 45 $400 $1,650 352 352 Eliminate the Agricultural Credit Insurance Fund (ACIF) farm loan pgrams. Theloan losses hm these progra m 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 organization. Instead it has become a multi-billion dollar per year grant to farmers who are bad businessme n 101 $184 $704 Merge the Agricultural Research Service, the Cooperative State Research Service, and the Agriculture Extension Service, then reduce total funding by 50 pent. The Department of Agri culture has some 11,000 field offices in 94 percent of the c oun ties in America even though only 13 percent of the nation's counties are consihd agricultural. Mareover, these programs fund most of the "pork barrel" research projects that many taxpayers find objectionable 575 $1,090 $4,740 371 Reduce FHA program lo s ses through impved underwriting monitaring, and enforcement efforts to incmse recoveries from mpt HUD contractors in the multi-family and single family housing programs. Allow increased sales of defaulted praperty. This program lost nearly $9 billion betw een 1988 and 19

90. Losses continue even though some reforms recently have betn instituted 200 $200 $1,000 37 1 Phase out over five years the Government National Mortgage Association (GNU letting the private sector assume mort gage insurance needs. Investo rs and banks, rather than the poor benefit fnrm Ginnie Mae through a gimmick known as "churning."

That is, by repeatedly refinancing loans and selling them quickly investors are making off with $700 million in taxpayers' money annually 100 $700 $2,000 37 1 Improve the Federal Housing Adminissation'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 improperl y forgave some $42 million in debt, and incomxtly transfed 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 20 $20 $100 19 Budget Functlon Recommended Program Cha n ges Number 1st Year 5th Year $Year Savlngs Savings Total in Mllions 371 371 376 376 401 401 401 401 Eliminate FmHA's Section 502 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 500 $870 $3360 Stop the expansion of the Rural Rental Housing (Section 515 program andincreme develapers'minimum intenst rate to 5 percent. Recent General.Accounting Wice studies show that this program has been a bonanza to d evelopers, in some cases End all Small Business Adminismtion direct loans and loan guarantees. Some 99.8 percent of American small businesses receive no direct financial aid from the SBA. Of those which receive SBA loans, 20 percent end in default. Accord ing to OMB, nearly $4 billion of SBA's outstanding loans m expected to default 450 $670 $3,000 allowing them returns on investment as high as 970 percent 40 $445 1330 Eliminate the activities of the Intemational Trade Administration.

This pgram assists pri vate firms in promoting and marketing exports. These 8~t activities better suited for private organiza tions such as the Chamber of Commerce 1 10 $190 860 Eliminaw the remaining regulations on the trucking indusay and abolish the Interstate Commerce Commi s sion. After 105 years of regulating commae, the now obsolete ICC should be retinxi 20 $30 $125 Terminate all highway demonstration projects. Congressmen often try to disguise the essentially local nature of federally funded highway projects by calling thm "dcmonstration projects." These projects are little mm than political pork 295 $1,575 $6,005 Eliminate federal operating assistance funding far mass transit and reduce federal spending on local mass transit capital projects by 50 percent over five 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 go vernment began funding local projects 470 $3,500 $8,065 Limit federal highway spending to the amount brought in by mom vehicle fuel taxes. Allow state and local governments to impose tolls to cover the cost of maintaining, repairing improving, and extendi n g mads, even on roads that have been built mainly or entirely with federal funds 320 $2,650 $8350 20 Budget 1st Year 5th Year $Year Functlon Recommended Program Changes Savlngs Savings Totel Number (In Millions 401 402 402 403 403 451 452 has received abo u t $15 billion in taxpayer subsidies even though the rail canier accounts far less than 1 percent of total intercity mileage nationally 401 End federal subsidies to AMTRAK. Since 1971, AMTRAK Make the FAA self-funding. The total cost in 1991 of oper ating, maintaining, and upgradingthe air traffic control system was about $4.7 billion, half of which was covered by taxpayers.Since the FAA has clkarly identifiable users there is no reason taxpayers should subsidize this service.

Eliminate the Essential Air Service Subsidy 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 airparts far construction and improvements. Most of the 100 largest airparts, that service over 90 percent of all air travelers, are p rimarily self financing and will not be harmed by the loss of federal funds.

