Cutting the budget: there's got to be a better way - federal budget

USA Today (Society for the Advancement of Education), July, 1997 by Murray L. Weidenbaum

Voting to approve th general idea of a balanced budget is a fine start on the path of fiscal sensibility, but only a start. The really tough job is ahead -- to identify the specific spending cuts that should be made to attract sufficient public support for such tough action. Each of us wants to cut the other guy's pet projects.

We surely know how the nation arrived at this situation. Powerful interest groups push very hard for the particular spending programs that benefit them. Few legislators -- or presidents -- want to stand up against a strong one-issue group of voters that promises to have a long memory, and for good reason. Cutting or even eliminating any specific program will not close the gap between Federal revenues and expenditures. Yet, the attempt to do so well could result in the defeat of those identified with the foolhardy effort.

Is there a way out? Perhaps. The solution may lie with the innovative concept designed by Rep. Dick Armey (R.-Tex.) to eliminate obsolete military bases. Under that approach, a bipartisan blue-ribbon commission recommends an array of facilities to be closed, and the Congress has to take an up-or-down vote on the entire package. In this spirit, a bipartisan commission on Federal expenditures should develop comprehensive Federal program reductions and terminations for the decade ahead. Congress should be required to vote on the entire proposal, making no exceptions for individual programs.

There would be a great deal of practical advantage to the comprehensive budget-cut approach. It appeals to our basic sense of fairness. When everyone's ox is getting gored, nobody can say that they are being picked on. To put it somewhat more elegantly, there is an old Budget Bureau maxim that good budgeting is the uniform distribution of dissatisfaction.

It would be helpful if the commission proposal was accompanied by a commitment by Congress not to cancel the planned reductions or initiate offsetting new spending programs except by a two-thirds vote. Economist Richard Vedder notes that, in effect, fiscal policy would be turned over to the blue-ribbon commission in the way monetary policy is assigned to the Federal Reserve System.

As someone who has participated in quite a few efforts to cut deficit spending, I know that the most popular formula -- eliminating waste, fraud, and abuse -- will not work. Of course, there are numerous individual examples of fraud or waste or abuse. The reports of prisoners who illegally receive Social Security checks are upsetting, and such abuses should be eliminated promptly. Attempts by companies to sell the government shoddy and dangerous products should be dealt with severely. Surely, there is no basis or need to contend that everything the Federal government does is efficient and high-minded.

However, I have not found very significant differences in the level of integrity between the public and private sectors. Each has a full quota of rogues and slackers. The more relevant point is that there simply are not enough proven instances of waste, fraud, and abuse to make a real dent in the budget.

The guidelines for fundamental budget cutting should be substantive and relate to fundamental priorities. Here are five for starters:

* For a nation with the low saving and investment levels of the U.S., reductions should focus on the large consumption part of the Federal budget, rather than the small investment component. Such an emphasis would curb the present tendency for Federal deficit financing to be a powerful mechanism for converting private saving into public consumption. There is no need, though, to give a free ride to every item labeled "investment."

* Target the many subsidy programs that provide special benefits to limited -- and not especially worthy -- parts of the national population at the expense of the national taxpayer.

* Avoid funding expenditure programs that are designed to offset problems created by other Federal activities, such as regulation. A more cost-effective way of dealing with the situation is to change the original regulations that created the problem. To maintain the status quo is to ensure fiscal perpetual motion.

* Privatize activities that properly should be the responsibility of the private sector. The need here is to go beyond the useful notion of having the private sector produce items under government contract. Although an improvement over relying on government arsenals, this now conventional approach to privatization still leaves the activity in the Federal budget. Many goods and services no longer should be paid for by the taxpayer, no matter who produces them.

* Introduce basic economic efficiency considerations in the budget preparation and review process. The key to success is to enforce the use of this guideline. For instance, benefit-cost analysis often has been used to sanctify pork barrel spending. This has been accomplished by overly generous estimates of benefits and niggardly estimates of costs. As has been done in the case of proposed regulations, the calculations should be reviewed by an independent agency, such as the Office of Management and Budget.