Controlling Other Spending Programs

It has become fashionable to deduct defense and entitlement spending from the budget total and show that the remainder is either too small to fuss with or already declining. I find such an approach far too gross for a

satisfactory analysis of the budget quandary. It ignores the important crosscurrents that are occurring within the "all other" category.

For example, the fastest growing area of spending in recent years is neither entitlements nor defense. Rather, it is a component of "all other" farm subsidies. This category of federal spending rose from $3 billion in 1981 to $21 billion in 1983. Moreover, recent Congressional action on the dairy program ensures that the U.S. Department of Agriculture will continue subsidizing some of the wealthiest farmers at the expense of taxpayers and

consumers.

An effective budget restraint effort must be comprehensive. Sacred cows are not limited to the dairy industry. Take the National Endowment for the Humanities. To urge a cut in that agency surely sets you up as a "heavy" who cares not a whit for culture. But an examination of the details is revealing. When I looked at how such money was to be spent in my own state, I found a portion going to finance a history of each of the fourteen branches of a municipal library. I do not believe that you have to be a Philistine to have the gumption to say that such expenditures show that we have not cut too much from civilian budgets, but far too little.

After all,

By no means do I intend to let the Congress off the hook. each Federal outlay is made pursuant to an appropriation enacted by Congress. According to a recent report, the House Rules Committee took action to eliminate a supposed inequity: the members of the Committee were approving

trips by members of other committees, but had not gone on any themselves. The

chairman proposed to remedy this discriminatory state of affairs

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by a bus tour across the Potomac to

expense of the taxpayers, of course Alexandria, Virginia. That suggestion failed to win sufficient support, but he persevered and succeeded in gaining approval for a trip to South America, Costa Rica, and Jamaica.

I do not mean to ignore the tax-writing committees either. In late 1982, the New York Times reported that the Congress had adopted the "love-boat" bill. Professionals who like sunbathing and shuffleboard while attending floating "seminars in the Caribbean" can now write off those so-called business expenses provided they take one of the four cruise ships that fly under the American flag. Such displays of patriotism are truly touching. As long as Congress keeps taking actions like these, it is hard to expect the executive branch to adopt a parsimonious attitude. Far more depressing, such actions make it hard for the public to take our government and its budget problems seriously.

Conclusion

There is plenty of blame to go around. It is the President who submitted the $200 billion deficit budgets, and it is the Congress who is going along

with them. Yet, it is the average citizen who generates the pressure for more government spending when he or she says "I'm all for economy in

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government . . but don't cut the special project in my area or the one

benefiting my industry, because that is different." I vividly recall my meeting with an interest group pleading for a bailout from the government. When I said, "That's just a form of welfare," the group protested vehemently: "Welfare is for poor people."

As I said at the outset of my testimony, this is no forecast of doom or gloom. With an expanding economy and a rising pool of saving, the budget deficits will, over time, shrink in importance. But meanwhile, if they force the Federal Reserve System to maintain excessive monetary stimulus, the deficits contribute to another round of inflation. If the Fed does not so monetize the deficits, the resultant Treasury borrowing will keep interest rates unduly high. Housing and business investment will increase more slowly than would otherwise be the case. Thus, economic growth and the rise in living standards will be more modest unless we take the necessary course of engaging in another round of comprehensive budget cuts.

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In the current environment, an increase in taxes is a confession of failure to control spending. Effective expenditure control truly requires a bipartisan approach. When the conservatives want to cut the social programs in the budget, we should support them. The public must understand the realities of the entitlement programs: the beneficiaries are receiving far more than they are "entitled" to under any insurance concept that links benefit payments to contributions (including employer contributions and earnings on both). These programs contain a major component of subsidy

from working people to retirees.

When the liberals want to limit the rapid defense buildup to the generous rate that candidate Reagan campaigned on (5% a year in real terms), we should support them, too. But we should part company with both groups when each tries to use its budget savings to restore the budget cuts made by the other. The budget quandary is no arcane matter. It simply represents our unwillingness as a nation to make hard choices. We can earn the 1981 tax cuts

by matching them with spending cuts

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or continue to suffer the

consequences.

Recommendation

The current public dialogue on the budget is unbalanced. In Congressional hearings as well as in professional publications, a great deal of attention is given to proposals for new taxes and increases in existing taxes. Very little consideration is given to ideas for reducing government spending. Just compare how much time the tax committees spend examining suggestions for increases in taxes with how little time the appropriations committees devote to considering proposals for reductions in expenditures. It may be an underestimate to say that 99 percent of the time spent at appropriation hearings is devoted to listening to agency representatives defend their requests for higher budgets.

The Congress now has one of those rare opportunities to redress this imbalance. A blue ribbon commission of private citizens has just completed a detailed analysis of possibilities for reducing federal spending. I am referring to the reports of the thirty-six of so task forces of the President's Private Sector Survey on Cost Control. To be sure, I am not now urging adoption of the Survey's proposals, but merely a public examination. suggest that Congress devote one day of open hearings for each department of government during which the proponents of budget cuts could advise the Congress

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and in the process the American public.

Frankly, I do not know whether each of the Survey's proposals is

necessary, but I do believe that a systematic examination of proposed budget

cuts

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department by department

is long overdue. The Congress might wish

I

to expand the hearings to cover other suggestions for budget savings, such as those that have been compiled by the Congressional Budget Office.

Advocates for economy in government often bemoan the lack of public support for specific budget cuts. That should not be surprising. Such support will only be forthcoming if the public gets the opportunity to learn about, consider, and debate specific alternatives for achieving budget

savings. The Congress now has the opportunity to exercise bipartisan

leadership in launching this vital educational effort.

The CHAIRMAN. Thank you very much.

I am going to turn first to Senator Danforth under the early bird rule.

Senator DANFORTH. Gentlemen, I think most citizens believe the deficits are a serious problem, and most would like to believe that they can be reduced to a responsible level in a painless fashion. In your opinion, would it be possible to bring deficits to a responsible level if both tax increases and entitlement changes in the formula were placed off limit?

Dr. MELTZER. In a word, "no."

Dr. WEIDENBAUM. Definitely not.

Dr. FRIEDMAN. No.

Dr. KLEIN. No.

Senator DANFORTH. Now if taxes and entitlements are not placed off limit, that means that we, as politicians, most go to the American people and ask them to do something that hurts. That is to say that we cannot say to the American people, hey, there is some painless way to do this; there is some little program that doesn't effect you; there is some change in the government programs that has no impact on your life.

Could you in about 1 minute each, because that's about all the time I have in a round of questions-could you please do your best to explain to the American people why they should be willing to make some sacrifice in either increased taxes or some change of entitlements? Most people would say, well, we are in a recovery now; we are doing all right; unemployment is down; things are looking fine; why should I be asked to do something that affects me in the pocketbook?

Dr. MELTZER. I'll start, if I may. The basic answer is because we want to look beyond the current recovery to the future. And the basic issue is how much investment we are going to have. It is not true in my opinion, and on the basis of correct economic analysis, that the deficits will cause the economy to abort or to prevent the recovery from continuing except under very extreme circumstances. So that isn't the problem.

The issue is whether the economy is going to grow faster or slower or whether it is going to grow at all. Whether the people who are your constituents and whether their children are going to have jobs at higher or lower real income. There is no magic in that. The only way we are going to do that is by investing more. And those investments have to come and have to be financed by private