Recover 100 pezcent of the costs for Coast Guard services provided to cammenial and pleasure boats. Studies have found that 80 percent of the Coast Guards total search and escuc o perations axe non-emergency, with 72 percent invol ving recreational boats within 3 miles of shore. Most of these seMccs are paid far by taxpayers, not boat owners Eliminate the Maritime Administrations Operating Differ ential Subsidy Program and the Ocea n Freight Differential Pmgram, which protect U.S. shippers from foreign competition.

Phase in a 50 pent reduction in Community Development Bloc Grant funding over five years. By some estimates over half of this programs funds go to non-distressed communiti es, some of which are very wealthy. Enterprise zones are a much more effi cient way of generating economic growth in pwr areas.

Transfer all Fanners Home Administration (FmHA) rural development activities to the states and use a portion of these savings to fund increased federal enterprise zone tax abatement.

Recent studies show 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 450 $595 $2,620 3,550 $6,215 $25.510 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 21 Budget Functlon Recommended Program Changss Number 1st Year 5th Year +Year Savings Savings Total in Millions 452 452 452 501 501 501 501 502 Transfer funding for Tennessee Valley Authority (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 Development Center or the environmental research center. These pjects benefit specific industiies who can affd to pay the direct costs Transfer the functions of the Appalachi a n Regional Commission ARC) to the states. This $200 million per year program 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 roa ds, result ing in few measureable results.

Eliminate the Economic Development 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 pork bad dollars.

Eliminate the untargeted portion of vocational education funding.

This includes consumer and homemaking education programs as well as programs not targeted to specific at-risk groups.

Eliminate State Student Incentive matching grants, whic h have accomplished the goal of encouraging the states to provide more student 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 wward sch ool districts near federal military instilations. This program is based on the false premise that military bases are a '%est" for local communi ties. The benefits to the communities of these installations make this program unnecessary.

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, this program indirectly subs idizes university labor costs in food service, administrative offices, etc. Most recipient students already receive student aid from other sources. This reform will not prevent students from getting private sector jobs 40 $160 $610 10 $190 $540 50 145 35 6 30 5 140 280 $840 85 900 40 1,550 930 1,940 355 4,020 150 5,990 22 Budget Function Recommended Program Changes Number 1st Year 5th Year &Year Savings Savings Total In Miillons 502 502 502 503 I 503 504 Reduce Pell Orant funding by tightening the definitio n of independent students. Many students whose pmnts have sufficient financial resources to contribute to their college education have declared themselves "independent" in order to receive greater government aid. This loophole should be closed. These stude n ts would still be eligible for student loans 70 $390 $1,550 Eliminate the Supplemental Educational Opportunity 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 b asis 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 Pell Orant and an SEOG Reduce defaults and losses in the Stafford Studen t Loan Pmgram. Such measures include: Eliminating all federal interest rate subsidies extended to students after they leave school; reducing subsidies to lenders by 1 percentage point and requiring institutions to share the risk of loan defaults.

Defaults in this program total nearly 30 percent of the annual cost of the program, or $1 billion. If the government is to con tinue to support postsecondary educatinnal opportunities, it cannot allow this program to become little more than a grant progra m for college graduates 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 a~e not already being done by the multi-billion dollar television, film , and radio indus tries, in addition to private philanthropy and state and local governments. Many of the programs' benefits, mareover, go to upper-income audiences.

Discontinue federal funding for the Corparation for Public Broad casting. The competitive cable television and radio industries have ma& this program obsolete. Since public radio and television stations wive the bulk of their money from private contributions they will survive without federal funding.

Consolidate 12 employment and training pro grams 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 n e eds 726 $2,115 $135 900 780 64 480 304 2,695 6,600 5220 885 7,764 23 Budget Function Recommended Program Changes Number 1st Year 5th Year 5Year Savlngs Savings Total In Mliilons 506 506 550 550 553 570 Consolidate mm than a halfdozen social service progra m s into a died program and xeduce funding in proportion to the overhead and administrative.cost savings. This measure would eliminate duplicate services and provide local governments more flexibility to design programs relevant to local needs 0 $280 $1,040 Cut by 50.pmcent~funding furthe Social Senices Block Grant program. Most of.the $3.4 billion spent annually on this program is directed to internediary organizations and providers, not recipients. Cutting out these middle-men by replacing these grants wit h vouchers for example, child care sewices would give poor families pater flexibility and choice 280 $1,400 Reduce National Institutes of Health (NIH) research funding by 15 percent overall, aiming in particular to cut overhead costs by 50 percent. At the c mnt 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 "indirect costs" such as maintenance, a dministration, and depreciation.

High priority resemh would not be affected by this change 400 $1,556 Consolidate the federal administrative cost-sharing programs of Medicaid, and Food Stamps into a single remiburse ment system and improve controls over ad ministrative cost increases. There is considerable overlap between the AFDC Food Stamp, and Medicaid pmgrams..This measure would encourage states to simplify administration of the programs and reduce bunaucratic costs without reducing benefits. Welfm dpie n ts would find it less confusing to deal with this unified system 470 $1,940 Eliminate health professionals education subsidies except for dis advantaged and minority students. Convert the remaining monies into a scholarship fund. In some respects, this pr o gram has been too successful, as some experts conclude that the U.S. will soon have a surplus of doctors. In 1965 thm were 148 doctors for every 100,OOO Americans. But by 1988, this number was 233 a 57 percent inmase 120 $234 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 recads on these primary payers Medicare too often ends up paying for services when these costs are the responsibility of the private insurers. The Inspector General of HHS has estimated that mare accurate and timely information on primary payers would save as much as $900 million annually 500 $900 5,350 5,850 990 3300 24 Budget Function Recommended Program Changes Number 1s t Year 5th Year 5-Year Savings Savings Total in Millions 570 570 570 570 570 600 602 Reduce Medicare's.payments to hospitals for their direct costs of pro viding graduate medical education that is, residents' salaries and benefits, teaching costs, and admi nistrative and overhead costs. This system tends to overpay hospitals, especially inefficient hospitals with excessive overhead costs. In effect, this rewards hospital inefficiency.

A be= system would be to reimburse each hospital the same amount for the s ame type of resident according to a national average 160 Reduce to 3 percent Medicare's payments to hospitals for the indirect costs of patient care that are related to a hospital's teaching program. Reviews by the Department of Health and Human Services indicate that mnt 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 costs inch by teaching hospitals 1550 2 00 2,450 930 10,250 Inmase Medicare oversight, or "safeguad funding to the 82 companies that process Medicare claims. GAO finds that every $1 expended on safeguard funding produces $1 1 in savings or refunds on inappropriate claim payments. Thus the follo w ing savings are net savings 1,100 $1200 $5,720 Penalize providers for claims that are not billed electronically to Medicads Supplementary Medical Insurance (SMI This recommendation will cut Medicare's administrative and data entry costs, and it will reduc e the incidence of m 230 Slow the growth in Medicare and Medicaid spending by enact ing comprehensive health caxe reform. There are several reform proposals now on Capitol Hill. Some would cut costs by regula tion and setting national health care spending l imits. Altema tively, consumer-based proposals would create powerful new incentives to hold down costs. Whichever reform plan is adopted Medicaxe and federal Medicaid contributions can be expected to benefit significantly from any reduction in the growth of overall health spending 0 Standadize the Federal-State Unemployment Insurance (VI) programs 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 Extend the prohibition on federal employees taking their retirement benefits in a lump sum. This prohibition was enacted in the 1990 system and en courage recipients to look for other work faster 0 budget agreement and is scheduled to expire in fiscal 1995 0 100 35,000 1,400 3,772 980 7 1 ,000 4,600 8,629 25 Budget Function Recommended Program Changes Number 1st Year 5th Year SYear Savings Savings T otal in Millions 602 603 604 604 604 Take stepsm conform federal retkment to private sector policies.

Such measures include: increase from three years to four years the average of the employees high salary base used to calculate initial pension benefits; a nd restrict an agencys matching contribution to employee thrift plans to 50 pemnt. These measures will still give federal employees slightly better pensions than comparable private workers 330 $990 $3,130 End Trade Adjustment Assistance. This program is i n tended to give temporary 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 fareign competition if indeed this can be proven should receive government benefits f ar exceeding the assistance available to those laid off due to domestic competition 220 $200 $1,050 Switch to a Random Digit Dialing System in calculating fair market rents for the Section 8 rental assistance program and modify the administrative cost fee structm for local and state agencies that administer the program. Also, eliminate funding for rental vouchers on dwellings not meeting HUDs Housing Quality Standads. HUD is cmntly calculating fair market rents in an antiquated manner which leads to signif i cant 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 redud Tight e n occupancy standards under the Performance Funding System far federal operating and administrative subsidies to local public housing authorities. These administrative and operating subsidies should then be reduced. Currently, about l00,OOO of the nations 1.4 million public housing units are vacant. Yet the federal government makes operating subsidy payments for these units to local housing authorities. On average, HUD pays local authorities about $3,700 per year per unit in total rent and operating subsid ies 610 $1,710 $5,335 50 520 $1,350 Partially replace new public housing construction with vouchers.

New construction of public housing is the most inefficient way of providing housing assistance to the poor. Many studies have found it costs at least twice the amount of money to house a family through new consmction than through vouchers 2 $440 $907 26 Budget Function Recommended Program Changes Number 1st Year 5th Year $Year Savings Savings Total in Millions 604 604 604 604 604 604 Partially replace new c o nstruction for the elderly (Section 202 with 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 t o live where they choose.

Eliminatethe HUD Utility Adjustment faymentpgram that defiays a tenant's electric and.other utility expenses. Because of the inequity in this program, many tenants in public housing not only pay no Rnt but actually receive a check from the government for utility payments. Indeed, many tenants xeceive 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 park barrel projects that serve only state or local interests. Such projects include 500,000 for a population and marketing analysis center in Towanda, Pennsylvania 400,000 for the State of Hawaii Real Estate Commission; and 6 67,000 for the Marshway Project in Chicago Require competitive bidding in all of HUD's Comprehensive Improvement Assistance Program (CIAP) procurements and create performance-based rather than a needs-based criteria for further CIAP awards. HUD's Inspecto r General has found extensive non-compliance with contract administration =quire ments in this program. Lmcal housing authorities are known to issue exclusive contracts to favored companies, puxchase 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 cha r ge market rates for their units. Allowing developers to prepay these loans can prevent sizeable taxpayer losses. Turning half of the current $618 million in construction subsidies into tenant vouchers would give low-income rentem 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 received housing assistance at an annual cost of $17 billion. Freezing for five years the number of h ousing assistance slots at $4.6 million would not ham current mipients. The natural turnover .process would still allow this program to assist newly eligible households 0 $260 $270 25 $35 $145 0 300 $320 70 130 500 650 1,850 430 2,000 $2,350 3,450 27 Budg e t 1st Year 5th Year 5-Year Functlon Recommended Program Changes Savings Savlngs Total Number (in Millions 604 605 605 605 609 609 Include the .value of food stamps when cslcalating income eligibil ity for Section 8 and other public housing benefits. Recip ients are expected to pay rent equal to 30 percent of their income. How ever, non-cash benefits 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-cashkmefits are included in the calculation of their income.

Require states to reimburse the federal government for all over payment enms caused by state administram in the food stamp program. In fiscal 1988 , the national overpayment ertw rate for food stamps was 7.4 percent, resulting in erroneous overpayments by Washington of nearly $900 million. States currently have no incentive to conml errors since all the pgrams benefits and half of the administrative costs are paid by the federal government.

Penalizing states for these errors will give them greater incentives to oversee the program Restrict subsidies under the child nutrition and school lunch programs to families below 185 percent of the poverty threshold.

These nutrition programs do help the poor, but typify the middle and upper-middle income entitlement programs that add substan tially to the federal deficit. The poor actually could be better sewed if the program were specifically targeted to them a nd not the middle class.

Require all non-elderly able-bodied food stamp recipients 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 assistance LIHEAP) to those with incomes below 130 percent of the poverty threshold, and reduce funding by 25 percent. This program duplicates other federal utility assistance in addition to state and local utility assistance programs Limit the housing allowance for AFDC families who live in subsidized public housing. Nearly one quarter of the 4 million AFDC families live in subsidized housing. A share of the normal AFDC benefi t 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 1,080 500 1,000 50 730 500 1,350 1,600 1300 200 880 8 0 0 6,150 5,600 5,700 600 4,100 3.000 28 Budget Function Recommended Program Changes Number 1st Year 5th Year 5-Year Savings Savings Total in Millions 609 700 700 700 700 700 752 Limit to 10 percent per annum the growth of administrative costs in the Foster Care program. The administrative costs of this program are projected to grow at 19 percent per year nationwide for the next sevd years, after increasing from about $50 million in 1981 to more than $450 million in 19

89. These costs can be controlled without curbing services to foster care families.

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 provided more economically.

Promote more efficient management and delivery of health care for veterans. Veterans hospitals have a long history of inefficiency and high cost . These costs can be controlled through a funding mechanism similar to Medicares prospective payment system which sets fixed payents for services. Greatex efficiency can be achieved by allowing the VA more flexibility in altering facility and staffneeds R a ise the loan-migination fee charged for housing loans guaran teed by the Department of Veterans Affairs (VA). The current loan-migination fees at far below those found in the private mortgage lending market. Raising these fees would institute sound busine ss practices in this program and lessen future losses and defaults.

Extend the cmnt law (due to expire on September 30,1992 that requires the Intemal Revenue Service to verify incomes xepomxl by veterans in order to more accurately determine pension and benefit eligibility.

Extend the current law (due to expire on October 1,1993 that quires the Veterans Administration to recover some veterans medical care costs from the patients private insurer 480 $1,285 $65 65 $340 $1,100 170 $260 25 170 End funding for the Legal Services Carporation (LSC) which in part, is intended to provide legal assistanc e to the poor. However 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 act ivism and political activities such as lobbying legislams and local ballot initiatives. Taxpayers should not have their tax dollars go to lawyers who turn around and sue the government 320 1,390 300 1 10 270 410 3,420 1,400 340 1.140 1,900 29 Budget Funct i on Recommended Program Changes Number 1st Year 5th Year 5-Year Savlngs Savings Total in Millions 800 900 920 920 920 950 999 Cut by halfcongressional staff, eliminate the franking privilege and privatize the Government Prinling Oflice. 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 unsoli cited, and is used forreelection purposes. The GAO has found that the Government Printing Mice is twice as expensive as commercial printers 205 Free= for one year the total level of federal civilian employee compensation. Total compensation (excluding ben e fits) for full-time and part-time civilian employees is nearly $1 10 billion annually 2,800 Sell gradually increasing portions of the governments loan port folio to the private sector. The federal government currently holds 205 billion worth of direct loa n s outstanding. According to OMB 1.9 percent of these direct loans are in dpfaclt this year. These assets should raise a minimum .of $2 billion the fmt year, climbing $2 Terminate most federal commissions. These terminations should include: The American Ba t tle 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 Rooscvelt Memurial Commission 142 billion ever y year thereafter, reaching $10 billion by 1997 2,000 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 i n to 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 sector r a tes 500 Auction to the private sector the Federal Communications Com missions (FCC) electromagnetic spectrum. This should include all the frequencies resewed for new technologies such as next generation cellular mobile phones, also known as Personal Commu n ications Sewices (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 univ e rsities. The lions shan of federal research grants should fund research, not extraneous expenses such as maintenance and student services 330 500 9,500 10,000 272 1,000 1,965 38,500 3o,OOo 645 3,000 0 $10,000 $20,000 830 $3,400 30 Budget Function Recommen d ed Program Changes Number 1st Year 5th Year 5Year Savings Savings Total in Millions 999 Disallow'hm federal grants the interest charges on unfunded actuarial liabilities of local government pension plans. Accarding to the HHS Inspectar General, the intere s t 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 intemt expenses at between $1.3 billion and $2 billion 8Mu8uy 820 $2,000 $6,725 999 Lower by 15 pent the travel budgets of non-postal civilian agencies, then cap the futm growth at the inflation rate.

Agency.trave1 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 Freeze for two years at cmnt levels the overhead costs of non postal civilian agencies (such as transportation and rental costs phone and utility costs, mting, supplies, and equipment excluding employee navel. After two years, allow growth only at the inflaiton rate. Some 24 cents of every tax dollar spent on dom estic pmgrams or about $210 billion pays for the overhead expenses of federal civilian agencies. These costs are in addition to the rn- than $100 billion pcr year spent on civilian employee wages and benefits. In total, these two spending categories consume nearly 40 cents of every federal tax GO!:ar Lpnt on domestic programs.

Cutting overhead costs thus will not hurt the ability of agencies to

am their duties 9,860 $43,777 $136,666 999 Repeal the Service Contract Act which requires contractors to pay pvailing wages" on federally funded service contracts. This law artificially inflates the cost of federal service contracts by as much as $500 million annually and creates an unfair barrier for many entry-level worken, who tend to be the poor and minorities 500 $750 $3,025 Repeal the 1931 Davis-Bacon Act. This law foxes contractors to pay the "pvailing wage" on all federally funded construction contracts. In practice this means the union rate must be paid.

When the legislation w as enacted, the general purpose was to keep black workers off federal construction sites. That 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 uneconomic al to recruit lower-skilled imai workers, who are disprapartionately minority Americans 312 $1,523 $5,329 999 Non-Defense Totalsavings 31

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